HR Technology Insights

Transcription

1 Special Edition August 2014 Insights M&A and Capital Markets Perspective on the Industry Robert Metzger Managing Director Andrew Arno Director

2 Contents Introduction... 1 Summary... 3 M&A Activity... 6 Capital Markets Overview... 9 Public Company Analysis Venture Capital Activity William Blair Selected Transactions William Blair Equity Research Coverage William Blair Contacts Disclosures Table of Contents

3 Introduction Welcome to another special edition of William Blair s Insights, a periodic newsletter in which we analyze M&A and capital markets activity as well as valuations of technology companies providing solutions to help manage all aspects of the employee life cycle. We view the sector broadly defined across the following subcategories: William Blair Industry Landscape Pre-Employment Strategic Talent Management Other HCM Core HR Online Employment Solutions Screening & Assessment Recruiting Performance Management Employee Recognition Services Procurement Workforce Management HRMS Learning and Development Compensation Payroll Benefits Technology M&A activity in the HR tech sector is on an upswing. After the wave of consolidation that swept over the talent management sector in 2012, 2013 was a relatively quiet year in which the large strategics focused on integrating acquired companies and limited activity to a few tuck-in acquisitions. Over the last six months, we have seen an uptick in M&A activity highlighted by SAP s acquisition of Fieldglass on the services procurement front and WEX s acquisition of Evolution1 on the benefits technology front. We expect M&A activity to continue increasing because interest from strategic buyers and financial sponsors in this sector remains robust. The public equity capital markets have also been strong for HR tech companies with notable IPOs from HealthEquity, Paylocity, Paycom, and TriNet, as well as follow-on offerings from WageWorks, LinkedIn, Benefitfocus, and Workday. Institutional investors continue to reward revenue growth with higher valuation multiples, although demonstration of profitability (or at the very least efficient customer acquisition models) is increasingly important for companies looking to go public. Venture capital activity has steadily increased each year since 2010, reaching record levels. Over the last 12 months, 60 transactions represented $711 million in raised capital (excluding the $750 million minority investment in Kronos). This healthy funding environment will drive continued technological innovation and is a leading indicator for strong M&A and public equity activity in the coming years. Some of the major themes we expect to drive investing and M&A activity over the foreseeable future include: Tight Professional Labor Markets Talent remains scarce and the job market remains highly inefficient, driving the need for improved tools for both job seekers and for companies sourcing candidates. Recruiting will continue to witness innovation beyond the application tracking system (e.g., social job referal, mobile job application, and video interviewing) as will technologies that improve employee engagement and retention. Increasing costs will drive adoption of the CRM approach to recruiting as HR professionals manage and automate their candidate pipeline and monitor the ROI of different channels (much like marketing automation has streamlined and optimized the funnel for the acquisition of new customers). Social and Mobile Technology Increasingly defines how employees work and how candidates look for jobs. Driving design principals for new applications and creating innovative new business models. Big Data and Predictive Analytics Key to making human capital management a C-level priority. Enable HR decisions that have meaningful and quantifiable impacts on business performance. Applications range from recruiting and workforce management to learning and development and succession planning in large organizations. ACA and Rising Employee Benefit Costs Increasingly burdensome regulatory environment and rising costs shifting responsibility to employees. Introduction 1

