C O N F I D E N T I A L 2 1 A U G U S T 2 0 1 9 Project Raven V A L U A T I O N A N A L Y S I S
C O N F I D E N T I A L P R O J E C T R A V E N Disclaimer The information herein has been prepared by Lazard based upon information supplied by Vail and Raven or publicly available information, and portions of the information herein may be based upon certain statements, estimates and forecasts provided by Vail and Raven with respect to the anticipated future performance of Raven, and provided by Vail with respect to the anticipated future performance of Vail. We have relied upon the accuracy and completeness of the foregoing information, and have not assumed any responsibility for any independent verification of such information or any independent valuation or appraisal of any of the assets or liabilities of Vail, Raven or any other entity, or concerning solvency or fair value of Vail, Raven or any other entity. With respect to financial forecasts, we have assumed that they have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management of Vail and Raven as to the future financial performance of Vail or Raven, as applicable. We assume no responsibility for and express no view as to such forecasts or the assumptions on which they are based. The information set forth herein is based upon economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof, unless indicated otherwise. These materials and the information contained herein are confidential and may not be disclosed publicly or made available to third parties without the prior written consent of Lazard; provided, however, that you may disclose to any and all persons the U.S. federal income tax treatment and tax structure of the transaction described herein and the portions of these materials that relate to such tax treatment or structure. Lazard is acting as investment banker to the Special Committee of the Board of Directors of Vail, and will not be responsible for and will not provide any tax, accounting, actuarial, legal or other specialist advice.
C O N F I D E N T I A L P R O J E C T R A V E N I Transaction Background
P R O J E C T R A V E N I T R A N S A C T I O N B A C K G R O U N D Transaction Background Raven options/RSUs 1 2 Based on an offer price of $15.00 for Class A shares, an exchange ratio of 0.0550 for Diamond’s Class B shares and the unaffected value per Vail share of $153.09 as of 8/14/2019. Subject to confirmation by Diamond. 1 Transaction Structure Vail to acquire all outstanding Raven shares that it does not already own Transaction Value Implied fully diluted equity value: $3.6 billion1 Implied fully diluted enterprise value: $2.8 billion1 Current Ownership Structure Vail: 81% owned by Diamond (97% of voting) Raven: 48% owned by Diamond (Class B shares; 71% of voting) 16% owned by Vail (Class B shares; 24% of voting) 6% owned by Ford (Class A shares; 1% of voting; 18% of Class A) Consideration Raven Class A shareholders will receive $15.00 in cash per Raven share Unvested in-the-money Raven options and RSUs will convert to equivalent Vail options and RSUs; vested in-the-money Raven option holders will be paid in cash Diamond will receive 0.0550 Vail Class B shares per Raven Class B share2 Aggregate consideration paid for shares not owned by Vail: $3.1 billion1 Aggregate cash consideration: ~$1.7 billion (~$1.5 billion to acquire Class A basic shares and ~$0.2 billion for vested options) Aggregate equity consideration: ~$1.4 billion (~$1.1 billion to Diamond; ~$0.3 billion to option / RSU holders)1 Financing Vail will fund the acquisition with a combination of cash on hand and debt financing Equity consideration will be in the form of Vail common shares for Diamond’s stake in Raven, and Vail options/RSUs for unvested No financing contingency Other Post transaction close, Raven will become a wholly owned subsidiary of Vail Raven will remain an independent tax entity Closing of the transaction will be subject to the approval of the holders of a majority of the Class A shares not owned by Vail, Diamond or their affiliates and other customary closing conditions Regulatory approval is not required
P R O J E C T R A V E N I T R A N S A C T I O N B A C K G R O U N D Raven Ownership Overview (Shares and $ in millions) Market Value2 (Unaffected) Basic Ownership (%)1 Investor Share Class Shares Fully Diluted Ownership (%) 45.4% $1,090 (71% voting) 15.3% 367 (24% voting) Source: Raven management, company filings and FactSet as of 8/14/2019. 1 2 3 Based on 274.1m basic shares outstanding as of August 2, 2019. Based on Raven’s unaffected share price of $8.30 as of 8/14/19. Represents dilution impact of options and RSUs using treasury stock method. Raven has 15.3m RSUs and 39.4m options with a weighted average exercise price of $8.3814 outstanding as of August 2, 2019. 2 Class B 10 votes / share 131.3 47.9% Class B 10 votes / share 44.2 16.1% Public Float Class A 1 vote / share 98.6 36.0% (5% voting) 34.1% 819 Basic Totals 274.1 100.0% 94.7% $2,275 Stock Options & RSUs3 15.3 --5.3% 127 Fully Diluted Total 289.4 --100.0% $2,402 Memo: Ford Stake (included in Public Float) Class A 1 vote / share 17.5 6.4% (1% voting) 6.1% 145 Vail Diamond
P R O J E C T R A V E N I T R A N S A C T I O N B A C K G R O U N D Raven Diligence Update Developer-Centric Industry Themes – Industry Trends Combined Portfolio Vision Driving Transaction Rationale Agile Development Software engineering framework that promotes iterative development throughout a project’s life cycle and close collaboration between software development teams and end users Operations DevOps Set of software development practices that combines software development and IT operations to shorten development life-cycles Infrastructure as Code Vail Cloud Compatibility List Process where development teams automatically manage and provision the technology stack for an application through software interfaces rather than using manual processes A Vail provides core IaaS Services Vail and Raven jointly provide Kubernetes container management C Raven provides an Application Platform B Vail Contribution Raven Contribution 3 Combined Portfolio Vision and Assets Applications CloudHealth Wavefront Bitnami Multi / Hybrid Cloud Management & Heptio NSX Service Mesh vRealize AHybrid Clouds Vail Cloud Foundation / Hardware B Container Platform (Kubernetes) Essential OSSEnterprise PKSCloud PKS CApplication Platform Raven ApplicationServices ServiceRaven Function ServiceMarketplace
P R O J E C T R A V E N I T R A N S A C T I O N B A C K G R O U N D Raven Forecast ($ in millions) P&L Forecasts Summary Growth and Margin 29% $1,318 18% 16% 15% 22% 18% 17% 16% $1,067 $1,054 18% 18% $1,153 19% $912 $896 14% $773 $759 $1,012 10% $973 13% $657 $973 $888 12% $840 $784 $509 10% $764 $735 7% 4% FY'18A FY'19A FY'20E FY'21E FY'22E FY'23E FY'24E FY'18A FY'19A FY'20E FY'21E FY'22E FY'23E FY'24E 73% $1,055 $819 $812 $899 55% 35% 35% 33% $671 $669 25% 24% $541 $540 $812 22% 21% $772 $743 $682 21% $401 17% $614 $569 14% $535 $511 28% $259 21% 20% 5% 13% 11% FY'18A FY'19A FY'20E FY'21E FY'22E FY'23E FY'24E FY'18A FY'19A FY'20E FY'21E FY'22E FY'23E FY'24E 23% $303 18% 11% 10% $210 4% 1% (0%) $107 $104 $30 $13 ($4) (5%) (6%) 5% 7% $56 5% ($39) ($44) (11%) (1%) $73 ($71) $49 (6%) (9%) ($129) ($8) (25%) (6%) ($46) ($46) ($64) FY'18AFY'19AFY'20EFY'21EFY'22EFY'23EFY'24E FY'18A FY'19A FY'20E FY'21E FY'22E FY'23E FY'24E Vail Case - Standalone Vail Case - In-Vail Street Consensus Raven Management LRP Mid Case Sensitivity Source: Vail management, Raven management, Wall Street research and FactSet as of 8/14/2019. Note:Raven fiscal year ends January 31st. 4 EBIT Margin (Pre-SBC) EBIT (Pre-SBC) Subscription Revenue Growth Subscription Revenue Revenue Growth Revenue
P R O J E C T R A V E N I T R A N S A C T I O N B A C K G R O U N D VWAP Metrics and Implied Exchange Ratios 0.064 $180 $11.00 0.062 175 10.50 30-Day VWAPs: Vail: $168.10 Raven: $9.78 20-Day VWAPs: Vail: $167.90 Raven: $9.33 10-Day VWAPs: Vail: $160.07 Raven: $8.74 0.060 170 10.00 30-Day VWAP: 0.0582 0.058 165 9.50 0.056 160 9.00 Transaction Exchange Ratio3: 0.0550 10-Day VWAP: 0.0546 0.054 155 8.50 150 8.00 0.052 50 40 30 20 10 1 50 40 30 20 10 1 Vail VWAP Raven VWAP Source: Company filings and FactSet as of 8/14/2019. 1 2 3 VWAP based on number of trading days. Represents the number of Vail shares to be exchanged for one share of Raven. Subject to confirmation by Diamond. 5 Days Days Vail VWAP Raven VWAP Raven and Vail VWAP Comparison as of August 14, 20191 Exchange Ratio as of August 14, 20192
