![]() Fairness Materials March 8, 2012 Project Castle Exhibit (c)(2) Portions of this Exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. The omitted portions are indicated by three asterisks inside of brackets “[***]” and those portions have been filed separately with the Securities and Exchange Commission. |
![]() Project Castle 2 Section 1 Executive Summary |
![]() Latest Updates Project Castle EXECUTIVE SUMMARY 3 • Given lack of progress in discussions with Icicle, the Special Committee authorized Morgan Stanley on February 8 to make an outreach to [***] parties: [***] [***] • On March 2, Icicle and VS made a revised offer of $22.50, which was rejected (committee required $23 to resume negotiations) • [***] • On March 5, Icicle and VS made a revised offer of $23.00 per share • [***] • Icicle indicated it was prepared to negotiate and sign an agreement within 2 days • [***] • Contract negotiations with Icicle underway; contract includes favorable go-shop conditions (60 day go- shop, low termination fee) • Announcement targeted for [March 9, 2012] subject to successful resolution of open issues in the contract *** Portions of this Exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission. |
![]() Selected Transaction Considerations Project Castle EXECUTIVE SUMMARY 4 Transaction Benefits • [***] • Must sell at $23 if no other superior offer is made – Subject to change of recommendation based on change in circumstances • Potential concern about 34% block voting against a deal *** Portions of this Exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission. Potential Challenges / Issues • Eliminates ongoing execution risk • Premium to public trading levels • Attractive go-shop parameters – 60-day go-shop – Low breakup fee (0.2% fee during go shop, plus expenses) • Go-shop creates opportunity to discover higher prices – [***] • Substantially shifts external risks to buyers – Greece/Euro, Macro, political • Leverages current low interest rates and market appetite • Initiates go-shop process now – [***] – [***] • Ability to induce buyers in go-shop [***] |
![]() Summary of Transaction Terms (1) Merger Consideration Public shareholders will receive $23.00 per share of Castle common stock, in cash VS and his affiliated trusts (“Rollover Investors”), representing ~34% on a fully diluted basis, will roll 100% of their ownership interests Funding through a combination of Equity and Debt: Equity: Icicle/partners with new cash equity of not less than $210MM (“Equity Providers”) and Rollover Investors Debt: $1.15Bn debt commitment (~5.0x Adjusted 2011 EBITDA) Transaction Statistics Equity Value: $2,025MM Aggregate Value: $1,923MM Premia to (2) Transaction Multiples (3) Stock Price AV/Adj EBITDA (4) AV/EBITA P/E 1-Day 30-Day Avg. 60-Day Avg. CY’11 CY’12 CY’11 CY’12 CY’11 CY’12 19% 12% 17% 8.5x 8.0x 11.4x 10.0x 17.4x 14.0x Structure Cash merger Transaction taxable to Castle shareholders, other than Rollover Investors Deal Provisions 60-day go-shop provision post-signing Bifurcated termination fee: $4.2MM and $6.3MM after the go-shop period (represents approximately 0.20% and 0.31% respectively of total equity value), plus expense reimbursement Subject to majority vote of the unaffiliated shareholders Reverse termination fee of $9MM for Icicle breach or failure to close; specific performance permitted to fund equity if debt financing is available Reverse termination fee is Castle’s sole monetary remedy except up to $18MM total (including reverse termination fee) may be recovered in suit on intentional or willful breach that prevents closing or financing breach Fiduciary out during and after go-shop period allowing Castle board to accept an unsolicited Summary of Proposed Transaction Terms Project Castle EXECUTIVE SUMMARY 5 Notes 1. Special Committee counsel to provide review of merger agreement and related documents. This is a summary of only certain selected proposed transaction terms, as set forth in the Draft Merger Agreement dated 03/06/12 and is not intended to be a complete description of proposed transaction terms 2. Based on current prices as of 3/07/12 3. Street Case based on Wall Street consensus as of 2/15/12 4. Adjusted EBITDA includes adjustment to reflect non-recurring items; EBITDA estimates based on Case A per Castle management as of 2/8/12 |
![]() Summary of Proposed Transaction Terms (cont’d) Project Castle EXECUTIVE SUMMARY 6 Summary of Transaction Terms (cont’d) Regulatory / HSR Buyer agrees to promptly take any and all steps necessary to obtain all regulatory and governmental approvals to consummate the transaction Treatment of Castle’s Employee Equity Vested Options will be cashed out at closing Unvested Options and RSUs shall remain subject to their vesting terms and be cashed out at the $23.00 per share deal price when they vest according to their vesting schedule Representations & Warranties Customary for a transaction of this nature Covenants Customary restrictive covenants for Castle between signing and closing Select Conditions to Closing Castle shareholder approval (including majority of unaffiliated shareholders) Antitrust/regulatory approvals Generally, no breach of representations and warranties that, in aggregate, would result in a material adverse effect No material adverse effect (with customary carve-outs) No material breaches of covenants Financing Equity Funding Letters executed at signing by Icicle partners for new cash equity commitment of at least $210MM Debt Commitment Letter executed at signing for $820MM of term loan and $75MM of revolving credit facility (senior credit facilities) and $300MM of unsecured exchange notes offering or bridge facility (bridging to unsecured exchange notes offering) Limited financing outs in commitment letters (principally: negotiation of merger agreement, accuracy of Representations and information provided, receipt of financing statements and offering memorandum, equity funded, at least 90% rollover of shares held by Rollover Investors, narrow MAE definition |
![]() Revenue Project Castle EXECUTIVE SUMMARY 7 Source Street Research, Castle Management Q4 Results Relative to Street Estimates EPS EBITA 244 243 243 237 249 246 246 246 245 245 Consensus Mean: $243.9 200 210 220 230 240 250 260 ($MM) 0.51 0.51 0.50 0.50 0.58 0.54 0.53 0.52 0.51 0.51 Consensus Mean: $0.52 $0.44 $0.46 $0.48 $0.50 $0.52 $0.54 $0.56 $0.58 $0.60 ($) 61 61 60 58 67 65 63 63 62 62 Consensus Mean: $61.6 $52 $54 $56 $58 $60 $62 $64 $66 $68 ($MM) |
![]() ($MM) 2010 2011 % Change ($MM) Q4-2010 Q4-2011 % Change Data Protection Data Protection Organic $27.7 $20.4 (26.3%) Organic $7.2 $5.0 (30.9%) Acquisitions - $21.6 Acquisitions - $5.3 Total $27.7 $42.0 51.8% Total $7.2 $10.3 42.5% Monitoring Monitoring Organic $68.8 $69.0 0.3% Organic $25.6 $20.8 (18.7%) Acquisitions - $3.0 Acquisitions - $2.7 Total $68.8 $72.1 4.7% Total $25.6 $23.5 (8.3%) User Workspace Mgmt User Workspace Mgmt Organic $17.8 $16.0 (9.8%) Organic $5.1 $4.2 (16.2%) Acquisitions - $3.7 Acquisitions - $1.9 Total $17.8 $19.7 11.1% Total $5.1 $6.1 20.7% Database Database Organic $104.4 $101.7 (2.6%) Organic $35.3 $27.8 (21.2%) Acquisitions - $0.0 Acquisitions - $0.0 Total $104.4 $101.7 (2.6%) Total $35.3 $27.8 (21.2%) Windows Mgmt Windows Mgmt Organic $219.6 $220.5 0.4% Organic $75.6 $71.6 (5.3%) Acquisitions - $9.1 Acquisitions - $2.6 Total $219.6 $229.6 4.6% Total $75.6 $74.2 (1.9%) Other Other Organic $4.7 $5.7 22.5% Organic $1.0 $1.1 5.5% Acquisitions - $0.0 Acquisitions - $0.0 Total $4.7 $5.7 22.5% Total $1.0 $1.1 5.5% Total Total Organic $443.0 $433.3 (2.2%) Organic $149.8 $130.5 (12.9%) Acquisitions - $37.5 Acquisitions - $12.5 Grand Total $443.0 $470.8 6.3% Grand Total $149.8 $143.0 (4.6%) 2011 License Bookings Growth: 2.2% Organic Decline EXECUTIVE SUMMARY Organic and Inorganic Growth Rates 8 Project Castle 2010 vs. 2011 License Bookings Growth Q4-’10 vs. Q4-‘11 License Bookings Growth |
![]() 934 931 930 959 942 940 940 936 935 Consensus Mean: $938.5 $800 $825 $850 $875 $900 $925 $950 $975 Revenue (1) ($MM) Project Castle EXECUTIVE SUMMARY 9 Source Street Research, Castle Management 2012 Plan Relative to Street Estimates Notes 1. Case A based on Castle management outlook as of 2/8/2012; Smarsh consolidated at 100% 2. “EBITA” reflects non-GAAP Operating Income, adjusted to exclude Castle’s amortization of acquired intangibles, SBC, and one-time items 3. Adjusted for the portion of EPS attributable to Smarsh minority interest holders 1.62 1.60 1.55 1.73 1.69 1.69 1.66 1.65 1.63 Consensus Mean: $1.65 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 EPS (1) ($) 191 188 187 197 197 196 195 193 193 Consensus Mean: $192.5 $182 $184 $186 $188 $190 $192 $194 $196 $198 EBITA (1,2) ($MM) |
![]() Project Castle EXECUTIVE SUMMARY 10 Source Street Research, Castle Management Q1 Plan Relative to Street Estimates Notes 1. Case A based on Castle management outlook as of 2/8/2012; Smarsh consolidated at 100%. 2. “EBITA” reflects non-GAAP Operating Income, adjusted to exclude Castle’s amortization of acquired intangibles, SBC, and one-time items 3. Adjusted for the portion of EPS attributable to Smarsh minority interest holders Bookings Forecast $6.5MM Ahead of Plan; Revenue Forecast $4.5MM Ahead of Plan 210 210 210 210 212 213 215 216 216 Consensus Mean: $212.7 $185 $190 $195 $200 $205 $210 $215 $220 Revenue (1) ($MM) 28 27 24 36 33 32 30 30 29 Consensus Mean: $29.9 $0 $5 $10 $15 $20 $25 $30 $35 $40 EBITA (1,2) ($MM) 0.22 0.21 0.20 0.32 0.29 0.27 0.26 0.25 0.24 Consensus Mean: $0.25 $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 EPS (1) ($) |
