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VENTURE CAPITAL
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EXECUTIVE SUMMARY
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EXECUTIVE SUMMARY
Our Mission:

To partner with brand advertisers across the globe to help them unlock the power of digital media to
build awareness, affinity and loyalty among consumers.

Exponential Interactive Incorporated is a leading global provider of advertising intelligence

and global media solutions to brand advertisers. It leverages its 𝑒 Advertising Intelligence
Platform to analyse anonymous user data to enable brand advertisers to learn about their
optimal consumer audience. Exponential Interactive is then able to design tailored
marketing campaigns for the brand advertiser to effectively reach and engage with that
audience.

Exponential Interactive operates broadly within the internet advertising market. The
advances in technology and increase proliferation of connected devices have revolutionised
the way people interact and rapidly increased the potential growth in the internet
advertising industry. PwC have forecasted the market to increase at a 13% CAGR. Further,
there  has  been  a  significant  increase  in  the  proportion  of  the  world’s  population  that  use  the  
internet especially in the rising middle class in emerging market such as Asia, Latin America
and Africa.

Some potential risks include the slow development of the digital advertising market, high
dependency on advertising agencies as intermediaries, risk of large businesses entering the
market as well as pending regulation and legislation with regards to internet privacy.
However, these risks can be mitigated through increasing market awareness of digital
advertising, forming direct relationships with customer base and diversifying or adapting its
research method to bypass regulations

An equal weighting of 33.3% was applied to the discounted cash flow method, venture
capital  method  and  comparable  company’s  method  which,  through  triangulation  arrives,  at  
an equity value (pre-money valuation) between $89.3m and $329.1m and therefore a
median summary valuation of $149.8m. Using the diluted shares outstanding of 68,049,000,
this provides an indicative share price of $2.17. Assuming a $25m capital infusion (with the
potential for latter stages amounting to an additional $50m), the new venture capitalists will
request 11,529,000 shares resulting in an ownership of 14.49% of the company. After the
$25m capital infusion in the first stage this will result in a post-money valuation of $174.8m.

The main purpose of funding is to further develop the eX Advertising Intelligence Platform as
well as investments and acquisitions in complementary business, technology and other
assets to further the growth of Exponential Interactive. Funds will also be used for increasing
the brand awareness of the company as well as increasing awareness of the digital
advertising industry itself. Lastly, funds will also cover administrative and operating expenses
as well as working capital.
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BUSINESS OVERVIEW
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BUSINESS AND PRODUCT DESCRIPTION

Exponential Interactive, Inc. uses advanced analytics to provide advertising intelligence and end-to-
end digital solutions to brand advertisers worldwide. Its solutions are based on the e Advertising
Intelligence Platform which analyses over 2 billion consumer interactions daily and categorises
consumers into audiences based on more than 50,000 unique attributes. Brand advertisers are then
able to understand the attributes of consumers who engage with their brand and apply those
insights to reach audiences with similar attributes. The company is then able to effectively and
efficiently connect with their target audience through tailored marketing campaigns across a wide
variety of digital devices and formats including display, video and mobile advertising. The company
delivers its marketing campaigns primarily under the Tribal Fusion, Firefly Video and AdoTube
brands.

EXPONENTIAL INTERACTIVE BRAND PORTFOLIO

Source: Company Website, Company Filings

NON-DILUTED OWNERSHIP STRUCTURE

Name of Beneficial Owner Percentage Other

Shareholders
Housatonic Partners 9.47% 10.52%
The Da Silva
The DaSilva Family Trust 5.11% Family Trust
Dilip DaSilva 74.90% 5.11%
John R. Rettig 1.55%
Houstanic
Marvin Tseu 1.19% Partners 9.47%
Alexander Saldanha 1.40%
Kesa Tsuda <1%
Steven Cakebread <1%
Dillip Da Silva
John Farrell <1%
74.98%
Robert Goldberg <1%
Dennis Wolf <1%

Source: Company Filings

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MANAGEMENT

EXPONENTIAL INTERACTIVE SENIOR MANAGEMENT AND BOARD

Executive Officers
Dilip DaSilva Chairman of the Board, President and Chief Executive Officer
Marvin Tseu Chief Operating Officer
John R. Rettig Chief Financial Officer
Alexander Saldnha Chief Technology Officer
Kesa Tsuda Chief People Officer

Directors
Steven Cakebread1 2 Director
John Farrell1 3 Director
Robert Goldberg2 3 Director
Dennis Wolf1 Director

EXPONENTIAL INTERACTIVE EXECUTIVE COMPENSATION POLICY

Elements of Definition Philosophy Formula

compensation
Base salary Initial cash amount given
in a specified period
Cash bonuses Extra cash given at the
end of a specified period
Equity-based Stock options with an
compensation initial exercise price equal
to the fair market value of
the common stock
Attract and retain talent
by offering competitive
compensation
Attract and retain talent
by offering competitive
compensation
Incentivise executives to
increase value of the
stock by aligning interests
with stockholders. Stock
options also have vesting
periods which will also
increase retention
Compensate executives by
corporate and individual
performance
Set expectation for each
executive and informally set a
fixed amount of potential bonus
No established equity ownership
guideline
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MANAGEMENT TEAM PROFILES

Name Position Past Experience

Dhilip DaSilva Founder, Chairman, Chief 18 years of experience in Silicon Valley to Tribal Fusion
Executive Officer and (Exponential’s  first  business)
President Designed and built the ad-serving systems behind Flycast
Communication’s  advertising  business.  
BSc (Bio-Engineering) & Masters in CompSc from Brown
University.

John R. Rettig Chief Financial Officer Chief Financial Officer of Tribal Fusion, Inc. since May 2005.
18 years of experience in managing financial operations,
systems, and people across several consumer, technology
and online media businesses.
Vice President of Finance of Reflect
Vice President of Finance of Achieva.com/Kaplan, Inc.
Served as Chief Financial Officer of E-Global Network, Inc.
Senior Director of Finance of Excite@Home
BSc from St. Mary's College in Economics and Business
Administration.
Marvin Tseu Chief Operating Officer Chief Operating Officer of Exponential Interactive, Inc. since
May 2009
Presiding Director of Plantronics Inc.
Co-founded and served as Chief Executive Officer of Active
Reasoning Inc. in 2002, from October 2002 to March 2006
Chief Executive Officer of Axesstel Inc. from May 17, 2006 to
November 21, 2007. Since November 2001, Mr. Tseu was a
Consulting venture partner with Fuse Capital from November
2001
Director of Axesstel Inc. from May 17, 2006 to November 21,
2007.
B.A (Economics) from Stanford University.
Alexander Salanha Chief Technology Officer Chief Technology Officer of Exponential Interactive, Inc.,
Parent of Tribal Fusion, Inc. since September 2006
Chief Technology Officer of Tribal Fusion, Inc., and Epiance
Corporation.
Co-founded Cadence Berkeley Labs, a division of Cadence
Design Systems, Inc. in 1993
Served on the Senior Leadership Council at Cadence and was
a member of the Technology Steering Group from 1997 to
1998.
He co-founded Softface, Inc., in 1998, and served as its Chief
Executive Officer as well as Chief Technology Officer until
2001.
He has over 50 publications in journals and conferences and
has received a best paper award at the VLSI Design
Conference.
Holds ten patents.
B. Tech. in Computer Science from the Indian Institute of
Technology - Madras, and a PhD. in Computer Science from
the University of California - Berkeley.