P R O J E C T R A V E N I T R A N S A C T I O N B A C K G R O U N D Enterprise Value ($ in millions, except per share values) Walk at Various Assumed Values Per Vail Shares Enterprise Value Walk Offer Price for Class A Shares $15.00 Consideration for Basic Class A Shares Consideration for Options & RSU's Total Consideration for Class A Shareholders $1,479 490 $1,969 Unaffected Current Unaffected 20-Day VWAP 52-Week High Assumed Value Per Vail Share $143.72 $153.09 $167.90 $206.80 Consideration for Diamond Class B Shares Total Consideration for Stake Not Owned by Vail Implied Blended Price per Share $1,038 $1,106 $1,213 $1,493 $3,007 $11.45 $3,075 $11.71 $3,182 $12.12 $3,463 $13.19 Implied Vail Fully Diluted Ownership Grossed Up Equity Value (Implied Value of 100%) 2 14.4% $3,513 14.4% $3,592 14.4% $3,717 14.4% $4,046 (-) Net Cash (808) (808) (808) (808) Vail 4 Memo EV / FY 2020 Revenue (In-Vail View) EV / FY 2021 Revenue (In-Vail View) Metric $764 $840 (Street) Infra. Peers 3.54x 3.22x 3.64x 3.32x 3.81x 3.47x 4.24x 3.86x 6.6x 6.0x 4.1x 3.6x 3 Premium to Unaffected - Class A Shareholders (%) 81% 38% 81% 41% 81% 46% 81% 59% 3 Blended Premium to Unaffected - All Shareholders (%) Source: Vail management, Raven management, Company filings and FactSet as of 8/16/2019. Note: We have assumed, with the consent of the Special Committee, for purposes of our analyses that the Vail Class A Common Stock and the Vail Class B Common Stock are equivalent from a financial point of view. Subject to confirmation by Diamond. Includes non-controlling interest of $671k as of May 3, 2019 and cash balance of $808.6m as of August 2, 2019. Based on Raven’s unaffected share price of $8.30 as of 8/14/19. Vail valuation metrics based on unaffected share price of $153.09 as of 8/14/19. 1 2 3 4 6 Enterprise Value$2,705$2,784$2,909$3,238 Exchange Ratio 10.0550
C O N F I D E N T I A L P R O J E C T R A V E N II Raven Valuation Analysis
P R O J E C T R A V E N I I R A V E N V A L U A T I O N A N A L Y S I S Raven ($ in millions) Valuation Summary – In-Vail View In-Vail Metric Enterprise Value Comments • 1st Quartile: 3.2x | Median: 4.1x • 1st Quartile: 2.8x | Median: 3.6x • Vista / Xactly: 5.6x • Oracle / Opower: 3.3x $3,809 • 5-year DCF 683 $4,383 ,788 $4,970 • WACC: 9.25% - 10.5% 55 8 EV at Vail Current: $2,7054 EV at Vail Unaffected: $2,7844 EV at Vail 20-Day VWAP: $2,9094 EV at Vail 52-Week High: $3,2384 Source: Vail management, public company filings, Wall Street research and FactSet as of 8/16/19. Note: 1 2 3 4 Valuations based on fully diluted shares outstanding (treasury stock method). Estimated as 50% of FY 2020E revenue and 50% of FY 2021E revenue. Assumes 11/2/19 valuation date (the assumed transaction close). Based on Raven’s unaffected share price of $8.30 as of 8/14/19. Based on offer price of $15.00 per Class A share and an exchange ratio of 0.0550 for Diamond Class B shares. Vail’s current price is $143.72 as of 8/16/19. Vail’s unaffected share price is $153.09 as of 8/14/19. Vail’s unaffected 20-Day VWAP is $167.90 as of 8/14/19. Vail’s 52-week intraday high is $206.80. 7 Reference Public Company Comparables CY'19 / FY'20 Revenue $764$2,293 $4,204• Assumed Range: 3.0x – 5.5x CY'20 / FY'21 Revenue $840$2,309 $3,988• Assumed Range: 2.75x – 4.75x Precedent Transactions LTM Revenue $716$2,506 • Assumed Range: 3.5x – 5.75x $4,117• Oracle / Opower: 3.5x NTM Revenue 1 $802$2,606 • Assumed Range: 3.25x – 4.75x • Vista / Xactly: 4.8x Discounted Cash Flow 2 (Vail Management Projections) 5 Years Exit LTM EBIT (Pre-SBC): 17.5x - 20.0x $3, • WACC: 9.25% - 10.5% 11 Years Exit LTM EBIT (Pre-SBC): 11.5x - 14.5x $3 • 11-year DCF Premiums Paid Paid to All Shareholders 3 Unaffected Share Price: $8.30$2,9 • Transactions where Target Exhibited Steep Drop from $3,50152-Week High • Low: 50%, High: 70% Analyst Price Targets Price Per Share High: $21.00 Low: $12.00$2,80 • Needham / Keybanc: $21.00 $5,767• Goldman Sachs: $12.00
P R O J E C T R A V E N I I R A V E N V A L U A T I O N A N A L Y S I S Raven ($ in millions) Valuation Summary – Standalone View vs. Raven LRP (Reference Only) Financial Metric Enterprise Value Comments Vail Standalone Case: $735 $4,252 Raven LRP Mid-Case: $843 EV at Vail Current: $2,7052 EV at Vail Unaffected: $2,7842 EV at Vail 20-Day VWAP: $2,9092 EV at Vail 52-Week High: $3,2382 Vail Standalone Raven LRP Mid-Case Sensitivity Source: Vail management, Raven management, public company filings, Wall Street research and FactSet as of 8/16/19. Note: 1 2 Valuations based on fully diluted shares outstanding (treasury stock method). Estimated as 50% of FY 2020E revenue and 50% of FY 2021E revenue. Based on offer price of $15.00 per Class A share and an exchange ratio of 0.0550 for Diamond Class B shares. Vail’s unaffected share price is $153.09 as of 8/14/2019. Vail’s unaffected 20-Day VWAP of $167.90 as of 8/14/2019. 8 Reference Public Company Comparables CY'19 / FY'20 Revenue $2,206 $4,043 • Assumed Range: 3.0x – 5.5x Raven LRP Mid-Case: $773 $2,319 • 1st Quartile: 3.2x | Median: 4.1x CY'20 / FY'21 Revenue $2,156 Vail Standalone Case: $784 $3,724 • Assumed Range: 2.75x – 4.75x Raven LRP Mid-Case: $912 $2,509 • 1st Quartile: 2.8x | Median: 3.6x $4,333 Precedent Transactions NTM Revenue 1$2,469 Vail Standalone Case: $760 $3,608• Assumed Range: 3.25x – 4.75x 1 $2,739 • Oracle / Opower: 3.3x • Vista / Xactly: 4.8x $4,003
P R O J E C T R A V E N I I R A V E N V A L U A T I O N A N A L Y S I S Benchmarking Raven to Public Software Infrastructure Peers CY’19E-CY’21E Revenue CAGR vs. CY’20E EBIT Margin (Pre-SBC) 50% Citrix, 4.1x 25% SailPoint, 5.9x Raven (In-Vail), 1.9x Cloudera, 1.8x 0% Talend, 4.4x (25%) (50%) 0% 5% 10% 15% 20% 25% Source: Vail management, public company filings, FactSet as of 8/16/19. Multiples reflect EV/CY’20 revenue. Raven fiscal year ends Jan 31st. FY financials used as proxy for prior CY metrics for Raven and Vail. Raven and Vail valuation metrics based on unaffected share prices on 8/14/19 of $8.30 and $150.09, respectively. Scenario A forecasts represent Vail’s current cloud transition trajectory. Scenario B forecasts represent an accelerated cloud transition scenario. Note 9 CY’19E-CY’21E Revenue CAGR Oracle, 5.0x Microsoft, 6.8x Vail (Scenario B), 6.0x SAP, 4.8xVail (Scenario A), 5.9xCyberArk, 8.3x CommVault, 2.2xSalesforce, 5.8xSplunk, 7.3x Dropbox, 3.7x FireEye, 3.6xPegasystems, 5.6xBox, 2.8xNew Relic, 4.6x MobileIron, 3.3xRaven (Street), 1.8x Raven (Standalone), 2.0xAppian, 13.4x Carbon Black, 6.2x Nutanix, 2.4x Peers with the most comparable financial profile selected for valuation benchmarking Domo, 3.4x CY’20E EBIT Margin (Pre-SBC)
P R O J E C T R A V E N I IR A V E N V A L U A T I O N A N A L Y S I S Benchmarking Raven to Public Software Infrastructure Peers (cont’d) 22.2% 22.0% 18.7% 17.7% 17.4% 17.3% 14.0% 12.0% 12.9% 12.9% 12.8% 11.8% 9.9% 11.4% 6.8% 4.4% Median: 12.9% 14.4% 12.9% 10.5% 5.6% 4.8% 3.9% 3.6% 3.6% 1.3% (2.0%) (5.6%) (5.8%) (8.1%) (12.7%) (35.9%) 15.6x 4.2x 4.1x 2.8x 3.9x 3.6x 3.2x 2.2x 2.1x 2.1x 3rd Quartile: 6.3x The public market valuation of Raven is based on the public view of Raven without the perspective of an In-Vail view 13.4x 4.4x 2.8x 3.7x 3.6x 3.4x 3.3x 2.4x 2.2x 1.8x 1.8x Source: Vail management, public company filings and FactSet as of 8/16/2019. Note:Median and quartile metrics exclude Raven. Raven fiscal year ends Jan 31st. FY financials used as proxy for prior CY metrics for Raven. Raven valuation metrics based on unaffected share price of $8.30 as of 8/14/19. 10 Valuation Metrics Operating Metrics 1st Quartile: 2.8x Median: 3.6x 3rd Quartile: 5.6x 6.2x5.9x5.6x Reference Range: 2.75x – 4.75x EV / CY’20E Revenue 1st Quartile: 3.2x Median: 4.1x 7.3x6.9x6.3x5.3x Reference Range: 3.0x – 5.5x EV / CY’19E Revenue (23.6%) 1st Quartile: (8.1%) Median: 3.6% 3rd Quartile: 5.6% CY’20E EBIT Margin (Pre-SBC) 1st Quartile: 11.8% 3rd Quartile: 17.4% CY’19E – CY’21E Revenue CAGR
P R O J E C T R A V E N I I R A V E N V A L U A T I O N A N A L Y S I S Benchmarking Raven to Precedent NTM Revenue Growth vs. NTM EBIT Margin (Pre-SBC) Software Transactions Transactions with the most comparable financial profile selected for valuation benchmarking 1 Source: Vail management, public company filings, press releases and Factset as of 8/16/19. Note:Multiples indicate EV / NTM Revenue. Raven NTM metrics calculated as 50% of FY’21 and 50% of FY’20 figures. Raven valuation metrics based on unaffected share price of $8.30 as of 8/14/19. 11 1 Represents transaction whereby a private investor group led by Bain Capital Partners, Golden Gate Private Equity, Insight Venture Partners and GIC Special Investments acquired BMC Software.
