Sectorwatch: IT Services - Ukraine€¦ · profit margins, indicating customer pricing power Current EBITDA margin exceeds the average of the last 3 years EBITDA margin by this amount,

Sectorwatch:IT Services - UkraineJuly 2018

2

IT Services - UkraineJuly 2018

Sector Dashboard [4]

Public Basket Performance [5]

Operational Metrics [7]

Valuation Comparison [10]

Recent Deals [13]

Appendix [14]

7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to be delivered only inconjunction with a verbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice & Disclaimer at the end of the document. Alldata cited in this document was believed to be accurate at the time of authorship and came from publicly available sources. Neither 7 Mile Advisors nor 7MSecurities make warranties or representations as to the accuracy or completeness of third-party data contained herein. This document should be treated asconfidential and for the use of the intended recipient only. Please notify 7 Mile Advisors if it was distributed in error.

3

Overview

7MA provides Investment Banking & Advisory Services to the Business Services and Technology Industries globally. We advise on M&A and private capital transactions, and provide market assessments and benchmarking. As a close knit team with a long history together and a laser focus on our target markets, we help our clients sell their companies, raise capital, grow through acquisitions, and evaluate new markets. We publish our sectorwatch, a review of M&A and operational trends in the industries we focus.

Dashboard• Summary metrics on the sector

• Commentary on market momentum by

comparing the most recent 12-month

performance against the last 3-year

averages.

Public Basket Performance• Summary valuation and operating metrics for

a basket of comparable public companies

Valuation Comparison• Graphical, detailed comparison of valuation

multiples for the public basket

Recent Deals• The most recently announced deals in the

sector

4

Dashboard

Operating Metrics

Valuation

Revenue Growth Momentum

0.03 1 - year revenue growth compared to revenue growth

average for last 3 years

Pricing / Gross Margin Momentum

-1.5% 1 - year gross profit % compared to gross profit %

average for last 3 years

Profitability Momentum

1.0% 1 - year EBITDA % compared to EBITDA % average for

last 3 years

Current revenue growth rate exceeds the average of the last 3 years by this

amount, indicating that market momentum is increasing

Current gross profit margin is less than the average of the last 3 years gross

profit margins, indicating customer pricing power

Current EBITDA margin exceeds the average of the last 3 years EBITDA margin

by this amount, a condition that may attract new entrants

7.9%

16.9%

36.7%

0% 10% 20% 30% 40%

Median LTM Rev. Growth %

Median LTM EBITDA Margin %

Median LTM GP Margin %

1.8x

12.3x

19.8x

23.3x

0x 10x 20x 30x

Median TEV / LTM Revenue

Median TEV / LTM EBITDA

Median TEV / LTM EBIT

Median Price / LTM Earnings

5

Public Basket

Company TEV $mLTM Rev

$m

Rev Growth

YoY GP %EBITDA

%TEV / Rev X

TEV / EBITDA

X # FTEsRev / FTE $k

Sirma Group Holding AD 50 34 25% 60% 30% 1.6 5.3 - NA

ATM S.A. 132 39 1% 58% 34% 3.7 12.4 - NA

Asseco South Eastern Europe S.A. 147 169 -1% 25% 18% 0.9 5.4 - NA

Comarch S.A. 371 327 -1% 24% 8% 1.2 15.1 5,541 59

Luxoft Holding, Inc. 1,183 907 15% 37% 11% 1.3 12.1 12,898 70

EPAM Systems, Inc. 6,625 1,550 27% 36% 14% 4.3 29.5 25,962 60

Accenture plc 102,284 38,574 13% 31% 16% 2.7 16.3 425,000 91

International Business Machines Corporation 168,593 80,771 3% 46% 21% 2.1 10.1 366,600 220

Average 34,923 15,296 10% 40% 19% 2.2 13.3 104,500 100

Median 777 617 8% 37% 17% 1.8 12.3 9,220 70

share price as of 26Jul18

6

Public Basket Valuation Trends

Public EBITDA Multiples over Time

Public Revenue Multiples over Time

11.5x

2.2x

0x

2x

4x

6x

8x

10x

12x

14x

16x

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Jan

-18

Ap

r-1

8

Jul-

18

TEV/EBITDA - Median TEV/Revenue - Median

TEV/EBITDA - Average TEV/Revenue - Average

0x1x1x2x2x3x3x

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Jan

-18

Ap

r-1

8

Jul-

18

TEV/Revenue - Median TEV/Revenue - Average

0x

5x

10x

15x

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Jan

-18

Ap

r-1

8

Jul-

18

TEV/EBITDA - Median TEV/EBITDA - Average

7

Operational Metrics

LTM Gross Profit Margin % LTM EBITDA %

- 10% 20% 30% 40%

Median

Comarch S.A.