4 Rise of alternative benefit platforms (e.g., private exchanges, defined-contribution models, high-deductible plans, individual exchanges) is disrupting the benefits industry and driving need for technology. Next-generation wellness platforms provide opportunities to improve employee long-term health, as well as engagement and productivity. William Blair remains active in the HR technology sector, having recently acted as co-advisor to Evolution1 in its sale to WEX, bookrunning manager on Paylocity s IPO, and co-manager on TriNet s IPO; other clients include WageWorks, Cornerstone OnDemand, and Sterling Infosystems, among others. We encourage you to contact us if we may be of any assistance with your business, portfolio companies or clients. Best regards, Robert Metzger Managing Director [email protected] Andrew Arno Director [email protected] Spotlight William Blair Recent M&A and Public Equity Transactions $532,500,000 has been acquired by WEX Inc. July 2014 William Blair & Company acted as co-advisor to Evolution1, a portfolio company of Genstar Capital, in connection with its acquisition by WEX Inc. (NYSE:WEX) for $532.5 million. Evolution1 and its partners, serving more than 10 million consumers, administer reimbursement accounts, including HSAs, HRAs, FSAs, VEBAs, wellness, and transit plans. Evolution1 offers a single end-to-end user experience, provides innovative autosubstantiation technologies, and automates workflow for partners, employers, and consumers. Evolution1 serves more than 90,000 employer groups, making it the nation s largest electronic payment, on-premise, and cloud computing healthcare solution. $276,000,000 Initial Public Offering March 2014 William Blair was a co-manager on the TriNet initial public offering in March TriNet is a leading provider of a comprehensive human resources solution for small to medium-sized businesses, or SMBs. TriNet s HR solution includes services such as payroll processing, human capital consulting, employment law compliance, and employee benefits, including health insurance, retirement plans, and workers compensation insurance. TriNet served over 8,000 clients in 47 states, the District of Columbia, and Canada; it coemployed roughly 218,000 of its clients employees. $137,729,750 Initial Public Offering March 2014 William Blair was a bookrunner on the Paylocity initial public offering in March Paylocity is a leading provider of cloud-based payroll and human capital management, or HCM, software solutions for medium-sized organizations. As of June 30, 2013, Paylocity served over 6,850 clients across the United States, each of which had an average of more than 100 employees. Paylocity s solutions help drive strategic human capital decision-making and improve employee engagement by enhancing the HR, payroll, and finance capabilities of Paylocity s clients. 2 Introduction

5 Summary Mergers & Acquisitions M&A activity over the last 12 months was strong, with 73 HR technology M&A transactions announced, totaling $4.6 billion in disclosed transaction value. Notable M&A transactions in the last 12 months include: Selected Mergers & Acquisitions (LTM) Date Announced Trans. Value ($ MM) Implied Enterprise Value ($ MM) Target Company Acquirer Company Enterprise Value LTM Revenue LTM EBITDA Vertical 07/15/ Talent2 International Ltd. Allegis Group - - Recruiting 07/08/14 $125.0 $125.0 Social Solutions Vista Equity Partners 6.3x - Performance Management 06/24/ MoBolt Indeed - - Online Employment Solutions 06/17/14 $532.5 $532.5 Evolution1 WEX 6.0x 20.0x Benefits Technology 06/17/ NETtime Solutions Paychex - - Workforce Management 06/10/14 $48.0 $48.0 eperfect M Dream Inworld 3.1x - HRMS 05/27/ Bachem Ventures XING - - Online Employment Solutions 04/24/14 $ PayScale Warburg Pincus - - Compensation/Screening & Assessment 04/23/ WorkForce Software Insight Venture Partners - - Workforce Management 03/30/ Broadbean Technology CareerBuilder - - Recruiting 03/26/14 $1,000.0 $1,000.0 Fieldglass SAP - - Services Procurement 02/26/ Identified Workday - - Recruiting 02/24/ TalentBin Monster Worldwide - - Recruiting 02/24/ Gozaik Monster Worldwide - - Online Employment Solutions 02/19/14 $525.1 $525.1 JobStreet.com and Agensi Pekerjaan JS Staffing Services SEEK Asia Investments - - Online Employment Solutions 02/19/ Audax Health Solutions Optum - - Wellness 02/06/14 $120.0 $120.0 Bright Media Corporation LinkedIn Corporation - - Online Employment Solutions 01/07/14 $200.0 $200.0 PeopleAnswers INFOR - - Screening & Assessment 12/18/ odesk Corporation Elance - - Services Procurement 11/22/13 $215.0 $215.0 Liazon Corporation Towers Watson & Co. - - Benefits Technology 11/19/13 $641.2 $641.2 P&I Personal & Informatik Aktiengesellschaft Kallisto Neunzigste Vermögensverwaltungs (HgCapital) 5.1x 15.4x HRMS 11/18/ Vana Group FinancialForce.com - - HRMS 11/07/13 $52.7 $52.7 ontargetjobs Dice Holdings 1.3x - Online Employment Solutions 10/22/13 $24.8 $24.8 TribeHR NetSuite - - HRMS 10/01/13 $12.9 $12.9 Employtouch The Ultimate Software Group - - HRMS 07/24/ EASY Software Solutions Bullhorn - - Services Procurement Sources: CapitalIQ, public news sources, and third-party estimates as of July 31, 2014 Summary 3

