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The world is flat?A perfect opportunity for Saba
Bobby YazdaniChief Executive Officer
September 2006
© 2006 Saba Software, Inc. All rights reserved.2
Safe Harbor Statement
With the exception of historical information, this presentation contains “forward-looking statements” that are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including any statements that use words such as “may,” “will,” “expects,” “projects,”“plans,” “estimates,” and “believes.” Forward-looking statements include pro forma operating projections for fiscal years ending May 31, 2007 and 2008, projected revenue mix and recurring revenue from OnDemand and License Update Product Support for fiscal years ending May 31, 2007 and 2008, projected market growth rates and projected revenue mix from new and existing customers . These statements are based on management’s current expectations and are subject to certain assumptions, risks, uncertainties and changes in circumstances. Such forward-looking statements involve important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements or from historical results, due to changes in economic, business, competitive and/or technological factors. More detailed information about risk factors that could affect actual results is set forth in filings by Saba with the Securities and Exchange Commission, including Saba’s annual report on Form 10-K for the fiscal year ended May 31, 2006. Saba is not obligated to (and expressly disclaims any obligation to) revise or update any forward-looking statement.
© 2006 Saba Software, Inc. All rights reserved.3
Did You Know?
The average employee turnover rate for quick-serve restaurants is 200%.
At Starbucks, it’s just 20% for managers and 80% for baristas.
Source: Workforce Management
© 2006 Saba Software, Inc. All rights reserved.4
Did You Know?
Replacing a hospital nurse costs 100% of their salary.
Average turnover is 20%.At $46K-$64K average salary and a staff of 600 nurses, a typical hospital spends $5.5M on replacement annually.Hospitals with lower turnover spend less, make more (23% return vs. 17%), and actually have a lower mortality rate.
Source: Voluntary Hospitals of America
© 2006 Saba Software, Inc. All rights reserved.5
Did You Know?
McDonald’s opens two brand new restaurants each and every week in China (with no end in sight)
Including new managers, supervisors, line cooks, order takers, and increased needs for the entire supply chain and support system
Source: USA Today
© 2006 Saba Software, Inc. All rights reserved.6
Did You Know?
Every day, nearly 200 accountants join India’s booming tax-outsourcing workforce
Roughly 400,000 individual U.S. tax returns were prepared in India in 2005 (100,000 in 2004 —25,000 in 2003)
Source: The World is Flat
© 2006 Saba Software, Inc. All rights reserved.7
Did You Know?
The official, national retirement age in Japan could easily rise from 60 to 70 over the next few of years
Over 20% of Japanese population is already over 65
Source: Japan Institute for Labour Policy
© 2006 Saba Software, Inc. All rights reserved.8
Did You Know?
100% of JetBlue’s 400 reservations agents work from their homes in Salt Lake City, Utah
Historically 30% more productive than physical call centers
Source: The World is Flat
© 2006 Saba Software, Inc. All rights reserved.9
Key Business Trends
Globalization
Aging Workforce
Hyper-Competition
Regulation & Deregulation
Enabling Technologies
© 2006 Saba Software, Inc. All rights reserved.10
Welcome to Human Capital Revolution!
A more people-focused, disciplined, approach to
strategy and organizational execution
© 2006 Saba Software, Inc. All rights reserved.11
Saba’s Compelling Investment Thesis
Growing HCM
Market
Saba’s Unique Opportunityto Capitalize
Increasing Momentum
Best Poised for Future
Growth
© 2006 Saba Software, Inc. All rights reserved.13
Imperative: Manage 3 Core ProcessesAcross the Extended Enterprise
Human Capital Processes Are Core?