![]() Revenue/%Growth 2008-2015 ($MM) Comparison of Forecasts 2008-2015: Historical; Street, Case A, Sensitivity, and Case A + $20MM Project Castle EXECUTIVE SUMMARY Notes 1. “EBITA” reflects non-GAAP Operating Income, adjusted to exclude Castle’s amortization of acquired intangibles, SBC, and one-time items 2. Case A based on Castle management outlook as of February 8, 2012 3. Sensitivity developed by Castle management based on Case A 4. Case A + $20MM assumes $10MM cost savings in 2012 and $20MM thereafter 11 EBITA (1) /%Margin 2008-2015 ($MM) Source Company Filings, Street Research, Castle Management $767.1/10.3% $695.2/(5.5%) $735.4/16.5% $990.2/5.8% $936.0/9.2% $857.4/11.8% $1,124.3/4.7% $1,073.6/5.2% $1,020.6/6.4% $958.9/11.8% $857.4/11.8% $1,070.4/3.0% $1,038.8/3.6% $1,003.2/5.5% $951.0/10.9% $857.4/11.8% $600 $700 $800 $900 $1,000 $1,100 $1,200 2008 2009 2010 2011 2012 2013 2014 2015 $177.4/23.1% $155.6/22.4% $136.0/18.5% $168.0/19.6% $192.5/20.6% $216.5/21.9% $168.0/19.6% $196.7/20.5% $227.5/22.3% $251.6/23.4% $273.9/24.4% $241.3/23.2% $168.0/19.6% $195.1/20.5% $222.7/22.2% $258.0/24.1% $168.0/19.6% $206.7/21.6% $247.5/24.3% $271.6/25.3% $293.9/26.1% $125 $150 $175 $200 $225 $250 $275 $300 2008 2009 2010 2011 2012 2013 2014 2015 Historical Street (2/15/12) Case A (2/8/12) Case A + $20MM Sensitivity |
![]() Project Castle 12 Section 2 Valuation Analysis |
![]() Implied Price Premium to (1) FD FD FD Aggregate FD Aggregate FD Aggregate Implied 30 Tr Days 60 Tr Days Equity Agg. Value / Revenue (3) Value / EBITDA (1) Value / EBITA (3) P/E (3) Price Current Average Average Value Value (2) '11 Act '12 Street '11 Act '11 Adj. Act (4) '11 PF Adj Act (5) '12 Street '12 Mgmt '12 Adj. Mgmt (4) '11 Act '12 Street '11 Act '12 Street $19.35 $20.60 $19.66 $857 $936 $184 $226 $237 $209 $216 $239 $168 $193 $1.32 $1.65 $19.35 0% (6%) (2%) $1,673 $1,572 1.8x 1.7x 8.5x 6.9x 6.6x 7.5x 7.3x 6.6x 9.4x 8.2x 14.7x 11.8x 20.00 3% (3%) 2% 1,735 1,633 1.9 1.7 8.9 7.2 6.9 7.8 7.5 6.8 9.7 8.5 15.2 12.2 21.00 9% 2% 7% 1,831 1,729 2.0 1.8 9.4 7.6 7.3 8.3 8.0 7.2 10.3 9.0 15.9 12.8 22.00 14% 7% 12% 1,928 1,826 2.1 2.0 9.9 8.1 7.7 8.7 8.4 7.6 10.9 9.5 16.7 13.4 23.00 19% 12% 17% 2,025 1,923 2.2 2.1 10.5 8.5 8.1 9.2 8.9 8.0 11.4 10.0 17.4 14.0 24.00 24% 16% 22% 2,122 2,021 2.4 2.2 11.0 8.9 8.5 9.7 9.3 8.5 12.0 10.5 18.2 14.6 $MM, Except Per Share Data Preliminary Valuation Matrix Project Castle VALUATION ANALYSIS 13 Notes: 1. Market data as of 3/7/12 2. Based on net cash of $136.5MM as of 12/31/11; Includes $34.9MM of Smarsh minority interest 3. Street based on consensus estimates; Case A for 2011 and 2012 based on Castle management outlook as of February 8, 2012 4. Adjusted EBITDA is adjusted for BakBone deferred revenue write-down of $33.8MM in 2011 and $19.6MM in 2012, duplicated Cork facility devoplment expense of $5.5MM in 2011, and public company costs of $3MM in 2011 and 2012; Detaild explanations provided on pg. 41 5. PF Adjustments include all adjustments per footnote 4 and also add back of eliminated expenses related to closure of Surgient business and one-time severance expense and previously paid compensation expense related to RIF actions in Q3'11; Detailed explanations provided on pg 41 |
![]() $19.34 $15.02 $15.02 $19.50 $17.42 $14.52 $18.35 $16.46 $18.66 $16.48 $19.52 $17.12 $19.67 $21.73 $19.16 $22.44 $23.22 $24.73 $21.29 $20.60 $20.75 $18.47 $23.04 $19.85 $16.71 $16.33 $21.93 $21.93 $26.99 $29.00 $21.83 $19.79 $22.37 $23.04 $22.76 $23.07 $23.78 $23.97 $29.12 $32.01 $27.21 $27.72 $29.99 $31.94 $26.12 $31.83 $31.37 $31.67 $32.91 $31.39 $26.27 $27.17 $10 $15 $20 $25 $30 $35 $20.83 $25.44 $18.67 $26.14 $22.99 $33.98 Notes 1. Market data as of 3/7/2012; Reflects closing prices 2. Street based on consensus estimates for 2011 and 2012; Case A based on Castle management outlook as of 2/8/2012; Sensitivity developed by Castle management based on Case A. “EBITA”reflects non-GAAP Operating Income, adjusted to exclude Castle’s amortization of acquired intangibles, SBC, and one-time items 3. Discounted at 10% Cost of Equity for 0.82 years to 3/7/12 4. Discounted as of 3/31/12; Excludes 9% WACC/3% PGR for Street Case and Case A and 9% WACC/2% PGR for Sensitivity Case; assumes 25%-40% tax rate in years 2017+ 5. Assumes exit multiple = entry multiple, based on Case A as of 2/8/2012 6. Based on actual results and street consensus estimates. LTM/NTM as of 12/31/2011. Net Cash Balance as of 12/31/2011 VALUATION ANALYSIS Valuation Analysis Summary Project Castle 14 Icicle Offer = $23.00 Case A + $20MM Street Case CY2012E – P/E (10.0x – 14.0x) Historical Trading Range (1) Current Price (1) = $19.35 Analyst Price Targets (Undiscounted) Comparable Companies Analysis (2) Last Twelve Months Last 30 Days Street Case CY2012E – AV / EBITA (7.0x – 9.0x) Street Case CY2011A – P/E (11.0x – 15.0x) Street Case CY2011A – AV / EBITA (7.5x – 10.0x) NTM P/E (14.0x – 20.0x) Discounted Cash Flow Analysis (2)(4) Street Case (9%-11% WACC; 1-3% PGR) Case A (9%-11% WACC; 1-3% PGR) Precedent Transaction Analysis LBO Analysis: 5.0x – 5.5x Leverage; 20%-25% IRR (5) 30-Day Average Price Premium (20% – 55%) 1-Day Price Premium (20% – 55%) NTM EBITDA (8.0x – 13.0x) LTM P/E (14.0x – 24.0x) LTM EBITDA (9.0x – 15.0x) NTM EBITDA (6.0x – 11.0x) LBO Transactions (6) : LTM EBITDA (7.0x – 12.0x) Precedent Premia (1) : Case A CY2012E – AV / EBITA (7.0x – 9.0x) Case A CY2012E – P/E (10.0x – 14.0x) Precedent Software Multiples (6) : Discounted Equity Value Analysis (2)(3) Case A CY2013E EBITA (7.0x - 9.0x) Case A CY2013E EPS (10.0x - 14.0x) LBOs: 1-Day Price Premium (10%-35%) Since Revised Guidance (7/12/2011) LTM Adj. EBITDA (7.0x – 12.0x) Sensitivity Case (9%-11% WACC; 0-2% PGR) Median: $23.00 Mean: $22.70 |
![]() L1M L3M L6M LTM Average $20.61 $19.61 $18.48 $20.12 High $21.93 $21.93 $21.93 $26.90 Low $19.34 $17.98 $15.02 $15.02 0 5 10 15 20 25 30 05/17/2011 07/28/2011 10/07/2011 12/19/2011 03/07/2012 0 5 10 15 20 25 30 Volume Price Beat earnings Missed earnings LTM Price ($) Volume (MM) Historical Stock Price Performance Project Castle VALUATION ANALYSIS 15 Source: Capital IQ • Castle’s share price has declined in 2011 with earnings misses • Stock price has pulled back after Q4’11 announcement 02-Aug-11 Missed Q2 earnings estimates by 19.3% 12-Jul-11 Castle lowers growth guidance from 16% growth to 11%-12%growth Last 12 Months 03-Nov-11 Beat Q3 earnings estimates by 13.8% $19.35 Median Price Target: $23.00 14-Feb-12 Missed Q4 earnings estimates by 1.5% 03-May-11 Missed Q1 earnings estimates by 31% 03/07/2011 |
![]() Year-To-Date Stock Price Performance Indexed to 100 on 1/3/12 (1,2) LTM Stock Price Performance Indexed to 100 on 3/7/11 (1,2) Source Capital IQ Indexed Price Performance VALUATION ANALYSIS 16 Project Castle Note 1. Large-Cap Software includes: HP, IBM, Microsoft, and Oracle 2. Other/High Growth Software includes: Citrix, Informatica, Qlik, Tibco, and VMware Castle BMC CA Compuware Symantec Large Cap Other/High Growth Castle: (27%) BMC: (25%) CA: 13% Compuware: (19%) Symantec: (3%) Large Cap Software: (0%) Other/High Growth Software: 14% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 3/7/2011 5/17/2011 7/28/2011 10/7/2011 12/19/2011 3/7/2012 90% 95% 100% 105% 110% 115% 120% 125% 130% 135% 1/3/2012 1/13/2012 1/26/2012 2/7/2012 2/17/2012 3/7/2012 BMC: 11% CA: 31% Compuware: 10% Symantec: 9% Large Cap Software: 8% Other/High Growth Software: 21% Castle: 4% |
![]() ($MM) Current Date of Revenue EBIT EPS Bank Price Target Price Target Recommendation Valuation Methodology CY2012E CY2013E CY2012E CY2013E CY2012E CY2013E Cowen & Co. NA 02/15/12 Hold 13.0x P/E, 10.0x AV/FCF $942.1 $997.9 $192.8 $214.4 $1.66 $1.92 Credit Suisse $19.50 02/15/12 Hold 13.3x P/E, 9.1x AV/uFCF $936.4 $977.0 $187.7 $201.1 $1.62 $1.74 Jefferies $23.00 02/14/12 Hold 8.0x uFCF $940.0 $1,002.5 $193.2 $218.2 $1.69 $1.92 JMP Securities NA 02/15/12 Hold 11.0x P/E $933.7 $995.6 $191.5 $222.5 $1.63 $1.89 JP Morgan $26.00 02/15/12 Buy DCF, 5.1x AV/Maint. Revenue $930.0 $968.4 $187.3 $221.0 $1.55 $1.80 Pacific Crest Securities $29.00 02/15/12 Buy 18.0x P/E, 15.0x AV/FCF $940.0 $1,000.0 $196.2 $219.3 $1.69 $1.88 Stifel, Nicolaus & Co. $25.00 02/15/12 Buy 14.0x P/E, 1.9x AV/Revenue, 11.0x Price/FCF $931.0 $990.2 $196.7 $219.2 $1.73 $1.96 Wunderlich Securities $20.00 02/15/12 Hold P/E, P/Revenue $934.6 N/A $194.7 N/A $1.60 N/A Mean (1) $22.70 $936.0 $990.2 $192.5 $216.5 $1.65 $1.87 Median (1) $23.00 $935.5 $995.6 $193.0 $219.2 $1.65 $1.89 Analyst Estimates and Targets VALUATION ANALYSIS Analyst Perspectives on Castle Concerns • The company reported license revenue of $106 million (7.7% year-over- year), compared to consensus expectations of $109 million • Challenges in both the North American commercial and public sector businesses, especially as it relates to large deals, had a negative effect on license revenue • Risks include competition and pricing pressure in