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The Net Surfers

Application Software Industry:

Adobe,
CA Technologies, Intuit, Salesforce, & Workday

Matt Allen, Jon Esquivel, Geovany Hernandez, Kaitlyn

Hirschbuehler, & Will Radney

Application Software
Industry

Industry Overview

Application Software

Market Capitalization: $564 Billion

Constantly changing environment

R&D extremely important

Liquidity Ratios

2014 Industry Average

Current Ratio: 2.22

Quick Ratio: 1.73

2015 Industry Average

Industry Liquidity Ratios

6

2015 Current Ratio

Current Ratio: 1.76

Quick Ratio: 1.25

2014 Current Ratio

2015 Quick Ratio

2014 Quick Ratio

2

0
Adobe

CA, Inc.

Intuit

Salesforce.com

Workday

Coverage Ratio

We had 3 out of 5 companies

increase their coverage ratios in
current year

Average coverage in current year was

11.22

Average in previous year was 13.39

A positive sign for investors because

companies are better able to cover
their debt in such a competitive
industry such as technology.

Outliers in the group were Intuit and

Workday

Intuit had a TIE of 42.94 in 2014

Workday had a TIE of -6.92 in 2015

% Revenue to R&D

The software industry uses a substantial amount of its

revenue in research and development.

In 2015 as industry 21.75% of revenues were spent on

R&D, reason for this substantial amount is attributed to
the desire of having the advantage in the rapid industry
of software.

Workday has the highest percentage of revenue spent

on research and development with 40.22%

CA Technologies has the lowest percentage of revenue

spent on research and development with 14.15%

Adobe and Salesforce.com were the only ones to have a

decreased percent of revenue spent on R&D with 20.8%
and 15%, respectfully.

SWOT Analysis
Strengths

Transforms businesses
Many users of applications
Large and highly globalized industry

Opportunities
Opportunity for growth in future
Mobile applications

Weaknesses
Competitive landscape
Short product life cycle

Threats
Privacy and security risks
Outsourcing

Adobe
Matt Allen

% of R&D to Revenue

2013: 20.38%

Revenue: $4,055,240

R&D: $826,631

2014: 20.36%

Revenue: $4,147,065

R&D: $844,353

Why the change?

Revenue increased 2.26% from 2013 to 2014

R&D increased 2.14%

Driver-increased subscription revenue

The software industry is characterized by rapid
technological change

The greater percentage change in revenue vs.

R&Ds percentage change is the reason for the
slight decrease in percentage

TIE Ratio

2013: 6.28

2014: 7.05

EBT: $356,141

EBT: $361,376

Gross Interest
Expense: $67,508

Gross Interest
Expense: $59,732

Operating Expenses:

Operating Expenses:

R&D $826,631

R&D $844,535

Sales & Marketing:

$1,620,454

Sales & Marketing:

$1,652,308

General & Admin:

$520,124

General & Admin:

$543,322

Adobes coverage ratio increased because earnings before interest and taxes
decreased from 2013 to 2014. This was due to an increase in operating
expenses; specifically R&D, sales and marketing, and general and
administrative expenses. This trend follows the industry trend.

CA Technologies
Will Radney

Overview

Creates IT management software and solutions

Global presence in a growing industry

Constant and increasing competition

Strong liquidity, coverage, declining earnings

Continued dedication to R&D

Margins & R&D

In spite of declining earnings, CA has

increased their R&D expense in
recent years

Still only 14% of revenue, but the

increase shows effort

Continuing dedication to R&D will

hopefully lead to turnaround in
earnings in time
% Revenue to R&D(C-10,C-11,C-12)

Both revenue and net income have been

declining over recent years

2012 Revenue: $4,779 MM

2015 Revenue: $4,262 MM

16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%

Primarily due to decreases in subscription

revenue and renewals

0.00%
2013.0

2014.0
Year

2015.0

Coverage and Liquidity

CA COVERAGE RATIO(C-7,C-8,C-9)

Fairly steady in recent years

Bettered position by significantly

decreasing liabilities in the face of
declining current assets

40.00
30.00
TIE Ratio

20.00
10.00
0.00
2013.0

2014.0

2015.0

Year

Leading TIE ratio among

competitors

Result of both a fairly strong

EBIT and low interest

Fluctuation due to fiscal

rebalancing plan

Possibility to issue debt to

invest more in R&D?

Paying off debt and earning unearned

revenue, along with decreasing cash

CA LIQUIDITY RATIOS(C-1,C-2,C-3,C-4,C-5,C-6)
1.50
Liquidity Ratios

1.00
Current Ratio
Quick Ratio

0.50

0.00
2013.0

2014.0
Year

2015.0

Intuit
Jon Esquivel

Highlights

Company posted revenue of $4,192 Billion in 2015

Subscription revenue is increasing

Up 16% in Quick book plus subscriptions

QuickBooks online growing 40%

Increasing spending on R&D

Spent $798 million in 2015

Acquired 6 new companies in 2015

Opportunities

Intuit currently has 50% of their revenue coming from small business

Starting an initiative to double the small business customer base by 2019

Looking to expand products accessibility through many platforms

IPad, desktop, and even social media

Key Ratios

TIE ratio decreased from 2014 to 2015

EBIT decreased 43 percent due to higher expenses for staffing and outside
services

R&D costs went up

Intuit spent 798 million on R&D in 2015, or 19 percent on revenue

Spent 17 percent in 2014

Quick Ratio decreased from 2015 to 2014

Mainly due to the increased liabilities from an increase in deferred revenue from
service fees

Salesforce
Geovany Hernandez

Highlights

Salesforce.com is a cloud computing company founded in 1999 specializing

in software as a service (SaaS)

Founded by former Oracle executive and current CEO Marc Benioff

Salesforce offers internet-based applications that manage employee

collaboration.

Company Health

2.3 Billion Transactions averaged a day, with 2,700 AppExchange apps

Sales grew an 32% in 2015 to reach $5.4 billion. Fastest enterprise software
company to reach $5 billion in annual revenue

Research and development expenses were $792.9 million, 15 percent of

total revenues, for fiscal 2015

Salesforce.com has a quick ratio of 0.66, even though this ratio is

somewhat low an increase of 16% in cash has helped increase Salesforce
ability to pay its short-term obligations using its most liquid asset.

Salesforce.coms expansion to Europe and Pacific Asia has had a substantial

effect in the companies success. Revenues in Europe and Asia Pacific
accounted for $1,505.3 million, or 28 percent of total revenues, for 2015.

Workday
Kaitlyn Hirschbuehler

Revenue, Net Income, & % Revenue to

R&D

WDAY has encountered

significant losses since the
inception of the company in
2005 and reached $248MM in
2015
2015 Revenues: $787.86MM

78% of total revenue was

Average company= 5%

In FY15,WDAY spent $250MM in

core operating expenses in
product development,
compared to $159MM in FY14,
an increase of 57% YoY

Liquidity and Coverage

WDAY does have the ability to

pay off its short term debts
with their short term assets

The increase in liabilities from

FY14 to FY15 was due to
increased unearned revenue
(3-yr contracts)

Questions?