Luxoft Holding, Inc.

EPAM Systems, Inc.

Accenture plc

Asseco South EasternEurope S.A.

International BusinessMachines Corporation

Sirma Group Holding AD

ATM S.A.

- 20% 40% 60% 80%

Median

Comarch S.A.

Asseco South Eastern Europe S.A.

Accenture plc

EPAM Systems, Inc.


International Business MachinesCorporation

ATM S.A.


8

Operational Metrics

LTM Revenue Growth %LTM Revenue per

Full Time Employee x 000’s

(10%) - 10% 20% 30% 40%

Median


Comarch S.A.

ATM S.A.


Accenture plc



EPAM Systems, Inc.

$- $100 $200 $300

Median

Comarch S.A.

EPAM Systems, Inc.


Accenture plc


9

Operational Metrics

Accounts Receivable TurnoverAverage Days

Sales Outstanding

0x 2x 4x 6x 8x 10x

Median

Comarch S.A.


EPAM Systems, Inc.


Accenture plc


ATM S.A.


0 30 60 90 120 150

Median


ATM S.A.


Accenture plc


EPAM Systems, Inc.


Comarch S.A.

10

Valuation

TEV / LTM Revenue TEV / LTM EBITDA

0x 1x 2x 3x 4x 5x

Median


Comarch S.A.




Accenture plc

ATM S.A.

EPAM Systems, Inc.

0x 10x 20x 30x 40x

Median





ATM S.A.

Comarch S.A.

Accenture plc

EPAM Systems, Inc.

11

Valuation

TEV / LTM EBIT Price / LTM Earnings

0x 20x 40x 60x

Median




Accenture plc


EPAM Systems, Inc.

ATM S.A.

Comarch S.A.

0x 20x 40x 60x 80x

Median



ATM S.A.



Accenture plc

EPAM Systems, Inc.

Comarch S.A.

12

Valuation

Historical Valuation Multiples versus Gross Profit

Historical Valuation Multiples versus Revenue Growth Rate

5x 5x 10x 12x 12x 15x 16x 30x

60.0%

25.2%

45.5%

37.4%

57.8%

24.2%

31.4%

36.0%

0%

10%

20%

30%

40%

50%

60%

70%

0x

5x

10x

15x

20x

25x

30x

35x

LTM

GP

%

EBIT

DA

(x)

EBITDA(x) LTM GP%

5x 5x 10x 12x 12x 15x 16x 30x

24.5%

(1.3%)

3.0%

15.4%

0.7% (0.6%)12.8%

27.0%

-5%

0%

5%

10%

15%

20%

25%

30%

0x

5x

10x

15x

20x

25x

30x

35x

LTM

RG

R%

EBIT

DA

(x)

EBITDA(x) LTM RGR%

13

Recent Transactions

Date Target Buyer / Investor

Total Transaction

Value Target

Revenue TEV /

Revenue TEV /

EBITDA

17Jul18 3DLOOK, LLC Horizon Capital; 500 Startups; U.Ventures 1.00 - - -

14May18 YouTeam Ltd. Horizon Capital; U.Ventures - - - -

28Feb18 CoreValue AVentures Capital; AVentures Capital venture fund - - - -

14Nov17 Forex Development Corporation (nka:FDCTech, Inc.)

Krypton Capital - 0.47 - -

2Nov17 TeamFusion, Inc. AVentures Capital - - - -

7Sep17 Spinbackup, Inc. AVentures Capital; AVentures Capital venture fund 0.50 - - -

27Jun17 PromoRepublic Tekes; Howzat Partners; Digital Future; Spring Capital 1.20 - - -

25May17 AB Ukraine Limited Liability Company Volia Limited - - - -

23Jun16 KitApps, Inc. TMT Investments PLC; Digital Future 1.70 - - -

16Mar16 Reply Services WannaBiz; Digital Future 0.40 - - -

31Dec15 PromoRepublic Tekes; Vendep Oy (nka:Vendep Capital Oy); Digital Future 0.55 - - -

15Dec15 Instant API, Inc. Imperious Group 0.35 - - -

18Nov15 Ciklum ApS Soros Fund Management LLC; Ukrainian Redevelopment Fund LP - - - -

14

APPENDIX:

Public Basket

Constituents

7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to be delivered only inconjunction with a verbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice & Disclaimer at the end of the document. Alldata cited in this document was believed to be accurate at the time of authorship and came from publicly available sources. Neither 7 Mile Advisors nor 7MSecurities make warranties or representations as to the accuracy or completeness of third-party data contained herein. This document should be treated asconfidential and for the use of the intended recipient only. Please notify 7 Mile Advisors if it was distributed in error.