P R O J E C T R A V E N I I R A V E N V A L U A T I O N A N A L Y S I S Benchmarking Raven to Public Software NTM Revenue Growth Transactions – Operating Metrics 22% 21% 20% 20% 19% 18% 17% 16% 15% 15% 15% 14% 13% 12% 11% 8% 7% 6% 7% 6% 5% 5% 4% 4% 3% 2% 1% 1% NTM EBIT Margin (Pre-SBC) 37% 34% 17% 17% 17% 14%14% 13% 12% 9% 8% 7% 4% 2% (1%) (7%) (8%) (9%) (14%) Strategic Acquisitions Sponsor Backed Transactions Source: Vail management, public company filings, press releases and FactSet as of 8/16/2019. Note:Raven fiscal year ends Jan 31st. Raven NTM metrics calculated as 50% of FY’21 and 50% of FY’20 figures. 12 24%22%22% 21%21% 20%19% 0% Median: 14% Median: 11%
P R O J E C T R A V E N I I R A V E N V A L U A T I O N A N A L Y S I S Benchmarking Raven to Public Software Transactions – Valuation Metrics EV / LTM Revenue 13.2x 10.7x Reference Range: 3.5x – 5.75x 10.0x 9.8x 9.7x 8.2x 8.2x 8.0x 7.0x 5.6x 5.3x 5.0x 4.6x 4.3x 4.3x 4.1x 4.0x 4.0x 3.8x 3.5x 3.5x 3.1x 3.0x 2.9x 2.0x EV / NTM Revenue 10.9x 9.4x 8.4x Reference Range: 3.25x – 4.75x 8.3x 8.1x 7.1x 6.8x 6.8x 6.5x 4.8x 4.7x 4.6x 4.3x 4.3x 3.9x 3.9x 3.6x 3.5x 3.4x 3.3x 3.0x 3.5x 2.9x 2.8x 1.9x Strategic Acquisitions Sponsor Backed Transactions 13 Source: Public company filings, press releases and FactSet as of 8/16/2019. Median: 4.3x Median: 4.6x
P R O J E C T R A V E N I I R A V E N V A L U A T I O N A N A L Y S I S Raven ($ in millions) – Discounted Cash Flow Analysis (5 Years) 2018A 2019A 2020E 2021E 2022E 2023E 2024E Revenue % Growth $509 22.4% $657 29.1% $764 16.3% $840 9.8% $973 15.9% $1,153 18.5% $1,318 14.3% EBIT (Pre-SBC) % Margin ($129) (25.2%) ($71) (10.8%) ($44) (5.7%) $30 3.6% $104 10.7% $210 18.2% $303 23.0% SBC $13 $69 $100 $90 $97 $105 $107 EBIT (Post-SBC) % Margin ($142) (27.8%) ($140) (21.3%) ($144) (18.8%) ($60) (7.1%) $7 0.7% $105 9.1% $196 14.9% $36 25.0% $15 25.0% ($2) 25.0% ($26) 25.0% ($49) 25.0% Taxes % Tax Rate After-Tax EBIT Plus: Depreciation Less: Capex Less: Change in NWC Unlevered Free Cash Flow ($108) 21 (15) (9) ($45) 17 (17) 56 $5 19 (19) 24 $79 17 (17) 34 $147 19 (20) 32 ($111) $11 $29 $112 $178 Terminal LTM EBIT Multiple (Pre-SBC) Terminal LTM EBIT Multiple (Pre-SBC) 17.5x 18.8x 20.0x 17.5x 18.8x 20.0x WACC WACC Terminal LTM EBIT Multiple (Pre-SBC) Terminal LTM EBIT Multiple (Pre-SBC) 17.5x 18.8x 20.0x 17.5x 18.8x 20.0x WACC WACC Source: Vail management and Raven public filings. Note:Assumes transaction closes on 11/2/19. Stock-based compensation (“SBC”) treated as a cash expense. Raven fiscal year ends January 31st. 14 9.25% 4.02x4.31x4.59x 9.88% 4.02x4.31x4.59x 10.50% 4.02x4.31x4.59x 9.25% 5.9%6.1%6.3% 9.88% 6.5%6.7%6.9% 10.50% 7.1%7.4%7.6% Implied LTM Revenue Multiple Implied Perpetuity Growth Rate 9.25% $4,644$4,904$5,164 9.88% 4,5524,8065,060 10.50% 4,4634,7114,959 9.25% $3,864$4,123$4,383 9.88% 3,7724,0264,279 10.50% 3,6833,9314,179 Equity Value Enterprise Value Historical "In-Vail" View
P R O J E C T R A V E N I IR A V E N V A L U A T I O N A N A L Y S I S Raven ($ in millions) – Discounted Cash Flow Analysis (11 Years) 2018A 2019A 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E Revenue % Growth $509 22.4% $657 29.1% $764 16.3% $840 9.8% $973 15.9% $1,153 18.5% $1,318 14.3% $1,482 12.4% $1,651 11.4% $1,822 10.3% $1,981 8.8% $2,123 7.1% $2,220 4.6% EBIT (Pre-SBC) % Margin ($129) (25.2%) ($71) (10.8%) ($44) (5.7%) $30 3.6% $104 10.7% $210 18.2% $303 23.0% $379 25.5% $441 26.7% $504 27.7% $556 28.1% $602 28.3% $633 28.5% SBC $13 $69 $100 $90 $97 $105 $107 $109 $112 $115 $116 $119 $120 EBIT (Post-SBC) % Margin ($142) (27.8%) ($140) (21.3%) ($144) (18.8%) ($60) (7.1%) $7 0.7% $105 9.1% $196 14.9% $269 18.2% $329 19.9% $390 21.4% $441 22.2% $483 22.7% $513 23.1% $36 25.0% $15 25.0% ($2) 25.0% ($26) 25.0% ($49) 25.0% ($67) 25.0% ($82) 25.0% ($97) 25.0% ($110) 25.0% ($121) 25.0% ($128) 25.0% Taxes % Tax Rate After-Tax EBIT Plus: Depreciation Less: Capex Less: Change in NWC Unlevered Free Cash Flow ($108) 21 (15) (9) ($45) 17 (17) 56 $5 19 (19) 24 $79 17 (17) 34 $147 19 (20) 32 $202 18 (19) 32 $247 20 (21) 34 $292 22 (23) 35 $330 19 (20) 34 $362 20 (21) 31 $385 21 (22) 36 ($111) $11 $29 $112 $178 $233 $280 $326 $363 $392 $420 Terminal LTM EBIT Multiple (Pre-SBC) Terminal LTM EBIT Multiple (Pre-SBC) WACC 11.5x 13.0x 14.5x WACC 11.5x 13.0x 14.5x Terminal LTM EBIT Multiple (Pre-SBC) Terminal LTM EBIT Multiple (Pre-SBC) WACC 11.5x 13.0x 14.5x WACC 11.5x 13.0x 14.5x Source: Vail management and Raven public filings. Note:Assumes transaction closes on 11/2/19. Stock-based compensation (“SBC”) treated as a cash expense. Raven fiscal year ends January 31st. 15 9.25% 3.28x 3.70x 4.13x 9.88% 3.28x 3.70x 4.13x 10.50% 3.28x 3.70x 4.13x 9.25% 3.5% 4.1% 4.7% 9.88% 4.1% 4.8% 5.3% 10.50% 4.7% 5.4% 5.9% Implied LTM Revenue Multiple Implied Perpetuity Growth Rate 9.25% $4,984 $5,367 $5,750 9.88% 4,770 5,131 5,492 10.50% 4,568 4,909 5,250 9.25% $4,203 $4,586 $4,970 9.88% 3,990 4,351 4,712 10.50% 3,788 4,129 4,470 Equity Value Enterprise Value Historical "In-Vail" View
P R O J E C T R A V E N I I R A V E N V A L U A T I O N A N A L Y S I S Analyst Price Target Summary – Raven Selected Broker Targets $25.00 $20.00 20.00 15.00 .00 10.00 5.00 0.00 KeyBanc Needham CS MS RBC Wedbush Barclays GS Buy Hold Source: Bloomberg and FactSet as of 8/14/19. Note:Analysis illustrates broker price targets after Raven announced Q1 FY 2020 earnings on 6/4/19. 16 Date 7/22/196/5/196/4/196/5/196/5/196/5/196/5/198/8/19 Unaffected: $8.30 Median: $18.00 $21.00$21.00 $18.00$18.00 $15.00$15.00 $12
P R O J E C T R A V E N I I R A V E N V A L U A T I O N A N A L Y S I S Selected Transactions Where Target Exhibited Steep Drop From 52-Week High Transactions where the target experienced a steep decline in share price prior to the acquisition exhibited ~50% - 70% premiums Unaffected Discount to 52-Week High Premium / (Discount) to Ann. Date Acquirer Target LTM Price Performance Before Announcement Unaffected 52-Week High $190 145 100 $190 134 days1 10/28/18 (38%) 63% 7% Oct-17 Jan-18 Mar-18 Jun-18 Aug-18 Oct-18 $80 45 10 $75 306 days1 06/01/16 (37%) 56% (1%) Jun-15 Aug-15 Oct-15 Jan-16 Mar-16 Jun-16 $45 30 15 56 days1 $38 11/11/18 (40%) 53% (8%) Nov-17 Jan-18 Apr-18 Jun-18 Aug-18 Nov-18 211 days1 $196 $260 175 90 06/13/16 (49%) 50% (24%) Jun-15 Aug-15 Nov-15 Jan-16 Mar-16 Jun-16 228 days1 $37 $45 30 15 12/24/18 (52%) 68% (20%) Dec-17 Mar-18 May-18 Jul-18 Oct-18 Dec-18 Class A ($15.00) $32 344 days1 72 days2 81% (49%) 18 8/14/19 Vail Raven (72%) Blended4 ($11.71) 4 41% (60%) Aug 18 Oct 18 Jan 19 Mar 19 Jun 19 Aug 19 Source: Press releases, public company filings, Wall Street research and FactSet as of 8/14/19. 1 2 3 4 Represents the number of calendar days from the 52-week intraday high to unaffected date. Represents the number of calendar days from Q1’20 earnings (June, 4th 2019) to 8/14/19. Excludes Raven. 17 Premium based on the blended price per share, which is based on a $15.00 price per share for Class A shares and a 0.0550 exchange ratio for Diamond's Class B shares. Assumes Vail shares valued at unaffected price of $153.09 as of 8/14/19. Mean3 Median3 (43%)58%(9%) (40%)56%(8%)
C O N F I D E N T I A L P R O J E C T R A V E N III Vail Valuation Analysis
