2015 hcm/talent management tech & software market update

Talent Management Workforce Management OtherHR

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SEG-Landscape: HCM Software Vendors

Copyright © 2015by SOFTWARE EQUITY GROUP, LLC, All Rights Reserved CONFIDENTIAL

HCM Software Market Update & Vendor EcosystemJanuary 2015

About SEG

• Twenty-two year, exclusive focus on software advisory services to lower & middle market representing companies seeking:• Strategic exit• Growth capital• Buyout• Inorganic growth via acquisition• Fairness opinions and valuations• Board advisory services

• Clients span virtually every technology, product category, delivery model and vertical market

• Global presence providing advice and guidance to more than 2,000 private and public companies throughout US, Canada, Europe, Asia-Pacific, Africa and Israel

• Strong cross-functional team leveraging transaction, operating, legal and engineering experience

• Unparalleled software industry reputation, track record and industry research

• Highly referenceable base of past clients and buyers / investors

Focus on Advice

Multi-service

Multi-Industry

Focus on Software

Advisory Boutiques

Bulge Bracket Firms

IPO Boutiques

Copyright © 2015 by SOFTWARE EQUITY GROUP, LLC, All Rights Reserved CONFIDENTIAL


SEG’s Industry Leading HCM Software Experience

4

10 Exits Completed in Talent Management, HR & Workforce Management Software

HCM Vendor Ecosystem

Human Capital Management (HCM) Software Overview


• Recruiting• Learning• Compensation• Performance• Etc.

• Core HRIS• Payroll• Benefits

Administration• Etc.

• Time & attendance• Shift scheduling /

optimization• Mobile workforce

Management• Expense

Management• Etc.

• Solutions for staffing/recruitment firms

• Other HCM related technologies not falling into alternate categories

Talent Management Workforce Management OtherHR

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SEG-Landscape: HCM Software Vendors

Copyright © 2015by SOFTWARE EQUITY GROUP, LLC, All Rights Reserved CONFIDENTIAL

SEG-Landscape: Public/Private Capital in HCM Software

Public Companies VC/Private Equity


BRIEF MARKET UPDATE – HCM Technology

Healthy Labor Market


Jan-07, 4.6%

Oct-09, 10.0%

Nov-14, 5.8%

Jan-07, 238K

Mar-09, -826K

Nov-14, 353K

-1000K

-800K

-600K

-400K

-200K

0K

200K

400K

600K

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%Ja

n-0

7

Mar

-07

May

-07

Jul-

07

Sep

-07

No

v-0

7

Jan

-08

Mar

-08

May

-08

Jul-

08

Sep

-08

No

v-0

8

Jan

-09

Mar

-09

May

-09

Jul-

09

Sep

-09

No

v-0

9

Jan

-10

Mar

-10

May

-10

Jul-

10

Sep

-10

No

v-1

0

Jan

-11

Mar

-11

May

-11

Jul-

11

Sep

-11

No

v-1

1

Jan

-12

Mar

-12

May

-12

Jul-

12

Sep

-12

No

v-1

2

Jan

-13

Mar

-13

May

-13

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

U.S

. Mo

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U.S

. Un

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ate

Unemployment Rate

Net Jobs Gain/Loss

• Healthy labor markets drive adoption of human capital management software products, which in turn, drives HCM software M&A volume.

• The U.S unemployment rate has been steadily declining since peaking in October 2009 at 10%. According to the Bureau of Labor Statistics (BLS), the unemployment rate was 5.8% in November 2014, and is projected to have fallen to 5.6% following December 2014.

• Non-farm payroll job creation in 2014 was especially strong according to the BLS, with the U.S. economy adding over 200K new jobs during 11 out of 12 months. In comparison, 200K jobs or more were created during 6 months in both 2013 and 2012, 4 months in 2011, 3 months in 2010, no months in 2009 and 2008, and only the month of January during 2007.