IT Services - UkraineJuly 2018

15

Public Basket


Sirma Group Holding AD provides software solutions and

services worldwide. It offers software products for the banks,

insurance companies, and other financial services providers;

healthcare; publishing and media, and cultural heritage; and

retail industries, as well as to cross industry and public sector. It

also provides technology, software development, system

integration, staffing and outsourcing, and consulting services.

The company was founded in 1992 and is based in Sofia,

Bulgaria.

Date Key Development Headline3/12/18 Sirma Group Holding AD (BUL:SKK) signed a deal to acquire

26.06% stake in Ontotext AD from New Europe Venture Equity

L.P. a fund managed by NEVEQ Capital Partners for €4.2 million.

0x

1x

2x

3x

4x

5x

Revenue Multiples - Sirma Group Holding

AD

TEV/Revenue Average

0x

15x

30x

45x

60x

EBITDA Multiples - Sirma Group Holding

AD

TEV/EBITDA Average

0x

15x

30x

45x

60x

P/E Multiples - Sirma Group Holding AD

P/E Average

16

Public Basket

ATM S.A.

ATM S.A. provides telecommunications and value-added

services in Poland and internationally. It operates through two

segments, Data Center Services and Telecommunications

Services. The company offers colocation services, such as

renting space for hardware and ensuring uninterruptible power

supply and network connection; and hosting services, including

renting servers with Internet access based on its data center. It

also provides data security center services consisting of renting

backup front-office and back-office environments; Atman data

center WAW-2; Internet access for telecommunications

operators, Internet and application service providers, and

business customers; and teletransmission services comprising

broadband data transmission, as well as operates optical data

transmission network. In addition, the company designs and set

ups telecommunications and IT networks; and provides

telecommunications solutions based on digital fiber optic or radio

links. It serves telecommunications, banking and finance,

industry, commerce, services, media, and publishing sectors.

The company was founded in 1987 and is based in Warsaw,

Poland.

Date Key Development Headline8/1/17 MCI Capital S.A. (WSE:MCI) made a tender offer to acquire an

additional 43.43% stake in ATM S.A. (WSE:ATM) from Nationale-

Nederlanden Powszechne Towarzystwo Emerytalne S.A., PKO

OFE and others for approximately PLN 180 million.

0x

2x

4x

6x

Revenue Multiples - ATM S.A.

TEV/Revenue Average

0x

5x

10x

15x

20xEBITDA Multiples - ATM S.A.

TEV/EBITDA Average

0x

50x

100x

150x

200xP/E Multiples - ATM S.A.

P/E Average

17

Public Basket

Asseco South Eastern Europe S.A., together with its

subsidiaries, sells its own and third-party software for banking

and financial, payment, telco and utilities, and public services

and government industries in Poland, South Eastern Europe,

and Turkey. It operates through Banking Solutions, Payment

Solutions, and Systems Integration segments. The company

offers payment industry solutions for non-financial and financial

institutions, and merchants supporting card and card-less

transactions, including processing, mobile payment, E-

commerce, POS and ATM related services and solutions,

security and fraud, and payment acceptance solutions. It also

provides omni-channel solutions designed to distribute banking

services over distribution channels; integrated banking systems

based on the Oracle and Microsoft platforms; and authentication

security solutions, reporting systems for regulatory compliance

and managerial information, and risk management systems. In

addition, the company offers software solutions for leasing and

consumer finance, and small payment institutions; infrastructure,

voice/contact center, and security solutions; and billing,

application performance management, enterprise spend

management, content management, and security systems.

Further, it provides suppliance, installation, and services in the

field of ATMs and payment terminals; and integration and

implementation services for IT systems and hardware. Asseco

South Eastern Europe S.A. is a subsidiary of Asseco Poland

S.A.

0.0x

0.5x

1.0x

1.5x

2.0xRevenue Multiples - Asseco South Eastern

Europe S.A.

TEV/Revenue Average

0x

3x

6x

9x

12x

15xEBITDA Multiples - Asseco South Eastern

Europe S.A.

TEV/EBITDA Average

0x

10x

20x

30xP/E Multiples - Asseco South Eastern

Europe S.A.

P/E Average


18

Public Basket

Comarch S.A.

