Shopify: SHOP Delivered

May 4, 2016 MORGAN STANLEY & CO. LLC SShhooppiiffyy Brian Essex, CFA [email protected] +1 212 296-5569 Brian Yun [email protected] +1 212 761-3555 SHOP Delivered Ivan P Holman [email protected] +1 212 761-2534 Stock Rating Industry View Price Target Shopify Inc ( SHOP.N, SHOP US ) Overweight Attractive $34.00 Software / United States of America Stock Rating Overweight Industry View Attractive Another beat with an increase in revenue guidance. Better than Price target $34.00 expected revenue growth was muted by mere reiteration of operating Shr price, close (May 4, 2016) $29.61 Mkt cap, curr (mm) $2,663 loss guidance as acquisition related expenses and currency are 52-Week Range $42.13-18.48 expected to offset revenue upside this year. Reiterating our OW rating FFiissccaall YYeeaarr EEnnddiinngg 1122//1155 1122//1166ee 1122//1177ee 1122//1188ee with a $34 price target. ModelWare EPS ($) (0.26) (0.51) (0.36) (0.12) Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare KPI strength drove revenue well over expectations. SHOP reported revenue framework e = Morgan Stanley Research estimates growth of 94.7% y/y in 1Q, meaningfully above MS and Street expectations. Record merchant adds in a seasonally softer 1Q (275k total merchants, 32k net new merchants) drove upside to key performance metrics in the quarter. SHOP benefitted from additional marketing spend in new sales channels as well as merchants drawn to the platform because of its social media integration. Subscription Solutions accelerated to 73.2% y/y compared to 70% last quarter and Merchant Solutions grew 126.8% y/y in the quarter versus 139.9% in 4Q. GMV exceeded expectations, growing 102% y/y to $2.7bn vs. MSe of $2.5bn. Take rate for Merchant Solutions increased q/q to 127bps versus our estimate of 121bps. Revenue guidance raised but investors focused on spending. SHOP raised FY16 revenue guidance to $337-$347mm with 2Q revenue guidance of $79-$81mm, both over consensus and our expectations. Sustained strength in merchant adds, GMV growth in a seasonally weak quarter and healthier GMV take rate were key factors for the increased revenue guidance. While the revenue outlook is positive, SHOP reiterated operating loss guidance, which remained at $16-$22mm for FY16. This, along with the reiteration of a 4Q17 target for non-GAAP operating profitability, drove investor concern that future revenue upside may not flow directly to the bottom line. We recognize investor preference for a faster timeline to profitability but see the company's effort to drive merchant growth and maximize platform value as the right long-term move. Update on key initiatives. 1. Infrastructure: SHOP continued to evaluate data center options in Europe, has increased office space in Toronto and expects to do the same in Ottawa in 2Q. Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a 2. Developing merchant and partner engagement: SHOP's Unite result, investors should be aware that the firm may have a conference saw the launch of new software developments kits, conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider enabling better product development capabilities for partners Morgan Stanley Research as only a single factor in making their investment decision. and leading to more merchants to the platform (see SHOP: For analyst certification and other important disclosures, UNITE Partner Conference Takeaways). SHOP continues to refer to the Disclosure Section, located at the end of this report. launch new products to spur merchant growth (see Shopify Capital). 1