6 Public Equity Performance For the last 12 months the broad HR technology group increased 5.9%. The SaaS HR solutions group was up 7.3%, while the HR techenabled services group was up 10.5% and the online employment solutions group was up 0.7%. Indexed Stock Price Performance Index LTM 2014 YTD SaaS HR Solutions 7.3% (13.4%) Online Employment Solutions 0.7% (9.3%) HR Tech-Enabled Services 10.5% (2.2%) All 5.9% (6.9%) NASDAQ 19.9% 5.5% S&P % 5.4% Source: FactSet as of July 31, 2014 Capital Markets Year-to-date, six HR technology IPOs and two follow-on offerings have been completed. Initial Public Offerings Health Equity, a provider of solutions for managing healthcare accounts, completed an initial public offering of $127 million. Viadeo S.A., a provider of social networking services to professionals, companies, and recruiters, completed an initial public offering of $33 million on the Euronext Paris Stock Exchange. Zhaopin, a provider of online recruitment services, completed an initial public offering of $87 million. Paycom Software, a provider of cloud-based human capital management software solutions, completed an initial public offering of $115 million. Paylocity, a provider of cloud-based payroll and human capital management software solutions, completed an initial public offering of $138 million. William Blair served as an bookrunner on the transaction. TriNet, a provider of human resources solutions, completed an initial public offering of $276 million. William Blair served as a co-manager on the transaction. Follow-ons Benefitfocus, a provider of cloud-based benefits software solutions, completed a follow-on of $111 million. Filings Workday, a provider of enterprise cloud applications for human resources and finance, completed a follow-on of $614 million. Recruit Holdings, a diversified human resources services company, has applied for listing on the Tokyo Stock Exchange. William Blair is pleased to serve as an underwriter for TriNet and Paylocity. 4 Summary