Source: Company Website, Company Filings

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MANAGEMENT TEAM PROFILES (CONTINUED)

Name Position Past Experience

Kesa Tsuda Chief People Officer Chief People Officer of Exponential Interactive, Inc. since July
2011.
Vice President of Human Resources at Idealab
Vice President of Human Resources at Aspen Marketing,
Launch Media, and Universal Pictures.
Served in several business operations and financial planning
positions at Comcast, Content and Communications (C3), the
National Broadcasting Corporation (NBC), and Hughes
Aircraft Company.
B.A. (Economics) from UCLA.
John McKoy Chief Revenue Officer Managing Director, APAC
Responsible for delivering  Exponential’s  proposition  and  its  
portfolio of businesses across Australia, New Zealand, South
Africa, and South East Asia
15  years’  experience  in  media
7  years’  experience  in  digital  space
Previous director at ninemsn
Phillip Buxton Chief Marketing Officer Independent marketing consultant for iCrossing,Tagman, and
Tribal Fusion
B.Sc (Marketing) Hon from Lancaster University

Rob Diechert SVP of Business Head of data at LivePerson

Operations, GM of Tribal Senior Vice President of Digital Ad Operations at The
Fusion Weather Channel
Senior Vice President of global sales development at AOL
MBA from University of Maryland – Robert H. Smith School
of Business
Bachelor’s  degree  from  John  Hopkins  University

Doug Conley Vice President – Product Four years at Yahoo!

Strategy & Operations Spent early career in strategy consulting and corporate
finance
Masters in Engineering from Cambridge University

Sandy Shanman General Manager – 12  years’  experience  in  commercial  roles  in  online, mobile,
Appsnack and digital advertising companies
Sales and Marketing at PepsiCo
Held executive roles at AOL Advertising and Quattro Wireless
Led sales, marketing, and business development for Kiptronic

Source: Company Website, Company Filings

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GROWTH STRATEGY

Exponential Interactive, Inc. has developed and proposed numerous expansion strategies which will
be identified below. These strategies aim to deliver maximum growth for the firm, and capitalize on
identified opportunities.

Strategy
Expand across mobile devices and other
platforms
Continue global expansion
Increase awareness and adoption of our
solution
Evolution of solutions provided
Expand our audience and data
Pursue strategic acquisitions
Description
Leverage capabilities of eX Advertising Intelligence
Platform to expand across all digital devices
This includes; smartphones, tablets, TVs etc.
Capitalise on significant global demand for the
proposed solution
Increase global footprint through penetrating further
into the 25 countries Exponential Interactive, Inc.
already operates in
Capitalise on digital advertising shifts towards brand-
centric campaigns
Strong belief that solution addresses the need for an
integrated solution, and push promotion of the
platform to generate greater awareness
Enhance eX Advertising Intelligence Platform while
developing new advertising capabilities and forms
that grow and generate value to brand-advertisers
Expand relationship with digital media content
providers across devices and platforms
Execute and continuously evaluate opportunities to
acquire complementary businesses and technologies
which represent a strategic fit with the business
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Key Risks
Slow development of early
stage digital brand advertising
market
Inability to retain existing
brand advertisers
High dependency on
advertising agencies as
intermediaries
High levels of competition
Unsuccessful marketing
campaigns
Regulation centred on
internet privacy matters
KEY OPERATIONAL RISKS
Impact
Business serves mainly the
digital advertising market,
slow growth will adversely
affect our revenue and
impact company value
Loss in revenue and brand
image to other existing and
future
customers/advertisers
Affect ability to attract and
maintain business due to
customers having reliance
with intermediary, and not
Exponential Interactive Inc.
Decrease in potential
revenue
Uncompetitive due to
economies of scale that
competitors may have
achieved through a
matured business
Customer base will not
grow, and therefore our
current customers may be
unable to be retained
New customers attraction
will be low
Increased internet privacy
laws will decrease the
business’  ability  to  collect   survey data
data through our core
platform.
Adverse effects on our
value proposition and
attractiveness to potential
customers
Mitigation Strategy
Initiate push marketing of products
to the market into to generate
increased awareness and accelerate
growth of the market
Provide ongoing support to brand-
advertisers and implement feedback
mechanisms for potential
improvements
Phase out reliance and build internal
network and strong direct
relationship with customer base
Introduce copyright and patent
protection to protect Exponential
Interactive, Inc. competitive
advantage and proprietary software
Implement customer surveys at the
end of campaign to obtain feedback
Look into diversifying your platform
into other research methods such as
The above method could be
implemented through a promotional
points scheme, where survey takers
get rewarded
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INDUSTRY ANALYSIS
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INTERNET ADVERTISING

Internet Advertising Industry Analysis

US digital advertisement spending is estimated to hit $42.26 billion in 2013, which will account for about
24.7% of total media advertisement spending this year. This represents significant growth potential for all
players in the early-stage and highly fragmented market. 1

Stage of Market Underdeveloped & early-stage

Barriers of Entry Low
Type of Market Highly fragmented with many players
Growth (% of previous year) 14.84%
Key Competitors 1. Marchex, Inc.
2. QuinStreet, Inc.
3. TechTarget, Inc.
4. Marin Software, Inc.
5. YuMe, Inc.

Exponential Interactive operates in the Advertising Intelligence and Digital Media Solutions space
which is broadly classified under the Internet Advertising Market.

Advances in technology and increased proliferation of connected devices such as netbooks, mobiles
and tables have revolutionised the way that people connect, interact, live, work and play. As a result
of this consumer shift, there has been a rapid increase in the internet advertising market as
advertisers seek to reach consumers where they are spending more of their time.

The key driver of internet advertising will be global Internet data consumption

Outlook
GLOBAL ADVERTISING MARKET – US$bn
FY2011 – FY2017

250

200

150

100

50

2011 2012 2013 2014 2015 2016 2017

TV Out of Home Newspaper Internet

Source: PriceWaterhouseCoopers – Global Entertainment and Media Outlook: 2013 – 2017

1
Mobile Pushes US Digital Ad Market Higher
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PriceWaterhouseCoopers (PWC) has forecast that the global internet advertising market will grow
from US$87.5 billion in 2011 to US$185 billion in 2017 representing a compounded annual growth
rate of 13%.

The growth in internet advertising is offset by dramatic changes in the market share of other
channels as budgets are drained from class media to fuel digital marketing. The major compromises
were newspapers and radio.

ADVERTISING REVENUE MARKET SHARE BY MEDIA – US$bn

FY2011

Cinema 0.7
Video Games 1
Out of Home 6.5
Radio 15.2
Magazines 18
Newspaper 20.7
Cable Television 30
Internet 31.7
Broadcast Television 38.5

Source: PriceWaterhouseCoopers – Global Entertainment and Media Outlook: 2013 – 2017

Internet Advertising is forecast to surpass Broadcast Television Advertising in 2013.

Internet Activity
TOTAL INTERNET USERS – BILLIONS OF PERSONS
CY2011 VS. CY2015

The growth in the internet advertising market over the prescribed period will be a result of increases
in internet use with the number of world internet users forecast to increase from [2 billion] in 2011
to [3.4 billion] in [2016] 2 representing 45% of the projected total world population at that date3. This
growth in users is to be driven by a rising upper middle class in emerging markets of Asia, Latin
America and Africa.