the systems management market, general reduction in IT spending, and U.S. dollar exchange rates • Organic growth still desired. Total revenue for 4Q11 was up 13% year- over-year, but weak Americas performance, particularly in the public sector Analyst Commentary Positives • Decent 4Q Results With Challenges in NA. Castle’s reported results were largely better than expected • Cash flow model remains source of strengths • Margin improves ahead of expected contraction. Operating margin of 27.2% for the quarter was up significantly from 22.6% in the year- ago period and 22.4% in the prior quarter • Management exhibited solid operating discipline in the quarter, reducing operating costs as a percentage of revenue on all lines, consistent with the trend throughout 2011 Outlook • Wait for Castle to show the benefits from investments/changes in the company’s go-to-market strategy, as well as more evidence of the effective integration of their acquisitions and more visibility into the growth profile of the company’s vRanger, performance management, and Exchange tools businesses, before turning more positive • Given the challenges in the 4Q and the disappointing 2011, we believe management has done a much better job in appropriately setting the bar for 2012 versus the experience of last year • We continue to view the shares as a relatively safe haven if the macro environment worsens and of the value names that we cover, offers the best potential for real growth Project Castle Notes Source: Street Research; Excludes Capstone Investments as estimates are stale Increase from Prior Decrease from Prior 17 Buy 38% Hold 63% Recommendation Summary |
![]() 11.8% 11.0% 8.8% 8.5% 5.6% 13.3% 8.1% (0.9%) 7.3% 41.2% 31.5% 29.0% 21.0% 20.4% 17.6% Median: 8.6% Median: 7.7% Median: 25.0% (6%) 0% 6% 12% 18% 24% 30% (10%) 0% 10% 20% 30% 40% 50% CY2011A/10A Revenue Growth (%) 6.7% 4.8% 3.4% 2.8% 6.4% 4.8% 9.2% 11.8% 10.9% (2.3%) 1.4% 27.7% 27.9% 21.6% 14.9% 13.9% 13.8% Median: 4.1% Median: 3.1% Median: 18.2% (5%) 0% 5% 10% 15% 20% 25% (6%) 0% 6% 12% 18% 24% 30% CY2012E/11E Revenue Growth (%) Benchmarking Castle Against Comparables Revenue Growth VALUATION ANALYSIS 18 Project Castle Total Organic Total Organic (3) (3) Castle Other/High-Growth Software Core Comparables Large Cap Software Note 1. Market data as of 3/7/2012; Street based on consensus estimates as of February 15, 2012. Case A based on Castle management outlook as of February 8, 2012; Sensitivity developed by Castle management based on Case A 2. Source: Capital IQ, Thomson Consensus, and Street Research 3. Based on ex-acquisition Y/Y growth rate Source Company Management 16.5% (5.5%) 10.3% 11.8% 9.3% (7.6%) 5.9% 9.4% (10%) (5%) 0% 5% 10% 15% 20% 2008 2009 2010 2011 Castle Historical Growth Total Revenue (Y/Y %) 11.8% (11.6%) 12.0% 6.3% 10.4% (12.9%) (2.2%) 4.8% (15%) (10%) (5%) 0% 5% 10% 15% 2008 2009 2010 2011 Castle Historical Growth License Bookings (Y/Y %) Organic: 5.3% (3) Organic: 5.9% (3) |
![]() (1) 34.7% 33.6% 26.0% 17.9% 45.6% 39.8% 21.3% 9.7% 20.6% 20.5% 20.5% 49.2% 30.3% 29.4% 27.1% 26.3% 13.3% Median: 29.8% Median: 30.6% Median: 28.2% 0% 12% 24% 36% 48% 60% 0% 11% 22% 33% 44% 55% CY2012E EBITA Margin (%) 19.6% 36.7% 33.1% 25.6% 17.6% 44.6% 40.4% 20.3% 10.3% 51.1% 30.7% 28.2% 26.3% 25.9% 11.6% Median: 29.3% Median: 30.4% Median: 27.2% 0% 12% 24% 36% 48% 60% 0% 11% 22% 33% 44% 55% CY2011A EBITA Margin (%) Benchmarking Castle Against Comparables EBITA Margin VALUATION ANALYSIS 19 Project Castle Note 1. “EBITA” reflects non-GAAP Operating Income, adjusted to exclude Castle’s amortization of acquired intangibles, SBC, and one-time items 2. Market data as of 3/7/2012; Street based on consensus estimates as of February 15, 2012; Case A based on Castle management outlook as of February 8, 2012; Sensitivity developed by Castle management based on Case A 3. Source: Capital IQ, Thomson Consensus, and Street Research Castle Other/High-Growth Software Core Comparables Large Cap Software |
![]() Benchmarking Castle Against Comparables EBITA Multiples (1) VALUATION ANALYSIS 20 Project Castle Castle Other/High-Growth Software Core Comparables Large Cap Software 11.0x 7.2x 7.2x 7.0x 10.9x 8.0x 7.8x 6.1x 8.0x 8.2x 45.4x 29.2x 21.1x 19.5x 18.6x 17.1x Median: 7.9x Median: 7.2x Median: 20.3x 0x 5x 10x 15x 20x 25x 0x 10x 20x 30x 40x 50x CY2012E AV / EBITA (x) 11.9x 7.7x 7.4x 7.0x 11.6x 8.5x 8.1x 5.6x 9.4x 35.1x 26.0x 22.2x 22.2x 20.4x N.M. Median: 7.5x Median: 8.3x Median: 22.2x 0x 10x 20x 30x 40x 0x 10x 20x 30x 40x CY2011A AV / EBITA (x) Note 1. “EBITA” reflects non-GAAP Operating Income, adjusted to exclude Castle’s amortization of acquired intangibles, SBC, and one-time items 2. Market data as of 3/7/2012; Street based on consensus estimates as of February 15, 2012; Case A based on Castle management outlook as of February 8, 2012; Sensitivity developed by Castle management based on Case A 3. Source: Capital IQ, Thomson Consensus, and Street Research |
![]() 20.0x 11.1x 10.9x 9.9x 12.9x 12.5x 10.6x 5.6x 11.8x 31.9x 29.5x 26.2x 24.9x N.M. 38.5x Median: 11.0x Median: 11.5x Median: 29.5x 0x 8x 16x 24x 32x 40x 0x 8x 16x 24x 32x 40x CY2012E P/E (x) 19.7x 12.3x 11.2x 10.9x 14.3x 12.9x 10.8x 5.0x 14.7x 36.8x 34.3x 30.2x 29.2x N.M. 46.5x Median: 11.8x Median: 11.9x Median: 34.3x 0x 8x 16x 24x 32x 40x 0x 10x 20x 30x 40x 50x CY2011A P/E (x) Benchmarking Castle Against Comparables P/E Multiples VALUATION ANALYSIS 21 Project Castle Note 1. Market data as of 3/7/2012; Street based on consensus estimates as of February 15, 2012 2. Source: Capital IQ, Thomson Estimates, and Street Research 3. Qlik multiples > 50.0x and implied by low EPS Castle Other/High-Growth Software Core Comparables Large Cap Software |
![]() 0 2 4 6 8 10 12 14 3/7/2011 5/17/2011 7/28/2011 10/7/2011 12/19/2011 3/7/2012 Forward AV/NTM EBITA (x) 0 x 5 x 10 x 15 x 20 x 25 x 3/7/2011 5/17/2011 7/28/2011 10/7/2011 12/19/2011 3/7/2012 Forward P/E Multiples (x) Symantec (9.9x) BMC (10.9x) VALUATION ANALYSIS Castle vs. Peers Historical Valuation Multiple Analysis 22 Source Capital IQ, Thomson Consensus Source Capital IQ Castle BMC CA Symantec Compuware CA (11.1x) Compuware (20.0x) Castle (11.8x) Symantec (6.8x) CA (7.2x) BMC (6.5x) Castle (8.2x) Project Castle Notes 1. Market data and Street Research as of 3/7/2012 Compuware (9.2x) |
![]() $MM, Except Per Share Data Mar. 2012 Dec. 2012 Forward EBITA $192.5 $227.5 Forward Multiple 8.2x 8.0x Aggregate Value $1,571.7 $1,820.0 Net Debt (Cash) - 12/31/11 (102) Est Net Debt (Cash) - 12/31/12 (279) Equity Value $1,673.2 $2,099.4 FDSO (4) 86.5 89.7 Value Per Share $19.35 $23.41 Discount Rate - 10.0% Discount Period - 0.82 years Current Value per Share $19.35 $21.65 Illustrative Calculation ($MM, Except Per Share Data) CY2012E Estimates CY2013E Estimates Street Case A Sensitivity Case A Case A + 20 Revenue $936.0 $958.9 Revenue $1,003.2 $1,020.6 $1,020.6 Revenue Growth 9.2% 11.8% Revenue Growth 5.5% 6.4% 6.4% EBITA $192.5 $196.7 EBITA $222.7 $227.5 $247.5 % Margin 20.6% 20.5% % Margin 22.2% 22.3% 24.3% Est. Net Debt / (Cash) 12/31/2012 (3) ($279) ($279) Forward Future Price Per Share (4) Current Price Per Castle Street Share (5) Multiple Sensitivity Case A Case A + 20 Sensitivity Case A Case A + 20 6.0 x $18.45 $18.75 $20.00 $17.07 $17.34 $18.50 7.0 $20.76 $21.10 $22.52 $19.21 $19.52 $20.83 8.0 $23.02 $23.41 $25.03 $21.30 $21.65 $23.15 9.0 $25.28 $25.71 $27.50 $23.38 $23.78 $25.44 10.0 $27.50 $27.97 $29.95 $25.44 $25.88 $27.71 Notes: 1. “EBITA” reflects non-GAAP Operating Income, adjusted to exclude Castle’s amortization of acquired intangibles, SBC, and one-time items 2. Street based on consensus estimates as of 2/15/12; Case A as based on Caslte management outlook as of 2/8/12; Sensitivity developed by Castle management based on Case A 3. Assumes 2012 unlevered free cash flow added to 2011 net cash balance; Includes $34.9MM of Smarsh minority interest 4. Assumes 1.5MM net shares added in 2012 to current capitalization 5. Discounted at cost of equity for 0.82 years to 3/7/12 NPV Discounted @ 10.0% Discounted Equity Value - CY2013 EBITA Castle Discounted Equity Value Analysis Based on EBITA (1) Project Castle VALUATION ANALYSIS 23 Case A + $20MM 11.0x 7.2x 7.2x 7.0x 8.2x Median: 7.2x 0x 3x 6x 9x 12x 15x CY2012E AV / EBITA (x) 2012 EBITA Multiple: 8.2x Source Capital IQ, Thomson Consensus, and Street Research ($ per Share) Forward Cost Savings ($MM) Multiple $10.0 $20.0 $30.0 $40.0 7.0x $20.18 $20.83 $21.49 $22.14 8.0x $22.40 $23.15 $23.90 $24.64 9.0x $24.61 $25.44 $26.27 $27.09 Share Price Impact of Cost Savings |