Annual HCM Software M&A Deal Volume


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90

2008 2009 2010 2011 2012 2013 2014

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WFM

HR

Talent

• Driven by a favoring economic climate and increasingly stable labor markets, aggregate HCM software M&A deal volume in 2014 was up 56% over 2013 (100% increase for Talent Management, 43% increase for HR and 50% increase for Workforce Management)

56%

Talent Management Software M&A Snapshot


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6

8

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12

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16

# o

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Quarterly M&A Volume

Other Delivery

On-Premise

SaaS

0

5

10

15

20

25

30

35

40

45

2008 2009 2010 2011 2012 2013 2014

# o

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Annual M&A Volume

Other Delivery

On-Premise

SaaS

Date Buyer SellerEnterprise

Value (mm) EV/ Rev

12/02/11 SAP SuccessFactors $3,516.1 12.1x

02/08/12 Oracle Taleo $1,805.5 5.7x

08/25/12 IBM Kenexa $1,307.1 4.1x

04/26/11 Successfactors Plateau Systems* $290.0 4.2x

01/07/14 INFOR PeopleAnswers* $200.0 7.0x

12/02/11 Nice Systems Merced Systems $170.0 3.0x

03/29/10 HgCapital Stepstone Solutions* $148.1 2.2x

05/05/08 Taleo Vurv Technology $130.5 4.0x

09/01/10 Taleo Learn.com $125.0 5.2x

04/03/09 Vista Equity Partners SumTotal Systems $106.7 0.9x


Value (mm) EV/ Rev

12/02/11 SAP SuccessFactors $3,516.1 12.1x

01/07/14 INFOR PeopleAnswers* $200.0 7.0x

07/29/08 Monster Trovix* $72.5 7.0x

02/08/12 Oracle Taleo $1,805.5 5.7x

09/01/10 Taleo Learn.com $125.0 5.2x

04/26/11 SuccessFactors Plateau Systems* $290.0 4.2x

08/25/12 IBM Kenexa $1,307.1 4.1x

06/21/11 Taleo Jobpartners* $37.4 4.0x

05/05/08 Taleo Vurv Technology $130.5 4.0x

09/29/08 Bedford Funding Authoria* $63.1 4.0x

Top by Enterprise Value Top by EV/Rev

HR Software M&A Snapshot




Value (mm) EV/ Rev

11/03/14 Aetna bswift $400.0 -

11/22/13 Towers Watson Liazon $215.0 -

09/22/14 Sage Group PAI Group $157.8 4.1x

12/17/10 Lawson Software Enwisen $75.0 5.0x


Value (mm) EV/ Rev

10/22/13 NetSuite TribeHR* - 20.0x

12/17/10 Lawson Software Enwisen $75.0 5.0x

09/22/14 Sage Group PAI Group $157.8 4.1x

0

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9

# o

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Other Delivery

On-Premise

SaaS

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013 2014

# o

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Annual M&A Volume

Other Delivery

On-Premise

SaaS

Workforce Management Software M&A Snapshot




Value (mm) EV/ Rev

09/18/14 SAP Concur $7,651.6 11.5x

10/14/14 HgCapital Allocate Software $145.3 2.3x

04/03/14 Amadeus i:FAO $93.8 4.6x

12/09/11 LDC Workplace Systems $60.2 4.0x

05/06/14 inContact Uptivity $50.2 2.6x

09/13/11 Verint Systems GMT $42.0 -

08/01/09 Concur Etap-On-Line $40.0 3.7x


Value (mm) EV/ Rev

09/18/14 SAP Concur Technologies $7,651.6 11.5x

04/03/14 Amadeus i:FAO $93.8 4.6x

12/09/11 LDC Workplace Systems $60.2 4.0x

08/01/09 Concur Etap-On-Line $40.0 3.7x

05/06/14 inContact Uptivity $50.2 2.6x

10/14/14 HgCapital Allocate Software $145.3 2.3x

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Other Delivery

On-Premise

SaaS

0

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2008 2009 2010 2011 2012 2013 2014