The effect of the increase in internet users is expected to compound with forecast increases in per
capita data consumption. Cisco is expecting 1.4 zettabytes4 of internet traffic by 2017.

In the residential space, Online Video will be the most highly adopted service by 2017 forecast to
increase from ~ 1 billion users in 2011 to 2 billion users in 2017 representing a 13.2% CAGR5.

2 ®
Cisco Visual Networking Index (VNI) Forecast (2011-2016)
3
UNESCO Population Estimates
4 ®
Cisco Visual Networking Index (VNI) Forecast (2011-2016)
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Internet Advertising Spend

The increase in users and data consumption will see companies spend a significant amount on
internet advertising.

UNITED STATES INTENTED ADVERTISING SPEND – US$bn

FY2010A – FY2016F
52.0 55.3
47.8
42.5
37.3
32.0
26.3

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

Source: IAB

The businesses in the United States alone will increase its internet advertising spend from [US$32
billion in 2011 to US$55 billion in 2016 representing a CAGR of 11.6%.

Impact of Mobile

Mobile data consumption is expected to be a large growth driver of internet usage. Unique mobile
data users will increase to 4.9 billion by 2015, equalling 2/3 of the projected world population.

This is a trend that will occur globally, with the largest drivers occurring in Africa, Latin America and
Asia6.

This increase in mobile data consumption will result in increase internet usage and will drive future
long term internet advertising revenue.

GLOBAL UNIQUE MOBILE USER GROWTH

Source: Company Filings, Capital IQ, Desktop

5 ®
Cisco Visual Networking Index (VNI) Forecast (2011-2016)
6
Ibid.
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COMPETITIVE ANALYSIS

COMPETITIVE ANALYSIS SUMMARY

Company Descriptions

Marchex, Inc. operates as a mobile performance advertising company delivering

analytics through monitoring customer calls to businesses. The company also
offers performance-based online advertising solutions to advertisers, connecting
them to consumers through its owned websites, and also third party websites.

QuinStreet, Inc. is an online performance marketing company, who provides

customer acquisition programs for their clients internationally and in the United
States. The company provides both Direct Marketing Services (DMS) and Direct
Selling Services (DSS), effectively operating in two segments.

TechTarget, Inc. delivers tailored online content and brand advertising. Its
solutions allow IT professionals to find specific information related to their
purchase decisions, enabling them to reach IT buyers that are researching
specific  solutions  related  to  vendors’  products  and  services.  

Marin Software, Inc. operates a cloud-based digital advertising management

platform. It offers a Revenue Acquisition Management Platform which delivers
integrated digital advertising management solutions for search, display, social
media, and mobile advertising.

YuMe, Inc. provides digital video brand advertising solutions. Its proprietary
technologies enable brand advertisers to find and target audiences across a
range of internet-connected devices and digital media properties.

COMPETITIVE ANALYSIS FINANCIALS

Exponential
QuinStreet, TechTarget, Marin
Interactive, Marchex, Inc. YuMe, Inc.
Inc. Inc. Software, Inc.
Inc.

P/E 8x(1) N.M.(2) 15x 41x N.M. N.M.

ROE 10% 2% 8% 2% N.M.(3) -29%

EBITDA Margin 12% 5% 19% 17% 42% 38%

Revenue growth on pcp 35% 50% 20% 11% 90% 32%

(1) Based on Book Value of Equity

(2) Negative Figure
(3) Too large to be meaningful

Source: Company Filings, Capital IQ, Desktop Research

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COMPETITIVE POSITIONING
This framework has been employed for analysing the drivers of competition in Exponential
Interactive’s  industry.  Each  force  has  been  assigned  with  a  mark  from  1  to  5,  with  5  being  most  
favourable for the company.

PORTERS FIVE FORCES ANALYSIS

Force Analysis RATING ( /5)

Competitive Fast industry growth rates of 14.84% and few
Rivalry within the competitors reduce the incentive of competitors to
Industry compete for market share.
Significant rivalry to introduce new services into the
market 3
Some firms Exponential Interactive competes with
have much larger total revenues and greater access
to capital due to being more mature

Threat of new Current competitors, including Exponential

entrants Interactive have employed proprietary technologies
which give themselves competitive advantages
Some firms Exponential Interactive competes can
copy or develop similar technologies due to the lack
of legal protection employed (patents, or 4
trademarks)
High learning curve and investment in R&D is
required to compete in a highly technological market,
which Exponential Interactive and its competitors are
already heavily invested in.
Bargaining powers Low bargaining power of suppliers due to the nature
of suppliers of the technology services industry. Suppliers consist
mainly of website development platforms, customer
management software, and content hosting.
Exponential Interactive, Inc. relies on intermediaries
to help it achieve market penetration and gain
customers. Any adverse effects on these 3
intermediaries will flow onto the firm.
However, due to the diversification within use of
these intermediaries (Exponential Interactive, Inc.
employs more than one) these shocks can be
minimised

Bargaining power Customers gain significant value from the services

of customers offered through the eX Advertising Intelligence
Platform which is unique to the company itself
The platform and marketing services provided are
Due to low barriers of entry, new market entrants 2
can   threaten   Exponential   Interactive’s   position   and  
create many substitute products for customers
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Threat of Due to proprietary software, close substitutes are

substitute hard to discover
products or Large investments into an integrated solution, such
services as that offered by Exponential Interactive means that
switching costs are very high for customers
Due to a lack of legal protection of services, and the 5
eX Advertising Intelligence Platform (patents,
copyright, etc.) the proprietary software is subjected
to copying by competitors.

PORTERS FIVE FORCES – SUMMARY

Competitive Rivalry
within the Industry
5
4
3
Threat of Substitute 2 Threat of New
Products or Services Entrants
1
0

Bargaining Power of Bargaining Power of

Customers Suppliers
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FINANCIAL ANALYSIS
&
VALUATION
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HISORICAL FINANCIAL ANALYSIS

FINANCIAL RATIOS SUMMARY TABLE

US$000 2010A 2011A

Liquidity ratios
Current ratio 1.9x 1.9x
Cash ratio 0.3x 0.4x
Profitability ratios
Gross profit margin 42.53% 43.31%
Operating profit margin 8.98% 8.40%
Pre-tax profit margin 7.87% 7.18%
Net profit margin 4.29% 4.07%
Effective tax rate 45.51% 43.33%
ROA 7.07% 5.66%
ROE 10.99% 11.91%
Debt ratios
Debt ratio 35.7% 52.5%
Debt to equity ratio 55.5% 110.5%
Capitalisation ratio 0.0% 18.8%
Interest coverage ratio 22.0x 23.7x
Operating performance ratio
Fixed-asset turnover 40.15% 26.61%

Source: Company Filings

FINANCIAL RATIOS7
FY2009A – FY2012E

10% 44.00%
43%
9%
8% 43% 43.00%
7% 42%
42.00%
6%
5% 41.00%
4% 40%
3% 40.00%
2% 39.00%
1%
0% 38.00%
2009A 2010A 2011A 2012E

Gross profit margin Operating profit margin

Pretax profit margin Net profit margin
Source: Company Filings

7
Only gross profit margin is to be interpreted using RHS axi
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Margin Analysis

Exponential  Interactive’s gross margins have remained relatively constant at 42% over the past two
years.EBITDA Margins have also remained constant at approximately 9% over the past five years.
The fact that this is a low margin relative to peers indicates a potential excess of expenditure. EBIT
Margins have also remained constant at approximately 8.4% over the past five years. Net Profit
Margins have declined slightly from 6.1% to 4.3% in recent years, signifying a potential increase in
financing expenditure brought about by use and expansion of the credit revolver.