![]() ($ per Share) Forward Cost Savings ($MM) Multiple $10.0 $20.0 $30.0 $40.0 10.0x $17.89 $18.67 $19.45 $20.22 11.0x $19.68 $20.54 $21.39 $22.24 12.0x $21.47 $22.40 $23.33 $24.27 13.0x $23.26 $24.27 $25.28 $26.29 14.0x $25.05 $26.14 $27.22 $28.31 Share Price Impact of Cost Savings ($MM, Except Per Share Data) CY2012E Estimates CY2013E Estimates Street Case A Sensitivity Case A Case A + 20 Revenue $936.0 $958.9 Revenue $1,003.2 $1,020.6 $1,020.6 Revenue Growth 9.2% 11.8% Revenue Growth 5.5% 6.4% 6.4% EBITA $192.5 $196.7 EBITA $222.7 $227.5 $247.5 % Margin 20.6% 20.5% % Margin 22.2% 22.3% 24.3% Adj. Net Income (2) $139.6 $144.0 Adj. Net Income (2) $162.1 $165.6 $180.6 FDSO (3) 84.9 88.0 FDSO (3) 89.5 89.5 89.5 Adj. EPS (3) $1.65 $1.64 Adj. EPS (3) $1.81 $1.85 $2.02 Forward Future Price Per Share (3) Current Price Per Share (4) Multiple Sensitivity Case A Case A + 20 Sensitivity Case A Case A + 20 9.0 x $16.30 $16.65 $18.16 $15.08 $15.41 $16.80 10.0 $18.11 $18.51 $20.18 $16.76 $17.12 $18.67 11.0 $19.92 $20.36 $22.20 $18.43 $18.83 $20.54 12.0 $21.74 $22.21 $24.22 $20.11 $20.54 $22.40 13.0 $23.55 $24.06 $26.24 $21.78 $22.26 $24.27 14.0 $25.36 $25.91 $28.25 $23.46 $23.97 $26.14 Notes: 1. Street based on consensus estimates as of 2/15/12; Case A as based on Caslte management outlook as of 2/8/12; Sensitivity developed by Castle management based on Case A 2. Net Income reflects additional after-tax interest earnings at 1.0% cost of cash from cash not used in share buyback; Adjusted for tax-affected Smarsh minority interest 3. Assumes 1.5MM net shares added in end of 2012 and 2013 to current fully diluted shares at current stock price 4. Discounted at cost of equity for 0.82 years to 3/7/12 NPV Discounted @ 10.0% Discounted Equity Value - CY2013 EPS $MM, Except Per Share Data Mar. 2012 Dec. 2012 Forward EPS $1.65 $1.85 Forward Multiple 11.8x 12.0x Value Per Share $19.35 $22.21 Discount Rate - 10.0% Discount Period - 0.82 years Current Value per Share $19.35 $20.54 Illustrative Calculation Castle Discounted Equity Value Analysis VALUATION ANALYSIS 24 Based on EPS Project Castle Case A + $20MM 20.0x 11.1x 10.9x 9.9x 11.8x Median: 11.0x 0x 5x 10x 15x 20x 25x CY2012E P/E (x) 2012 P/E: 11.8x Source Capital IQ, Thomson Consensus, and Street Research |
![]() Terminal Discount Rate / Perpetual Growth Rate Tax Rate 11.0% / 1.0% 10.0% / 2.0% 9.0% / 2.0% 25.0% $21.92 $26.12 $29.12 30.0% $21.18 $25.15 $27.99 35.0% $20.43 $24.17 $26.86 40.0% $19.67 $23.20 $25.72 Tax Rate Sensitivity Analysis Discount Perpetual Growth Rate Rate 1.0% 2.0% 3.0% 9.0% 7.2 x 8.6 x 10.5 x 10.0% 6.4 x 7.5 x 9.0 x 11.0% 5.8 x 6.7 x 7.9 x Implied LTM EBITA Exit Multiple Discount Perpetual Growth Rate Rate 1.0% 2.0% 3.0% 9.0% $23.23 $25.72 $28.98 10.0% $21.27 $23.20 $25.68 11.0% $19.67 $21.23 $23.15 Price Per Share ($MM) Calendar Year Ended December (1) Terminal 2011 2012 2013 2014 2015 2016 Value Revenue (1) $857.4 $936.0 $990.2 $1,039.7 $1,081.3 $1,113.8 $1,136.0 % Growth 11.8% 9.2% 5.8% 5.0% 4.0% 3.0% 2.0% Operating Income (1) $168.0 $192.5 $216.5 $236.0 $247.6 $256.2 $261.3 % Margin 19.6% 20.6% 21.9% 22.7% 22.9% 23.0% 23.0% - Stock Compensation (2) ($24.4) ($28.1) ($29.7) ($31.2) ($32.4) ($33.4) ($34.1) % of Revenue 2.8% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% - Taxes (1) ($40.6) ($44.3) ($49.6) ($51.2) ($53.8) ($55.7) ($90.9) % Tax Rate 28.3% 27.0% 26.5% 25.0% 25.0% 25.0% 40.0% After-tax EBIT $103.0 $120.1 $137.3 $153.6 $161.4 $167.1 $136.3 % of Revenue 12.0% 12.8% 13.9% 14.8% 14.9% 15.0% 15.0% + Depreciation and Amortization (1) $7.1 $16.2 $25.7 $23.9 $21.6 $22.5 % of Revenue 0.8% 1.7% 2.6% 2.3% 2.0% 2.0% - Capital Expenditures (1,3) ($25.5) ($18.9) ($20.0) ($20.8) ($21.8) ($22.5) % of Revenue 3.0% 2.0% 2.0% 2.0% 2.0% 2.0% + / - Change in Net Working Capital (1,5) $33.4 $19.1 $27.1 $24.8 $20.8 $16.2 $11.1 % of Change in Revenue (36.9%) (24.3%) (50.0%) (50.0%) (50.0%) (50.0%) (50.0%) Unlevered Free Cash Flow (post SBC) $117.9 $102.4 $170.1 $181.5 $182.0 $183.3 $1,843.3 NPV of UFCF (10.0% Discount Rate) $98.8 $151.0 $146.4 $133.5 $122.2 $1,228.8 Aggregate NPV of UFCFs $1,880.6 + Net Cash (4) $198.6 - Minority Interest ($34.9) Castle Equity Value $2,044.2 Castle Per Share Value $23.20 Notes: 1. Based on Street consensus as of 2/15/12 for 2011, 2012, and 2013; 2014 onwards extrapolated based on 2013 estimates; assumed long-term tax rate in terminal year of 25% 2. Stock compensation expense as a percent of revenue based on management Case A as of 2/8/12 3. 2013 onwards assumes steady state at 2% of sales 4. Based on Castle net cash of $198.6MM as of 3/31/12; no discount for foreign cash 5. Change in net working capital for 2013 based on steady state assumptions for management Case A 6. Captures free cash flow from 3/31/2012 to 12/31/2012 Discounted Cash Flow Discounted Cash Flow Analysis Street Case: As of 3/31/2012 Project Castle VALUATION ANALYSIS 25 11.9x 7.7x 7.4x 7.0x 9.4x Median: 7.5x 0x 3x 6x 9x 12x 15x CY2011A AV / EBITA (x) Source Capital IQ, Thomson Consensus, and Street Research (6) 2012 cash flow includes only Q2-Q4 |
![]() ($MM) Calendar Year Ended December (1) Terminal 2011 2012 2013 2014 2015 2016 Value Revenue (1) $857.4 $958.9 $1,020.6 $1,073.6 $1,124.3 $1,158.0 $1,181.2 % Growth 11.8% 11.8% 6.4% 5.2% 4.7% 3.0% 2.0% Adjusted EBITDA (1,4) $226.3 $238.9 $257.9 $276.1 $297.7 $304.3 % Margin 26.4% 24.9% 25.3% 25.7% 26.5% 26.3% Operating Income (1) $168.0 $196.7 $227.5 $251.6 $273.9 $279.9 $285.5 % Margin 19.6% 20.5% 22.3% 23.4% 24.4% 24.4% 24.4% - Stock Compensation (1) ($24.4) ($28.8) ($30.6) ($32.2) ($33.7) ($34.7) ($35.4) % of Revenue 2.8% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% - Taxes (1) ($30.4) ($42.0) ($49.2) ($54.8) ($60.1) ($61.3) ($100.0) 21.2% 25.0% 25.0% 25.0% 25.0% 25.0% 40.0% After-tax EBIT $113.1 $125.9 $147.7 $164.5 $180.2 $183.9 $150.0 % of Revenue 13.2% 13.1% 14.5% 15.3% 16.0% 15.9% 15.9% + Depreciation and Amortization (1) $15.9 $19.6 $20.4 $21.5 $20.8 $21.4 % of Revenue 1.9% 2.0% 2.0% 2.0% 1.9% 1.9% - Capital Expenditures (2) ($28.7) ($32.0) ($19.0) ($20.0) ($20.8) ($21.4) % of Revenue 3.3% 3.3% 1.9% 1.9% 1.9% 1.9% + / - Change in Net Working Capital (1) $74.2 $64.3 $49.2 $42.0 $25.4 $16.9 $11.6 % of Change in Revenue (82.2%) (63.4%) (79.6%) (79.3%) (50.0%) (50.0%) (50.0%) Unlevered Free Cash Flow (post SBC) $174.6 $139.2 $198.2 $208.0 $205.5 $200.7 $2,020.3 NPV of UFCF (10.0% Discount Rate) $134.3 $175.9 $167.8 $150.7 $133.8 $1,346.8 Aggregate NPV of UFCFs $2,109.4 + Net Cash (3) $198.6 - Minority Interest ($34.9) Castle Equity Value $2,273.0 Castle Per Share Value $25.55 Notes: 1. Case A based on Castle management outlook as of 2/8/12; depreciation for 2013 and beyond extrapolated; assumed long-term terminal year tax rate of 25% 2. 2011 and 2012 Capex includes higher one-time Cork investments 3. Based on Castle net cash of $198.6MM as of 3/31/12; no discount for foreign cash 4. Adjusted EBITDA based on add back of Bakbone deferred revenue, Cork expenses, and estimated public company savings 5. Captures free cash flow from 3/31/2012 to 12/31/2012 Discounted Cash Flow ($ per Share) WACC/PGR/ Cost Savings ($MM) Tax Rate $0.0 $20.0 $40.0 11%/1%/40% $21.73 $22.99 $24.24 10%/2%/40% $25.55 $27.03 $28.51 9%/2%/25% $32.01 $33.98 $35.95 Impact of Cost Savings Terminal Discount Rate / Perpetual Growth Rate Tax Rate 11.0% / 1.0% 10.0% / 2.0% 9.0% / 2.0% 25.0% $24.18 $28.71 $32.01 30.0% $23.36 $27.66 $30.76 35.0% $22.55 $26.61 $29.52 40.0% $21.73 $25.55 $28.27 Tax Rate Sensitivity Analysis Discount Perpetual Growth Rate Rate 1.0% 2.0% 3.0% 9.0% 7.2 x 8.6 x 10.5 x 10.0% 6.4 x 7.6 x 9.0 x 11.0% 5.8 x 6.8 x 7.9 x Implied LTM EBITA Exit Multiple Discount Perpetual Growth Rate Rate 1.0% 2.0% 3.0% 9.0% $25.62 $28.27 $31.80 10.0% $23.46 $25.55 $28.19 11.0% $21.73 $23.39 $25.47 Price Per Share Discounted Cash Flow Analysis Case A: As of 3/31/2012 Project Castle VALUATION ANALYSIS 26 11.9x 7.7x 7.4x 7.0x 9.4x Median: 7.5x 0x 3x 6x 9x 12x 15x CY2011A AV / EBITA (x) Source Capital IQ, Thomson Consensus, and Street Research (5) 2012 cash flow includes only Q2-Q4 Case A + $20MM |
![]() Terminal Discount Rate / Perpetual Growth Rate Tax Rate 11.0% / 0.0% 10.0% / 1.0% 9.0% / 1.0% 25.0% $21.27 $24.76 $27.21 30.0% $20.58 $23.88 $26.19 35.0% $19.87 $22.99 $25.16 40.0% $19.16 $22.10 $24.12 Tax Rate Sensitivity Analysis Discount Perpetual Growth Rate Rate 0.0% 1.0% 2.0% 9.0% 6.1 x 7.2 x 8.6 x 10.0% 5.5 x 6.4 x 7.6 x 11.0% 5.0 x 5.8 x 6.8 x Implied LTM EBITA Exit Multiple Discount Perpetual Growth Rate Rate 0.0% 1.0% 2.0% 9.0% $22.15 $24.12 $26.65 10.0% $20.52 $22.10 $24.07 11.0% $19.16 $20.47 $22.04 Price Per Share ($MM) Calendar Year Ended December (1) Terminal 2011 2012 2013 2014 2015 2016 Value Revenue (1) $857.4 $951.0 $1,003.2 $1,038.8 $1,070.4 $1,091.8 $1,102.7 % Growth 11.8% 10.9% 5.5% 3.6% 3.0% 2.0% 1.0% Adjusted EBITDA (1,4) $226.3 $237.3 $252.8 $265.1 $280.8 $286.4 % Margin 26.4% 25.0% 25.2% 25.5% 26.2% 26.2% Operating Income (1) $168.0 $195.1 $222.7 $241.3 $258.0 $263.2 $265.8 % Margin 19.6% 20.5% 22.2% 23.2% 24.1% 24.1% 24.1% - Stock Compensation (1) ($24.4) ($28.5) ($30.1) ($31.2) ($32.1) ($32.8) ($33.1) % of Revenue 2.8% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% - Taxes (1) ($30.4) ($41.6) ($48.2) ($52.5) ($56.5) ($57.6) ($93.1) % Tax Rate 21.2% 25.0% 25.0% 25.0% 25.0% 25.0% 40.0% After-tax EBIT $113.1 $124.9 $144.5 $157.6 $169.4 $172.8 $139.6 % of Revenue 13.2% 13.1% 14.4% 15.2% 15.8% 15.8% 15.8% + Depreciation and Amortization (1) $15.9 $19.6 $20.1 $20.8 $19.8 $20.2 % of Revenue 1.9% 2.1% 2.0% 2.0% 1.9% 1.9% - Capital Expenditures (2) ($28.7) ($32.0) ($19.0) ($20.0) ($19.8) ($20.2) % of Revenue 3.3% 3.4% 1.9% 1.9% 1.9% 1.9% + / - Change in Net Working Capital (1) $74.2 $59.4 $41.5 $28.3 $15.8 $10.7 $5.5 % of Change in Revenue (82.2%) (63.4%) (79.6%) (79.3%) (50.0%) (50.0%) (50.0%) Unlevered Free Cash Flow (post SBC) $174.6 $128.9 $187.1 $186.7 $185.2 $183.5 $1,612.2 NPV of UFCF (10.0% Discount Rate) $124.3 $166.0 $150.6 $135.8 $122.3 $1,074.7 Aggregate NPV of UFCFs $1,773.9 + Net Cash (3) $198.6 - Minority Interest ($34.9) Castle Equity Value $1,937.5 Castle Per Share Value $22.10 Notes: 1. Sensitivity developed bt Castle management based on Case A; depreciation for 2013 and beyond extrapolated; assumed long-term terminal year tax rate of 25% 2. 2011 and 2012 Capex includes higher one-time Cork investments 3. Based on Castle net cash of $198.6MM as of 3/31/12 4. Adjusted EBITDA based on add back of Bakbone deferred revenue, Cork expenses, and estimated public company savings 5. Captures free cash flow from 3/31/2012 to 12/31/2012 Discounted Cash Flow Discounted Cash Flow Analysis Sensitivity Case: As of 3/31/2012 Project Castle VALUATION ANALYSIS 27 11.9x 7.7x 7.4x 7.0x 9.4x Median: 7.5x 0x 3x 6x 9x 12x 15x CY2011A AV / EBITA (x) Source Capital IQ, Thomson Consensus, and Street Research (5) 2012 cash flow includes only Q2-Q4 |