7 Venture Capital Over the last 12 months there were 61 HR technology venture investments with a total disclosed transaction value of $1.5 billion; this includes the $750 million minority equity investment in Kronos by Blackstone and GIC. This represents a healthy increase from the previous 12-month period, during which 45 transactions were announced with a total disclosed transaction value of $578 million. Notable Venture Capital (LTM) Announced Date Target Trans. Value ($ in MM) Vertical Investors 07/21/14 Talview - Recruiting Mayfield Fund 07/10/14 erecruit Holdings $25.0 Recruiting North Bridge Venture Partners 07/08/14 SilkRoad Technology $14.0 Talent Management Foundation Capital, Intel Capital, Azure Capital, Tenaya Capital, Two Sigma Investments 06/30/14 Simply Hired $12.0 Online Employment Solutions City National Bank; Foundation Capital; IDG Ventures SF 06/27/14 Viadeo S.A. $6.8 Online Employment Solutions A Capital 06/16/14 Smashfly Technologies $9.0 Recruiting OpenView Venture Partners 06/05/14 Montage Talent $6.0 Recruiting Baird Venture Partners; Beringea LLC; Calumet Venture Fund; Foley Venture Fund; Foley Ventures; GCI; The State of Wisconsin Investment Board 05/07/2014 JIBE $20.0 Recruiting Draper Fisher Jurvetson; Polaris Partners; SAP Ventures; Gotham Ventures; Longworth Venture Partners; Thrive Capital 04/02/2014 bswift $51.0 Benefits Technology Great Hill Partners, LLC 03/05/2014 GuideSpark $15.0 Benefits Technology IDG Ventures; New Enterprise Associates; Storm Ventures LLC 02/20/2014 Kronos $750.0 Workforce Management The Blackstone Group L.P.; GIC Pte. Ltd. 11/25/2013 Glassdoor $50.0 Career Community/Workplace Insights Battery Ventures; Benchmark Capital; Sutter Hill Ventures; Tiger Global Management LLC; DAG Ventures, LLC; Dragoneer Investment Group, LLC 10/01/2013 HireVue $25.0 Recruiting Sequoia Capital; Granite Ventures, LLC; Investor Growth Capital; Rose Park Advisors, LLC; Peterson Ventures, LLC; Kickstart Seed Fund 09/12/2013 TalentSoft $20.0 Talent Management Highland Capital Partners; Bpifrance Investissement 08/12/2013 SilkRoad Technology $16.0 Talent Management Foundation Capital; CrossLink Capital, Inc.; Azure Capital Partners; Intel Capital; Keating Capital, Inc. (NasdaqCM:KIPO) 07/03/2013 TOA Technologies $66.0 Workforce Management Technology Crossover Ventures 06/28/2013 Replicon $20.0 Workforce Management Emergence Capital Partners; The Social+Capital Partnership 06/11/2013 TalentWise $25.0 Screening and Assessment NA Sources: Capital IQ and VentureSource as of July 31, 2014 Summary 5

8 M&A Activity While the total number of M&A transactions decreased by 33% when comparing LTM July 2014 to LTM July 2013, the total disclosed transaction value increased by 97%. Large transactions that represented sizable percentages of total disclosed transaction values included the $1.4 billion Kenexa acquisition in August 2012 and the $1.0 billion Fieldglass acquisition in March M&A Activity Detail Number of Transactions Dollar Value ($ in MM) LTM 07/13 LTM 07/ LTM 07/13 LTM 07/14 Annual Disclosed $960 $1,076 $6,254 $5,952 $1,384 $2,336 $4,603 Annual Undisclosed Total $960 $1,076 $6,254 $5,952 $1,384 $2,336 $4,603 Source: Capital IQ Annual M&A Detail ($ in millions) Transaction Value # of Transactions $10,000 $15,000 $20,000 $5,000 $0 Number of Transaction Value Transactions $10, $7,500 $5,000 $2,500 $ LTM 07/13 LTM 07/14 Transaction Value $960 $1,076 $6,254 $5,952 $1,384 $2,336 $4,603 Number of Transactions Source: Capital IQ 6 M&A Activity

9 M&A Valuation Analysis ($ in millions) Annual LTM 07/13 LTM 07/14 Volume Number of Announced Transactions Number of Disclosed Transactions Total Dollar Volume $960 $1,076 $6,254 $5,952 $1,384 $2,336 $4,603 Average Transaction Size $46 $45 $174 $192 $60 $102 $144 EV/LTM Revenues Number of Disclosed Transactions Mean 2.21x 3.89x 3.21x 4.64x 2.11x 4.29x 3.59x Median 1.67x 2.91x 2.67x 3.63x 2.04x 3.00x 2.75x EV/LTM EBITDA Number of Disclosed Transactions Mean 16.2x 13.7x 57.8x 33.4x 15.8x 28.3x 20.0x Median 13.2x 14.5x 47.5x 30.6x 15.5x 28.3x 20.0x Source: Capital IQ M&A Activity by Target Ownership (Percentage of Transactions) Private Sponsor Backed Private Independent Public -25% 50% 75% 75.0% 50.0% 25.0% 0.0% LTM 07/13 LTM 07/14 Private Sponsor Backed 28% 28% 38% 38% 38% 33% 52% Private Independent 67% 66% 58% 58% 60% 64% 43% Public 5% 6% 4% 4% 2% 3% 5% Source: Capital IQ M&A Activity 7