Operating Expenditure

Exponential   Interactive’s   operating   expenditure   has   remained   relatively   constant   at   approximately  

34% over the pasts 5 years indicative of relative stability in the business model.

Revenue Growth

Revenue growth for this business has been significant with the company achieving growth rates of
35%  in  both  2010  and  2011.  As  Exponential  Interactive’s  market  share  has  remained  fairly  constant,  
this growth has been a function of more sales driven by growth in the internet advertising market.

Return on Equity and Debt Ratios

Return on Equity has been increasing from 9% in 2009 to 12% in 2011. This may be seen as a
fundamental growth driver for Exponential Interactive.

DEBT RATIOS
FY2010A – FY2011A

110%
24x
22x

55% 52%
36%

2010A 2011A 2010A 2011A

Debt ratio Debt to equity ratio Interest coverage ratio

Source: Company Filings

Further, although the company has increased its debt ratio and debt-to-equity ratio by 47% and 99%
respectively as total liabilities increase from 27.1m to 63.9m in FY2011, its interest coverage ratio
still increased to 23.7x meaning it will have no troubles of repaying the increased interest expense.

Cash Burn Ratio

The cash burn ratio for Exponential Interactive has varied significantly. However in recent financial
year the company has achieved a net cash gain of $5.8m
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PROFORMA FINANCIAL STATEMENTS

PROFORMA STATEMENT OF CONSOLIDATED INCOME

US$000 2009A 2010A 2011A 2012E 2013E

Revenue 92,560 125,268 169,082 209,357 259,652

Growth (20.5%) 35.3% 35.0% 23.8% 24.0%
Cost of Sales (55,436) (71,988) (95,848) (121,507) (150,697)
Gross Profit 37,124 53,280 73,234 87,851 108,956
Margin 40.1% 42.5% 43.3% 42.0% 42.0%
Operating Expenses
Sales and Marketing (20,060) (28,688) (42,179) (48,433) (60,069)
Product Development (3,434) (4,680) (5,304) (7,362) (9,130)
General and Administrative (5,482) (7,615) (10,360) (12,650) (15,689)
Amortisation of Intangible (1,073) (1,045) (1,189) (1,841) (2,283)
Total Operating Expenses (30,049) (42,028) (59,032) (70,286) (87,171)
Margin 32.5% 33.6% 34.9% 33.6% 33.6%
Net Operating Income 7,075 11,252 14,202 17,565 21,784
Financing Income / (Expense) (852) (448) (512) (689) (854)
Other Income (Including Financing Effects (1,441) (1,396) (2,055) (2,685) (3,330)
Net Income before Tax 5,634 9,856 12,147 14,880 18,455
Margin 6.1% 7.9% 7.2% 7.1% 7.1%
Tax (2,623) (4,485) (5,263) (6,123) (7,192)
Effective Rate 46.6% 45.5% 43.3% 41.1% 39.0%
Net Income 3,011 5,371 6,884 8,757 11,262
Margin 3.3% 4.3% 4.1% 4.2% 4.3%

PROFORMA SELECTED BALANCE SHEET ITEMS

US$000 2010A 2011A 2012E 2013E

Cash 8,505 14,263 15,844 19,650
Trade and other receivables 40,189 53,330 56,210 59,343
Inventories - - - -
Trade and other payables (4,960) (9,822) (10,210) (12,663)
PP&E 3,120 6,355 7,052 7,917
Long Term Debt - 13,400 13,400 13,400
Shareholder Equity 48,880 57,812 82,812 82,812

PROFORMA SELECTED CASH FLOW STATEMENT ITEMS

US$000 2009A 2010A 2011A 2012E 2013E

Operational Cash Flows 7169 4302 9178 7,206 11,974
Investing Cash Flows (273) (1,352) (15,353) (2,538) (28,148)
Financing Cash Flows (21,849) (5,179) 12,372 23724.501 -1537.895
Exchange Rate Effects 10 21 (439) 0 0
Net Change in Cash Position (14,943) (2,208) 5,758 28,393 (17,712)

Source: Company Filings, Forecast s

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VALUATION – SUMMARY

FOOTBALL FIELD VALUATION ANALYSIS

Discounted Cash Flow Analysis $55,721 $614,299

Discounted Cash Flow Analysis $75,667 $468,965

VC Method $70,737 $194,570

LTM EV/EBITDA $79,319 $192,088

NTM EV/EBITDA $93,442 $182,112

LTM EV/EBIT $122,023 $222,222

NTM EB/EBIT $146,992 $204,535

LTM P/E $99,550 $137,267

NTM P/E $140,679 $344,020

Multiples Summary $131,480 $251,188

Total Summary $89,304 $329,130

Due to the inaccuracies associated with the valuation of private companies, the intrinsic equity value
for Exponential Interactive was derived using:

Discounted Cash Flow Analysis – to provide a more flexible means of adjusting assumptions

Venture Capital Method – to provide a valuation more geared to the information desired by
Venture Capitalists

Multiples Analysis – to provide a valuation of the company relative to its peers

An equal weighting of 33.3% was applied to each of the above methodologies, which through
triangulation arrives at an equity value (pre-money valuation) between $89.3m and $329.1m and
therefore a median summary valuation of $149.8m8.

VALUATION – KEY ASSUMPTIONS

General

We have assumed that the incoming venture capitalist will provide an initial capital infusion of $25m
with the potential for an additional $50m of staggered capital if key milestones are met.

Discounted Cash Flow Analysis – 10 year period

Revenues

The first step towards forecasting revenues was to forecast the internet display and video
advertising market. This was forecast using industry data from IAB between FY2011 and FY2017.
From there, the growth rate was decreased towards a steady rate of ~3%

8
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The second step involved a consideration of Exponential Interactive market penetration potential.
Based on an assessment of the past endeavours of the company, its good management (especially as
the founder was still on board) and its current contracted parties, it was estimated that Exponential
Interactive’s  market  share  would  grow.

However, as the internet display and video advertising market still remains heavily fragmented, it
was estimated that the market share would only increase from the current 0.6% to ~1.5% of the
total market by FY2022.

Margins

Due to the late stage of Exponential Interactive, it was estimated that the operating margins of the
company (EBIT Margin, EBITDA Margin, Gross Margin and Op Ex Margin) would all remain constant.

Taxation

The effective tax rate was forecast to decrease to an equilibrium level of 30% by FY2017 and then
remain constant for the duration of the forecast period.

Capex

Capital Expenditure is forecast to remain constant at 1.2% of Revenue

Working Capital

Inventories are forecast to remain at 0

Receivables are forecast to decrease from 32% of revenue to 12% of revenue as the company
becomes more efficient at collecting its revenue.

Payables are forecast to remain at a constant margin to COGS.