![]() $MM, Unless Otherwise Noted As of 3/7/2012 Market Total Debt / Total Predicted Predicted Implied Ke (RFR=3.9%) (1) Implied Ke (RFR=2.0%) (1) Software Capitalization Debt Capitalization Equity Beta Asset Beta (4% MRP) (6% MRP) (4% MRP) (6% MRP) BMC 5,913 337 5.4% 1.093 1.046 8.3% 10.5% 6.3% 8.5% CA 9,795 1,310 11.8% 1.056 0.969 8.1% 10.2% 6.2% 8.3% Compuware 1,698 126 6.9% 1.214 1.151 8.8% 11.2% 6.8% 9.2% Symantec 11,577 2,012 14.8% 1.015 0.891 8.0% 10.0% 6.0% 8.1% Mean 9.7% 1.095 1.014 8.3% 10.5% 6.4% 8.6% Median 9.3% 1.075 1.007 8.2% 10.3% 6.3% 8.5% Castle $1,433 $33 2.2% 1.158 1.142 8.5% 10.8% 6.6% 8.9% Comparable Company Analysis PGR Implied WACC 0% 8.7% 1% 9.8% 2% 10.9% 3% 11.9% 4% 13.0% WACC Analysis Based on Comparable Company Analysis Project Castle VALUATION ANALYSIS 28 ÷ ø ö ç è æ - + = growth WACC growth) NTM uFCF AggValue 1 ( Implied WACC = 10.9% 2% $1,571.7MM WACC ) 2% $136.5MM 1 ( Market-Based Implied WACC (2,3) growth AggValue growth) NTM uFCF WACC + + = ÷ ø ö ç è æ 1 ( As of 3/7/2012 Metric Low High Notes Risk Free Rate 2.0% - 3.9% Low based on spot rate of 1.96%; High based on 10 year avg of 10-Yr UST Equity Risk Premium 4.0% - 6.0% Morgan Stanley estimated range Relevered Beta 1.031 - 1.031 Relevered based on Mean Asset Beta of Comparables Size Risk Premium 1.5% - 1.5% Ibbotson size / liquidity premium Cost of Equity Range 7.6% - 11.6% CAPM Debt / Total Capitalization 2.2% - 2.2% Assumed based on current capital structure Pre-tax Cost of Debt (K D ) 5.5% - 5.5% Assumption for Castle's cost of debt Weighted Average Cost of Capital (WACC) (2) 7.5% - 11.4% KE * E/(D+E) + KD * (1-t) * D/(D+E) CAPM Cost of Capital Calculation Source Capital IQ, Barra Predicted Beta; Company Filings Notes 1. Implied cost of equity range derived from 10 year average rate of UST-10yr (3.90%) and low spot rate of 2.00% 2. Based on 25% tax rate 3. Based on Street consensus as of 2/15/2012. Castle Aggregate Value of $1,571MM at $19.34 per share |
![]() LBO Sensitivity Analysis Project Castle VALUATION ANALYSIS 29 Notes 1. Case A based on Castle management outlook as of 2/8/2012 As of 3/31/2012; Case A (1) > 20% IRR Purchase Price & Exit Multiple Purchase Price & Leverage Multiple Assumes $1.19Bn of Debt Financing at implied 5.0x Leverage Assumes Exit Multiple Equal to Entry LTM Exit EBITDA Multiple Total Leverage 24.1% 7.0x 8.0x 8.2x 9.0x 10.0x 24.1% 4.0x 4.5x 5.0x 5.5x 6.0x $20.00 30.8% 34.8% 35.6% 38.4% 41.7% $20.00 25.1% 27.5% 30.5% 34.7% 41.0% $21.00 26.4% 30.3% 31.1% 33.8% 37.0% $21.00 23.5% 25.5% 27.9% 31.2% 35.6% $22.00 22.8% 26.6% 27.3% 30.0% 33.1% $22.00 22.2% 23.8% 25.8% 28.4% 31.8% $23.00 19.6% 23.3% 24.1% 26.7% 29.7% $23.00 21.1% 22.4% 24.1% 26.2% 28.9% $24.00 16.9% 20.5% 21.3% 23.8% 26.7% $24.00 20.1% 21.3% 22.7% 24.4% 26.6% $25.00 14.5% 18.1% 18.8% 21.2% 24.1% $25.00 19.2% 20.3% 21.5% 23.0% 24.8% Purchase Price & Annual Cost Savings (EBIT Improvement) Purchase Price & Additional Cash at Closing Assumes 50% Cost Savings in 2012; 100% Thereafter; Exit Multiple Equal to Entry Assumes initial cash of $302.5 at closing; Exit Multiple Equal to Entry Annual Cost Savings Additional Cash at Closing 24.1% $0 $10 $20 $30 $40 24.1% $0 $10 $20 $30 $40 $20.00 30.5% 31.9% 33.3% 34.6% 35.9% $20.00 30.5% 31.0% 31.5% 32.0% 32.6% $21.00 27.9% 29.3% 30.6% 31.8% 33.1% $21.00 27.9% 28.3% 28.7% 29.2% 29.6% $22.00 25.8% 27.1% 28.4% 29.6% 30.8% $22.00 25.8% 26.2% 26.5% 26.9% 27.3% $23.00 24.1% 25.4% 26.6% 27.8% 28.9% $23.00 24.1% 24.4% 24.7% 25.1% 25.4% $24.00 22.7% 23.9% 25.1% 26.3% 27.4% $24.00 22.7% 23.0% 23.2% 23.5% 23.8% $25.00 21.5% 22.7% 23.8% 25.0% 26.0% $25.00 21.5% 21.7% 22.0% 22.2% 22.5% Price Price Price Price |
![]() 67% 64% 63% 55% 54% 51% 48% 47% 45% 43% 40% 38% 38% 38% 36% 34% 33% 31% 30% 29% 28% 25% 16% 14% 12% 10% 7% 70% 73% 75% 76% 104% 236% 36% 54% 53% 52% 51% 20% 19% 23% 23% 23% 24% 24% 0 50 100 150 200 250 3PAR/HPCompellent/Motorola / GoogleDemandTecNetlogic / BroadcomNational (9/10; $2,349MM) Dell (12/10;$11,935MM) (12/11; $955MM) (8/11; / IBM $509MM) (9/11; $3,467MM) Semi/ TI (4/11; $6,400MM) Verigy/ Advantest (3/11; $1,132MM)$1,710MM)$1,237MM) Netezza/ IBM (9/10; ADC/Autonomy / HPArcSight/SuccessFactorsMcAfee/Terremark / VerizonIsilon/Blue Coat Systems Zarlink / MicrosemiGSI Tyco (7/10; (8/11; $11,037MM) HP (9/10; $1,749MM)$3,748MM)$7,677MM) / SAP (12/11; Intel (8/10; (1/11; $1,281MM) EMC (11/10; $2,587MM)$1,279MM) / Thoma Bravo(7/11; (12/11; $521MM) Commerce/ eBay (3/11; $2,419MM) Sybase/ SAP (5/10; $6,383MM)$1,033MM)$1,972MM) ATG/ Oracle (11/10; CyberSource/Varian/ Visa (4/10; Applied Materials (5/11; $4,973MM) Radiant/ NCR (7/11; $1,243MM)$594MM) Actel/Internet Brands / H&FPhase Microsemi (10/10; (9/10; $625MM) Forward/ Oracle (4/10; $788MM) Syniverse / Carlyle (10/10; $2,212MM) Interactive Data / Investor Group L-1 IdentityAtheros/ (5/10; $3,245MM) Safran SA Solutions/QualcommAttachmate (9/10; $1,587MM) (1/11; $3,545MM)$2,207MM) Novell/ (11/10; Dionex/RightNow / Thermo Fisher (12/10; $2,155MM) Oracle (10/11; $1,800MM) SMART/ Silver Lake (4/11; $645MM) Blackboard/ Providence (7/11; $1,640MM)$2,056MM)$1,023MM)$3,383MM)$802MM) Taleo / Oracle (2/12; Stanley/ CGI GroupData/NTT (5/10; Dimension (7/10; Epicor/ Apax (4/11; SonicWALL / Investor Group Cogent / 3MLawson/ (6/10; $718MM) $934MM) (8/10; Infor (Golden Gate) (3/11; $1,958MM) Castle / Icicle @ $23.00 Palm/ HP (4/10; $962MM) SkillSoft/ Investor Group (2/10; $1,067MM) 30-Day Average (%) 39% 34% 33% 31% 30% 30% 30% 29% 18% 14% 13% 11% 11% 63% 64% 64% 76% 85% 242% 32% 54% 54% 51% 48% 48% 47% 46% 57% 56% 55% 57% 60% 21% 22% 21% 20% 19% 24% 27% 28% 46% 44% 40% 18% 18% 0 50 100 150 200 250 300 3PAR/HPCompellent/ (9/10; $2,349MM) Dell (12/10; $955MM) National Semi/ TI (4/11; $6,400MM) Verigy/Autonomy / HPMotorola / GoogleMcAfee/Netlogic / BroadcomDemandTecSybase/ Advantest (3/11; $1,132MM) (8/11; $11,037MM) $11,935MM) (8/11; Intel (8/10; $7,677MM) (9/11; $3,467MM) / IBM (12/11; $509MM)$6,383MM) SAP (5/10; Varian / Applied Materials (5/11; $4,973MM) ArcSight/SuccessFactorsGSI HP (9/10; $1,749MM)$3,748MM) / SAP (12/11; Commerce/ eBay (3/11; $2,419MM) Palm/Blue Coat Systems Internet Brands / H&FATG/ HP (4/10; $962MM)$1,279MM) / Thoma Bravo(9/10; (12/11; $625MM) Oracle (11/10; $1,033MM)$2,587MM)$1,237MM) Isilon/ EMC (11/10; ADC/Zarlink / MicrosemiTerremark / VerizonCyberSource/Interactive Data / Investor Group SonicWALL /Radiant / Tyco (7/10; (7/11; $521MM) $1,281MM) (1/11; Visa (4/10; $1,972MM) (5/10;Investor GroupNCR (7/11;Microsemi $3,245MM) (6/10; $802MM) $1,243MM) Actel/ (10/10; $594MM) Phase Forward/Technologies/ Oracle (4/10; $788MM)$2,212MM)$1,023MM) Syniverse Carlyle (10/10; Stanley/ CGI Group (5/10; Novell/ Attachmate (11/10; $2,207MM)$1,710MM) Netezza/ IBM (9/10; L-1 IdentityAtheros/Blackboard / ProvidenceDionex/ Solutions/Qualcomm Safran SA (9/10; $1,587MM) (1/11; $3,545MM) (7/11; $1,585MM) Thermo Fisher (12/10; $2,155MM) RightNow / Castle @ 23 Oracle (10/11; $1,800MM) Taleo / Oracle (2/12; $2,056MM)$3,383MM) DimensionCogent / 3MLawson/ Data/NTT (7/10; (8/10; $934MM) Infor (Golden Gate) (3/11; $1,958MM) SMART /Silver Lake (4/11; $645MM)$1,069MM) SkillSoft/ Investor Group (2/10; Epicor/ Apax (4/11; $802MM) 1-Day Prior (%) VALUATION ANALYSIS 30 Precedent Premiums – Technology Transactions 2010 to Present; Selected All Cash Transactions; >$500MM Equity Value Note 1. Verigy unaffected price prior to disclosure of Advantest’s original offer 2. Isilon unaffected price prior to acquisition rumors 3. Netezza unaffected price prior to acquisition rumors 4. ArcSight unaffected price prior to acquisition rumors 5. 