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Vail Long ($ in billions) Range Plan (“LRP”) Cases FY’ 19A – FY’ 24E CAGR: $15.0 (10%) Scenario A: 10.8% Scenario B: 10.7% $13.6 (10%) Reflects Vail’s current Hybrid Cloud / SaaS transition trajectory $14.9 (11%) $12.4 (10%) $11.2 (12%) $13.4 (10%) $10.0 (12%) $12.1 (10%) $9.0 (14%) $11.0 (10%) Hybrid Cloud subscription & SaaS revenue grows gradually to 27% of total revenue by FY 2024 FY'19A FY'20E FY'21E FY'22E FY'23E FY'24E Significant investments in GTM / R&D; operating margin assumed to remain flat at 32.5% throughout forecast period $5.1 (34%) $3.6 (27%) $4.1 (27%) $2.5 (20%) $1.7 (16%) $3.0 (22%) $1.2 (12%) $0.9 (10%) $2.2 (18%) $1.7 (15%) FY'19A FY'20E FY'21E FY'22E FY'23E FY'24E Illustrates an accelerated transition towards Hybrid Cloud / SaaS, resulting in lower near-term growth but higher long-term growth $4.9 (33%) $4.4 (33%) $4.8 (32%) Hybrid Cloud subscription & SaaS revenue grows at accelerated pace to 34% of total revenue by FY 2024 $4.0 (33%) $3.7 (33%) $4.2 (32%) $3.3 (33%) $3.8 (31%) $3.0 (34%) Incremental investments in GTM / R&D place further margin pressure; operating margin returns to 32% at end of forecast period $3.5 (32%) FY'19A FY'20E FY'21E FY'22E FY'23E FY'24E Scenario A Scenario B Source: Vail management. Note: 1 2 3 Vail fiscal year ends January 31st. Scenario A and Scenario B are on a standalone basis and do no reflect any pending or future acquisitions or dispositions by Vail. Numbers in parentheses represent y/y growth rate. Numbers in parentheses represent Hybrid Cloud / SaaS revenue as a percent of total revenue. Numbers in parentheses represent EBIT (Pre-SBC) margin. 18 EBIT (Pre-SBC)3 Scenario B: Accelerated Cloud Transition Hybrid Cloud / SaaS Revenue2 Scenario A: Current Cloud Transition Trajectory Total Revenue1 P&L Forecasts Scenario Description
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Vail Valuation Summary values) Scenario A: Current Cloud Transition Trajectory Scenario B: Accelerated Cloud Transition Enterprise Value Scenario A: $10.0 $75.2 $174.67 • Range: 4.75x – 6.75x $74.4 $172.78 $53.0 53.58 Scenario A: $3.3 $122.62 $53.0 2.41 Scenario A: $3.7 7 5 DCF management forecast through FY’22 70.5 $206.80 • Nomura: $130.00 $224.00 Unaffected: $66.0220-Day VWAP3: $72.3 Current: $62.0 Price as of 7/30/2019: $76.8 ($178.31 per share) ($143.72 per share) ($153.09 per share) ($167.90 per share) Source: Vail management forecasts, Wall Street research and FactSet as of 8/16/19. Fully diluted share count for per share calculations based on dilutive instruments as of Q1 FY 2020. Vail fiscal year ends January 31st. FY financials used as proxy for prior CY metrics for Vail. Scenario A forecasts represent Vail’s current cloud transition trajectory. Scenario B forecasts represent an accelerated cloud transition scenario. Assumes 8/31/19 valuation date. Based on Vail unaffected share price of $153.09 on 8/14/19. Represents unaffected 20-day VWAP as of 8/14/19. Note: 19 1 2 3 For Reference ($ in billions, except per share Vail Management Metric Implied Share Price Comments Public Company Comparables EV / FY'20E Revenue $75.2 $174.67 • Range: 5.0x – 7.5x $116.04 $50.1 Scenario B: $10.0 $116.04 $50.1 • SAP: 5.2x | Microsoft: 7.6x EV / FY'21E Revenue $123.45 $53.3 Scenario A: $11.2 $75.8 $175.95 • SAP: 4.8x | Microsoft: 6.8x Scenario B: $11.0 $121.22 $52.4 EV / FY'20E EBIT (Pre-SBC) $66.2 $66.2 $1 $15 • Range: 16.0x – 20.0x • SAP: 17.7x | Microsoft: 18.9x 3.58 $122.62 Scenario B: $3.3 EV / FY'21E EBIT (Pre-SBC) $65.7 63.5 $1 $15 47.2 • Range: 14.0x – 18.0x • SAP: 15.8x | Microsoft: 16.8x $118.27 $51.1 Scenario B: $3.5 $114.27 $49.4 $ 1 3 Years Scenario A Exit LTM EBIT: $151.55 $65 16.5x - 19.5x Scenario B Exit LTM EBIT: 17.5x - 20.5x $149.53 $64. .3 $77.5 $179.90 • 3 Year DCF based on Vail management forecast through FY’22 $75.8 $176.10 • WACC: 8.00% - 9.50% 5 Years Scenario A Exit LTM EBIT: $166. 16.5x - 19.5x Scenario B Exit LTM EBIT: 17.5x - 20.5x $1 19 $71.6 4 $73.5 $86.1 $200.10 • 5 Year DCF based on Vail and Vail guidance for extrapolation $87.8 $204.09 • WACC: 8.00% - 9.50% 52 Week Trading Intraday High and Low High: $206.80 $55.8 Low: $129.33 $129.33 $89.0 • High: 5/16/19; Low: 1/3/19 Analyst Price Targets Price Per Share High: $224.00 $56.1 Low: $130.00 $130.00 $96.3 • Barclays: $224.00
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Vail – Analysis at ($ in billions, except per share values) Various Prices Current Price ($143.72) Unaffected Price ($153.09) 20-Day Price as of VWAP 7/30/19 Meeting1 ($167.90) ($178.31) Premium / (Discount) to Current (21.6%) (15.1%) (8.6%) (2.0%) 0.0% 4.5% 11.0% 17.6% FDSO 427.1 427.1 427.2 427.2 427.2 427.2 427.3 427.3 (-) Cash & Equivalents ($3.3) ($3.3) ($3.3) ($3.3) ($3.3) ($3.3) ($3.3) ($3.3) (-) Equity Investments ($0.4) ($0.4) ($0.4) ($0.4) ($0.4) ($0.4) ($0.4) ($0.4) (+) Debt $4.3 $4.3 $4.3 $4.3 $4.3 $4.3 $4.3 $4.3 Metric Revenue FY2020 / CY2019 $10.0 5.17x 5.60x 6.02x 6.45x 6.58x 6.87x 7.30x 7.73x FY2021 / CY2020 $11.2 4.62x 5.00x 5.38x 5.76x 5.88x 6.14x 6.52x 6.90x EBIT (Pre -SBC) FY2020 / CY2019 $3.3 15.7x 17.0x 18.2x 19.5x 19.9x 20.8x 22.1x 23.4x FY2021 / CY2020 $3.7 14.2x 15.4x 16.5x 17.7x 18.1x 18.9x 20.1x 21.2x Metric Revenue FY2020 / CY2019 $10.0 5.17x 5.60x 6.02x 6.45x 6.58x 6.87x 7.30x 7.73x FY2021 / CY2020 $11.0 4.70x 5.09x 5.48x 5.87x 5.99x 6.25x 6.64x 7.03x EBIT (Pre -SBC) FY2020 / CY2019 $3.3 15.7x 17.0x 18.2x 19.5x 19.9x 20.8x 22.1x 23.4x FY2021 / CY2020 $3.5 14.7x 15.9x 17.1x 18.3x 18.7x 19.5x 20.8x 22.0x Source: Note: Company filings, Vail management and FactSet as of 8/16/2019. Vail fiscal year ends January 31st. FY financials used as proxy for prior CY metrics for Vail. Scenario A forecasts represent Vail’s current cloud transition trajectory. Scenario B forecasts represent an accelerated cloud transition scenario. Represents share price as of 7/26/19. 20 1 Scenario B: Accelerated Cloud Transition Scenario A: Current Cloud Transition Trajectory Comparable Companies Large HG CapInfra. MedianMedian Global Median 7.6x5.2x5.2x6.2x 6.8x4.8x4.8x5.4x 18.9x17.7x14.5x26.8x 16.8x15.8x13.7x26.3x 7.6x5.2x5.2x6.2x 6.8x4.8x4.8x5.4x 18.9x17.7x14.5x26.8x 16.8x15.8x13.7x26.3x 5.6x 5.0x 17.2x 15.8x 5.6x 5.0x 17.2x 15.8x Enterprise Value$51.8$56.1$60.4$64.7$66.0$69.0$73.2$77.5 Implied Multiples Equity Value$51.3$55.5$59.8$64.1$65.4$68.4$72.6$76.9 Price per Share$120$130$140$150$153$160$170$180