Weighted Average Cost of Capital

Cost of Equity

Exponential Interactive cost of equity was calculated to be 21.87% The cost of equity was calculated
using a Modified Capital Asset Pricing Model (CAPM). The inputs for the model are as follows:

Risk Free (2%) – Yield to maturity on 10 year US Zero Coupon Treasury Bonds in 20119
Equity Risk Premium (6%) – Implied ERP as of 1 May 2013, normalised for cash yield10
Levered Beta (1.43) – Fundamental beta calculated using a comparable company universe of
14 firms
Market Correlation – Market correlation of 43% determined. Proxy was internet
companies11
Total Beta (3.31)

Exponential Interactive cost of equity was calculated to be 21.87% The cost of equity was calculated
using a Modified Capital Asset Pricing Model (CAPM). The inputs for the model are as follows:

9
Bloomberg Estimates (2011)
10
Damodaran
11
Damodatan
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Cost of Debt

Exponential Interactive after-tax cost of debt was calculated to be 1.15%. The cost of debt was
calculated based on:

Current effective interest rate of 2.00% on the long term credit revolver12
Effective tax rate of 43.16%13

Venture Capital Method

IPO Date

Due to the late stage of the model, it is forecast that the company will be ready to IPO around
FY2014

IPO Multiple

Based on similar IPOs and IPO expectations (such as YuMe Inc), we have forecast a base case
EV/EBITDA IPO multiple of 8.0x

Multiples

Number

A  comparable  company’s  universe  of  17  firms  was  created  based  on  the  fact  that:  

The companies had similar industry drivers to Exponential Interactive

The companies operated in the US
The companies has an enterprise value around the forecasted enterprise value of
Exponential Interactive
A greater sample would reduce the impact of outliers and reduce standard error
Liquidity

As these are public comparable, a liquidity discount of 20% was applied to the implied equity
value

Sensitivity Analysis

DCF valuations were sensitised to WACC, terminal growth rate, market growth and
Exponential  Interactive’s  market  penetration
VC  method  valuations  were  sensitised  to  the  potential  EV/EBITDA  IPO  multiple  and  VC’s  
target rate of return

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Company Filings
13
Company Filings
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POTENTIAL DEAL METRICS

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POTENTIAL DEAL TERMS

Pre Money Valuation

Based on a triangulation of the Net Present Value method (33.3%), Venture Capitalist method
(33.3%) and Multiples method (33.3%) it is forecast that the pre-money valuation of the firm will be
between $89.3m and $329,1m

However, based on a base case average from all the methods above, the most likely pre-money
valuation is $149.8m

Post Money Valuation

With a Series B capital injection of $25,000,000 this results in a post-money valuation of $174.8m

Shares Outstanding

The current pool of outstanding common shares is 52,560,000. Taking into account the options pool
and reserved shares for incentive program, 14,259,000, the fully diluted amount of outstanding
shares is 68,049,000.

Price

Therefore, the current share price of the Exponential Interactive should be $2.17 a share14.

Ownership Structure

The proposed capital infusion of $25.0m will require the issuance of an additional 11,520,000 shares.

This will affect the ownership as below:

Shareholder no.(000s) % Shareholder no. (000s) %

Housatonic Partners 5,051 7.4% Housatonic Partners 5,051 6.35%
The DaSilva Family Trust 2,722 4.0% The DaSilva Family Trust 2,722 3.42%
Founders 44,787 65.8% Founders 44,787 56.28%
Option Reserve+STI 15,489 22.8% Option Reserve+STI 15,489 19.46%
Venture Capitalist Series B 11,529 14.49%
Total 68,049 100% Total 79,579 100%

Note: For simplicity the above assumes no anti-dilutive measures for any of the original parties

Staging

In addition to the initial capital infusion of $25.0m, there should be provisions to allow for a further
$50.0m of staggered capital if key development milestones are reached. These may be discussed
informally with Exponential Interactive at a later date.

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Housatonic Venture Housatonic

Partners Capitalist Series Partners
The DaSilva
Option 7.4% The DaSilva B 6.35%
Family Trust
Reserve+STI Family Trust 14.49%
3.42%
22.8% 4.0%
Option
Reserve+STI
19.46%

Founders
Founders 56.28%
65.8%

The new capital infusion will give the new Venture Capitalist a significant share of ownership and
dilute the rest of the shareholders. This will mean that the new Venture Capitalist may now have the
ability and be justified in being involved in decisions relating to the operation and exit of the
company

Type of Security

Due to the late stage of develop and near term horizon for a potential IPO, it is recommended that
the Series B round of funding be undertaken using Participating Convertible Preferred Shares. We
recommend a preferred type share because firstly, the venture capitalists will get priority in the
event of bankruptcy. Later-stage investors are willing to pay very high prices for the participatory
feature. It also gives investors protection if the firm does not go public. It will also encourage the
existing owners to aim for an IPO exit

If the firm goes public, then participating convertible preferred stock will be converted to ordinary
shares at a pre-set rate. If the firm does not go public, and is sold or liquidated, the holder receives
face value and the equity participation as if the stock was converted.

Exit

Based on the:

Profitability of the Exponential Interactive – which is indicative that the company is in the
latter stage of development
The expected boom in the internet advertising market
The choice of participating convertible preferred shares as the funding instrument

It is recommended that the Exponential Interactive looks to exit via an Initial Public Offering.
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USE OF PROCEEDS
KEY INFORMATION

Key Information
Venture Capital Injection Amount $25,000,000
Venture Capital Stake in Company 14.49%

This offering for the purpose of obtaining additional capital, establishing access to the public equity
markets, and also to create a primary market for the trading. The net proceeds from the offering will
be used for working capital, general purposes, with a portion being allocated to the investment and
acquisitions of complementary businesses, technologies, or other assets.

The specified uses of these net proceeds are estimates. The management team will have discretion
in the allocation of proceeds. Furthermore, there are plans to invest in short-term investment-grade
and interest-bearing instruments, certificates of deposit,  and  either  in  U.S.  government’s  obligations.

ESTIMATED USE OF PROCEEDS

Uses Approx. Amount (US$000)

General & Administrative 635
Costs
Marketing and Strategic 1,287
Alliances
Tech/Equipment/Start-up 2,600
Contingency 250
Investment & Acquisitions 12,800
Product Development 418
Undecided Expenditure 7,010

General administrative costs, marketing and also product development were taken from the SEC
filing. Equipment use is determined through the amount spent on hardware ($2.1million) and
software ($0.5million). A contingency amount of $250,000 is estimated based on 10% of proceeds be
kept in light of an adverse market. Investment and acquisitions was calculated from the amount
spent on acquiring AdoTube in 2011.

GROWTH IN USE OF PROCEEDS

Uses Approx. % over next year

General & Administrative 37.45%
Costs
Tech/Equipment/Start-up 5%
Contingency 2%
Investment & Acquisitions 17%
Reserve
Product Development 24.80%

General and administrative, marketing, and development cost growth were calculated using the
average of growth rates between 2009-10 and 2010-11. This gives an accurate estimation on future
growth rates. A 5% growth in equipment is based on the assumption that legacy technology needs to
be replaced. It also takes into account the expansion of the company, whereby purchases of greater
volume is necessary. Contingency is held at a constant 10%, with 2% being the forecasted inflation
rate. Investment and acquisitions growth is estimated using the previous acquisition ($12.8 million)
as a percentage over the total injection amount if all key milestones are met ($75million).
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Exponential Interactive, Inc.