3Par unaffected price prior to Dell’s offer Source Morgan Stanley Technology M&A Database Project Castle Interactive Data/ Investor Group (5/10; $3,363MM) Compellent/ Dell (12/10; $955MM) Verigy/ Advantest (3/11; $1,132MM) Motorola/ Google (8/11; $11,935MM) Netlogic/ Broadcom (9/11; $3,467MM) Varian /Applied Materials (5/11; $4,973MM) GSI Commerce/ eBay (3/11; $2,419MM) Internet Brands/ H&F (9/10; $625MM) Isilon/ EMC (11/10; $2,587MM) Zarlink/ Microsemi (7/11; $521MM) CyberSource /Visa (4/10; $1,972MM) 3PAR/ HP (9/10; $2,349MM) ADC/ Tyco (7/10; $1,237MM) ATG/ Oracle (11/10; $1,033MM) Palm/ HP (4/10; $962MM) ArcSight/ HP (9/10; $1,749MM) Sybase/ SAP (5/10; $6,383MM) McAfee/ Intel (8/10; $7,680MM) Dionex/ Thermo Fisher (12/10; $2,155MM) Radiant/ NCR (7/11; $1,243MM) Phase Forward/ Oracle (4/10; $788MM) Stanley/ CGI Group (5/10; $1,023MM) Netezza/ IBM (9/10; $1,710MM) Atheros/ Qualcomm (1/11; $3,545MM) Dimension Data/NTT (7/10; $3,383MM) Lawson /Infor (GoldenGate) (3/11; $1,958MM) Terremark/ Verizon (1/11; $1,281MM) Autonomy/ HP (8/11; $11,037MM) National Semi/TI (4/11; $6,400MM) Cogent/ 3M (8/10; $934MM) L-1 Identity Solutions/ Safran SA (9/10; $1,587MM) Novell/ Attachmate (11/10; $2,207MM) Syniverse Technologies/ Carlyle (10/10; $2,212MM) Actel/ Microsemi (10/10; $594MM) Blackboard/ Providence (7/11; $1,585MM) Epicor/ Apax (4/11; $802MM) RightNow / Oracle (10/11; $1,800MM) Syniverse / Carlyle (10/10; $2,212MM) Actel/ Microsemi (10/10; $594MM) ATG/ Oracle (11/10; $1,033MM) Isilon/ EMC (11/10; $2,587MM) McAfee/ Intel (8/10; $7,680MM) ADC/ Tyco (7/10; $1,237MM) 3PAR/ HP (9/10; $2,349MM) Varian/ Applied Materials (5/11; $4,973MM) GSI Commerce/e Bay (3/11; $2,419MM) Verigy/ Advantest (3/11; $1,132MM) National Semi/ TI (4/11; $6,400MM) Motorola/ Google (8/11; $11,935MM) Interactive Data/ Investor Group (5/10; $3,245MM) Internet Brands /H&F (9/10; $625MM) Cyber Source/ Visa (4/10; $1,972MM) Sybase/ SAP (5/10; $6,383MM) Netezza/ IBM (9/10; $1,710MM) Compellent/ Dell (12/10; $955MM) Radiant/ NCR (7/11; $1,243MM) Zarlink/ Microsemi (7/11; $521MM) Terremark/ Verizon (1/11; $1,281MM) Autonomy/ HP (8/11; $11,037MM) Netlogic/ Broadcom (9/11; $3,467MM) SkillSoft/ Investor Group (2/10; $1,067MM) Blackboard/ Providence (7/11; $1,585M) Stanley/ CGI Group (5/10; $1,023MM) Dionex/ Thermo Fisher (12/10; $2,155MM) Lawson/ Infor (Golden Gate) (3/11; $1,958MM) Epicor/ Apax (4/11; $802MM) Atheros/ Qualcomm (1/11; $3,545MM) RightNow / Oracle (10/11; $1,800MM) SonicWALL / Investor Group (6/10; $718MM) Cogent/ 3M (8/10; $934MM) Dimension Data/NTT (7/10; $3,383MM) Novell/ Attachmate (11/10; $2,207MM) L-1 Identity Solutions/ Safran SA (9/10; $1,587MM) SMART/ Silver Lake (4/11; $645MM) Palm/ HP (4/10; $962MM) SonicWALL / Investor Group (6/10; $718MM) Phase Forward/ Oracle (4/10; $788MM) ArcSight/ HP (9/10; $1,749MM) 6. Lawson unaffected price prior to acquisition rumors 7. Blackboard unaffected price prior to review of strategic alternatives 8. IDC unaffected price prior to rumors of PE firms bidding for the business 9. Novell unaffected price prior to offer by Elliott Associates 10. Summary statistics and median line exclude Castle Blue Coat Systems/ Thoma Bravo (12/11; $1,279MM) Success Factors / SAP (12/11; $3,748MM) DemandTec / IBM (12/11; $509MM) Success Factors / SAP (12/11; $3,748MM) DemandTec / IBM (12/11; $509MM) Blue Coat Systems/ Thoma Bravo (12/11; $1,279MM) Castle Financial Sponsor Buyer Castle / Icicle (3/12; $2,025MM) SkillSoft/ Investor Group (2/10; $1,067MM) SMART/ SilverLake (4/11; $645MM) Castle / Icicle (3/12; $2,025MM) Taleo / Oracle (2/12; $2,056MM) Premia to 1-Day Prior Summary Statistics Overall LBO Min 11.0% 11.0% Bottom Quartile 23.5% 13.5% Median 36.3% 28.0% Top Quartile 54.3% 32.5% Max 242.0% 48.0% Taleo / Oracle (2/12; $2,056MM) Premia to 30-Day Average Summary Statistics Overall LBO Min 7.0% 7.0% Bottom Quartile 24.8% 19.5% Median 38.0% 24.0% Top Quartile 54.0% 33.5% Max 236.0% 51.0% |
![]() 54.9% 41.2% 34.8% 27.3% 26.5% 23.3% 22.5% 20.8% 20.6% 17.8% 16.1% 14.5% 13.8% 13.6% 11.9% 11.8% 10.3% 8.8% 8.7% 7.8% 7.7% 7.1% 5.5% 5.3% 3.2% 2.5% 0.6% 0.0% (6.9%) 4.2% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% RightNow / Oracle (10/11; $1,800MM) Sybase / SAP (05/10; $6,383MM) Success Factors / SAP (12/11; $3,748MM) ATG / Oracle (11/10; $1,033MM) Autonomy /Fast Search & HP (08/11; $11,700MM) Transfer / Microsoft (01/08; $1,218MM) SkillSoft / Investor Group ArcSight / HP (09/10; $1,749MM) IDC / Investor Group (05/10; $3,363MM) Omniture / Adobe (09/09; (02/12; 1940MM) $1,833MM) Taleo / Oracle Sonic / Rovi (12/10; $772MM) Phase Forward / Oracle (04/10; $788MM) SonicWALL /Interwoven / Investor Group (06/10; $718MM) Autonomy Corporation (01/09; $775MM) Castle Street 2012 Lawson / Infor (Golden Gate) (03/11; $1,958MM) DemandTec / Wind River IBM (12/11; $509MM) Systems / Intel (06/09; $909MM) Eclipsys / Allscripts - Misys (06/10; $1,445MM) Epicor / Apax (04/11; $802MM) Blackboard / Providence Equity (07/11; $1,585MM) Novell / Attachmate (11/10; $2,175MM) Castle Organic 2012 McAfee / Intel (08/10; $7,680MM) SPSS / IBM (07/09; $1,158MM) Radiant Systems / NCR (07/11; $1,168MM) Blue Coat Systems / Thoma Bravo (12/11; $1,279MM) S1 Corp / ACI Worldwide (07/11; $508MM) Sun / Oracle (04/09; $7,369MM) Comparative Growth Analysis (%) VALUATION ANALYSIS 31 Precedent Transactions - Revenue Growth (1) Software Transactions: 2008 to Present; >$500MM Equity Value Source Morgan Stanley Technology M&A Database Project Castle Notes 1. NTM Revenue growth prior to transaction announcement per Street Research 2. Castle 2012 total growth based on street estimates. Castle 2012 organic growth based on Castle management Case A as of 2/8/12 3. Summary statistics and median line exclude Castle (2) (2) Financial Sponsor Buyer Castle NTM AV / Revenue Summary Statistics Overall LBO Min (6.9%) 0.6% Bottom Quartile 6.7% 6.7% Median 12.8% 9.0% Top Quartile 21.2% 15.4% Max 54.9% 22.5% |
![]() 10.7x 10.2x 10.2x 10.1x 10.0x 9.7x 8.3x 5.3x N.M. N.M. 18.2x 17.7x 15.5x 15.5x 16.2x 10.8x 10.9x 11.3x 11.5x 11.7x 12.6x 12.9x 9.3x 41.1x 37.9x 33.7x 26.8x 25.4x 20.2x 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x 45.0x Fast Search &RightNow / Transfer / Microsoft (01/08; $1,218MM) Oracle (10/11; $1,800MM) ArcSight / HP (09/10; $1,749MM) Taleo / Oracle (02/12; $1,940MM) Sonic / Rovi (12/10; $772MM) Omniture / Adobe (09/09; $1,833MM) Radiant Systems / NCR (07/11; $1,168MM) Autonomy / HP (08/11; $11,700MM) ATG / Oracle (11/10; $1,033MM) Eclipsys / Allscripts - Misys (06/10; $1,445MM) S1 Corp / ACI Worldwide (07/11; $508MM) Sybase / SAP (05/10; $6,383MM) Blackboard / Providence Equity (07/11; $1,585MM) Epicor / Apax (04/11; $802MM) Wind River Systems / Intel (06/09; $909MM) McAfee / Intel (08/10; $7,680MM) SPSS / IBM (07/09; $1,158MM) IDC / Investor Group (05/10; $3,363MM) SonicWALL / Investor Group (06/10; $718MM) Phase Forward / Oracle (04/10; $788MM) Lawson / Infor (Golden Gate) (03/11; $1,958MM) Blue Coat Systems / Thoma Bravo (12/11; $1,279MM) Castle / Icicle (03/12; $2,025MM) Sun / Oracle (04/09; $7,369MM) SkillSoft / Investor Group (02/10; $1,067MM) Interwoven / Autonomy Corporation (01/09; $775MM) Novell / Attachmate (11/10; $2,175MM) DemandTec / IBM (12/11; $509MM) Success Factors / SAP (12/11; $3,748MM) NTM AV / EBITDA (x) 11.0x N.M. N.M. N.M. N.M. 8.1x 8.8x 9.4x 20.8x 20.7x 15.4x 16.6x 19.2x 11.0x 11.4x 11.9x 12.9x 12.9x 13.0x 14.5x N.M. 42.5x 35.8x 31.0x 28.9x 23.8x 22.8x 10.7x 9.8x 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x 45.0x ArcSight / HP (09/10; $1749.2MM) S1 Corp / ACI Worldwide (07/11; $507.7MM) Oracle / Taleo (02/12; $1940MM) Omniture / Adobe (09/09; $1833.0MM)$11700.0MM)$1033.0MM) Autonomy / HP (08/11; ATG / Oracle (11/10; Wind River Systems / Intel (06/09; $908.6MM) Radiant Systems / NCR (07/11; $1168.2MM) Eclipsys / Allscripts - Misys (06/10; $1444.6MM) SonicWALL / Investor Group (06/10; $718.0MM) Blackboard / Providence Equity (07/11; $1585.4MM) Sybase / SAP (05/10; $6382.8MM) Epicor / Apax (04/11; $2000.0MM) Sun / Oracle (04/09; $7369.2MM) Lawson / Infor (Golden Gate) (03/11; $1958.1MM) McAfee / Intel (08/10; $7680.0MM) Castle / Icicle (3/12; $2,025MM) IDC / Investor Group (05/10; $3362.7MM) Phase Forward / Oracle (04/10; $788.4MM) Interwoven / Autonomy Corporation (01/09; $775.0MM) SPSS / IBM (07/09; $1157.5MM) Blue Coat Systems / Thoma Bravo (12/11; $1,279MM) SkillSoft / Investor Group (02/10; $1067.5MM) Novell / Attachmate (11/10; $2175.4MM) Success Factors / SAP (12/11; $3,748MM) RightNow / Oracle (10/11; $1800.0MM) Fast Search DemandTec / & Transfer / Microsoft (01/08; $1218.5MM) IBM (12/11; $509MM) Sonic / Rovi (12/10; $772.2MM) LTM AV / EBITDA (x) VALUATION ANALYSIS 32 Precedent Multiples – Software Transactions 2008 to Present; >$500MM Equity Value Source Morgan Stanley Technology M&A Database Project Castle Financial Sponsor Buyer Castle Notes 1. Castle and precedent NTM EBITDA based on street estimates 2. Summary statistics and median line exclude Castle LTM AV / EBITDA Summary Statistics Overall LBO Min 8.1x 8.1x Bottom Quartile 11.0x 9.7x Median 14.5x 11.5x Top Quartile 21.8x 13.0x Max 42.5x 16.6x NTM AV / EBITDA Summary Statistics Overall LBO Min 5.3x 5.3x Bottom Quartile 10.3x 9.9x Median 12.2x 10.5x Top Quartile 18.1x 11.0x Max 41.1x 12.6x |