3. Shopify Plus: In Q1, SHOP continued to expand the Shopify Plus team including adding a senior-level sales role. New partners include: Universal Music Group (Kanye West selling his apparel and new album), Ellen Degeneres, The Golf Channel, Nescafe and Jones Soda. Taking numbers up, maintaining $34 price target. We are increasing our revenue forecast following strong 1Q results. We now forecast FY16 and FY17 revenues of $351mm (71% y/y) and $472mm (35% y/y), versus prior estimates of $330mm (61% y/y) and $436mm (32% y/y), respectively. An greater focus on sales and marketing spend has us adjusting our non-GAAP operating income forecast to - $18.2mm and -$4.3mm in FY16 and FY17, versus our prior estimates of -$17.4mm and $3.7mm respectively. We are maintaining our $34 price target derived from a 10 Year DCF. 2

RRiisskk RReewwaarrdd LLeeaaddiinngg SSMMBB SSttoorree FFrroonntt PPllaattffoorrmm Investment Thesis Shopify is a leader in the retail eCommerce software market. The company delivers the power of enterprise level functionality and scalability to SMBs at a fraction of the cost vs. similar enterprise level solutions. One of the best ecosystems in the tech universe. Attractive developer economics draws top coder talent to build on the Shopify platform, resulting in product offerings that are among the best in the market. Elegant design and intuitive apps drive customer growth and usage, which in turn attracts even more developers into the Source: Thomson Reuters, Morgan Stanley Research ecosystem. PPrriiccee TTaarrggeett $$3344 Derived From Base Case Scenario. Potential Catalysts Launch of new merchant solutions BBuullll $$5500 Early signs of growth acceleration due to 1100 YYeeaarr DDCCFF recent social media integration The platform continues to deliver significant growth. Shopify's growth and profitability accelerate with the help of international penetration, new product launches, social media traction, better pricing, and GMV expansion. Developer Risks to Achieving Price Target and app growth remains robust and contributes to better-than-peer economics. Ability to penetrate installed based and The company turns profitable sooner than expected. increase payments adoption BBaassee $$3344 Investor growth expectations could be 1100 YYeeaarr DDCCFF bbaasseedd wwiitthh FFYY2255ee FFCCFF ooff $$331122mmmm disconnected with company guidance Shopify's strategy stays the course. Pricing remains flat, growth is driven by new New product additions don't roll out customer adds and increased GMV. Growth moderates near-term off recent quickly enough, or don’t succeed introduction of Shopify Payments and inflection in subscription growth drives Developer economics shift, resulting in loss margins to improve from (3%) in FY15 to ~23% by FY25, driving FY25 FCF of of talent on the ecosystem $312mm. This yields a DCF value of $34/share based on a 10.2% WACC and a 4.5% terminal growth. BBeeaarr $$1144 1100 YYeeaarr DDCCFF Execution slips. Increased competition in the US, lack of international growth or new products, and deceleration in GMV growth lead to lower revenue growth and margin pressure. Competition at the high end of the market leads to customer loss and deteriorating LTV customer metrics. 3