Term Sheet
16 March 2012

Issuer Exponential Interactive,  Inc.  (the  “Company”)

Amount $25,000,000

Security Series  B  Participating  Convertible  Preferred  Stock  (“Series  B  Preferred”)

A preferred  stock  that  can  be  converted  at  the  shareholder’s  option  into  common  stock  with  
the additional feature that in the event of a sale or liquidation of the company, the holder has
the right to receive the face value and equity participating as if the stock were converted.

Price per Share $2.17

Capitalisation Table Shareholder no. (000s) %

Housatonic Partners 5,051 6.35%
The DaSilva Family Trust 2,722 3.42%
Founders 44,787 56.28%
Option Reserve+STI 15,489 19.46%
Venture Capitalist Series B 11,529 14.49%
Total 79,579 100%

Liquidation Upon liquidation, merger, acquisition dissolution or winding up of the Company, the holders
Preference of Series B Preferred shall be paid out of the assets of the Company an amount equal to the
purchase price. The remaining proceeds will be used to pay the holders of all other preferred
shareholders an amount equal to their purchase price. After all obligations to preferred
shareholders are met, the remaining assets of the Company shall be distributed on a pro rata
basis to all common and Series B Preferred shareholders on an as-converted basis.

Registration Rights The holders of Series B Preferred will be entitled to one more demand registration and will
have full piggy-back rights on all public listings

Mandatory Venter Capital firm has the right to sell their preferred stock back to the company at $2.17
redemption rights
Voting Rights The Series B Preferred shall vote together with Common Stock Holders on an as-converted
basis, and not as a separate class. The Series B shareholders shall be entitled to elect four
members of the Board.

Board Observation A representation from the Venture Capital firm shall have the right to attend all meetings of
Rights the Board of Directors in a nonvoting advisory capacity and shall be entitled to receive all
information given to board members, consult with and advise management of the Company
on significant business issues and shall have the right to examine Company records. Such
rights  will  terminate  upon  the  closing  of  the  Company’s  IPO.

Dividend Holders of Series B Preferred will not accrue dividends.

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Protective Provisions So long as any Series B Preferred are outstanding, the company will not, without written
consent  of  the  holders  of  at  least  50%  of  the  Company’s  Series  B  Preferred,  either  directly  or  
by amendment, merger, consolidation or otherwise:
i. Liquidate, dissolve or wind-up affairs of the company
ii. Amend, alter or repeal any provisions of the term sheet.
iii. Create or authorize the creation of or issue any other security convertible into
equity, have rights senior to or on parity with Series B Preferred.
iv. Create or authorise the creation of debt securities
v. Increase or decrease the size of the Board of Directors

Optional Conversion The Series B Preferred initially converts 1:1 Common Stock at any time at the option of the
holder, subject to Anti-dilution Provisions described below.

Anti-dilution In the event the company issues additional securities at a purchase price less than the current
Provisions Series B Preferred conversion price, such conversion price shall be reduced to the weighted
average of the original and new price at which the shares are issued (weighted average)

Matters Requiring So long as 50% of the originally issues Series B Preferred remains outstanding, the company
Investor Director will not without Board approval, which approval must include the affirmative vote of 100% of
Approval the Series B directors

i. Make a loan to any other entity

ii. Provide credit guarantees
iii. Make any investments other than in money market securities
iv. Incur any debt of over $1.5million
v. Enter into any transactions with any director or employee
vi. Hire, fire, or change the compensation of any of the executive officers
vii. Change the principle business of the company
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APPENDIX
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NET PRESENT VALUE METHOD – SUMMARY OF OUTPUT

DCF Summary Table

Enterprise Value 142,088

Cash 14,263
Debt 16,531
Equity Value 139,820
Common Shares Outstanding (000) 52,560
Stock Options @ $1.47 (000) 14,259
Shares reserved for Equity Incentive Plan (000) 1,230
Diluted Shares Outstanding (000) 68,049
Share Price 2.05
Capital Infusion 25,000
Post - Money Valuation 164,820
New Shares to be issued 12,167
Shares Outstanding (After Capital Infusion) (000) 80,216
% Ownership Original Shareholders 84.8%
% Ownership New Shareholders 15.2%

VENTRUE CAPITAL METHOD – SUMMARY OF OUTPUT

Venture Capital Metrics

Current EBITDA 15,391
Current Year 2011
Assumed IPO Year 2014
Time to IPO (Years 3
EBITDA at IPO Year 29,937
IPO Multiple 8.0x
EV at IPO Year 239,493
Target Rate of Return 25%
Enterprise Value 122,621
Debt 16,531
Cash 14,263
Equity Value 120,353
Capital Infusion 25,000
Post-Money Valuation 145,353
Proportion Share of Equity 17.2%
Proportion of Equity to Orginial Shareholders 82.8%
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BETA ANALYSIS

Company Name Levered Beta Debt-to-Equity Ratio Tax Rate Unlevered Beta
Monster Worldwid 2.01 3.2% 30% 1.96
Lin Media Llc 1.98 74.6% 30% 1.30
J2 Global Inc 0.88 (3.3%) 30% 0.90
Marchex Inc-B 0.96 (5.9%) 30% 1.00
Active Network I 1.31 (5.9%) 30% 1.37
Quinstreet Inc 0.95 (8.6%) 30% 1.01
Trulia Inc 2.75 (4.9%) 30% 2.85
Techtarget 1.24 (28.7%) 30% 1.56
Autobytel Inc 0.65 (16.1%) 30% 0.74
Locm Us Equity 1.20 14.3% 30% 1.09
Local Corp 1.77 (9.7%) 30% 1.90
Wpp Plc 0.90 16.9% 30% 0.81
Marin Software I 1.94 (23.3%) 30% 2.32
Aol Inc 0.72 (13.1%) 30% 0.79

Average 1.40
Median 1.20
Exponential Interactive 3.9% 43% 1.43

WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS

Weighted Average Cost of Capital

Risk Free Rate 2.00%
Market Risk Premium 6%
Beta 1.43
Market Correlation 43%
Total Beta 3.31

Cost of Equity 21.87%

Pre Tax Cost of Debt 2.02%

After Tax Cost of Debt 1.15%

Equity 57813
Debt 16531
Cash 14263
Net Debt 2268
Enterprise Value 60081

E/EV 0.96
ND/EV 0.04

WACC 21.09%
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NET PRESENT VALUE METHOD – ASSUMPTIONS

2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E

Market Assumptions

Display Advertising Market 0 1% 18% 17% 11.1% 10.9% 11.1% 10.5% 9.9% 9.2% 7.7% 6.2%
Video Advertising Market 0 32% 42% 33% 32.8% 32.5% 30.9% 26.4% 21.8% 18.2% 15.2% 12.2%
Exponential Interactive Market Share 0.6% 0.6% 0.7% 0.7% 0.8% 0.9% 1.0% 1.0% 1.1%