10 M&A Activity by Consideration (Percentage of Transactions) Not Disclosed Cash Stock -25% 50% 75% 80.0% 60.0% 40.0% 20.0% 0.0% LTM 07/13 LTM 07/14 Not Disclosed 66% 63% 61% 75% 75% 80% 59% Cash 29% 32% 37% 25% 22% 17% 37% Stock 5% 4% 2% 0% 3% 3% 4% Source: Capital IQ 8 M&A Activity

11 Capital Markets Overview Public equity offering activity increased when comparing the LTM July 2014 and LTM July 2013 periods. The number of transactions increased from 7 to 13 and the total dollars raised increased from $1.9 billion to $3.2 billion, largely driven by LinkedIn s $1.4 billion follow-on and Workday s $614 million follow-on. Annual Public Offering Activity ($ Volume) ($ in millions) Initial Public Offerings Follow-On Offerings Convertible Debt Offerings -$2,500 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ LTM 07/13 LTM 07/14 Initial Public Offerings - $157.0 $473.0 $732.6 $489.7 $795.8 $957.7 Follow-on Offerings $411.6 $148.4 $1,113.6 $120.8 $1,696.5 $276.2 $2,266.2 Convertible Debt Offering - - $ $853.0 $ Total Public Offerings $411.6 $305.4 $1,667.1 $853.4 $3,039.2 $1,925.0 $3,223.9 Sources: Capital IQ and Dealogic as of July 31, 2014 Capital Markets Overview 9

12 Selected Public Equity Offering Detail (LTM) Company IPOs Priced Filing Date Pricing Date Filing Range Offer Price Offering Size ($ in MM) Primary as % of Offering Market Cap % Change Pricing to Post Offering Dilution ($ in MM) First Day First Week To Date Offer Price Discount to Health Equity (NasdaqGS:HQY) 06/10/14 07/30/14 $ $12.00 $14.00 $ % 18.4% $ % Viadeo S.A. (ENXTPA:VIAD) 06/17/14 07/01/14 $ $28.60 $23.40 $ % 12.9% $233.7 (17.2%) (21.9%) (28.3%) - - Zhaopin (NYSE:ZPIN) 05/05/14 06/11/14 $ $14.50 $13.50 $ % 12.7% $ % 6.1% (1.2%) - - Paycom Software (NYSE:PAYC) 03/10/14 04/14/14 $ $20.00 $15.00 $ % 9.1% $ % 7.1% (13.3%) - - Paylocity Holdings (NasdaqGS:PCTY) 01/30/14 03/18/14 $ $16.00 $17.00 $ % 10.9% $ % 40.1% 18.1% - - TriNet (NYSE:TNET) 11/21/13 03/26/14 $ $17.00 $16.00 $ % 22.0% $1, % 31.3% 38.4% - - Benefitfocus (NasdaqGM:BNFT) 08/14/13 09/17/13 $ $24.50 $26.50 $ % 12.3% $ % 80.9% 47.0% - - Follow-Ons Priced Benefitfocus (NasdaqGM:BNFT) 07/01/14 07/16/14 - $38.50 $ % 0.0% $996.8 (0.5%) 1.5% 5.2% (18.9%) (3.2%) Workday (NYSE:WDAY) 01/13/14 01/14/14 - $89.00 $ % 3.8% $16, % 4.7% (8.5%) 1.3% (2.5%) LinkedIn (NYSE:LNKD) 09/03/13 09/04/13 - $ $1, % 5.2% $28, % 14.9% (20.4%) (9.4%) (6.7%) Halogen Software (TSX:HGN) 08/21/13 08/21/13 - $13.50 $ % 0.0% $295.6 (0.1%) (5.7%) (40.7%) (3.5%) (3.5%) WageWorks (NYSE:WAGE) 08/12/13 08/13/13 - $40.45 $ % 0.0% $1, % 8.9% 1.9% (1.3%) (1.3%) Sources: FactSet and Dealogic as of July 31, 2014 Filing Price Last Sale 10 Capital Markets Overview