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Vail – Comparable Company Benchmarking – Operating Metrics CY’19E-CY’20E Revenue Growth vs. CY’20E EBIT Margin (Pre-SBC) 50% 22% 21% 18% 18% 16% are closest financial peers 12% 11% 10% 7% 3% 25% 40% 34% 6% 5% 4% 3 0% 36% 33% 30% 23% 19% 16% (24%) (25%) 0% 5% 10% 15% 20% 25% Large Cap Software High-Growth Infrastructure Large Cap Software High-Growth Infrastructure 21 Source: Company filings, Vail management and FactSet as of 8/16/2019. Note:Valuations fully diluted based on treasury stock method. Multiples over 50x are denoted as “NM”. Multiples reflect EV/CY’20 revenue. Medians do not include Vail. Vail fiscal year ends January 31st. Scenario A forecasts represent Vail’s current cloud transition trajectory. Scenario B forecasts represent an accelerated cloud transition scenario. Vail valuation metrics based on unaffected share price of $153.09 as of 8/14/19. Splunk Splunk Oracle Salesforce Salesforce Microsoft Palo Alto Networks Palo Alto Networks Arista Networks Nutanix Arista Networks Cisco Arista Networks Vail (Scenario A) Microsoft Vail (Scenario A) SAP Vail (Scenario B) Microsoft Vail (Scenario A) SAP Vail (Scenario B) Vail (Scenario B) Citrix SAP Palo Alto Networks Citrix Citrix Salesforce Nutanix Oracle Splunk Cisco Cisco Nutanix Oracle CY’19E-CY’20E Revenue Growth 44% 40% 33% 32% 31% Median: 30% % 23% 13% 13% 12% 10% 7% Median: 12% 4% 3% Microsoft and SAP Oracle, 5.0x Arista, 5.4x Cisco, 3.6x Citrix, 4.1xPalo Alto Networks, 5.0x Salesforce, 5.8x Splunk, 7.3x Nutanix, 2.4x Microsoft, 6.8x Vail (Scenario B), 6.0x Vail (Scenario A), SAP, 4.8x5.9x Median: 14% CY’20E EBIT Margin (Pre-SBC) CY’19E – CY’20E Revenue Growth CY’19E – CY’20E EBIT Growth (Pre-SBC) CY’20E EBIT Margin (Pre-SBC)
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Vail – Comparable Company Benchmarking EV / CY’19E Revenue – Valuation Metrics EV / CY’19E EBIT (Pre-SBC) Reference Range: 16.0x – 20.0x 41.4x Reference Range: 5.0x – 7.5x 8.9x 6.2x 16.8x 4.3x 3.7x 14.5x 11.8x 11.6x 2.8x NM EV / CY’20E Revenue EV / CY’20E EBIT (Pre-SBC) Reference Range: 4.75x – 6.75x Reference Range: 14.0x – 18.0x 45.1x 6.0x 5.9x 5.8x 5.4x 5.0x5.0x 21.7x 15.8x 4.1x 13.7x 14.9x 3.6x 11.4x 11.1x 2. NM Large Cap Software High-Growth Infrastructure Source: Vail management, public company filings and FactSet as of 8/16/2019. Note:Valuations fully diluted based on treasury stock method. Multiples over 50x are denoted as “NM”. Medians do not include Vail. Vail fiscal year ends January 31st. Scenario A forecasts represent Vail’s current cloud transition trajectory. Scenario B forecasts represent an accelerated cloud transition scenario. Vail valuation metrics based on unaffected share price of $153.09 on 8/14/19. 22 Splunk Splunk Microsoft Microsoft Vail (Scenario B) Salesforce Vail (Scenario A) Vail (Scenario B) Vail (Scenario A) Salesforce Arista Networks Arista Networks Palo Alto Networks Oracle Palo Alto Networks SAP Oracle SAP Citrix Citrix Cisco Cisco Nutanix Nutanix Splunk Salesforce Palo Alto Networks Salesforce Palo Alto Networks Vail (Scenario B) Vail (Scenario A) Vail (Scenario B) Vail (Scenario A) Microsoft Microsoft SAP Arista Networks SAP Arista Networks Citrix Citrix Oracle Oracle Cisco Cisco Splunk Nutanix Nutanix 7.3x 6.8x 4x 4.8x 30.9x 18.7x 18.1x 16.8x 7.6x 7.0x 6.6x 6.6x 5.9x 5.2x 5.2x 26.8x 19.9x 19.9x 18.9x 17.7x NM
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Vail DCF Analysis ($ in billions, except per share values) – 3 Year Plan (Scenario A) Revenue % Growth EBIT (Pre-SBC) % Margin SBC % of Sales EBIT (Post-SBC) % Margin Levered FCF (+) Tax-Effected Interest Expense/(Income), Net Unlevered FCF (-) Stock-Based Compensation Unlevered FCF (Post-SBC) Terminal LTM EBIT Multiple Terminal LTM EBIT Multiple 16.5x 18.0x 19.5x 16.5x 18.0x 19.5x WACC WACC Terminal LTM EBIT Multiple Terminal LTM EBIT Multiple WACC 16.5x 18.0x 19.5x WACC 16.5x 18.0x 19.5x Source: Vail management. Note:Vail fiscal year ends January 31st. Valuation as of 8/31/2019. Stock-based compensation (“SBC”) treated as a cash expense. Stock-based compensation and FY’23 / FY’24 extrapolation based on guidance from Vail. Scenario A forecasts represent Vail’s current cloud transition trajectory. 23 8.00% $154.52 $167.21 $179.90 8.75% 153.02 165.59 178.15 9.50% 151.55 163.99 176.44 8.00% 3.5% 3.5% 3.5% 8.75% 4.2% 4.2% 4.2% 9.50% 5.0% 5.0% 5.0% Value Per Common Share Implied Perpetuity Growth Rate 8.00% $66.0 $71.4 $76.9 8.75% $65.4 $70.7 $76.1 9.50% $64.7 $70.1 $75.4 8.00% $66.6 $72.0 $77.5 8.75% $66.0 $71.3 $76.7 9.50% $65.3 $70.7 $76.0 Equity Value Enterprise Value Historical Vail Management Plan 2018A 2019A 2020E 2021E 2022E $7.9 $9.0 11.2% 14.1% 2.7 3.0 33.8% 33.9% 0.7 0.7 8.7% 8.1% 2.0 2.3 25.1% 25.7% $10.0 $11.2 $12.4 11.8% 11.9% 10.5% 3.3 3.7 4.0 33.0% 32.5% 32.5% 0.9 1.0 1.1 8.7% 8.7% 8.7% 2.4 2.7 3.0 24.3% 23.8% 23.8% $3.6 $4.0 $4.5 (0.0) (0.0) 0.0 $3.6 $4.0 $4.5 (0.9) (1.0) (1.1) $2.7 $3.1 $3.4
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Vail DCF Analysis ($ in billions, except per share values) – 3 Year Plan (Scenario B) Revenue % Growth EBIT (Pre-SBC) % Margin SBC % of Sales EBIT (Post-SBC) % Margin Levered FCF (+) Tax-Effected Interest Expense/(Income), Net Unlevered FCF (-) Stock-Based Compensation Unlevered FCF (Post-SBC) Terminal LTM EBIT Multiple Terminal LTM EBIT Multiple 17.5x 19.0x 20.5x 17.5x 19.0x 20.5x WACC WACC Terminal LTM EBIT Multiple Terminal LTM EBIT Multiple WACC 17.5x 19.0x 20.5x WACC 17.5x 19.0x 20.5x Source: Vail management. Note:Vail fiscal year ends January 31st. Valuation as of 8/31/2019. Stock-based compensation (“SBC”) treated as a cash expense. Stock-based compensation and FY’23 / FY’24 extrapolation based on guidance from Vail. Scenario B forecasts represent an accelerated cloud transition scenario. 24 8.00% $152.46 $164.28 $176.10 8.75% 150.99 162.69 174.39 9.50% 149.53 161.12 172.71 8.00% 3.6% 3.6% 3.6% 8.75% 4.3% 4.3% 4.3% 9.50% 5.1% 5.1% 5.1% Value Per Common Share Implied Perpetuity Growth Rate 8.00% $65.1 $70.2 $75.2 8.75% $64.5 $69.5 $74.5 9.50% $63.9 $68.8 $73.8 8.00% $65.7 $70.8 $75.8 8.75% $65.1 $70.1 $75.1 9.50% $64.5 $69.4 $74.4 Equity Value Enterprise Value Historical Vail Management Plan 2018A 2019A 2020E 2021E 2022E $7.9 $9.0 11.2% 14.1% 2.7 3.0 33.8% 33.9% 0.7 0.7 8.7% 8.1% 2.0 2.3 25.1% 25.7% $10.0 $11.0 $12.1 11.8% 9.9% 9.9% 3.3 3.5 3.8 33.0% 32.0% 31.0% 0.9 1.0 1.1 8.7% 8.7% 8.7% 2.4 2.6 2.7 24.3% 23.3% 22.3% $3.6 $4.0 $4.3 (0.0) (0.0) 0.0 $3.6 $4.0 $4.3 (0.9) (1.0) (1.1) $2.7 $3.0 $3.3
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Vail DCF Analysis ($ in billions, except per share values) – 5 Year Extrapolated (Scenario A) Revenue % Growth EBIT (Pre-SBC) % Margin SBC % of Sales EBIT (Post-SBC) % Margin Levered FCF (+) Tax-Effected Interest Expense/(Income), Net Unlevered FCF (-) Stock-Based Compensation Unlevered FCF (Post-SBC) Terminal LTM EBIT Multiple Terminal LTM EBIT Multiple 16.5x 18.0x 19.5x 16.5x 18.0x 19.5x WACC WACC Terminal LTM EBIT Multiple Terminal LTM EBIT Multiple WACC 16.5x 18.0x 19.5x WACC 16.5x 18.0x 19.5x Source: Vail management. Note:Vail fiscal year ends January 31st. Valuation as of 8/31/2019. Stock-based compensation (“SBC”) treated as a cash expense. Stock-based compensation and FY’23 / FY’24 extrapolation based on guidance from Vail. Scenario A forecasts represent Vail’s current cloud transition trajectory. 25 8.00% $173.77 $186.93 $200.10 8.75% 169.92 182.78 195.63 9.50% 166.19 178.74 191.30 8.00% 3.2% 3.2% 3.2% 8.75% 3.9% 3.9% 3.9% 9.50% 4.6% 4.6% 4.6% Value Per Common Share Implied Perpetuity Growth Rate 8.00% $74.2 $79.9 $85.5 8.75% $72.6 $78.1 $83.6 9.50% $71.0 $76.4 $81.7 8.00% $74.8 $80.5 $86.1 8.75% $73.2 $78.7 $84.2 9.50% $71.6 $77.0 $82.3 Equity Value Enterprise Value Historical Vail Management Plan Extrapolation with Vail Guidance 2018A 2019A 2020E 2021E 2022E 2023E 2024E $7.9 $9.0 11.2% 14.1% 2.7 3.0 33.8% 33.9% 0.7 0.7 8.7% 8.1% 2.0 2.3 25.1% 25.7% $10.0 $11.2 $12.4 11.8% 11.9% 10.5% 3.3 3.7 4.0 33.0% 32.5% 32.5% 0.9 1.0 1.1 8.7% 8.7% 8.7% 2.4 2.7 3.0 24.3% 23.8% 23.8% $13.6 $15.0 10.0% 10.0% 4.4 4.9 32.5% 32.5% 1.2 1.3 8.7% 8.7% 3.3 3.6 23.8% 23.8% $3.6 $4.0 $4.5 (0.0) (0.0) 0.0 $3.6 $4.0 $4.5 (0.9) (1.0) (1.1) $4.9 $5.4 (1.2) (1.3) $2.7 $3.1 $3.4 $3.7 $4.1
