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SumTotal Systems, Inc. Bill Docherty January 30, 2007

SumTotal Systems, Inc. Bill Docherty January 30, 2007. SumTotal Background. Significant Company Events Click2Learn (CLKS) IPO in 1998; Docent (DCNT) IPO in 2000 Click2learn and Docent merged to form SumTotal Systems in March 2004 Acquired Pathlore Software in October 2005

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SumTotal Systems, Inc. Bill Docherty January 30, 2007

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  1. SumTotal Systems, Inc.Bill DochertyJanuary 30, 2007

  2. SumTotal Background • Significant Company Events • Click2Learn (CLKS) IPO in 1998; Docent (DCNT) IPO in 2000 • Click2learn and Docent merged to form SumTotal Systems in March 2004 • Acquired Pathlore Software in October 2005 • Acquired MindSolve in November 2006 • SumTotal Today • Headquartered in Mountain View, California • US offices in Bellevue, Rochester, Columbus • Global presence with offices in Australia, France, Germany, Hong Kong, India, Japan, Singapore and the United Kingdom • Over 820 employees

  3. Market Drivers for LMS Companies • Talent Management • SaaS/On-Demand Models

  4. What is Talent Management? • Goal of strategic Talent Management is to ensure that organizations have optimum skills and competencies to achieve business objectives

  5. Talent Management Market Drivers • As much as 80% of a company’s worth is tied to its human capital(1) • Increasing “War for Talent” and employee turnover rates • America’s 500 leading companies will lose approximately 50% of their senior managers over the next five years(2) • Global organizations need to ensure worldwide alignment of individuals’ goals with business objectives • Rapidly training the “Extended Enterprise” is critical in today’s market • Regulatory and compliance requirements drive the need to develop, certify and track the knowledge and procedures of individuals (1) HR Magazine, January 2005. (2) The Economist, October 7, 2006.

  6. Talent Management Market is Growing Rapidly 17% Est. CAGR Talent Management Market (including Recruiting, Performance, Learning and Compensation Management) $ Billions Source: Yankee Group, March 2005.

  7. Participant in Attractive Market Segments • LMS is the core market for SumTotal • Offerings in Performance Management and Compensation Planning obtained via MindSolve acquisition Learning Management ~$500M market ~16% growth Compensation Management $290M market 11% growth Performance Management $181M market 23% growth Sources: Management estimates, based on Yankee Group and Gartner Group. 2005 Market Size and 4-year compound annual growth rate to 2008.

  8. Significant Opportunity for SUMT Clear market focus on internal talent Source: Knowledge-Infusion/SHRM Survey, April 2007

  9. SumTotal: A Talent Management Market Leader 120 100 80 2006 Revenues ($M) 60 40 20 0 250 500 750 1,000 1,250 1,500+ Number of Customers Sources: Bersin & Associates, Learning Management Systems 2006, Hoovers Data and other public sources.

  10. Education Energy & Utilities Government Financial Services Healthcare Retail Manufacturing Services Defense Ammunition Center Large, Diversified “Blue Chip” Customer Base • Over 1,500 customers across numerous vertical markets • Targeting customers with 300 to over 1,000,000 users • ~50% of the Fortune 100 are customers

  11. Emerging Sales Channel HRO Partnerships • Human Resource Outsourcing (“HRO”) market growing(1) • SumTotal has strong HRO relationships • Strength with HROs presents other OEM opportunities • BPO Outsourcers • Training Outsourcers • HR Software • Product OEMs • Opportunity to cross-sell Performance Management offering (1) The Yankee Group, April 2006.

  12. Annual Revenue Trend (Non-GAAP Basis)(1) • Predictability of our model is increasing as our recurring subscriptions and support revenue grows $117.6 - $119.6 $110.3 License and Service Revenue $78.4 ~50% $65.6 53% $ Millions 58% Subscriptions and Support Revenue (2) 63% ~50% 47% 42% 37% %s reflect % of Total Revenue (1) Non-GAAP figures exclude one-time charges, non-cash charges related to acquisition accounting, stock-based compensation expense, and related income tax effects. GAAP revenue was $55.2M, $75.0M, and $106.0M for 2004, 2005, and 2006, respectively. Management guidance for 2007 GAAP revenue is approximately $116.4M to $118.4M. (2) Recurring revenue includes term licenses, hosting subscriptions, on-demand LMS and performance management solutions, and maintenance. Typically, these are annual contracts, most of which are renewed at the expiration of their term.

  13. SumTotal Talent Management Suite Enterprise Solutions Management Reporting & Analytics TotalLMS TotalLCMS TotalPerformance TotalCompensation Employee data Competencies HRIS System On-Demand Solutions

  14. Standards Support • AICC Compliant • SCORM 1.2 certified • SCORM 2004 3rd edition certified • Leading adopter of SkillSoft OLSA

  15. SkillSoft OLSA Support • Catalog synchronization (asset integration) • Federated search • Over one dozen customers live • Baker Hughes • BDO Seidman • Cap Gemini • Duke Energy • Manpower • Shell

  16. Learning Industry Observations • Need to focus on improving existing LMS capabilities • Interest in delivering content to mobile devices growing • LCMS adoption is growing • Capture and re-use of tacit knowledge still a big challenge

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