Financials Exhibit 1: Revenue Drivers ($ in thousands) 2016E 2017E FY14 FY15 3/16 6/16e 9/16e 12/16e FY16E 3/17e 6/17e 9/17e 12/17e FY17E FY18E Revenue Model MRR Ending $6,573 $11,300 $12,800 $14,280 $15,680 $16,385 $16,385 $17,792 $19,278 $20,698 $22,120 $22,120 $26,433 Growth in MRR in $ (y/y) $2,754 $4,727 $5,400 $5,780 $5,880 $5,085 $5,085 $4,992 $4,998 $5,018 $5,735 $5,735 $4,313 Growth in MRR in $ (q/q) $1,500 $1,480 $1,400 $705 $1,407 $1,486 $1,420 $1,422 y/y 72.1% 71.9% 73.0% 68.0% 60.0% 45.0% 45.0% 39.0% 35.0% 32.0% 35.0% 35.0% 19.5% q/q 13.3% 11.6% 9.8% 4.5% 8.6% 8.4% 7.4% 6.9% MRR q/q growth factor 7% 6% 5% 2% 4% 4% 4% 3% 78% 56% Monthly Billing Retention Rate 101.4% 100% MRR (average in quarter) $12,050 $13,540 $14,980 $16,033 $17,089 $18,535 $19,988 $21,409 y/y 72% 70% 64% 52% 42% 37% 33% 34% q/q 14.2% 12.4% 10.6% 7.0% 6.6% 8.5% 7.8% 7.1% Subscription revenue rate (includes themes/apps/domains) 107.1% 106.0% 104.0% 104.0% 104.0% 104.0% 104.0% 104.0% Subscription Solutions Revenue $66,669 $111,979 $38,706 $43,057 $46,738 $50,021 $178,522 $53,316 $57,829 $62,362 $66,795 $240,302 $296,976 y/y 73.9% 68.0% 73.2% 69.1% 58.1% 44.5% 59.4% 37.7% 34.3% 33.4% 33.5% 34.6% 23.6% q/q 11.8% 11.2% 8.5% 7.0% 6.6% 8.5% 7.8% 7.1% % of total revenues 63% 55% 53% 53% 53% 46% 51% 54% 54% 53% 45% 51% 50% GMV $3,763,838 $7,709,149 $2,674,646 $3,029,761 $3,347,613 $4,833,511 $13,885,530 $3,744,504 $4,090,177 $4,519,277 $6,525,240 $18,879,198 $24,542,957 Growth in GMV in $ (y/y) $2,147,537 $3,945,310 $1,350,564 $1,400,857 $1,434,691 $1,990,269 $6,176,381 $1,069,858 $1,060,416 $1,171,665 $1,691,729 $4,993,668 $5,663,759 y/y 132.9% 104.8% 102.0% 86.0% 75.0% 70.0% 80.1% 40.0% 35.0% 35.0% 35.0% 36.0% 30.0% Growth in GMV in $ (q/q) -$168,596 $355,115 $317,852 $1,485,898 -$1,089,007 $345,673 $429,101 $2,005,962 q/q -5.9% 13.3% 10.5% 44.4% -22.5% 9.2% 10.5% 44.4% % GMV Processed Through Payments 37.0% GMV Take Rate 1.02% 1.21% 1.27% 1.26% 1.22% 1.23% 1.24% 1.22% 1.22% 1.22% 1.24% 1.23% 1.23% Merchant Solutions Revenue $38,350 $93,254 $34,016 $38,175 $40,841 $59,452 $172,484 $45,683 $49,900 $55,135 $80,913 $231,631 $301,121 y/y 221.9% 143.2% 126.8% 96.1% 75.8% 67.2% 85.0% 34.3% 30.7% 35.0% 36.1% 34.3% 30.0% q/q -4.4% 12.2% 7.0% 45.6% -23.2% 9.2% 10.5% 46.8% % of total revenues 37% 45% 47% 47% 47% 54% 49% 46% 46% 47% 55% 49% 50% GMV prior period merchants $10,986 $11,017 $11,271 $14,402 $9,874 $10,200 $10,659 $14,555 y/y 20.0% 9.7% 3.1% 1.3% -10.1% -7.4% -5.4% 1.1% Total Revenue $105,018 $205,233 $72,722 $81,232 $87,578 $109,474 $351,006 $98,999 $107,729 $117,497 $147,708 $471,934 $598,096 y/y 109.0% 95.4% 94.7% 80.8% 65.9% 56.0% 71.0% 36.1% 32.6% 34.2% 34.9% 34.5% 26.7% q/q 3.6% 11.7% 7.8% 25.0% -9.6% 8.8% 9.1% 25.7% $ Growth (y/y) $54,767 $100,214 $145,773 $120,927 $126,163 Customer Data Number of Merchants - EOP 144,670 243,468 275,000 297,000 335,610 