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Vail DCF Analysis ($ in billions, except per share values) – 5 Year Extrapolated (Scenario B) Revenue % Growth EBIT (Pre-SBC) % Margin SBC % of Sales EBIT (Post-SBC) % Margin Levered FCF (+) Tax-Effected Interest Expense/(Income), Net Unlevered FCF (-) Stock-Based Compensation Unlevered FCF (Post-SBC) Terminal LTM EBIT Multiple Terminal LTM EBIT Multiple 17.5x 19.0x 20.5x 17.5x 19.0x 20.5x WACC WACC Terminal LTM EBIT Multiple Terminal LTM EBIT Multiple 17.5x 19.0x 20.5x 17.5x 19.0x 20.5x WACC WACC Source: Vail management. Note:Vail fiscal year ends January 31st. Valuation as of 8/31/2019. Stock-based compensation (“SBC”) treated as a cash expense. Stock-based compensation and FY’23 / FY’24 extrapolation based on guidance from Vail. Scenario B forecasts represent an accelerated cloud transition scenario. 26 8.00% $178.34 $191.22 $204.09 8.75% 174.38 186.96 199.53 9.50% 170.54 182.82 195.10 8.00% 3.4% 3.4% 3.4% 8.75% 4.1% 4.1% 4.1% 9.50% 4.9% 4.9% 4.9% Value Per Common Share Implied Perpetuity Growth Rate 8.00% $76.2 $81.7 $87.2 8.75% $74.5 $79.9 $85.3 9.50% $72.9 $78.1 $83.4 8.00% $76.8 $82.3 $87.8 8.75% $75.1 $80.5 $85.9 9.50% $73.5 $78.7 $84.0 Equity Value Enterprise Value Historical Vail Management Plan Extrapolation with Vail Guidance 2018A 2019A 2020E 2021E 2022E 2023E 2024E $7.9 $9.0 11.2% 14.1% 2.7 3.0 33.8% 33.9% 0.7 0.7 8.7% 8.1% 2.0 2.3 25.1% 25.7% $10.0 $11.0 $12.1 11.8% 9.9% 9.9% 3.3 3.5 3.8 33.0% 32.0% 31.0% 0.9 1.0 1.1 8.7% 8.7% 8.7% 2.4 2.6 2.7 24.3% 23.3% 22.3% $13.4 $14.9 10.4% 11.5% 4.2 4.8 31.5% 32.0% 1.2 1.3 8.7% 8.7% 3.1 3.5 22.8% 23.3% $3.6 $4.0 $4.3 (0.0) (0.0) 0.0 $3.6 $4.0 $4.3 (0.9) (1.0) (1.1) $4.7 $5.3 (1.2) (1.3) $2.7 $3.0 $3.3 $3.5 $4.0
P R O J E C T R A V E N I I I V A I L V A L U A T I O N A N A L Y S I S Analyst Price Target Summary – Vail Selected Broker Targets $250 225 $214 $213 $210 $210 $206 200 $190 $190 $185 $180 $180 175 150 30 125 100 Buy Hold Sell Source: Bloomberg and FactSet as of 8/14/19. Note:Analysis illustrates broker price targets after Vail announced Q1 FY 2020 earnings on 5/30/19. 27 1 Represents share price as of 7/26/19. Date 7/307/105/317/227/127/307/175/305/306/18/55/316/35/315/315/305/315/306/137/13 Current: $143.72 Median: $194.50 As of 7/30/19 Meeting1: $178.31 20-Day VWAP: $167.90 Unaffected: $153.09 $224 $220 $220 $198 $195 $194 $194 $193 $160 $1
C O N F I D E N T I A L P R O J E C T R A V E N Appendix
C O N F I D E N T I A L P R O J E C T R A V E N A Raven
P R O J E C T R A V E N A R A V E N Raven Terminal Multiple Analysis CY’19E – CY’20E Revenue Growth CY’19E – CY’20E Revenue Growth 22.3% 20.5% 11.1% 19.0% 9.8% 16.8% 14.8% 14.3% 12.6% 11.1% 9.8% 4.6% 4.2% 7.4% 2.9% 2.7% CY’19E EBIT Margin (Pre-SBC) CY’19E EBIT Margin (Pre-SBC) 39.9% 44.0% 33.0% 29.5% 39.9% 25.5% 23.0% 6.6% 0.3% EV / CY’19E EBIT EV / CY’19E EBIT Reference Range: 17.5x – 20.0x Reference Range: 11.5x – 14.5x 41.4x 38.6x 36.7x 19.9x 19.9x 18.9x 18.9x 17.7x 17.7x 11.6x 14.5x 11.8x NM Source: Vail management, public company filings, FactSet as of 8/16/2019. 28 Note Raven fiscal year ends January 31st. Multiples greater than 50.0x or less than 0.0x are designated as “NM.” FY’24E EBIT margin (Pre-SBC) and revenue numbers are used for In-Vail metrics in the 5-year model, and FY’30E metrics are used for In-Vail metrics in the 11-year model. Medians exclude Raven. Vail valuation metrics based on unaffected share price of $153.09 as of 8/14/19. NM NM Median: 16.1x Median: 28.3x 5% 33.0% 32.3% 29.6% 29.5% 28. 16.9% 14.0% 11.5% Median: 33% Median: 17% 7.4% Median: 6% Median: 15% Raven – In Vail Case, 5-Year Model Raven – In Vail Case, 11-Year Model
P R O J E C T R A V E N A R A V E N Public Trading Comparables – ($ in millions, except per share data) Raven Ente rprise Value / M argins Re v . Re v e nue EBITDA (Pre -SBC) EBIT (Pre -SBC) CAGR Gross (Pre -SBC) EBITDA (Pre -SBC) EBIT (Pre -SBC) Stock Price 8/16/19 % Change 52 Wk. Equity Value Ente rprise Value Company Low High 2019E 2020E 2019E 2020E 2019E 2020E 2019E 2020E 2019E 2020E 2019E 2020E '19 - '21 Dropbox $17.48 1% (38%) $7,766 $6,981 4.2x 3.7x 18.2x 14.6x 36.7x 25.6x 14% 76% 76% 23% 25% 12% 14% Pegasystems $70.07 59% (11%) 5,979 5,822 6.3 5.6 NM NM NM NM 11% 68% 71% 4% 7% (1%) 4% Nutanix $18.24 0% (70%) 3,934 3,568 2.8 2.4 NM NM NM NM 17% 78% 78% (20%) (15%) (26%) (24%) FireEye $13.28 3% (34%) 3,195 3,387 3.9 3.6 33.4 28.9 NM NM 7% 73% 74% 12% 12% 1% 5% Box $13.35 2% (50%) 2,291 2,185 3.2 2.8 42.9 24.5 NM NM 13% 72% 72% 7% 12% 0% 6% Appian $59.54 159% 0% 4,165 4,088 15.6 13.4 NM NM NM NM 17% 65% 68% (10%) (6%) (13%) (8%) CommVault $41.84 1% (40%) 1,967 1,516 2.2 2.2 15.2 14.6 18.2 16.7 4% 83% 82% 15% 15% 12% 13% SailPoint $21.97 29% (36%) 2,030 1,937 6.9 5.9 NM NM NM NM 12% 80% 80% 8% 11% 7% 11% Cloudera $6.68 32% (65%) 2,072 1,528 2.1 1.8 NM 20.8 NM NM 13% 75% 78% 3% 9% (12%) (2%) Carbon Black $22.67 85% (11%) 1,942 1,794 7.3 6.2 NM NM NM NM 18% 79% 78% (15%) (9%) (18%) (13%) Talend $40.16 26% (45%) 1,332 1,304 5.3 4.4 NM NM NM NM 22% 76% 78% (8%) (2%) (11%) (6%) Domo $25.42 79% (42%) 754 704 4.1 3.4 NM NM NM NM 22% 69% 71% (52%) (29%) (57%) (36%) MobileIron $6.82 67% (6%) 857 756 3.6 3.3 NM NM NM NM 12% 82% 82% 1% 5% (2%) 4% Source: Vail management, public company filings, FactSet as of 8/16/2019. Note:FY financials used as proxy for prior CY metrics for Raven. Raven fiscal year ends Jan 31st. Raven valuation metrics based on unaffected share price of $8.30 as of 8/14/19. Multiples greater than 50.0x or less than 0.0x are indicated as “NM”. 29 1st Quartile M e an M e dian 3rd Quartile 3.2x 2.8x 17.5x 14.6x 22.8x 18.9x 12% 72% 72% (10%) (6%) (13%) (8%) 5.2 4.5 27.4 20.7 27.5 21.2 14% 75% 76% (3%) 3% (8%) (2%) 4.1 3.6 25.8 20.8 27.5 21.2 13% 76% 78% 3% 7% (2%) 4% 6.3 5.6 35.8 24.5 32.1 23.4 17% 79% 78% 8% 12% 1% 6% Rav e n (In-Vail) Rav e n (Standalone ) Rav e n (Stre e t) $8.30 0% (71%) $2,402 $1,594 $8.30 0% (71%) 2,402 1,594 $8.30 0% (71%) 2,402 1,594 2.1x 1.9x NM 33.7x NM NM 13% 70% 74% (3%) 6% (6%) 4% 2.2 2.0 NM NM NM NM 10% 70% 74% (6%) (6%) (9%) (6%) 2.1 1.8 NM NM NM NM 18% 71% 74% (4%) 3% (6%) 1%
