a perfect opportunity for saba - iis windows...

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.


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


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


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


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


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


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


Key Business Trends

Globalization

Aging Workforce

Hyper-Competition

Regulation & Deregulation

Enabling Technologies


Welcome to Human Capital Revolution!

A more people-focused, disciplined, approach to

strategy and organizational execution


Saba’s Compelling Investment Thesis

Growing HCM

Market

Saba’s Unique Opportunityto Capitalize

Increasing Momentum

Best Poised for Future

Growth

The GrowingHCM Market


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


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


Strategic Human Capital Management

Recruit Align &Develop

Motivate &Measure ManagePlan

Strategic HCM = Saba

Promote

Hire Track Pay Report Retire

Infrastructure HCM = Oracle, SAP, PSFT


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%


$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.

Saba’s Unique Opportunity to Capitalize


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


Saba + Centra: Market Leaders

+ Leader in Collaborative LearningLeader in Managed Learning

= Strength in the Integrated HCM Marketplace


Saba Market Leadership

#1Health Services

#1Financial Services

#1Automotive & Mfg

#1High Tech

#1Public Sector


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.


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.


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


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)


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

Increasing Financial Momentum


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


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%


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


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


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%

Best Poised for Future Growth


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


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

Thank you.

Bobby YazdaniChief Executive Officer

September 2006

a perfect opportunity for saba - iis windows...

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