Source: Execution: The Discipline of Getting Things Done, Larry Bossidy & Ram Charan
StrategicProcessesStrategic
ProcessesOperational Processes
Operational Processes
PeopleProcesses
PeopleProcesses
© 2006 Saba Software, Inc. All rights reserved.14
Traditional HR Approach
Transactional Processes
Focus on cost containment
HR Dept is the owner
HR as the bookkeeper and auditor
Centralized HR operations
“Hire, Fire, Legs and Regs”
Technology for transactional efficiency
Traditional ERP solutions
Hire Track Pay Report
© 2006 Saba Software, Inc. All rights reserved.15
Strategic Human Capital Management
Recruit Align &Develop
Motivate &Measure ManagePlan
Strategic HCM = Saba
Promote
Hire Track Pay Report Retire
Infrastructure HCM = Oracle, SAP, PSFT
© 2006 Saba Software, Inc. All rights reserved.16
Growth in HCM Market Categories
Sources: Yankee Group and Gartner Group
Recruitment Management
$660M
Compensation Management
$290M
Performance Management
$180M
Learning Management
$545M
Collaboration $682M
+16%
+11%
+16%+23%
+19%
© 2006 Saba Software, Inc. All rights reserved.17
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
(in millions)
2005 2006 2007 2008 2009
Learning Management License Revenue Virtual Classroom License Revenue Performance Management License Revenue
An Incredible Market Opportunity
12.0%CAGR
18.3% CAGR
16.2% CAGR
Source: IDC, February and March 2006.
© 2006 Saba Software, Inc. All rights reserved.19
Saba: Leading the Market for HCM
Founded 1997NASDAQ: SABAEnterprise class software and services for Human Capital Management1,100 Customers in 31 countriesMore than 1 million OnDemand usersChosen by 51% of the Fortune 100520 Employees in: US, Europe, Japan, Australia, India, Latin AmericaStrategic global partners, including IBM, Deloitte Consulting, Tata Consulting and ConvergysSolid Financials: Pro forma profitable, Visibility through ~45% recurring revenue
© 2006 Saba Software, Inc. All rights reserved.20
Saba + Centra: Market Leaders
+ Leader in Collaborative LearningLeader in Managed Learning
= Strength in the Integrated HCM Marketplace
© 2006 Saba Software, Inc. All rights reserved.21
Saba Market Leadership
#1Health Services
#1Financial Services
#1Automotive & Mfg
#1High Tech
#1Public Sector
© 2006 Saba Software, Inc. All rights reserved.22
Saba Large Customer Success
NORTHROP GRUMMAN selected Saba Learning Suite solution as the enterprise learning management system for over 130,000 employeesacross all seven sectors. This is Northrop Grumman’s first enterprise software solution and they have created an enterprise governing body to oversee the implementation and use of the system.
KOHLER COMPANY, a world leader in kitchen and bath products, has selected Saba Enterprise to provide the infrastructure for Kohler’s learning enterprise, facilitating the development of skills and competencies for over 20,000 global associates, customers, and suppliers worldwide.
IBM, the world’s largest information technology company, has selected Saba Enterprise to support learning across its enterprise. IBM is deploying Saba Learning Suite in a single launch to more than 330,000employees across the globe.
QUEENSLAND GOVERNMENT, a state government in Australia, selected Saba Learning and Saba Performance across 28 agencies and Shared Service Providers to manage its learning and performance initiatives starting in 2006.
© 2006 Saba Software, Inc. All rights reserved.23
Saba + Centra Customer Success
ASTRA ZENECA, one of the world's leading pharmaceutical companies, is a current Centra and Saba customer who has expanded its Saba Learning Suite license to standardize their use of Saba around the world and displace all competitive LMSs in place
LOS ANGELES COUNTY, one of the largest counties in the US, selected Saba Learning Suite to expand its training and development offerings to 91,000 county employees and agents. LA County is a former THINQ and Centra customer who is moving to the Saba platform. Next, they will expand licenses for Centra Live for Virtual Classes and Centra Knowledge Center.
GOODWILL INDUSTRIES, one of the world’s largest nonprofit providers of education, training an career services for the disadvantaged, is improving its Centra – Saba learning solution with an upgrade of Saba Learning Suite to develop its MyGoodwill online education and training portal for 4,000 corporate employees and chapter members.
© 2006 Saba Software, Inc. All rights reserved.24
Integrated Enterprise Learning Solution Delivers Bottom-Line Results
JOINT CUSTOMER SUCCESS
RiskAddress Regulations or Compliance Requirements
CostsRoll out Enterprise Applications
RevenueRoll out New Products through Sales and Partners
ProductivityProvide Workforce Development
RESULTAPPLICATIONS
Through a company-wide intranet, employees register for SAP implementation and other learning in 15 languages
20% of all education orders for thousands of customers and partners in North America are online
Redesigned new hire training saved $800 per new hire in hard costs and $1,000 in opportunity costs.