![]() N.M. 19.3x 17.4x N.M. N.M. N.M. 13.8x 40.3x 36.3x 28.7x 31.7x 33.4x 19.6x 21.2x 22.1x 23.4x 24.8x 26.6x 27.0x N.M. 81.9x 65.2x 58.1x 54.6x 43.5x 42.0x N.M. N.M. N.M. 0.0x 15.0x 30.0x 45.0x 60.0x 75.0x 90.0x Wind River Systems / Intel (06/09; $909MM) ArcSight / HP (09/10; $1,749MM) Omniture / Adobe (09/09; $1,833MM) RightNow / Oracle (10/11; $1,800MM) Taleo / Oracle (02/12; $1940MM) Radiant Systems / NCR (07/11; $1,168MM) SonicWALL / Investor Group (06/10; $718MM) Sybase / SAP (05/10; $6,383MM) Autonomy / HP (08/11; $11,700MM) ATG / Oracle (11/10; $1,033MM) Blue Coat Systems / Thoma Bravo (12/11; $1,279MM) SPSS / IBM (07/09; $1,158MM) Blackboard / Providence Equity (07/11; $1,585MM) Lawson / Infor (Golden Gate) (03/11; $1,958MM) IDC / Investor Group (05/10; $3,363MM) Interwoven / Autonomy Corporation (01/09; $775MM) Epicor / Apax (04/11; $802MM) Novell / Attachmate (11/10; $2,175MM) McAfee / Intel (08/10; $7,680MM) Castle / Icicle (03/12; $2,025MM) SkillSoft / Investor Group (02/10; $1,067MM) Eclipsys / Allscripts - Misys (06/10; $1,445MM) Fast Search & Transfer / Microsoft (01/08; $1,218MM) Phase Forward / Oracle (04/10; $788MM) S1 Corp / ACI Worldwide (07/11; $508MM) Sonic / Rovi (12/10; $772MM) Sun / Oracle (04/09; $7,369MM) Success Factors / SAP (12/11; $3,748MM) DemandTec / IBM (12/11; $509MM) LTM P/E (x) LTM P/E Summary Statistics Overall LBO Min 13.8x 13.8x Bottom Quartile 22.1x 20.8x Median 28.7x 24.1x Top Quartile 42.0x 27.2x Max 81.9x 40.3x N.M. 17.7x N.M. N.M. N.M. 17.5x N.M. 14.0x 14.2x 17.2x 30.5x 29.7x 26.5x 27.1x 27.4x 18.7x 19.1x 22.0x 22.4x 23.4x 24.8x 26.1x N.M. 63.8x 51.6x 46.0x 41.1x 39.2x 36.2x 0.0x 10.0x 20.0x 30.0x 40.0x 50.0x 60.0x 70.0x Eclipsys / Allscripts - Misys (06/10; $1,445MM) RightNow / Oracle (10/11; $18,000MM) Sonic / Rovi (12/10; $772MM) S1 Corp / ACI Worldwide (07/11; $508MM) Taleo / Oracle (02/12; $1,940MM) Omniture / Adobe (09/09; $1,833MM) SPSS / IBM (07/09; $1,158MM) Autonomy / HP (08/11; $11,700MM) Radiant Systems / NCR (07/11; $1,168MM) Sybase / SAP (05/10; $6,383MM) SonicWALL / Investor Group (06/10; $718MM) Blue Coat Systems / Thoma Bravo (12/11; $1,279MM) ATG / Oracle (11/10; $1,033MM) IDC / Investor Group (05/10; $3,363MM) Blackboard / Providence Equity (07/11; $1,585MM) Novell / Attachmate (11/10; $2,175MM) Lawson / Infor (Golden Gate) (03/11; $1,958MM) Wind River Systems / Intel (06/09; $909MM) McAfee / Intel (08/10; $7,680MM) Epicor / Apax (04/11; $802MM) Interwoven / Autonomy Corporation (01/09; $775MM) SkillSoft / Investor Group (02/10; $1,067MM) Castle / Icicle (02/12; $2,025MM) ArcSight / HP (09/10; $1,749MM) Fast Search & Transfer / Microsoft (01/08; $1,218MM) Phase Forward / Oracle (04/10; $788MM) Sun / Oracle (04/09; $7,369MM) Success Factors / SAP (12/11; $3,748MM) DemandTec / IBM (12/11; $509MM) NTM P/E (x) VALUATION ANALYSIS 33 Precedent Multiples – Software Transactions 2008 to Present; >$500MM Equity Value Source Morgan Stanley Technology M&A Database Project Castle Financial Sponsor Buyer Castle Notes 1. Castle and precedent NTM P/E based on street estimates 2. Summary statistics and median line exclude Castle NTM P/E Summary Statistics Overall LBO Min 14.2x 14.2x Bottom Quartile 19.9x 18.7x Median 26.3x 22.2x Top Quartile 34.8x 24.1x Max 63.8x 26.5x |
![]() 12.6x 12.1x 11.7x 11.4x 10.9x 10.8x 10.2x 10.2x 10.1x 9.7x 9.7x 9.6x 9.4x 9.3x 9.2x 9.2x 9.0x 9.0x 8.4x 8.3x 5.3x 5.3x N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 6.3x 6.4x 6.8x 7.0x 7.8x 8.0x 8.0x 0.0x 5.0x 10.0x 15.0x NTM AV/EBITDA (x) Blackboard Providence (06/11; $2.1Bn) Epicor Apax (04/11; $2.0Bn) Lawson Golden Gate (04/11; $2.4Bn) Tomkins CPP (07/10; $4.7Bn) Immucor TPG (07/11; $1.8Bn) PPD Carlyle (10/11; $3.9Bn) Skillsoft Berkshire (02/10; $1.2Bn) Syniverse Carlyle (10/10; $2.7Bn) Dynegy Blackstone (08/10; $4.7Bn) SRA Providence (04/11; $1.7Bn) Emdeon Blackstone (08/11; $3.0Bn) J.Crew TPG (11/10; $2.8Bn) EMSC CD&R (02/11; $3.2Bn) Kinetic Apax (07/11; $6.5Bn) Del Monte KKR (11/10; $5.7Bn) Comm Scope Carlyle (10/10; $4.3Bn) NBTY Carlyle (07/10; $3.8Bn) Novell Attachmate (11/10; $1.2Bn) InventivTH Lee (05/10; $1.2Bn) 99c Only Leonard Green (03/11; $1.3Bn) Gymboree Bain (10/10; $1.8Bn) Jo-Ann Leonard Green (12/10; $1.6Bn) BJ’s Leonard Green (06/11; $2.4Bn) CKE Apollo (04/10; $1.0Bn) DynCorp Cerberus (04/10; $1.5Bn) RCNA BRY (03/10; $1.2Bn) GoDaddy KKR (07/11; $2.4Bn) Academy KKR (05/11; $2.4Bn) Vertafore TPG (06/10; $1.4Bn) IDC Warburg Pincus (05/10; $3.2Bn) American Tire / TPG (04/10; $1.3Bn) Capsugel KKR (04/11; $2.4Bn) Sedgwick H&F (04/10; $1.1Bn) Advantage Apax (11/10; $1.8Bn) Acosta TH Lee (01/11; $2.0Bn) Multiplan Silver Lake (07/10; $3.1Bn) Husky Berkshire (05/11; $2.2Bn) Air Medical Bain (08/10; $1.0Bn) BK3G (09/10; $4.0Bn) Bumble Bee Lion (11/10; $1.0Bn) Michael GS (05/10; $1.7Bn) Ashland TPG (11/10; $1.0Bn) Arizona American (09/10; $0.8Bn) Styron Bain (03/10; $1.6Bn) VALUATION ANALYSIS 34 Precedent Multiples – LBO Transactions 2010 to Present; >$1Bn Equity Value Project Castle Source Morgan Stanley Technology M&A Database; Morgan Stanley Leverage Finance M&A Database 15.4x 12.9x 11.7x 11.6x 11.3x 11.0x 10.8x 10.5x 9.6x 9.4x 9.3x 9.1x 9.0x 8.9x 8.8x 8.5x 8.3x 5.5x 13.5x 13.0x 11.7x 11.4x 11.0x 10.8x 10.6x 9.7x 9.4x 9.4x 9.2x 9.0x 8.3x 8.1x 8.0x 8.0x 7.9x 7.7x 7.7x 7.4x 7.3x 7.2x 7.0x 6.2x 6.1x 6.1x 6.0x 5.9x 5.8x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x LTM AV/EBITDA (x) GoDaddy KKR (07/11; $2.4Bn) Academy Sports KKR (05/11; $2.4Bn) Vertafore TPG (06/10; $1.4Bn) IDC Silver Lake (05/10; $3.2Bn) American Tire/TPG (04/10; $1.3Bn) Syniverse Carlyle (10/10; $2.7Bn) Sedgwick Claims/H&F (04/10; $1.1Bn) Acosta TH Lee (01/11; $2.0Bn) Lawson Golden (04/11; $2.4Bn) Air Medical Bain (08/10; $1.0Bn) Del Monte KKR (11/10; $5.7Bn) J.Crew TPG (11/10; $2.8Bn) SRA Providence (04/11; $1.7Bn) Comm Scope Carlyle (10/10; $4.3Bn) NBTY Carlyle (07/10; $3.8Bn) Michael GS (05/10; $1.7Bn) Inventiv TH Lee (05/10; $1.2Bn) Tomkins CPP (07/10; $4.7Bn) Jo-Ann Leonard Green (12/10; $1.6Bn) DynCorp Cerberus (04/10; $1.5Bn) CKE Apollo` (0`4/10; $1.0Bn) Styron Bain (03/10; $1.6Bn) PPD Carlyle (10/11; $3.9Bn) Blackboard Providence (06/11; $2.1Bn) Immucor TPG (07/11; $1.8Bn) Epicor Apax (04/11; $2.0Bn) Capsugel KKR (04/11; $2.4Bn) Emdeon Blackstone (08/11; $3.0Bn) Skillsoft Berkshire (02/10; $1.2Bn) Advantage Apax (11/10; $1.8Bn) Multiplan Silver Lake (07/10; $3.1Bn) Husky Berkshire (05/11; $2.2Bn) BK 3G (09/10; $4.0Bn) 99c Only Leonard Green (03/11; $1.3Bn) EMSC CD&R (02/11; $3.2Bn) Kinetic Apax (07/11; $6.5Bn) Bumble BeeLion (11/10; $1.0Bn) Ashland TPG (11/10; $1.0Bn) Gymboree Bain (10/10; $1.8Bn) Novell Attachmate (11/10; $1.2Bn) Trans Union/MD (04/10; $2.2Bn) Dynegy Blackstone (08/10; $4.7Bn) BJ’s Leonard Green (06/11; $2.4Bn) Arizona American (09/10; $0.8Bn) RCN ABRY (03/10; $1.2Bn) Blue Coat Thoma Bravo (12/11; $1,279MM) Blue Coat Thoma Bravo (12/11; $1,279MM) TransUnion Madison Dearborn (04/10; $2.2Bn) Castle Castle / Icicle (3/12; $2,025MM) Castle / Icicle (3/12; $2,025MM) LTM AV / EBITDA Summary Statistics Overall Min 5.5x Bottom Quartile 7.7x Median 9.0x Top Quartile 10.8x Max 15.4x Notes 1. Castle and precedent NTM EBITDA based on street estimates 2. Summary statistics and median line exclude Castle NTM AV / EBITDA Summary Statistics Overall Min 5.3x Bottom Quartile 8.0x Median 9.2x Top Quartile 10.2x Max 12.6x |
![]() Project Castle 35 Appendix A Supplemental Materials |
![]() ($MM) Pre-Transaction Including Adjustments Transaction Costs 3/31 3/31 Purchase Price/Share $23.00 $23.00 Equity Value $2,024.7 $2,024.7 Cash 302.5 302.5 Debt (103.9) (103.9) Minority Interest (34.9) (34.9) Repatriation Exp. 0.0 0.0 Trans. Expenses (63.2) Net Cash (Debt) 163.7 100.4 Aggregate Value $1,861.1 $1,924.3 2012 EBITDA (1) $238.9 $238.9 AV/2012 EBITDA 7.8x 8.1x 2011 EBITDA (1) $226.3 $226.3 AV/2011 EBITDA 8.2x 8.5x Purchase Valuation Project Castle SUPPLEMENTAL MATERIALS 36 Summary of Investment Profile Notes 1. Case A based on Castle management outlook as of 2/8/2012 2. Includes deferred options/RSUs that get paid out per vesting schedule; Includes Smarsh minority interest of $34.9MM 3. Based on Castle management assumptions (3) ($MM) PF 3/31 2016 Sponsor IRR LTM Multiple 8.5x 8.2x LTM EBITDA 226.3 306.7 Imp. Aggregate Value $1,924.3 $2,522.1 (Debt) (2) (1,260.9) (428.7) US Cash 150.0 30.0 Off-Shore Cash 30.0 229.5 Implied Equity Value $843.5 $2,352.9 Equity Investment: Sponsor New Equity $150.0 $404.5 VS Equity $683.5 $1,843.0 Other Rolled Equity $10.0 $27.0 New Options (5% Pool) -- $78.5 Total Equity $843.5 $2,352.9 IRR 24.1% Multiple of Invested Equity 2.8x Returns Analysis Assumes $23.00/share Purchase Price, 5.0x Total Leverage, and as of 3/31/2012 |
![]() ($MM) U.S. Off-Shore Total PF Min Cash $30.0 $30.0 $60.0 Additional Cash Kept on Bal Sheet 120.0 - 120.0 Total PF Balance Sheet Cash $150.0 $30.0 $180.0 Potential Loan to VS (120.0) - (120.0) Remaining PF Cash $30.0 $30.0 $60.0 Pro Forma Cash ($MM) U.S. Off-Shore Total Est. Cash at Closing (3/31) $56.5 $246.0 $302.5 Less: Tax on Repatriation (5) - - 0.0 Less: PF Min Cash (3) (30.0) (30.0) (60.0) Available for Funding $26.5 $216.0 $242.5 Less: Additional Cash Kept on Bal Sheet (3) (120.0) Excess Cash Used in Funding 122.5 Cash Reconciliation Project Castle SUPPLEMENTAL MATERIALS 37 Summary of Sources and Uses Assumes $23.00/share Purchase Price, 5.0x Total Leverage, and as of 3/31/2012 Notes 1. Assumes Q1’12 B/S cash of $302.5MM ($56.5MM U.S., $246.0MM off-shore) 2. Debt of $103.9MM based on $71MM draw on existing Line of Credit and existing Bldg Debt of $32.9MM 3. Assumes minimum operational cash of $60MM ($30MM U.S., $30MM off-shore); additional excess cash of $120MM kept on balance sheet to finance VS loan and to meet Sponsor minimum equity requirements 4. Rollover includes shares outstanding, RSUs, and Net Options 5. Off-shore cash repatriation of $216.0 ($30MM min cash) assumes repatriation tax is deferred 6. Assumes 1.0% OID on $985.7MM bank financing equal to $9.9MM; Assumes no OID on bonds 7. Deferred payout for unvested in-the-money options and RSUs 8. Leverage based on 2011 Pro Forma Adjusted EBITDA of $237.3MM 9. Based on Castle management assumptions (9) 5.0x Total Leverage, 100% Rollover, and $23.00 per share Multiple of ($MM) Adj. EBITDA (8) Est. Excess Balance Sheet Cash (3/31/12) (1) $122.5 5.5% Bank Loan 985.7 4.2x 9.25% Bond 200.0 0.8x Note: Total Debt $1,185.7 57.3% 5.0x VS Equity (100% Rollover) (4) $683.5 Other Rolled Equity (TBD) 10.0 Deferred Unvested Options & RSUs (7) 40.3 Sponsor Equity 150.0 Note: Total Equity $883.7 42.7% 3.7x Note: Total Debt + Equity $2,069.4 100.0% 8.7x Total Sources $2,191.9 Sources ($MM) Rolled Equity (VS / Other) $693.5 Deferred Unvested Options / RSUs (7) 40.3 Public Equity 1,291.0 Note: Total Fully-Diluted Equity $2,024.7 Retire Existing Debt (2) 103.9 Fees & Expenses 53.4 OID (6) 9.9 Total Uses $2,191.9 Uses |