Comarch S.A. designs, implements, and integrates IT solutions

worldwide. Its Telecommunications division offers solutions in

the areas of IOT Ecosystem, sales and customer management,

billing and charging, BSS, future-proof operations, integrated

assurance, resource planning and inventory, service design and

fulfillment, and professional services. Its Enterprise Resource

Planning (ERP) division provides various ERP solutions. The

company’s Public division offers ERGO solutions, electronic flow

solutions, e-Office platform, ERP class integrated IT system,

security platform, smart city platform, smart parking solutions,

eRecording solutions, and video terminal solutions. Its Services

division designs, implements, and integrates IT solutions for

loyalty programs, marketing campaign management, employee

motivation management, electronic data interchange and

business information, document management, and sales process

management support systems and mobile applications; and

offers IT infrastructure management for services companies. The

company also offers solutions for IT systems for hospitals;

software products for radiology; medical record management in

medical institutions; Internet of Things, short series

manufacturing solutions, mobility solutions, certification tool,

embedded systems, and outsourcing systems; and advertising

and other services, as well as operates sports activities and sells

tickets to sports events. Comarch S.A. was founded in 1993 and

is headquartered in Kraków, Poland.

0.0x

0.5x

1.0x

1.5x

2.0xRevenue Multiples - Comarch S.A.

TEV/Revenue Average

0x

5x

10x

15x

20xEBITDA Multiples - Comarch S.A.

TEV/EBITDA Average

0x

20x

40x

60x

80x P/E Multiples - Comarch S.A.

P/E Average

19

Public Basket


Luxoft Holding, Inc., together with its subsidiaries, provides

software development services and IT solutions to multinational

corporations. The company offers application software

development, software architecture design, performance

engineering, optimization and testing, process consulting, and

software quality assurance services; functional specification and

mock-up, product design, engineering, automated testing,

maintenance, support, and performance engineering services;

and IT strategy, software engineering process, and data security

consulting services. Its products and platforms include Populus,

a tool chain for human machine interface (HMI) design and

development, and the deployment of automotive user interfaces

for distributed embedded systems; Qt Automotive Suite, which

enables developers to create stunning user experience and ease

the integration toward the system backend; AllView, an user-

experience demonstrator; software tools and consulting services

focused on scheduling analysis, architecture optimization, and

timing verification; Pelux, a base development platform; and

ARP, an automotive hardware reference platform. Luxoft

Holding, Inc. was founded in 2000 and is headquartered in Zug,

Switzerland.

Date Key Development Headline6/17/18 Luxoft Holding, Inc. (NYSE:LXFT) acquired Smashing Ideas, Inc.

from Penguin Random House LLC.

11/17/17 Luxoft Holding, Inc. Seeks Acquisitions

0x

2x

4x

6xRevenue Multiples - Luxoft Holding, Inc.

TEV/Revenue Average

0x

6x

12x

18x

24x

30xEBITDA Multiples - Luxoft Holding, Inc.

TEV/EBITDA Average

0x

10x

20x

30x

40x

50xP/E Multiples - Luxoft Holding, Inc.

P/E Average

20

Public Basket

EPAM Systems, Inc.

EPAM Systems, Inc. provides software product development and

digital platform engineering services primarily in North America,

Europe, Asia, and Australia. It offers software product

development services, including product research, customer

experience design, prototyping, program management,

component design and integration, lifecycle software testing,

product deployment, end-user customization, performance

tuning, product support and maintenance, managed services,

and porting and cross-platform migration. The company provides

custom application development services, such as business and

technical requirement analysis, user experience design, solution

architecture creation and validation, development, component

design and integration, quality assurance and testing,

deployment, performance tuning, support and maintenance,

legacy applications re-engineering/refactoring, porting and cross-

platform migration, and documentation. The company was

founded in 1993 and is headquartered in Newtown,

Pennsylvania.

Date Key Development Headline3/14/18 EPAM Systems, Inc. (NYSE:EPAM) acquired Continuum LLC.

1/11/18 Epam Systems and Black Box Create In-Store Dynamic

Advertising Solution Using Instant Facial Recognition

11/2/17 EPAM Systems Seeks Acquisitions

0x

2x

4x

6xRevenue Multiples - EPAM Systems, Inc.

TEV/Revenue Average

0x

10x

20x

30x

40xEBITDA Multiples - EPAM Systems, Inc.

TEV/EBITDA Average

0x

30x

60x

90x

120xP/E Multiples - EPAM Systems, Inc.

P/E Average

21

Public Basket

Accenture plc

Accenture plc provides consulting, technology, and outsourcing

services worldwide. Its Communications, Media & Technology

segment provides professional services that help clients

accelerate and deliver digital transformation, and enhance

business results through industry-specific solutions for

communications, media, and high tech industries, as well as for

software platforms. The company’s Financial Services segment

offers services that address profitability pressures, industry

consolidation, regulatory changes, and the need to continually

adapt to new digital technologies. This segment serves clients in

banking, capital markets, and insurance industries. Its Health &

Public Service segment provides research-based insights and

offerings, including consulting services and digital solutions to

help clients deliver social, economic, and health outcomes.