Trained 700+ global employees on Sarbanes-Oxley Act regulations and created a continuous learning environment to remain current
© 2006 Saba Software, Inc. All rights reserved.25
The Most Integrated HCM Suite
Saba Analytics
Saba Learning LCMS & Centra
Live
Saba Performance
Saba Talent/ Succession
Saba Collaboration & Centra Live
Saba Foundation - Competency Management
J2EE Service Oriented Architecture (SOA)
© 2006 Saba Software, Inc. All rights reserved.26
Saba’s Product Leadership
Significant investment in R&D in HCM
True ownership of IP (not licensed)
Fully integrated, interoperable suite built from the ground up
Major R&D leaders & talent emigrated from PeopleSoft
TALENT R&D
IP TOTAL
© 2006 Saba Software, Inc. All rights reserved.28
Strong Quarterly Revenue Growth
$0
$5,000
$10,000
$15,000
$20,000
$25,000
R evenue( $0 0 0 's)
Q1 FY '05 Q2 FY '05 Q3 FY '05 Q4 FY '05 Q1 FY '06 Q2 FY '06 Q3 FY '06 Q4 FY '06
F iscal Quart er
License Update and Product Support Professional Services OnDemand License
© 2006 Saba Software, Inc. All rights reserved.29
Fastest Growing Player in HCM
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
May/June '05 Aug/Sept '05 Nov/Dec '05 Feb/Mar '06 May/June '06Fiscal Quarter
Quarterly License Growth Over Prior Year
Saba GAAP License RevenueSumTotal GAAP License Revenue
Growth Rate Over Trailing 4 QuartersSaba -- 49%SumTotal -- 16%
© 2006 Saba Software, Inc. All rights reserved.30
Greater Visibility Going Forward
A significant amount of recurring revenue projected from OnDemand and License Update and Product Support.
Recurring Revenue – 42%
Professional Services License
FY ’07 Projected Revenue Mix
Recurring Revenue – 45%
LicenseProfessional Services
FY ’08 Projected Revenue Mix
© 2006 Saba Software, Inc. All rights reserved.31
Saba Balance Sheet Improvement
$16.7M$9.6M$11.9MCash and Short-Term Investments Net of Debt
$24.8M$12.5M$9.4MDeferred Revenue
$18.9M$15.2M$6.6MReceivables
$16.8M
May 31, 2003
$15.4M
May 31, 2004
$23.0M
May 31, 2005
Cash and Short-Term Investments
© 2006 Saba Software, Inc. All rights reserved.32
Pro Forma Operating Projections
Fiscal Year Ending May 31,
2007 May 31,
2008 Percent of Total Revenue License 30% - 35% 30% - 35% OnDemand 10% - 15% 12% - 17% License Update and Product
Support 27% - 32% 27% - 32%
Professional Services 23% - 27% 20% - 25% Gross Margin License 93% - 97% 93% - 97% OnDemand 60% - 65% 60% - 65% License Update and Product
Support 80% - 85% 80% - 85%
Professional Services 35% - 40% 35% - 40% Total 70% - 75% 70% - 75% Operating Expense as % of Revenue Sales and Marketing 30% - 35% 27% - 32% Research and Development 15% - 20% 15% - 20% General and Administrative 7% - 12% 7% - 12% EBITDA Margin 10% - 15% 15% - 20%
© 2006 Saba Software, Inc. All rights reserved.34
Intelligent Expansion StrategyGeographic expansion
Significantly increased size of worldwide sales forceGrowing maturity of international markets—Latin America, Australia, and Japan
Product growthBroadest product suite—including Centra, Saba Performance, Saba Talent, and Saba Content
Existing customers50% of quarterly products revenue are from existing / 50% from new customersDeep cross-selling opportunities among Saba and Centra customers
Alliance opportunitiesValuable Strategic Alliance Relationships, including IBM
© 2006 Saba Software, Inc. All rights reserved.35
Saba—Perfectly Positioned
Saba makes the “flattened world” practicalFastest growing & leading Human CapitalManagement (HCM) providerIdeally positioned to take advantage of significant market growthMost global enterprise deploymentsMost significant ongoing R&D investment, resulting in real IP ownershipTrue global presence and customersSolid financial position and outlook