P R O J E C T R A V E N A R A V E N Raven – Weighted Average Cost of Capital Analysis ($ in billions) Barra Predicted Local Beta Bloomberg Historical (2 Year, Weekly, Raw) Capital Structure Market Debt / Debt / Levered Unlevered Levered Unlevered Company Value Cap. Equity Beta Beta Beta Beta Dropbox $7.8 2% 2% 1.376 1.346 1.626 1.590 Unlevered Beta 1.100 1.300 Pegasystems 6.0 0% 0% 1.137 1.137 1.331 1.331 Target Debt/Capitalization 0.0% 0.0% Nutanix 3.9 10% 11% 1.764 1.573 1.827 1.629 Target Debt/Equity 0.0% 0.0% FireEye 3.2 24% 31% 1.197 0.919 1.179 0.906 Levering Factor 1.00 1.00 Levered Beta(1) Box 2.3 5% 5% 1.284 1.214 1.407 1.330 1.100 1.300 Appian 4.2 0% 0% 1.251 1.250 0.881 0.880 Tax Rate 0.0% 0.0% Risk-Free Rate of Return(2) Equity Risk Premium(3) Cost of Equity(4) CommVault 2.0 0% 0% 1.124 1.124 0.972 0.972 1.56% 1.56% SailPoint 2.0 0% 0% 1.662 1.662 1.644 1.644 6.91% 6.91% Cloudera 2.1 0% 0% 1.658 1.658 0.800 0.800 9.2% 10.5% Carbon Black 1.9 0% 0% 1.432 1.432 0.970 0.970 Pre-Tax Cost of Debt 0.0% 0.0% Talend 1.3 0% 0% 1.044 1.043 0.558 0.558 Domo 0.8 12% 14% 1.627 1.430 1.755 1.542 Reference Range: 9.25% - 10.5% MobileIron 0.9 0% 0% 0.956 0.956 0.700 0.700 Raven $2.4 0% 0% 1.479 1.479 1.156 1.156 Source: Public company filings, Barra Beta Book, Bloomberg and FactSet as of 8/16/2019. Note: 1 2 3 4 5 6 Raven valuation metrics based on unaffected share price of $8.30 as of 8/14/19. Levered Beta = Unlevered Beta x [1 + (1 - Tax Rate)(Debt/Equity)]. Represents 10-year U.S. Treasury yield as of 8/16/2019. Long-horizon expected equity risk premium (historical): large company stock total returns minus long-term government bond income returns (Source: Duff & Phelps). Cost of Equity = (Risk Free Rate of Return) + (Levered Beta)(Equity Risk Premium). Weighted Average Cost of Capital = (After-Tax Cost of Debt)(Debt/Cap) + (Cost of Equity)(Equity/Cap). Excludes impact of 41% share price decline after Q1 FY 2020 earnings on June 4, 2019. 30 (6) Median of Peers 0% 0% 1.284 1.250 1.179 0.972 WACC5 9.2% 10.5% Assumptions
P R O J E C T R A V E N A R A V E N Raven – Last 6 Months Evolution of Betas 2.50 2.50 2.00 2.00 1.50 1.50 1.28 1.27 1.26 1.00 1.00 0.50 0.50 0.00 0.00 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 CAurgr-e1n9t Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 CurJreunl-t19 High / Low Median High / Low Median Source: Barra Beta Book, Bloomberg as of 8/16/2019. Note:Levered betas as of end of month noted. Levering factor based on current figures. 31 1.321.331.291.28 1.40 1.351.341.34 1.18 1.101.09 Levered Beta Levered Beta Barra Predicted Local Beta Bloomberg Raw Local Beta (2 Year, Weekly)
C O N F I D E N T I A L P R O J E C T R A V E N B Vail & Pro Forma Impact
P R O J E C T R A V E N B V A I L & P R O F O R M A I M P A C T Vail LTM Price Performance $220 5 200 4 180 3 160 2 $143.72 (5.4%) 1 140 120 0 8/16/2018 10/28/2018 1/9/2019 3/23/2019 6/4/2019 8/16/2019 32 Source: FactSet as of 8/16/2019. Stock Price Volume (m)
P R O J E C T R A V E N B V A I L & P R O F O R M A I M P A C T Illustrative ($ in millions) Pro Forma P&L Impact to Vail 33 Source: Vail management. Note:Vail and Raven fiscal years end of January 31st. Scenario B: Accelerated Cloud Transition Vail (Scenario B) % growth Raven ("In-Vail" View) % growth FY' 2019A FY' 2020E FY' 2021E FY' 2022E 19A - '22E CAGR $8,974 14% $657 29% $10,030 $11,025 $12,120 12% 10% 10% $764 $840 $973 16% 10% 16% 11% 14% Total Pro Forma Revenue $9,631 $10,794 $11,864 $13,093 11% % growth 15% % Delta to Vail Standalone 1% Vail (Scenario B) $3,041 % margin 34% Raven ("In-Vail" View) ($71) % margin (11%) 12% 10% 10% 0% (0%) 0% $3,310 $3,528 $3,758 33% 31% 30% ($44) $30 $104 (6%) 4% 11% 0% 7% NA Total Pro Forma EBIT (Pre-SBC) $2,970 $3,267 $3,558 $3,861 9% % margin 31% % Delta to Vail Standalone (3%) 30% 29% 29% (3%) (2%) (1%) 2% Scenario A: Current Cloud Transition Trajectory Vail (Scenario A) % growth Raven ("In-Vail" View) % growth FY' 2019A FY' 2020E FY' 2021E FY' 2022E 19A - '22E CAGR $8,974 14% $657 29% $10,030 $11,225 $12,400 12% 12% 10% $764 $840 $973 16% 10% 16% 11% 14% Total Pro Forma Revenue $9,631 $10,794 $12,065 $13,373 12% % growth 15% % Delta to Vail Standalone 1% Vail (Scenario A) $3,041 % margin 34% Raven ("In-Vail" View) ($71) % margin (11%) 12% 12% 11% 0% (0%) 0% $3,310 $3,650 $4,035 33% 33% 33% ($44) $30 $104 (6%) 4% 11% 0% 10% NA Total Pro Forma EBIT (Pre-SBC) $2,970 $3,267 $3,680 $4,139 12% % margin 31% % Delta to Vail Standalone (3%) 30% 31% 31% (3%) (2%) (2%) 2%
P R O J E C T R A V E N B V A I L & P R O F O R M A I M P A C T Pro Forma Capitalization Impact ($ in millions, except per share values) Vail Capitalization Current Illustrative Impact of Raven Acquisition Pro Forma Basic Shares Outstanding RSUs 409.2 16.5 7.2 1.3 416.4 17.8 Options (Gross) WAEP Options (Net Treasury Method) 2.0 $36.50 1.5 1.0 $91.34 0.4 2.9 $54.62 1.8 1 Fully Diluted Shares Outstanding (Gross) Fully Diluted Shares Outstanding (Net Treasury Method) 427.7 427.2 9.4 8.8 437.1 436.0 Basic Shares Owned by Diamond 330.7 7.2 337.9 % Basic Shares % FDSO (Gross) % FDSO (Net Treasury Method) 80.81% 77.32% 77.41% 0.33% (0.02%) 0.09% 81.14% 77.30% 77.50% Diamond % Voting 97.47% 0.06% 97.53% Net Debt $592 $1,743 $2,335 Net Leverage (FY'21E EBITDA Pre-SBC, Scenario A) Net Leverage (FY'21E EBITDA Pre-SBC, Scenario B) 0.1x 0.1x 0.4x 0.4x 0.5x 0.6x Source: Vail management, Raven management, Company filings and FactSet as of 8/16/2019. Note:Analysis based on an exchange ratio to Diamond of 0.0550 Vail Class B shares per Raven Class B share. Scenario A forecasts represent Vail’s current cloud transition trajectory. Scenario B forecasts represent an accelerated cloud transition scenario. 34 1 Reflects weighted average exercise price of the 1.0m to-be-issued Vail options.
P R O J E C T R A V E N B V A I L & P R O F O R M A I M P A C T Vail – Public Company Comparables ($ in billions, except per share amounts) Ente rprise Value / M argins Re v . Re v e nue EBIT (Pre -SBC) P/E (Pre -SBC) Growth Gross (Pre -SBC) EBIT (Pre -SBC) NI (Pre -SBC) Stock Price 8/16/19 % Change 52 Wk. Equity Value Ente rprise Value Company Low High 2019E 2020E 2019E 2020E 2019E 2020E '19 - '20 2019E 2020E 2019E 2020E 2019E 2020E Large Cap Software Microsoft $136.13 45% (4%) $1,059.4 $1,002.3 7.6x 6.8x 18.9x 16.8x 23.3x 20.8x 11% 66% 66% 40% 40% 34% 34% Cisco $46.96 17% (19%) 205.7 195.7 3.7 3.6 11.6 11.2 14.7 13.7 3% 64% 65% 32% 33% 27% 27% Oracle $53.59 26% (11%) 187.6 207.5 5.2 5.0 11.8 11.4 14.4 13.3 3% 80% 80% 44% 44% 33% 33% SAP €107.30 27% (14%) 146.4 158.4 5.2 4.8 17.7 15.8 21.9 19.7 7% 72% 73% 29% 31% 21% 22% Citrix $92.44 1% (19%) 12.7 12.9 4.3 4.1 14.5 13.7 16.9 15.3 4% 87% 87% 30% 30% 24% 25% High-Growth Infrastructure Salesforce $143.89 19% (14%) $116.8 $112.6 7.0x 5.8x 41.4x 30.9x NM 43.4x 21% 78% 78% 17% 19% 14% 15% Palo Alto Networks $199.27 22% (22%) 20.7 18.6 5.9 5.0 26.8 21.7 34.7 29.5 18% 77% 77% 22% 23% 19% 19% Splunk $124.79 42% (11%) 20.3 19.7 8.9 7.3 NM 45.1 NM NM 22% 85% 84% 14% 16% 13% 14% Arista Networks $221.18 17% (33%) 18.1 15.8 6.2 5.4 16.8 14.9 22.9 21.0 16% 64% 64% 37% 36% 31% 30% Nutanix $18.24 0% (70%) 3.9 3.6 2.8 2.4 NM NM NM NM 18% 78% 78% (26%) (24%) (27%) (24%) 35 Source: Vail management, public company filings and FactSet as of 8/16/2019. Note:FY financials used as proxy for prior CY metrics for Vail. Vail fiscal year ends Jan 31st. Scenario A forecasts represent Vail’s current cloud transition trajectory. Scenario B forecasts represent an accelerated cloud transition scenario. Vail valuation metrics based on unaffected share price of $153.09 as of 8/14/19. Vail (Sce nario A) Vail (Sce nario B) $153.09 17% (26%) $65.4 $66.0 $153.09 17% (26%) 65.4 66.0 6.6x 5.9x 19.9x 18.1x 23.6x 21.1x 12% NA NA 33% 33% 27% 27% 6.6 6.0 19.9 18.7 23.6 21.8 10% NA NA 33% 32% 27% 26% Global M e an Global M e dian 5.7x 5.0x 19.9x 20.2x 21.3x 22.1x 12% 75% 75% 24% 25% 19% 19% 5.6 5.0 17.2 15.8 21.9 20.2 14% 77% 77% 30% 30% 23% 23% M e an M e dian 6.2x 5.2x 28.4x 28.2x 28.8x 31.3x 19% 76% 76% 13% 14% 10% 11% 6.2 5.4 26.8 26.3 28.8 29.5 18% 78% 78% 17% 19% 14% 15% M e an M e dian 5.2x 4.9x 14.9x 13.8x 18.2x 16.5x 6% 74% 74% 35% 36% 28% 28% 5.2 4.8 14.5 13.7 16.9 15.3 4% 72% 73% 32% 33% 27% 27%