379,239 379,239 400,997 424,002 448,328 474,049 474,049 587,264 y/y 72.1% 68.3% 69.5% 69.7% 67.8% 55.8% 55.8% 45.8% 42.8% 33.6% 25.0% 25% 24% q/q 13.0% 8.0% 13.0% 13.0% 5.7% 5.7% 5.7% 5.7% Source: Company data, Morgan Stanley Research Exhibit 2: Income Statement ($ thousands, Except Per-Share Data) 2016E 2017E FY14 FY15 3/16 6/16e 9/16e 12/16e FY16E 3/17e 6/17e 9/17e 12/17e FY17E FY18E Subscription solutions 66,669 111,979 38,706 43,057 46,738 50,021 178,522 53,316 57,829 62,362 66,795 240,302 296,976 Y/Y Change 73.9% 68.0% 73.2% 69.1% 58.1% 44.5% 59.4% 37.7% 34.3% 33.4% 33.5% 34.6% 23.6% Q/Q Change 11.8% 11.2% 8.5% 7.0% 6.6% 8.5% 7.8% 7.1% %age of Total Revenue 63.5% 54.6% 53.2% 53.0% 53.4% 45.7% 50.9% 53.9% 53.7% 53.1% 45.2% 5 0.9% 49.7% Merchant solutions 38,350 93,254 34,016 38,175 40,841 59,452 172,484 45,683 49,900 55,135 80,913 231,631 301,121 Y/Y Change 221.9% 143.2% 126.8% 96.1% 75.8% 67.2% 85.0% 34.3% 30.7% 35.0% 36.1% 34.3% 30.0% Q/Q Change -4.4% 12.2% 7.0% 45.6% -23.2% 9.2% 10.5% 46.8% %age of Total Revenue 36.5% 45.4% 46.8% 47.0% 46.6% 54.3% 49.1% 46.1% 46.3% 46.9% 54.8% 49.1% 50.3% Total Revenue 105,018 205,233 72,722 81,232 87,578 109,474 351,006 98,999 107,729 117,497 147,708 471,934 598,096 Y/Y change 109.0% 95.4% 94.7% 80.8% 65.9% 56.0% 71.0% 36.1% 32.6% 34.2% 34.9% 34.5% 26.7% Q/Q change 3.6% 11.7% 7.8% 25.0% -9.6% 8.8% 9.1% 25.7% Cost of Revenue Total Cost of Sales 42,964 93,817 33,336 38,295 41,462 56,183 169,276 46,258 50,187 54,520 73,357 224,322 284,107 Gross Profit (Non-GAAP) 62,054 111,416 39,386 42,937 46,116 53,290 181,730 52,741 57,542 62,977 74,351 247,612 313,990 GP $ Growth (y/y) 68.4% 79.5% 82.1% 69.6% 60.1% 49.5% 63.1% 33.9% 34.0% 36.6% 39.5% 36.3% 26.8% Total Gross Margin 59.1% 54.3% 54.2% 52.9% 52.7% 48.7% 51.8% 53.3% 53.4% 53.6% 50.3% 52.5% 52.5% Incremental Gross Margin 46.0% 49.3% 50% 48.5% 49.7% 44.9% 48.2% 50.8% 55.1% 56.4% 55.1% 54.5% 52.6% Operating Expenses (Non-GAAP) Sales and Marketing 45,232 69,023 27,403 29,244 31,791 32,842 121,280 36,630 37,705 41,362 44,312 160,009 195,942 Research and Development 23,139 33,349 11,379 12,997 13,137 13,444 50,957 13,511 15,082 14,687 14,446 57,726 61,322 General and Administrative 8,672 15,746 6,524 6,905 6,744 7,554 27,726 8,415 8,511 8,577 8,700 34,203 38,469 Total Operating Expenses 77,044 118,118 45,306 49,145 51,671 53,840 199,962 58,555 61,298 64,626 67,459 251,938 295,732 Y/Y Change 95.8% 53.3% 96.2% 80.6% 67.5% 45.6% 69.3% 29.2% 24.7% 25.1% 25.3% 26.0% 17.4% Non-GAAP Operating Income -14,990 -6,703 -5,920 -6,208 -5,555 -549 -18,232 -5,815 -3,756 -1,649 6,892 -4,327 18,258 Operating Margin -14.3% -3.3% -8.1% -7.6% -6.3% -0.5% -5.2% -5.9% -3.5% -1.4% 4.7% -0.9% 3.1% Y/Y Change 498.7% -55.3% 302.7% 228.4% 173.4% -58.1% 172.0% -1.8% -39.5% -70.3% -1354.9% -76.3% -522.0% GAAP Operating Income -21,615 -17,757 -9,712 -12,784 -12,274 -8,948 -43,717 -12,938 -10,880 -8,772 -231 -32,821 -12,429 Depreciation & Amortization 4,672 7,236 3,058 3,174 3,226 3,279 12,736 3,674 4,004 4,334 4,664 16,676 21,192 Adjusted EBITDA* -10,318 533 -2,862 -3,034 -2,329 2,729 -5,496 -2,141 248 2,686 11,557 12,350 39,450 Y/Y change 805.9% -105.2% 1189.5% 1793.2% 206.0% -1130.1% -25.2% -108.2% -215.3% 323.4% -324.7% 219.4% Adjusted