13 Public Company Analysis Year-to-date the HR technology index was down 6.9% versus the Nasdaq, which was up 5.5%. This was largely driven by the underperformance of the SaaS HR and online employment solutions groups. In the same period, the online employment solutions group fell 9.3%, while the SaaS HR solutions and HR tech-enabled services groups fell 13.4% and 2.2%, respectively. Indexed Stock Price Performance (2014 YTD) SaaS HR Solutions (-13.4%) Online Employment Solutions (-9.3%) HR Tech-Enabled Services (-2.2%) All (-6.9%) NASDAQ (+5.5%) SaaS HR solutions consists of: BNFT, CALD, CSOD, TSX:HGN, HSTM, PAYC, PCTY, ULTI, WAGE, WDAY Online employment solutions consists of: JOBS, DHX, FLN, LNKD, MWW, SEK, ZPIN, O1BC HR tech-enabled services consists of: ADP, NSP, PAYX, TNET Source: FactSet as of July 31, 2014 Valuation Overview SaaS HR Solutions Online Employment Solutions HR Tech-Enabled Services 5.2x 6.3x 3.5x 31.5x 14.7x 12.5x 29.0x 25.7x 19.7x EV / 2014 Revenue EV / 2014 EBITDA EV / 2014 FCF Source: FactSet as of July 31, 2014 Public Company Analysis 11