P R O J E C T R A V E N B V A I L & P R O F O R M A I M P A C T Vail – Weighted Average Cost ($ in billions) of Capital Analysis Barra Predicted Local Beta Bloomberg Historical (2 Year, Weekly, Raw) Capital Structure Market Debt / Debt / Levered Unlevered Levered Unlevered Company Value Cap. Equity Beta Beta Beta Beta Microsoft $1,059 7% 7% 0.948 0.890 1.074 1.009 Unlevered Beta 1.000 1.200 Cisco Systems 206 11% 12% 1.039 0.948 1.210 1.104 Target Debt/Capitalization 6.1% 6.1% Oracle 188 23% 30% 0.996 0.803 1.095 0.882 Target Debt/Equity 6.5% 6.5% SAP 146 10% 11% 1.033 0.955 0.955 0.883 Levering Factor 1.05 1.05 Levered Beta(1) Citrix Systems 13 6% 6% 0.932 0.887 0.815 0.776 1.055 1.266 salesforce com 117 3% 3% 1.126 1.101 1.390 1.359 Tax Rate 16.0% 16.0% Risk-Free Rate of Return(2) Palo Alto Networks 21 7% 8% 0.991 0.939 0.768 0.728 1.56% 1.56% Equity Risk Premium(3) Splunk 20 8% 8% 1.350 1.271 1.602 1.508 6.91% 6.91% Cost of Equity(4) Arista Networks 18 0% 0% 1.362 1.362 1.426 1.426 8.5% 9.9% Nutanix 4 10% 11% 1.764 1.573 1.827 1.629 Pre-Tax Cost of Debt 3.8% 3.8% Reference Range: 8.00% - 9.50% Source: Public company filings, Barra Beta Book, Bloomberg and FactSet as of 8/16/2019. Note: 1 2 3 4 5 Vail valuation metrics based on unaffected share price of $153.09 as of 8/14/19. Levered Beta = Unlevered Beta x [1 + (1 - Tax Rate)(Debt/Equity)]. Represents 10-year U.S. Treasury yield as of 8/16/2019. Long-horizon expected equity risk premium (historical): large company stock total returns minus long-term government bond income returns (Source: Duff & Phelps). Cost of Equity = (Risk Free Rate of Return) + (Levered Beta)(Equity Risk Premium). Weighted Average Cost of Capital = (After-Tax Cost of Debt)(Debt/Cap) + (Cost of Equity)(Equity/Cap). 36 Vail $65.4 6% 7% 1.266 1.202 1.494 1.418 WACC5 8.1% 9.4% Median of Peers 7% 8% 1.036 0.951 1.153 1.056 Assumptions
P R O J E C T R A V E N B V A I L & P R O F O R M A I M P A C T Vail – Last 6 Months Evolution of Betas 2.00 2.00 1.50 1.50 1.14 1.13 1.12 1.12 1.12 1.11 1.03 1.02 0.99 0.99 0.98 1.00 1.00 0.50 0.50 0.00 0.00 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 CAurgr-e1n9t Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 CurJreunl-t19 High / Low Median High / Low Median Source: Barra Beta Book and Bloomberg as of 8/16/2019. Note:Levered betas as of end of month noted. Levering factor based on current figures. 37 1.051.04 1.15 Levered Beta Levered Beta Barra Predicted Local Beta Bloomberg Raw Local Beta (2 Year, Weekly)
C O N F I D E N T I A L P R O J E C T R A V E N C Updates Since Last Meeting (7/30/19)
P R O J E C T R A V E N CU P D A T E S S I N C E L A S T M E E T I N G ( 7 / 3 0 / 1 9 ) Trading Update Since Last Committee Valuation Discussion Share Price Share Price Company 7/26/19 8/16/19 % Change Company 7/26/19 8/16/19 % Change Nutanix $24.50 $18.24 (26%) Dropbox $24.63 $17.48 (29%) Arista Networks $272.98 $221.18 (19%) Nutanix $24.50 $18.24 (26%) Cisco $56.53 $46.96 (17%) Box $16.97 $13.35 (21%) Palo Alto Networks $227.03 $199.27 (12%) CommVault $50.31 $41.84 (17%) Splunk $140.73 $124.79 (11%) FireEye $15.95 $13.28 (17%) Salesforce $159.97 $143.89 (10%) Domo $30.22 $25.42 (16%) Oracle $58.50 $53.59 (8%) Pegasystems $78.84 $70.07 (11%) SAP € 114.10 € 107.30 (6%) MobileIron $7.05 $6.82 (3%) Microsoft $141.34 $136.13 (4%) SailPoint $21.88 $21.97 0% Citrix $95.59 $92.44 (3%) Cloudera $6.01 $6.68 11% Talend $35.39 $40.16 13% Carbon Black $18.94 $22.67 20% Appian $39.89 $59.54 49% 38 Source: FactSet as of 8/16/2019. Rav e n (Curre nt) Rav e n (Unaffe cte d) $9.91 $14.00 41% $9.91 $8.30 (16%) M e dian M e an (11%) (4%) Vail (Curre nt) Vail (Unaffe cte d) $178.31 $143.72 (19%) $178.31 $153.09 (14%) M e dian M e an (11%) (12%) Raven Public Peers Vail Public Peers
P R O J E C T R A V E N C U P D A T E S S I N C E L A S T M E E T I N G ( 7 / 3 0 / 1 9 ) Update to In-Vail ($ in millions) Raven Forecast FY 2020E FY 2021E FY 2022E FY 2023E FY 2024E FY 2025E FY 2026E FY 2027E FY 2028E FY 2029E FY 2030E Subscription Revenue Services Revenue Total Revenue $511 224 $574 226 $713 230 $876 255 $1,038 263 $1,194 268 $1,355 273 $1,518 279 $1,670 285 $1,803 290 $1,893 296 $735 $800 $943 $1,131 $1,301 $1,462 $1,629 $1,797 $1,954 $2,094 $2,189 % Growth 12% 9% 18% 20% 15% 12% 11% 10% 9% 7% 5% EBIT (Pre-SBC) % Margin ($69) (9%) ($29) (4%) $67 7% $185 16% $295 23% $369 25% $431 26% $493 27% $544 28% $589 28% $619 28% FY 2020E FY 2021E FY 2022E FY 2023E FY 2024E FY 2025E FY 2026E FY 2027E FY 2028E FY 2029E FY 2030E Subscription Revenue Services Revenue Total Revenue % Growth $540 224 $614 226 $743 230 $899 255 $1,055 263 $1,213 268 $1,377 273 $1,543 279 $1,697 285 $1,833 290 $1,924 296 $764 16% $840 10% $973 16% $1,153 19% $1,318 14% $1,482 12% $1,651 11% $1,822 10% $1,981 9% $2,123 7% $2,220 5% EBIT (Pre-SBC) % Margin ($44) (6%) $30 4% $104 11% $210 18% $303 23% $379 26% $441 27% $504 28% $556 28% $602 28% $633 28% Total Revenue % Growth EBIT (Pre-SBC) % Margin $29 4% $25 4% $40 1% $59 7% $30 (2%) $37 4% $23 (1%) $24 2% $17 (1%) $8 0% $19 0% $9 0% $22 0% $10 0% $25 0% $11 0% $27 0% $12 0% $29 0% $13 0% $31 0% $13 0% 39 Source: Vail management. Revised vs. Prior Forecast In-Vail Forecast as of August 21st In-Vail Forecast as of July 30th
P R O J E C T R A V E N C U P D A T E S S I N C E L A S T M E E T I N G ( 7 / 3 0 / 1 9 ) Update on Valuation Drivers have traded down ~11% declined ~50 bps (Pre-SBC) Multiple3 Source: Vail management, public company filings, Barra Beta Book, Bloomberg and FactSet as of 8/16/19. 1 2 3 Previously showed only accelerated scenario. Based on 10-year treasury yield as of 8/16/19. Exit multiples apply to both 3-year and 5-year DCFs. 40 Raven Valuation ($m) Vail Valuation ($b) Commentary July 30thAugust 21stJuly 30thAugust 21st Raven forecast updated to reflect Q2 FY 2020 performance and confirmatory diligence Vail forecast to reflect current cloud / subscription trajectory & an accelerated transition scenario1 Forecast Assumptions FY’20E Revenue: $735$764 FY’20E Revenue: $10.0$10.0 FY’21E Revenue: $800$840 FY’21E Revenue: $11.0$11.0 – $11.2 FY’20E EBIT (Pre-SBC): ($69)($44) FY’20E EBIT (Pre-SBC): $3.3$3.3 FY’21E EBIT (Pre-SBC): ($29)$30 FY’21E EBIT (Pre-SBC): $3.5$3.5 - $3.7 Public Comparables Multiples EV / FY’20E Revenue: 3.5x – 6.0x3.0x – 5.5x EV / FY’20E Revenue: 5.5x – 8.0x5.0x – 7.5x Public peers for Raven Microsoft and SAP have traded down ~5% EV / FY’21E Revenue: 3.25x – 5.0x2.75x – 4.75x EV / FY’21E Revenue: 5.0x – 7.25x4.75x – 6.75x DCF Assumptions WACC: 9.75% - 11.0%9.25% - 10.5% WACC: 8.75% - 10.0%8.0% - 9.5% Risk free rate has 2 Public peers for Raven have traded down ~11% Terminal EBIT (Pre-SBC) Multiple (5-Year) 18.5x – 23.5x17.5x – 20.0x Scenario A: Terminal EBIT NA16.5x – 19.5x Terminal EBIT (Pre-SBC) Multiple (11-Year) 12.5x – 17.5x11.5x – 14.5x Scenario B: Terminal EBIT (Pre-SBC) Multiple3 17.5x – 22.5x17.5x – 20.5x