EBITDA Margin -9.8% 0.3% -3.9% -3.7% -2.7% 2.5% -1.6% -2.2% 0.2% 2.3% 7.8% 2.6% 6.6% Net Interest and Other Income (Expense) -696 -1,034 783 -250 -250 -250 33 -250 -250 -250 -250 -1,000 -1,000 Loss Before Income Taxes -15,686 -7,737 -5,137 -6,458 -5,805 -799 -18,199 -6,065 -4,006 -1,899 6,642 -5,327 17,258 % of Revenue -14.9% -3.8% -7.1% -8.0% -6.6% -0.7% -5.2% -6.1% -3.7% -1.6% 4.5% -1.1% 2.9% Net Loss and Comprehensive Loss -15,686 -7,737 -5,137 -6,458 -5,805 -799 -18,199 -6,065 -4,006 -1,899 6,642 -5,327 17,258 Net Margin -14.9% -3.8% -7.1% -8.0% -6.6% -0.7% -5.2% -6.1% -3.7% -1.6% 4.5% -1.1% 2.9% Y/Y change 410.6% -50.7% 103.5% 274.3% 143.0% -27.2% 135.2% 18.1% -38.0% -67.3% -931.1% -70.7% -424.0% GAAP Net Income -22,311 -18,791 -8,929 -13,034 -12,524 -9,198 -43,684 -13,188 -11,130 -9,022 -481 -33,821 -13,429 Diluted Adjusted EPS ($0.40) ($0.13) ($0.06) ($0.08) ($0.07) ($0.01) ($0.22) ($0.07) ($0.05) ($0.02) $0.08 ($0.06) $0.19 Diluted GAAP EPS ($0.57) ($0.31) ($0.11) ($0.16) ($0.15) ($0.11) ($0.53) ($0.16) ($0.13) ($0.10) ($0.01) ($0.39) ($0.15) Basic Shares 38,940 61,277 80,448 81,448 82,448 83,448 81,948 84,448 85,448 86,448 87,448 85,948 89,948 Diluted Shares 81,279 61,277 80,448 81,448 82,448 83,448 81,948 84,448 85,448 86,448 87,448 85,948 89,948 Source: Company data, Morgan Stanley Research 4

Exhibit 3: Balance Sheet ($ in thousands, except EPS) 2016E 2017E FY14 FY15 3/16e 6/16e 9/16e 12/16e FY16E 3/17e 6/17e 9/17e 12/17e FY17E FY18E Assets Cash and cash equivalents 41,953 110,070 83,864 73,192 63,543 53,651 53,651 46,879 40,313 36,454 35,678 35,678 45,488 Short-term investments 17,709 80,103 105,600 105,600 105,600 105,600 105,600 105,600 105,600 105,600 105,600 105,600 105,600 ,618 24,618 30,737 Trade and other receivables 7,227 6,089 6,548 13,539 14,596 19,462 19,462 16,500 17,955 19,583 24 Other current assets 1,495 6,203 7,149 7,986 8,609 10,762 10,762 9,732 10,590 11,551 14,521 14,521 18,130 Total Current Assets 68,384 202,465 203,161 200,316 192,349 189,475 189,475 178,711 174,458 173,187 180,416 180,416 199,955 Long-term marketable securities 0 0 0 0 0 0 0 0 0 0 0 Property and Equipment, net 21,728 33,048 34,558 37,375 41,692 46,009 46,009 48,929 51,568 53,924 55,998 55,998 59,616 66 5,898 6,178 6,178 6,459 6,691 6,876 7,012 7,012 7,702 Intagibles assets 2,708 5,826 5,182 5,5 Goodwill 2,373 2,373 2,373 2,373 2,373 2,373 2,373 2,373 2,373 2,373 2,373 2,373 2,373 Total Assets 95,193 243,712 245,274 245,630 242,313 244,035 244,035 236,472 235,090 236,360 245,800 245,800 269,646 Liabilities Accounts Payable and Accrued Liabilities 12,514 23,689 27,070 30,033 31,577 29,911 29,911 35,784 37,460 39,494 37,477 37,477 43,831 Current Portion of Deferred Revenue 6,775 12,726 14,522 16,282 17,614 22,568 22,568 17,043 18,614 20,372 25,810 25,810 28,731 Current Portion of Lease Incentives 485 822 935 935 935 935 935 935 935 935 935 935 935 Total Current Liabilities 19,774 37,237 42,527 47,250 50,126 53,414 53,414 53,762 57,009 60,801 64,223 64,223 73,497 Deferred Revenue 394 661 777 777 777 777 777 777 777 777 777 777 777 Lease incentives 7,293 10,497 10,993 13,660 13,859 13,828 13,828 12,606 12,606 12,606 12,606 12,606 12,606 Total Liabilities 27,461 48,395 54,297 