# o

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Annual M&A Volume

Other Delivery

On-Premise

SaaS

Public SaaS Companies: HCM Software

*Data set – January 9, 2015


Category Name Market Cap EVTTM

Revenue

TTM Gross

Margin

TTM EBITDA Margin

TTM Revenue Growth

EV/ Revenue

EV/ EBITDA

Forward EV/

Revenue

Forward EV/

EBITDA YTD

SEG SaaS Index $948.7 $844.3 $142.0 65.5% -6.9% 29.1% 5.6x 61.1x 4.8x 33.8x -10.8%

CRM & Marketing $1,073.0 $905.3 $157.9 68.5% -6.7% 28.4% 5.0x 90.9x 4.1x 30.5x -8.6%

ERP & Supply Chain $948.7 $807.9 $120.5 68.2% -8.7% 30.6% 5.5x 60.7x 4.4x 27.5x -18.9%

Vertically Focused $1,122.3 $940.2 $145.3 62.3% 7.9% 38.1% 6.4x 46.2x 5.2x 27.1x -8.2%

Human Capital Management $1,445.0 $1,372.2 $128.7 59.9% -14.8% 31.8% 7.0x 59.3x 5.3x 42.7x -3.4%

SaaS Other $557.9 $644.3 $163.9 64.6% -11.2% 23.9% 4.4x 74.5x 3.8x 75.5x -12.8%

Company Name Ticker Market Cap EVTTM

Revenue

TTM Gross

Margin

TTM EBITDA Margin

TTM Revenue Growth

EV/ Revenue

EV/ EBITDA

Forward EV/

Revenue

Forward EV/

EBITDA YTD

Benefitfocus BNFT $692.3 $673.4 $127.5 34.8% -37.5% 31.8% 5.3x n/a 4.2x n/a -51.7%

Callidus Software CALD $776.6 $748.4 $128.7 59.9% -1.4% 19.8% 5.8x n/a 4.8x 42.7x 22.3%

Cornerstone OnDemand CSOD $1,701.4 $1,697.8 $242.1 71.2% -15.8% 45.2% 7.0x n/a 5.3x 166.1x -40.0%

Halogen Software TSX:HGN $168.8 $122.9 $54.2 73.0% -14.8% 18.9% 2.3x n/a 1.9x n/a -37.7%

Paylocity Holding PCTY $1,445.0 $1,372.2 $117.4 50.2% -5.1% 40.1% 11.7x n/a 9.0x n/a 21.0%

The Ultimate Software Group ULTI $4,177.3 $4,076.5 $482.4 59.6% 14.2% 23.5% 8.5x 59.3x 7.0x 28.5x -3.4%

Workday WDAY $16,191.3 $14,846.2 $703.5 65.1% -22.7% 72.2% 21.1x n/a 14.4x n/a 6.5%

Median: $1,445.0 $1,372.2 $128.7 59.9% -14.8% 31.8% 7.0x 59.3x 5.3x 42.7x -3.4%

• SaaS HCM companies are performing well in the publics markets. Currently, the SEG SaaS HCM Index, which includes the companies listed below, is outperforming the remaining SEG SaaS Indices on a EV/Revenue basis (7.0x TTM revenue).

• The index is outperforming all others despite posting the poorest median TTM gross margin and EBITDA margin percentages.

• Valuations in the group have been buoyed by strong revenue growth rates (31.8%), which most closely correlates to SaaS company valuation, and strengthening labor markets.

Key Trends


• Current M&A market extremely active

• Valuations strong for strategic acquisition targets

• Private equity helping to buoy valuations and accelerate deal flow

• HCM M&A market will likely remain quite robust for the next few quarters

Contact Information

Kris Beible(858) 509-2800

[email protected]

The information contained in this Report is obtained from sources we believe to be reliable, but no representation or guarantee is made about the accuracy or completeness of such information, or the opinions expressed herein. Nothing in this Report is intended to be a recommendation of a specific security or company or intended to constitute an offer to buy or sell, or the solicitation of an offer to buy or sell, any security. Software Equity Group LLC may have an interest in one or more of the securities or companies discussed herein. Financial data provided by Capital IQ.

This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C.Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights.

2015 hcm/talent management tech & software market update

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