14 Comparable-Company Analysis SaaS HR Solutions Market Enterprise '13A - '14E 2014E Close Cap Value Enterprise Value/Revenue Enterprise Value/EBITDA Enterprise Value/FCF Revenue EBITDA 07/31/14 ($ MM) ($ MM) LTM E LTM E LTM E Growth Margin Benefitfocus $38.54 $965.9 $ x 6.85x 5.38x nmf nmf nmf nmf nmf nmf 27.3% -39.0% Callidus Software $10.72 $492.7 $ x 3.67x 3.16x nmf 35.8x 27.1x 27.6x 30.2x 21.9x 16.3% 10.3% Cornerstone OnDemand $41.84 $2,223.6 $2, x 7.99x 5.86x nmf nmf nmf nmf nmf nmf 36.4% 1.1% Halogen $7.67 $167.8 $ x 1.84x 1.51x nmf nmf nmf nmf nmf nmf 21.6% -11.4% HealthStream $24.96 $688.1 $ x 3.39x 2.85x 24.0x 21.8x 17.8x 21.2x 27.9x 31.8x 19.0% 15.6% Paycom $12.78 $652.3 $ x 5.15x 4.02x 56.5x 38.3x 22.8x nmf nmf 35.4x 28.4% 13.4% Paylocity $19.59 $971.0 $ x 7.32x 5.88x nmf nmf nmf nmf nmf nmf 24.6% 2.0% The Ultimate Software Group $ $3,825.9 $3, x 7.40x 6.02x 55.9x 31.5x 23.8x nmf nmf 59.6x 22.9% 23.5% WageWorks $41.74 $1,465.3 $1, x 4.73x 4.29x 22.2x 17.1x 14.7x na na na 10.5% 27.7% Workday $83.84 $15,510.4 $14, x 19.48x 13.26x nmf nmf nmf nmf nmf nmf 46.9% -5.4% Mean 8.35x 6.78x 5.20x 39.7x 28.9x 21.3x 24.4x 29.0 x 37.2 x 25.2% 8.5% Median 6.20x 5.15x 4.29x 40.0x 31.5x 22.8x 24.4x 29.0 x 33.6 x 22.9% 10.3% Online Employment Solutions 51job $75.56 $4,471.9 $3, x 13.36x 11.56x 46.5x 40.5x 33.9x na 59.0x 52.2x 15.5% 33.0% Dice Holdings $9.16 $491.6 $ x 2.29x 2.17x 8.8x 7.5x 7.0x 10.3x 10.9x 10.6x 5.6% 30.7% Freelancer $0.74 $325.5 $ x 12.48x 12.48x nmf nmf nmf nmf nmf nmf 0.0% 1.2% LinkedIn $ $21,994.6 $19, x 9.26x 6.98x nmf 37.8x 26.2x nmf nmf nmf 32.7% 24.5% Monster Worldwide $6.50 $591.6 $ x 0.95x 0.93x 7.1x 6.3x 5.8x 13.7x 20.8x 16.9x 2.3% 15.0% SEEK Limited $15.42 $5,246.7 $5, x 8.64x 7.60x 24.6x 20.6x 17.3x 40.3x 36.8x 28.2x 13.7% 41.9% Viadeo S.A. $14.99 $148.3 $146.9 na na na na na na na na na na na XING $ $604.6 $ x 3.92x 3.45x 21.7x 13.8x 10.5x na 30.6x 23.1x 13.5% 28.4% Zhaopin $14.40 $719.2 $ x 3.72x 3.12x 16.8x 14.7x 11.6x na 10.2x 8.9x 19.2% 25.3% Mean 8.01x 6.83x 6.04x 20.9x 20.2x 16.0x 21.4x 28.1 x 23.3 x 12.8% 25.0% Median 6.50x 6.28x 5.22x 19.2x 14.7x 11.6x 13.7x 25.7 x 20.0 x 13.6% 26.8% HR Tech-Enabled Services Automatic Data Processing $81.31 $39,199.7 $37, x 2.95x 2.73x 15.1x 14.2x 12.8x 22.6x 20.4x 19.2x 7.8% 20.8% Insperity $31.91 $814.8 $ x 0.23x 0.21x 7.4x 7.8x 6.5x 19.6x 18.4x 9.8x 10.5% 3.0% Paychex $41.01 $14,890.7 $14, x 5.44x 5.08x 13.2x 12.7x 11.9x 18.0x 19.4x 19.0x 7.1% 42.9% TriNet $23.40 $1,615.7 $2, x 4.13x 3.62x 14.2x 12.3x 10.8x na 20.0x 17.5x 14.0% 33.5% Mean 2.54x 3.19x 2.91x 12.5x 11.7x 10.5x 20.1x 19.6x 16.4x 9.9% 25.1% Median 2.11x 3.54x 3.18x 13.7x 12.5x 11.3x 19.6x 19.7x 18.2x 9.1% 27.2% Overall Mean 7.12x 6.11x 5.08x 23.9x 20.8x 16.3x 21.7x 25.4x 25.3x 17.5% 18.0% Median 5.06x 4.73x 4.02x 19.2x 15.9x 13.7x 20.4x 20.6x 20.5x 15.5% 20.8% Source: FactSet as of July 31, Public Company Analysis

15 Venture Capital Activity The total number of venture investments increased 36% and total disclosed transaction value more than doubled when comparing LTM July 2014 with LTM July The disproportionate increase in disclosed transaction value can be partly attributed to the $750 million Kronos private placement that occurred in Annual Venture Capital Detail ($ in millions) $10,000 $15,000 $20,000 $5,000 $ Number of Transaction Value Transactions $1,500 $1,200 $900 $600 $300 $0 Transaction Value LTM 07/13 LTM 07/14 Transaction Value $228 $119 $339 $492 $522 $578 $1,461 Number of Transactions Note: Exhibits exclude transactions less than $3 million in transaction value Source: Capital IQ as of July 31, 2014 # of Transactions Venture Capital Activity 13