61,687 64,762 68,019 68,019 67,145 70,392 74,184 77,606 77,606 86,880 Convertible Preferred Stock - Series A 5,346 0 0 0 0 0 0 0 0 0 0 0 0 Convertible Preferred Stock - Series B 11,952 0 0 0 0 0 0 0 0 0 0 0 0 Convertible Preferred Stock - Series C 69,758 0 0 0 0 0 0 0 0 0 0 0 0 Total Convertible Preferred Stock 87,056 0 0 0 0 0 0 0 0 0 0 0 0 11 Common Stock 4,055 231,452 233,411 233,411 233,411 233,411 233,411 233,411 233,411 233,411 233,411 233,411 233,4 Additional Paid-in Capital 5,685 11,719 14,128 20,128 26,258 33,922 33,922 40,422 46,922 53,422 59,922 59,922 87,922 Accumulated Deficit -29,064 -47,854 -56,562 -69,596 -82,119 -91,317 -91,317 -104,505 -115,635 -124,657 -125,138 -125,138 -138,567 Total Stockholders' Equity 67,732 195,317 190,977 183,943 177,550 176,016 176,016 169,328 164,698 162,176 168,194 168,194 182,766 45,630 242,313 244,035 244,035 236,472 235,090 236,360 245,800 245,800 269,646 Total Liabilities and Stockholders' Equity 95,193 243,712 245,274 2 Source: Company data, Morgan Stanley Research Exhibit 4: Cash Flow Statement ($ in thousands, except EPS) 2016E 2017E FY14 FY15 3/16 6/16e 9/16e 12/16e FY16E 3/17e 6/17e 9/17e 12/17e FY17E FY18E Net Income -22,311 -18,790 -8,929 -13,034 -12,524 -9,198 -43,684 -13,188 -11,130 -9,022 -481 -33,821 -13,429 Depreciation and Amortization 4,672 7,236 3,058 3,174 3,226 3,279 12,736 3,674 4,004 4,334 4,664 16,676 21,192 Stock-based compensation 3,792 7,805 3,374 6,000 6,130 7,663 23,168 6,500 6,500 6,500 6,500 26,000 28,000 Vesting of restricted shares 651 353 86 86 Loss on asset disposal 100 Unrealized foreign exchange (gain) loss 524 1,828 -978 -978 Changes in lease incentives 7,292 3,541 609 2,667 199 -31 3,444 -1,222 0 0 0 -1,222 0 Changes in deferred revenue 2,813 6,218 1,912 1,760 1,333 4,954 9,958 -5,525 1,571 1,758 5,438 3,242 2,920 Changes in non-cash working capital items 1,666 7,565 1,523 -4,864 -138 -8,684 -12,163 9,865 -637 -554 -10,022 -1,348 -3,374 Other (litigation, settlement, unusual items) 0 0 0 Net Cash Provided by (Used in) Operating Activities -801 15,756 655 -4,297 -1,773 -2,017 -7,433 103 309 3,016 6,099 9,527 35,310 Purchases of short-term investments/marketable securities -20,131 -111,154 -46,439 0 0 0 -46,439 0 0 0 0 0 0 Sales of short-term investments 2,375 48,350 20,700 0 0 0 20,700 0 0 0 0 Acquisitions of property and equipment -20,573 -16,525 -2,715 -5,500 -7,000 -7,000 -22,215 -6,000 -6,000 -6,000 -6,000 -24,000 -22,000 Proceeds from disposal of property and equipment 90 0 0 Acquisitions of intangible assets -2,127 -4,511 -330 -875 -875 -875 -2,955 -875 -875 -875 -875 -3,500 -3,500 Acquisitions of businesses, net of cash acquired 0 0 0 Net Cash Provided by (Used in) Investing Activities -40,366 -83,840 -28,784 -6,375 -7,875 -7,875 -50,909 -6,875 -6,875 -6,875 -6,875 -27,500 -25,500 Issuance of series C convertible preferred shares 0 0 Procee ds from the exercise of stock options 140 1,604 844 0 0 0 844 0 0 0 0 0 0 Proceeds from IPO 136,251 0 Net Cash Provided by (Used in) Financing Activities 140 137,855 844 0 0 0 844 0 0 0 0 0 0 Effect of foreign exchange on cash and cash equivalents -549 -1,654 1,079 1,079 Change in Cash and Cash Equivalents -41,576 68,117 -26,206 -10,672 -9,648 -9,892 -56,419 -6,772 -6,566 -3,859 -776 -17,973 9,810 Adjustments to reconcile restatements Cash, beginning of Period 83,529 41,953 110,070 83,864 73,192 63,543 110,070 53,651 46,879 40,313 36,454 53,651 35,678 Cash, end of Period 41,953 110,070 83,864 73,192 63,543 53,651 53,651 46,879 40,313 36,454 35,678 35,678 45,488 Source: Company data, Morgan Stanley Research 5