Margin Assumptions

Gross Margins 38% 38% 40% 43% 43% 42% 42% 42% 42% 42% 42% 42% 42%
Sales and Marketing % Revenue 19% 15% 22% 23% 25% 23% 23% 23% 23% 23% 23% 23% 23%
Product Development % Revenue 3% 4% 4% 4% 3% 4% 4% 4% 4% 4% 4% 4% 4%
General and Administrative % Revenue 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6% 6%
Amortisation of Intangible % Revenue 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Financing Costs % Revenue 1% 0.4% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%
Other Income % Revenue 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Taxation Assumptions

Tax % 55% 41% 47% 46% 43% 41% 39% 37% 35% 32% 30% 30% 30%

Capital Expenditure

Capex 0.3% 1.1% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2%

Working Capital
-15%
Trade and other receivables % Revenue 32% 32% 27% 23% 19% 17% 14% 12% 12% 12%
Inventories % COGS 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Trade and other payables % COGS 7% 10% 8% 8% 8% 8% 8% 8% 8% 8%
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NET PRESENT VALUE METHOD – OPERATING MODEL

2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E

Market

Display Advertising Market 19,703,000 19,945,000 23,444,000 27,517,000 30,566,000 33,906,000 37,662,000 41,616,000 45,724,000 49,943,000
Growth 1.2% 17.5% 17.4% 11.1% 10.9% 11.1% 10.5% 9.9% 9.2%
Video Advertising Market 1,162,000 1,537,000 2,176,000 2,886,000 3,832,000 5,076,000 6,644,000 8,400,000 10,228,000 12,094,000
Growth 32.3% 41.6% 32.6% 32.8% 32.5% 30.9% 26.4% 21.8% 18.2%
Total Display and Video Advertising Market 20,865,000 21,482,000 25,620,000 30,403,000 34,398,000 38,982,000 44,306,000 50,016,000 55,952,000 62,037,000
3.0% 19.3% 18.7% 13.1% 13.3% 13.7% 12.9% 11.9% 10.9%
Income Statement

Revenue 107,410 116,422 92,560 125,268 169,082 209,357 259,652 322,972 399,011 488,500 592,753
Growth n.m. 8.4% (20.5%) 35.3% 35.0% 23.8% 24.0% 24.4% 23.5% 22.4% 21.3%
Cost of Sales (66,216) (71,930) (55,436) (71,988) (95,848) (121,507) (150,697) (187,446) (231,578) (283,515) (344,022)
Gross Profit 41,194 44,492 37,124 53,280 73,234 87,851 108,956 135,526 167,433 204,985 248,731
Margin 38.4% 38.2% 40.1% 42.5% 43.3% 42.0% 42.0% 42.0% 42.0% 42.0% 42.0%

Operating Expenses
Sales and Marketing (20,815) (17,323) (20,060) (28,688) (42,179) (48,433) (60,069) (74,717) (92,308) (113,011) (137,129)
Product Development (3,401) (4,324) (3,434) (4,680) (5,304) (7,362) (9,130) (11,357) (14,031) (17,178) (20,843)
General and Administrative (6,328) (7,497) (5,482) (7,615) (10,360) (12,650) (15,689) (19,515) (24,109) (29,517) (35,816)
Amortisation of Intangible (805) (1,137) (1,073) (1,045) (1,189) (1,841) (2,283) (2,840) (3,509) (4,296) (5,213)
Total Operating Expenses (31,349) (30,281) (30,049) (42,028) (59,032) (70,286) (87,171) (108,429) (133,957) (164,001) (199,001)
Margin 29.2% 26.0% 32.5% 33.6% 34.9% 33.6% 33.6% 33.6% 33.6% 33.6% 33.6%

Net Operating Income 9,845 14,211 7,075 11,252 14,202 17,565 21,784 27,097 33,476 40,984 49,730

Financing Income / (Expense) (852) (448) (512) (689) (854) (1,063) (1,313) (1,608) (1,951)
Other Income (Including Financing Effects (1,699) (2,225) (1,441) (1,396) (2,055) (2,685) (3,330) (4,142) (5,117) (6,264) (7,601)
Net Income before Tax 8,146 11,986 5,634 9,856 12,147 14,880 18,455 22,955 28,359 34,720 42,129
Margin 7.6% 10.3% 6.1% 7.9% 7.2% 7.1% 7.1% 7.1% 7.1% 7.1% 7.1%

Tax (4,486) (4,922) (2,623) (4,485) (5,263) (6,123) (7,192) (8,446) (9,817) (11,263) (12,639)
Effective Rate 55.1% 41.1% 46.6% 45.5% 43.3% 41.1% 39.0% 36.8% 34.6% 32.4% 30.0%

Net Income 3,660 7,064 3,011 5,371 6,884 8,757 11,262 14,509 18,542 23,457 29,491
Margin 3.4% 6.1% 3.3% 4.3% 4.1% 4.2% 4.3% 4.5% 4.6% 4.8% 5.0%
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NET PRESENT VALUE METHOD – DISCOUNTED CASH FLOW MODEL

2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E Thereafter

Discounted Cash Flow Analysis

Revenue 259,652 322,972 399,011 488,500 592,753 708,338 833,070 963,654 1,095,717 1,223,988
Cost of Sales (150,697) (187,446) (231,578) (283,515) (344,022) (411,104) (483,496) (559,285) (635,932) (710,377)
Gross Profit 108,956 135,526 167,433 204,985 248,731 297,233 349,573 404,369 459,786 513,611
Operating Expenses
Sales and Marketing (60,069) (74,717) (92,308) (113,011) (137,129) (163,869) (192,724) (222,934) (253,486) (283,161)
Product Development (9,130) (11,357) (14,031) (17,178) (20,843) (24,908) (29,294) (33,886) (38,530) (43,040)
General and Administrative (15,689) (19,515) (24,109) (29,517) (35,816) (42,800) (50,337) (58,227) (66,207) (73,957)
Total Operating Expenses (84,888) (105,589) (130,448) (159,705) (193,788) (231,576) (272,355) (315,047) (358,222) (400,158)

EBITDA 24,068 29,937 36,985 45,280 54,943 65,657 77,218 89,322 101,563 113,453

Depreciation & Amortisation (2,283) (2,840) (3,509) (4,296) (5,213) (6,229) (7,326) (8,474) (9,636) (10,764)
EBIT 21,784 27,097 33,476 40,984 49,730 59,428 69,892 80,848 91,928 102,690
Tax (8,490) (9,970) (11,588) (13,295) (14,919) (17,828) (20,968) (24,254) (27,578) (30,807)
NOPLAT 13,294 17,126 21,888 27,689 34,811 41,599 48,925 56,594 64,350 71,883 74,758
Depreciation & Amortisation (2,283) (2,840) (3,509) (4,296) (5,213) (6,229) (7,326) (8,474) (9,636) (10,764) (11,194)
Capex (3,148) (3,916) (4,838) (5,923) (7,187) (8,588) (10,100) (11,684) (13,285) (14,840) (15,434)
(Increase) / Decrease in NCWC 680 403 -463 -1579 -2818 8233 8885 9302 9407 9137 9,503
Free Cash Flow to Firm 11,749 15,648 21,022 27,641 35,655 31,007 37,265 44,082 51,293 58,669 61,016
Terminal Value 356,998
Discount Rate 21%
Terminal Growth Rate 4%
Period 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5
Discount Factor 0.75 0.62 0.51 0.42 0.35 0.29 0.24 0.20 0.16 0.13 0.11
PV Cash Flows 8,818 9,698 10,759 11,683 12,445 8,938 8,871 8,666 8,327 7,865 39,524
? PV Cash Flows
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NET PRESENT VALUE METHOD – SENSITIVITY TABLES