![]() SUPPLEMENTAL MATERIALS 38 Precedent Premiums – Software Transactions 2008 to Present; >$500MM Equity Value Project Castle Financial Sponsor Buyer Castle Premia to 1-Day Prior Summary Statistics Overall LBO Min 11.0% 11.0% Bottom Quartile 23.5% 13.1% Median 33.1% 24.7% Top Quartile 49.5% 32.1% Max 91.0% 48.0% Premia to 30-Day Average Summary Statistics Overall LBO Min 7.0% 7.0% Bottom Quartile 24.7% 18.0% Median 39.7% 22.0% Top Quartile 53.0% 30.1% Max 98.0% 51.0% (1) (4) (6) (5) (1) (2) (1) (3) 29% 26% 25% 24% 23% 20% 17% 14% 12% 7% 54% 53% 47% 51% 51% 33% 36% 38% 38% 41% 43% 45% 19% 98% 75% 70% 67% 58% 54% 0% 20% 40% 60% 80% 100% 120% Sun / Oracle (04/09; $7,369MM) DemandTec / IBM (12/11; $509MM) ArcSight / HP (09/10; $1,749MM) Fast Search & Transfer / Microsoft (01/08; $1,218MM) Autonomy / HP (08/11; $11,700MM) Success Factors / SAP (12/11; $3,748MM) Wind River Systems / Intel (06/09; $909MM) McAfee / Intel (08/10; $7,680MM) SPSS / IBM (07/09; $1,158MM) Blue Coat Systems / Thoma Bravo (12/11; $1,279MM) Omniture / Adobe (09/09; $1,833MM) Sybase / SAP (05/10; $6,383MM) ATG / Oracle (11/10; $1,033MM) Interwoven / Autonomy Corporation (01/09; $775MM) Sonic / Rovi (12/10; $772MM) Radiant Systems / NCR (07/11; $1,168MM) Phase Forward / Oracle (04/10; $788MM) IDC / Investor Group (05/10; $3,363MM) Novell / Attachmate (11/10; $2,175MM) S1 Corp / ACI Worldwide (07/11; $508MM) RightNow / Oracle (10/11; $1,838MM) Blackboard / Providence Equity (07/11; $1,585MM) Taleo / Oracle (02/12; $2,056MM) Epicor / Apax (04/11; $802MM) SonicWALL / Investor Group (06/10; $718MM) Eclipsys / Allscripts - Misys (06/10; $1,445MM) Lawson / Infor (Golden Gate) (03/11; $1,958MM) Castle / Icicle (3/12; $2,025MM) SkillSoft / Investor Group (02/10; $1,067MM) 30-Day Average % (6) (1) (3) (1) (2) (1) (5) 28% 26% 24% 21% 20% 19% 18% 14% 11% 11% 54% 48% 42% 44% 46% 28% 30% 32% 33% 33% 37% 42% 18% 91% 64% 60% 57% 56% 54% 0% 20% 40% 60% 80% 100% Sun / Oracle (04/09; $7,369MM) Autonomy / HP (08/11; $11,700MM) McAfee / Intel (08/10; $7,680MM) DemandTec / Sybase / IBM (12/11; $509MM) SAP (05/10; $6,383MM) Success Factors / SAP (12/11; $3,748MM) ArcSight / HP (09/10; $1,749MM) Blue Coat Systems / Thoma Bravo (12/11; $1,279MM) ATG / Oracle (11/10; $1,033MM) Wind River Systems / Intel (06/09; $909MM) SPSS / IBM (07/09; $1,158MM) Fast Search & Transfer / Microsoft (01/08; $1,218MM) Interwoven / Autonomy CorporationWorldwide (01/09; $775MM) S1 Corp / ACI (07/11; $508MM) IDC / Investor Group (05/10; $3,363MM) SonicWALL / Investor Group (06/10; $718MM) Phase Forward / Oracle (04/10; $788MM) Novell / Attachmate (11/10; $2,175MM) Radiant Systems / NCR (07/11; $1,168MM) Omniture / Adobe (09/09; $1,833MM) Sonic / Rovi (12/10; $772MM) Blackboard / Providence Equity (07/11; $1,585MM) RightNow / Oracle (10/11; $1,838MM) Castle / Icicle (3/12; $2,025MM) Eclipsys / Allscripts - Misys (06/10; $1,445MM) Taleo / Oracle (02/12; $2,056MM) Lawson / Infor (Golden Gate) (03/11; $1,958MM) SkillSoft / Investor Group (02/10; $1,067MM) Epicor / Apax (04/11; $802MM) 1-Day Prior % Notes 1. Transactions are 100% cash except for: S1 / ACI transaction: 66% Cash / 34% Stock, Sonic / Rovi transaction: 55% Cash / 45% Stock, Eclipsys / Allscripts transaction: 100% Stock 2. Blackboard unaffected price prior to company announcement that it had received takeover offers 3. Lawson unaffected price prior to acquisition rumors 4. ArcSight unaffected price prior to acquisition rumors 5. Novell unaffected price prior to acquisition rumors 6. IDC unaffected price prior to acquisition rumors 7. Summary statistics and median line exclude Castle |
![]() ($MM) Cash Debt Net Cash U.S. Off-Shore Total Bldg Fac Line of Credit Total (Debt) 12/31/11 Balance (Q4) $36.2 $224.0 $260.2 ($32.9) ($91.0) ($123.9) $136.3 Operating Cash Flow 50.5 27.0 77.5 - - - 77.5 CAPEX (1.0) (5.0) (6.0) - - - (6.0) Acquisitions (2) (9.2) 0.0 (9.2) - - - (9.2) LOC Paydown (20.0) 0.0 (20.0) - 20.0 20.0 0.0 3/31/12 Balance (Q1) $56.5 $246.0 $302.5 ($32.9) ($71.0) ($103.9) $198.6 Operating Cash Flow 16.2 16.2 32.4 - - - 32.4 CAPEX (3.2) (9.8) (13.0) - - - (13.0) LOC Paydown (23.0) 0.0 (23.0) - 23.0 23.0 0.0 6/30/12 Balance (Q2) $46.5 $252.5 $299.0 ($32.9) ($48.0) ($80.9) $218.1 Liquidity Rollforward Projected Cash Balances Project Castle SUPPLEMENTAL MATERIALS 39 Note 1. Per Castle management 2. Acquisition allowance of $9.2MM for Q1 2012 Preliminary (1) |
![]() 2011 and 2012 by Quarter Project Castle SUPPLEMENTAL MATERIALS 40 Notes 1. Castle management Case A as of 2/8/2012 Slow Start in Q1’12, But Expected to Finish Strong by Q4’12 (1) (1) 2011A 2012E % Change ($MM) Q1(A) Q2(A) Q3(A) Q4(A) Q1(E) Q2(E) Q3(E) Q4(E) 2011(A) 2012(E) 2011-2012 Licenses $90 $111 $127 $143 $92 $113 $133 $173 $471 $510 8.5% Maintenance 80 86 91 124 91 101 108 133 381 433 13.7% Services 15 18 20 17 17 18 20 19 69 74 6.8% Total Bookings $184 $215 $238 $283 $200 $232 $261 $325 $921 $1,018 10.5% Licenses 67 78 88 106 66 81 95 120 338 362 7.3% Maintenance 108 110 117 126 128 130 133 137 462 528 14.4% Services 13 15 15 14 16 17 17 17 58 68 17.8% Total Revenue $188 $203 $220 $246 $210 $228 $246 $275 $857 $959 11.8% Cost of Revenues 22 25 25 26 27 29 29 29 98 113 15.4% Gross Profit $166 $178 $196 $220 $183 $200 $217 $246 $759 $845 11.4% % margin 88% 88% 89% 89% 87% 88% 88% 89% 89% 88% Sales & Marketing $79 $85 $82 $89 $91 $92 $92 $102 $335 $377 12.7% R&D 40 42 41 40 44 45 45 44 162 178 9.9% G&A 24 24 23 24 24 24 23 23 95 94 (0.7%) Total Operating Expenses 142 150 146 153 159 161 160 169 591 649 9.8% % margin 75% 74% 66% 62% 76% 70% 65% 62% 69% 68% Non-GAAP Operating Income $24 $28 $49 $67 $24 $39 $57 $77 $168 $197 17.1% % margin 13% 14% 22% 27% 11% 17% 23% 28% 20% 21% Quarterly Model |
![]() Actual EBITDA Reconciliation as Reported Adjusted LTM EBITDA Reconciliation Project Castle SUPPLEMENTAL MATERIALS 41 Notes 1. Based on quarterly earnings press release filed with SEC; Amortization and Depreciation includes impairment losses on intangible assets 2. Reflects amount of deferred revenue written-off in conjunction with BakBone acquisition which would otherwise have been recognized 3. Estimated costs of duplicative shared service expense during build out of facility in Cork, Ireland 4. Add-back of eliminated expenses related to closure of Surgient business, acquired in August 2010; Quarterly splits not available, assumed all in Q3 5. Add-back of one-time severance expense and previously paid compensation expense related to reduction in force actions in Q3’11; Quarterly splits not available, assumed all in Q3 6. Estimated savings in public company costs as a result of being a private company ($MM) Q1'11 Q2'11 Q3'11 Q4'11 CY2011 GAAP Operating Income (as reported) $5.4 $10.2 $29.9 $43.6 $89.0 + Amortization of purchased technology 4.7 5.2 6.3 7.6 23.8 + Amortization of purchased intangible assets 3.7 4.2 5.0 11.0 24.0 + Stock-based compensation expense 7.4 5.5 5.5 6.8 25.3 + One-time items (legal, fees, costs, etc) 2.8 2.7 2.7 (2.3) 5.9 Non-GAAP Operating Income (as reported) (1) $23.9 $27.8 $49.4 $66.8 $168.0 + Depreciation 4.0 3.9 3.6 4.4 15.9 EBITDA $28.0 $31.8 $53.0 $70.8 $183.9 Add-Backs: + BakBone Deferred Revenue (2) $9.1 $9.5 $8.2 $7.0 $33.8 + Cork Buildout (3) 1.0 2.4 1.6 0.6 5.6 + Surgient Shutdown (4) - - 6.0 - 6.0 + Q3 Reduction-in-Force (5) - - 5.0 - 5.0 + Estimated Public Company Costs (6) 0.8 0.8 0.8 0.8 3.0 Adjusted EBITDA $38.8 $44.4 $74.5 $79.1 $237.3 |
![]() SUPPLEMENTAL MATERIALS Disclaimer Project Castle 42 We have prepared this document solely for informational purposes. You should not definitively rely upon it or use it to form the definitive basis for any decision, contract, commitment or action whatsoever, with respect to any proposed transaction or otherwise. You and your directors, officers, employees, agents and affiliates must hold this document and any oral information provided in connection with this document in strict confidence and may not communicate, reproduce, distribute or disclose it to any other person, or refer to it publicly, in whole or in part at any time except with our prior written consent. If you are not the intended recipient of this document, please delete and destroy all copies immediately. 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