Exhibit 5: DCF ($ Thousands, Except Per-Share Data) base DCF Assumptions DCF Valuation Per Share % of Total Adjusted Beta 1.32 Current Intrinsic Value $31 Estimated Beta (Used for WACC) 1.32 Implied Value 1 Yr Out $34 Expected Return on Market 8.4% 10 Year Treasury Yield 2.3% Current Equity Risk Premium 6.1% LR Average Equity Risk Premium (Used for WACC) 6.1% Current Year for DCF 2016 Cost of Equity 10.3% Sum of NPV of FCF 2,579,079 93.6% Cost of LT Debt 4.7% Excluding Terminal Value 412,283 15.0% 66,796 78.6% Tax Rate 34% Terminal Value Only 2,1 After-Tax Cost of Debt 3.1% Cash Market Value 189,464.0 6.9% Debt/Capital Ratio 1% Debt Market Value 11,928.0 0.4% WACC 10.2% Total Equity Value 2,756,615 100.0% Terminal Growth Rate 4.5% FD Shares Outstanding 89,919.1 Terminal Value Multiple 17.4x Fiscal year 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E Free Cash Flow Analysis 160,617 1,424,462 1,734,042 2,046,169 2,394,018 Revenue 50,252 105,018 205,233 351,006 471,934 598,096 752,005 938,000 1, Operating Income (EBIT) (2,504) (14,990) (6,703) (18,232) (4,327) 18,258 60,160 103,180 185,699 270,648 364,149 450,157 538,654 Other* (1,766) (4,443) (8,158) (25,485) (28,495) (30,687) (34,635) (38,918) (43,536) (48,485) (53,754) (58,592) (63,572) EBIT (1-t) (4,270) (19,433) (14,861) (43,717) (32,821) (12,429) 16,847 42,413 93,827 146,627 204,861 258,433 313,554 + Depreciation & Amortization 1,365 4,672 7,236 12,736 16,676 21,192 20,167 21,175 26,200 32,157 39,145 46,192 54,044 - Capital Expenditures (3,462) (20,573) (16,525) (22,215) (24,000) (22,000) (20,167) (21,175) (26,200) (32,157) (39,145) (46,192) (54,044) - (Increase)/Decrease in Working Capital Needs 2,339 4,479 13,783 (2,205) 1,894 (454) (571) (712) (881) (1,081) (1,316) (1,553) (1,817) ,546 203,545 256,881 311,738 Free Cash Flow (4,028) (30,855) (10,367) (55,400) (38,251) (13,690) 16,276 41,701 92,946 145 Net Present Value of Free Cash Flow (53,445) (33,473) (10,867) 11,719 27,235 55,064 78,215 99,219 113,583 125,032 Note: Free Cash Flow is calculated by the following equation: FCF = EBIT (1 - t) + Depreciation Expense - Capital Expenditures - Change in Working Capital Need Growth Y/Y % Near Term Transition Revenue 109% 95% 71% 34% 27% 26% 25% 24% 23% 22% 18% 17% EBIT 499% -55% 172% -76% -522% 230% 72% 80% 46% 35% 24% 20% Other 152% 84% 212% 12% 8% 13% 12% 12% 11% 11% 9% 9% EBIT (1-t) 355% -24% 194% -25% -62% -236% 152% 121% 56% 40% 26% 21% Depreciation & Amortization 242% 55% 76% 31% 27% -5% 5% 24% 23% 22% 18% 17% Capital Expenditures 494% -20% 34% 8% -8% -8% 5% 24% 23% 22% 18% 17% Change in Working Capital 91% 208% -116% -186% -124% 26% 25% 24% 23% 22% 18% 17% 31% -64% -219% 156% 123% 57% 40% 26% 21% Free Cash Flow 666% -66% 434% - Selected Ratios Near Term Transition Operating Margin -5% -1% 3% 8% 11% 16% 19% 21% 22% 23% Implied EBITDA Margin -2.3% -9.8% 0.3% -1.6% 2.6% 