Implied Equity Value ImpliedImplied

Equity Equity
Value Value
Discount Discount
Rate Market Penetration Rate Terminal Growth Rate
% 0.5% 1.00% 1.5% 2.0% 2.5% % 3.0% 3.5% 4.0% 4.5% 5.0%
11.1% $206,689.00 $320,598.86 $423,953.95 $521,226.42 $614,299.35 11.1% $390,068.48 $405,895.30 $423,953.95 $444,752.34 $468,965.13
16.1% $122,138.91 $173,188.56 $218,559.90 $260,754.63 $300,797.87 16.1% $210,823.31 $214,538.00 $218,559.90 $222,928.77 $227,691.55
21.1% $87,161.66 $115,271.81 $139,820.15 $162,411.94 $183,694.90 21.1% $137,276.41 $138,512.13 $139,820.15 $141,207.01 $142,680.05
26.1% $67,939.43 $85,044.17 $99,776.40 $113,218.67 $125,804.44 26.1% $98,768.21 $99,261.15 $99,776.40 $100,315.51 $100,880.19
31.1% $55,720.79 $66,726.86 $76,115.91 $84,628.85 $92,561.97 31.1% $75,666.67 $75,887.22 $76,115.91 $76,353.20 $76,599.58

Implied Equity Value

Discount
Rate Market Growth Variation
% (5.0%) (2.5%) – 2.5% 5.0%
11.1% $300,112.62 $356,344.72 $423,953.95 $504,978.04 $601,764.34
16.1% $164,202.26 $189,011.65 $218,559.90 $253,665.33 $295,267.56
21.1% $110,413.47 $123,894.77 $139,820.15 $158,596.46 $180,689.36
26.1% $82,131.36 $90,249.59 $99,776.40 $110,938.09 $123,992.80
31.1% $64,873.12 $70,059.12 $76,115.91 $83,178.79 $91,401.65

VENTRURE CAPITAL METHOD – SENSITIVITY TABLES

Implied Equity Value InternalInternal

Rate of Rate
Return
of Return
Discount Discount
Rate IPO Exit Multiple Rate IPO Exit Multiple
% 6.0x 7.0x 8.0x 9.0x 10.0x % 6.0x 7.0x 8.0x 9.0x 10.0x
15.0% $115,835.08 $135,518.92 $155,202.77 $174,886.62 $194,570.46 15.0% 26% 29% 32% 34% 35%
20.0% $101,678.77 $119,003.23 $136,327.69 $153,652.15 $170,976.62 20.0% 40% 44% 47% 50% 52%
25.0% $89,697.45 $105,025.02 $120,352.60 $135,680.17 $151,007.75 25.0% 55% 59% 63% 66% 69%
30.0% $79,488.95 $93,115.11 $106,741.27 $120,367.42 $133,993.58 30.0% 70% 75% 80% 84% 87%
35.0% $70,737.14 $82,904.66 $95,072.19 $107,239.71 $119,407.23 35.0% 85% 92% 98% 102% 106%
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COMPARABLE COMPANIES ANALYSIS – SUM<ARY TABLE

Share 52 Week % of 52 Market Enterprise EV/EBITDA (x) EV/EBIT (x) Price / Earnings (x)
Company Price (LC) High (LC) Low (LC) Week High Cap (AUDm) Value (AUDm) 2011A 2012E 2013E 2011A 2012E 2013E 2011A 2012E
B2 E9 C18 C19 D18 E23 E27 W45 X45 Y45 W47 X47 Y47 W52 X52

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MONSTER WORLDWID $4.39 $8.53 $4.02 51.5% $530.9 $548.1 3.0x 3.6x 3.4x 5.2x 7.1x 7.6x 10.0x n.m.
LIN MEDIA LLC 20.83 20.86 4.41 99.9% 1,211.9 2,119.0 16.8x 9.4x 8.6x 21.9x 11.5x 20.1x 23.9x n.m.
J2 GLOBAL INC 50.69 53.10 28.08 95.5% 2,509.8 2,425.7 14.6x 12.3x 9.3x 16.7x 14.0x 11.2x 20.6x 19.3x
MARCHEX INC-B 7.15 7.99 3.47 89.5% 289.2 272.1 n.m. n.m. 17.5x n.m. n.m. n.m. n.m. n.m.
ACTIVE NETWORK I 14.37 14.41 3.83 99.7% 959.1 902.1 n.m. n.m. 14.0x n.m. n.m. n.m. n.m. n.m.
QUINSTREET INC 9.45 9.71 5.41 97.3% 437.3 399.5 5.6x 5.5x 7.2x 8.5x 9.6x 20.6x 17.4x 21.7x
TRULIA INC 48.24 52.71 14.69 91.5% 1,955.2 1,858.8 n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m.
TECHTARGET 4.98 5.99 4.00 83.1% 204.9 146.0 7.7x 9.3x 12.2x 12.5x 16.8x n.m. 41.2x 49.8x
AUTOBYTEL INC 7.17 7.88 3.51 91.0% 68.3 57.3 22.3x 15.4x 9.9x n.m. n.m. 27.3x n.m. 47.1x
LOCAL CORP 1.93 3.00 1.44 64.3% 47.3 54.0 n.m. n.m. 7.6x n.m. n.m. n.m. n.m. n.m.
YUME INC 10.44 12.08 7.80 86.4% 357.1 410.1 n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m.
BLINKX PLC 155.25 163.00 49.25 95.2% 613.3 553.5 n.m. n.m. 17.0x n.m. n.m. 22.8x n.m. n.m.
TREMOR VIDEO INC 9.63 11.09 6.25 86.8% 510.6 657.3 n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m.
WPP PLC 1,253.00 1,313.00 766.00 95.4% 29,013.2 34,339.1 12.6x 11.1x 9.9x 16.7x 14.2x 11.6x n.m. n.m.
MILLENNIAL MEDIA 7.26 16.86 5.87 43.1% 632.0 485.0 n.m. n.m. 16.9x n.m. n.m. n.m. n.m. n.m.
MARIN SOFTWARE I 12.20 19.95 8.75 61.2% 423.9 514.9 n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m.
AOL INC 35.91 42.12 29.16 85.3% 2,950.2 2,578.3 6.6x 6.0x 5.1x 21.2x 10.8x 9.0x n.m. 3.1x

EXPONENTIAL INTERACTIVE 15391 19406 24068 14202 17565 21784 6884 8757

AVERAGE 11.1x 9.1x 10.6x 14.7x 12.0x 16.3x 22.6x 28.2x

MEDIAN 10.2x 9.3x 9.9x 16.7x 11.5x 15.8x 20.6x 21.7x
HIGH 15.1x 11.4x 14.0x 18.9x 14.1x 21.2x 23.9x 47.1x
LOW 6.3x 5.9x 7.6x 10.5x 10.2x 10.7x 17.4x 19.3x
MIN 3.0x 3.6x 3.4x 5.2x 7.1x 7.6x 10.0x 3.1x
MAX 22.3x 15.4x 17.5x 21.9x 16.8x 27.3x 41.2x 49.8x
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