16 William Blair Selected Transactions $532,500,000 $276,000,000 $137,729,750 $138,076,762 $155,418,768 has been acquired by WEX Initial Public Offering Initial Public Offering Follow-on Offering Follow-on Offering Not Disclosed $120,750,000 Not Disclosed $67,275,000 $60,734,375 has been acquired by has merged with Compass Investment Partners Follow-on Offering BenefitMall Initial Public Offering Follow-On Offering $156,975,000 $115,000,000 $263,062,500 Not Disclosed $34,499,985 has been acquired by significant investment from Initial Public Offering Paychex Initial Public Offering Calera Capital Initial Public Offering Not Disclosed Not Disclosed $54,000,000 $62,625,000 has been acquired by has acquired ADP Centive Valuation Analysis Private Placement Initial Public Offering $59,850,000 Not Disclosed $285,618,000 $56,000,000 has been acquired by Initial Public Offering ADP Follow-on Offering Common Stock PIPEs Sole Manager 14 William Blair Selected Transactions

17 William Blair Equity Research Coverage Equity Research Company Ticker Analyst Aon AON Adam Klauber Automatic Data Processing ADP Timothy McHugh Benefitfocus BNFT Adam Klauber Cornerstone OnDemand CSOD Justin Furby CTPartners Executive Search CTP Timothy McHugh Dice Holdings DHX Timothy McHugh 51job JOBS Timothy McHugh HealthStream HSTM Ryan Daniels Heidrick & Struggles International HSII Timothy McHugh Korn/Ferry International KFY Timothy McHugh LinkedIn LNKD Timothy McHugh Paychex PAYX Timothy McHugh Paylocity PCTY Bhavan Suri Robert Half International RHI Timothy McHugh Towers Watson TW Timothy McHugh TriNet TNET Timothy McHugh Ultimate Software Group ULTI Justin Furby WageWorks WAGE Robert Napoli Workday WDAY Justin Furby William Blair Equity Research Coverage 15

18 William Blair Contacts Brent Gledhill Global Head of Investment Banking John Ettelson Chief Executive Officer North America Andrew Arno Robert Metzger Dan Connolly Chris Lane Britt Trukenbrod U.S. Venture Capital Coverage Brandon Lower Anu Sharma Jonathan Skinner Charles Watson Jamie Wildman Europe Raphael Grunschlag Matt Gooch Stewart Licudi Asia-Pacific Andrew Kaye Mergers & Acquisitions Mark Brady Robert Abbe Equity Capital Markets Brett Paschke Institutional Sales & Trading John Moore Private Capital Kelly Martin Equity Research Bhavan Suri Justin Furby Tim McHugh Adam Klauber William Blair Contacts

19 Disclosures William Blair is a trade name for William Blair & Company, L.L.C. and William Blair International, Limited. William Blair & Company, L.L.C., is a Delaware company and is regulated by the Securities and Exchange Commission, The Financial Industry Regulatory Authority, and other principal exchanges. William Blair International Limited is authorised and regulated by the Financial Services Authority ("FSA") in the United Kingdom. William Blair & Company only offers products and services where it is permitted to do so. Some of these products and services are only offered to persons or institutions situated within the United States and are not offered to persons or institutions outside of the United States. This material has been approved for distribution in the United Kingdom by William Blair International Limited, and is directed only at, professional clients and eligible counterparties (as defined in COBS 3.5 and 3.6 of the FSA Handbook). This advertisement is not intended to be investment advice. William Blair & Company 222 West Adams Street Chicago, Illinois williamblair.com July 31, 2014 Disclosures 17

20 About William Blair Investment Banking William Blair s investment banking group combines significant transaction experience, rich industry knowledge, and deep relationships to deliver successful advisory and financing solutions to our global base of corporate clients. We serve both publicly traded and privately held companies, executing mergers and acquisitions, growth financing, financial restructuring, and general advisory projects. This comprehensive suite of services allows us to be a long-term partner to our clients as they grow and evolve. From , the investment banking group completed 250 merger-and-acquisition transactions worth more than $52 billion in value, involving parties in 27 countries and four continents, was an underwriter on over 20% of all U.S. initial public offerings and arranged more than $11.5 billion of debt financing.