6.6% 10.7% 13.3% 18.3% 21.3% 23.3% 24.3% 24.8% Tax Rate 34% 34% 34% 34% 34% 34% 34% Free Cash Flow to EBIT (1-T) 94% 159% 70% 127% 117% 110% 97% 98% 99% 99% 99% 99% 99% Capital Expenditure to Depreciation -254% -440% -228% -174% -144% -100% -100% -100% -100% -100% -100% -100% -100% Capital Expenditure to Revenue -7% -20% -8% -6% -5% -4% -3% -2% -2% -2% -2% -2% -2% Morgan Stanley Research Estimates E = * Other Expense includes cash impact of stock based compensation Source: Company data, Morgan Stanley Research 6

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INDUSTRY COVERAGE: Software COMPANY (TICKER) RATING (AS OF) PRICE* (05/04/2016) Brian Essex, CFA AppFolio Inc (APPF.O) O (07/21/2015) $12.30 CDK Global Inc (CDK.O) U (01/19/2016) $49.30 Descartes Systems Group Inc (DSGX.O) E (11/25/2014) $18.93 EnerNOC Inc (ENOC.O) E (07/30/2015) $6.90 GoDaddy Inc (GDDY.N) O (05/11/2015) $30.64 Instructure Inc (INST.N) E (12/08/2015) $21.62 MINDBODY INC (MB.O) E (09/28/2015) $15.29 Sabre Corp (SABR.O) O (10/30/2014) $28.58 Shopify Inc (SHOP.N) O (01/19/2016) $29.61 SS&C Technologies Holdings, Inc. (SSNC.O) E (03/28/2016) $61.27 Travelport Worldwide Limited (TVPT.N) O (11/04/2014) $13.97 Keith Weiss, CFA Adobe Systems (ADBE.O) E (09/10/2010) $92.94 Akamai Technologies, Inc. (AKAM.O) E (04/28/2011) $49.54 Autodesk (ADSK.O) E (11/10/2015) $58.73 Check Point Software Technologies Ltd. (CHKP.O) U (05/27/2015) $82.01 Citrix Systems Inc (CTXS.O) U (01/19/2016) $80.20 Intuit (INTU.O) E (08/19/2015) $99.89 Microsoft (MSFT.O) O (01/13/2016) $49.87 Oracle Corporation (ORCL.N) E (11/11/2015) $39.29 Palo Alto Networks Inc (PANW.N) O (05/16/2013) $142.07 QLIK Technologies Inc. (QLIK.O) E (10/06/2014) $30.86 Red Hat, Inc. (RHT.N) O (01/13/2014) $71.45 Salesforce.com (CRM.N) O (05/23/2011) $73.99 ServiceNow Inc (NOW.N) O (09/18/2013) $67.61 Splunk Inc (SPLK.O) O (10/06/2014) $48.87 Symantec (SYMC.O) O (12/15/2015) $16.67 Tableau Software (DATA.N) E (02/08/2016) $49.95 VMware Inc (VMW.N) ++ $55.36 Workday (WDAY.N) E (11/06/2012) $71.27 Melissa Gorham AVG Technologies (AVG.N) E (03/12/2013) $19.12 Barracuda Networks Inc (CUDA.N) E (01/08/2016) $16.61 Box Inc (BOX.N) E (02/17/2015) $12.31 FireEye Inc (FEYE.O) E (10/15/2013) $16.19 Fortinet Inc. (FTNT.O) E (10/06/2014) $32.16 Imperva Inc. (IMPV.N) U (04/21/2016) $45.27 Proofpoint Inc (PFPT.O) O (09/10/2015) $56.53 Rapid7 Inc (RPD.O) E (08/11/2015) $11.80 Varonis Systems, Inc. (VRNS.O) U (09/10/2015) $19.04 Sanjit K Singh Apigee Corporation (APIC.O) O (05/19/2015) $9.73 Atlassian Corporation PLC (TEAM.O) E (01/04/2016) $23.28 New Relic Inc (NEWR.N) O (09/10/2015) $25.77 Nuance Communications Inc. (NUAN.O) E (05/01/2013) $16.58 Stan Zlotsky, CFA Bazaarvoice Inc (BV.O) E (09/02/2015) $3.36 Cvent (CVT.N) ++ $35.71 HubSpot, Inc. (HUBS.N) O (09/10/2015) $46.25 Jive Software Inc (JIVE.O) U (09/10/2015) $3.90 NetSuite (N.N) U (10/14/2010) $77.16 Opower Inc (OPWR.N) E (04/29/2014) $10.30 Veeva Systems Inc (VEEV.N) O (04/02/2014) $27.01 Workiva Inc (WK.N) O (01/06/2015) $11.88 Zendesk, Inc (ZEN.N) O (09/10/2015) $23.67 Stock Ratings are subject to change. Please see latest research for each company. * Historical prices are not split adjusted. © 2016 Morgan Stanley 11