Accenture plc was founded in 1989 and is based in Dublin,

Ireland.

Date Key Development Headline7/23/18 Accenture Forms Strategic Alliance and Invests in Data

Intelligence Company Ripjar

7/11/18 Accenture plc (NYSE:ACN) acquired Kogentix Inc.

6/30/18 Accenture Reportedly Seeks Acquisitions

6/7/18 Accenture plc (NYSE:ACN) entered into an agreement to acquire

designaffairs GmbH.

6/4/18 SAP SE to Team with Accenture, Capgemini and Deloitte to

Accelerate Customer Adoption of SAP S/4Hana(R) Cloud in

Target Industries

0x

1x

2x

3x

4xRevenue Multiples - Accenture plc

TEV/Revenue Average

0x

6x

12x

18x

24x

30xEBITDA Multiples - Accenture plc

TEV/EBITDA Average

0x

10x

20x

30x

40xP/E Multiples - Accenture plc

P/E Average

22

Public Basket

International Business Machines Corporation

International Business Machines Corporation operates as an

integrated technology and services company worldwide. Its

Cognitive Solutions segment offers Watson, a cognitive

computing platform that interacts in natural language, processes

big data, and learns from interactions with people and

computers. This segment also offers data and analytics

solutions, including analytics and data management platforms,

cloud data services, enterprise social software, talent

management solutions, and solutions tailored by industry; and

transaction processing software that runs mission-critical

systems in banking, airlines, and retail industries. International

Business Machines Corporation was founded in 1911 and is

headquartered in Armonk, New York.

Date Key Development Headline7/17/18 Columbia University and IBM Establish New Center to Accelerate

Innovation in Blockchain and Data Transparency

7/16/18 IBM, Banca Carige Launches Dock a USD 500 Million US Joint

Venture

6/14/18 International Business Machines Corporation (NYSE:IBM)

acquired Oniqua Pty Ltd. from ASCO Holdings Limited.

6/7/18 Intellect Design Arena Limited and International Business

Machines Corporation to Deliver Seamless Digital Transformation

to the Large Banks with IBM Cloud

4/26/18 Host Hotels & Resorts, Inc. Announces Joint Development

Agreement with IBM Research

0x

1x

2x

3x

4x

5x

Revenue Multiples - International Business

Machines Corporation

TEV/Revenue Average

0x

5x

10x

15x

20x

EBITDA Multiples - International Business


TEV/EBITDA Average

0x

10x

20x

30x

40x

P/E Multiples - International Business


P/E Average

23

Contact Information7MA provides Investment Banking & Advisory Services to the Business Services and Technology Industries globally.

We advise on M&A and private capital transactions, and provide market assessments and benchmarking. As a close-

knit team with a long history together and a laser focus on our target markets, we help our clients sell their

companies, raise capital, grow through acquisitions, and evaluate new markets. Securities offered through 7M

Securities LLC.

Leroy Davis, Partner 704.899.5962 [email protected]

Tripp Davis, Partner 704.899.5762 [email protected]

Andy Johnston, Partner 704.899.5961 [email protected]

Tom Dinnegan, Managing Director 310. 426.2410 [email protected]

Ben Lunka, Managing Director 704.496.2995 [email protected]

Jeff Stoecklein, Managing Director 312.373.3737 [email protected]

Kristina Sergueeva, Director 704.899.5149 [email protected]

Neil Churman, Director 704.899.5960 x 121 [email protected]

John Cooper, Director 704.973.3996 [email protected]

Tim Frye, Director 704.973.3994 [email protected]

Casey Augustine, Business Development - Manager 704.973.3999 [email protected]

Nicholas Prendergast, Financial Analyst 704.899.5960 [email protected]

Ariail Siggins, Marketing Director 704.899.5960 x 123 [email protected]

Sydney Larese, Associate 704.899.5960 [email protected]

Marty Johnson, Associate 704.899.5960 [email protected]

Rory Julyan, Associate 704.899.5960 [email protected]

Garth Martin, Associate 704.899.5960 x 109 [email protected]

Chevonese Dacres, Analyst 360.499.1502 [email protected]

Documents

Sectorwatch: IT Services - Ukraine€¦ · profit margins, indicating customer pricing power Current EBITDA margin exceeds the average of the last 3 years EBITDA margin by this amount,