HR Technology Insights

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August 2014

HR Technology Insights

M&A and Capital Markets Perspective

on the HR Technology Industry

Robert Metzger

Managing Director

+1 312 364 8517

Andrew Arno

Director

+1 415 248 5905

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HR Technology Table of Contents

Introduction

Welcome to another special edition of William Blair’s HR Technology 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 HR Technology Industry Landscape

Recruiting Compensation Workforce Management Screening & Assessment Services Procurement Online Employment Solutions Benefits Technology Performance Management Learning and Development Employee Recognition Payroll HRMS Other HCM

Pre-Employment Strategic Talent Management Core HR

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

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HR Technology

2 Introduction

 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 Andrew Arno

Managing Director Director

[email protected] [email protected]

Spotlight – William Blair Recent M&A and Public Equity HR Technology Transactions

 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

auto-substantiation 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.

 William Blair was a co-manager on the TriNet initial public offering in March 2014.  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 co-employed roughly 218,000 of its clients’ employees.

 William Blair was a bookrunner on the Paylocity initial public offering in March 2014.  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.

$532,500,000

has been acquired by

WEX Inc.

July 2014

$276,000,000

Initial Public Offering

March 2014

$137,729,750

Initial Public Offering March 2014

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HR Technology

Summary 3

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 HR Technology Mergers & Acquisitions (LTM)

Implied Enterprise Value

Date Trans. Value

($ MM) Enterprise Value ($ MM) Target Company Acquirer Company LTM Revenue LTM EBITDA Vertical Announced

07/15/14 - - Talent2 International Ltd. Allegis Group - - Recruiting

07/08/14 $125.0 $125.0 Social Solutions Vista Equity Partners 6.3x - Performance Management 06/24/14 - - MoBolt Indeed - - Online Employment Solutions 06/17/14 $532.5 $532.5 Evolution1 WEX 6.0x 20.0x Benefits Technology 06/17/14 - - NETtime Solutions Paychex - - Workforce Management 06/10/14 $48.0 $48.0 ePerfect M Dream Inworld 3.1x - HRMS

05/27/14 - - Bachem Ventures XING - - Online Employment Solutions 04/24/14 $100.0 - PayScale Warburg Pincus - - Compensation/Screening &

Assessment 04/23/14 - - WorkForce Software Insight Venture Partners - - Workforce Management 03/30/14 - - Broadbean Technology CareerBuilder - - Recruiting

03/26/14 $1,000.0 $1,000.0 Fieldglass SAP - - Services Procurement 02/26/14 - - Identified Workday - - Recruiting 02/24/14 - - TalentBin Monster Worldwide - - Recruiting

02/24/14 - - 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 02/19/14 - - 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 12/18/13 - - 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 11/18/13 - - 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

07/24/13 - - EASY Software Solutions Bullhorn - - Services Procurement

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HR Technology

4 Summary

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 tech-enabled 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 HR Technology 5.9% (6.9%)

NASDAQ 19.9% 5.5%

S&P 500 14.5% 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.

 Workday, a provider of enterprise cloud applications for human resources and finance, completed a follow-on of $614 million.

Filings

 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.

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HR Technology

Summary 5 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 HR Technology 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

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HR Technology

6 M&A Activity

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 2014.

M&A Activity Detail

Number of Transactions Dollar Value ($ in MM)

2009 2010 2011 2012 2013 LTM 07/13 LTM 07/14 2009 2010 2011 2012 2013 LTM 07/13 LTM 07/14 Annual Disclosed 21 24 36 31 23 23 32 $960 $1,076 $6,254 $5,952 $1,384 $2,336 $4,603

Annual Undisclosed 37 44 50 82 57 88 42 - - - -

Total 58 68 86 113 80 111 74 $960 $1,076 $6,254 $5,952 $1,384 $2,336 $4,603

Source: Capital IQ

Annual M&A Detail

($ in millions) 2009 2010 2011 2012 2013 LTM 07/13 LTM 07/14 Transaction Value $960 $1,076 $6,254 $5,952 $1,384 $2,336 $4,603 Number of Transactions 58 68 86 113 80 111 74 Source: Capital IQ $0 $5,000 $10,000 $15,000 $20,000 ₀₄₀80120160200

Transaction Value # of Transactions

$0 $2,500 $5,000 $7,500 $10,000 0 25 50 75 100 125 150 Number of Transactions Transaction Value

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HR Technology

M&A Activity 7 M&A Valuation Analysis

($ in millions) Annual

2009 2010 2011 2012 2013 LTM 07/13 LTM 07/14

Volume

Number of Announced Transactions 58 68 86 113 80 111 74

Number of Disclosed Transactions 21 24 36 31 23 23 32

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

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

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)

2009 2010 2011 2012 2013 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 -25%25%50%75%0%

Private – Sponsor Backed Private – Independent Public

0.0% 25.0% 50.0% 75.0%

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HR Technology

8 M&A Activity

M&A Activity by Consideration

(Percentage of Transactions) 2009 2010 2011 2012 2013 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 -25%25%50%75%0%

Not Disclosed Cash Stock

0.0% 20.0% 40.0% 60.0% 80.0%

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HR Technology

Capital Markets Overview 9

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)

2009 2010 2011 2012 2013 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 - - $80.5 - $853.0 $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

-$2,500$2,500

Initial Public Offerings Follow-On Offerings Convertible Debt Offerings

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500

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HR Technology

10 Capital Markets Overview

Selected Public Equity Offering Detail (LTM)

Company Filing Date Pricing Date Filing Range Offer Price Offering Size ($ in MM) Primary as % of Offering Dilution Market Cap Post Offering ($ in MM)

% Change Pricing to Offer Price Discount to First

Day First Week To Date Filing Price Last Sale

IPOs Priced

Health Equity (NasdaqGS:HQY) 06/10/14 07/30/14 $10.00 - $12.00 $14.00 $127.4 100.0% 18.4% $694.4 27.3% - - - - Viadeo S.A. (ENXTPA:VIAD) 06/17/14 07/01/14 $23.40 - $28.60 $23.40 $33.4 90.3% 12.9% $233.7 (17.2%) (21.9%) (28.3%) - - Zhaopin (NYSE:ZPIN) 05/05/14 06/11/14 $12.50 - $14.50 $13.50 $87.1 87.0% 12.7% $674.2 8.5% 6.1% (1.2%) - - Paycom Software (NYSE:PAYC) 03/10/14 04/14/14 $18.00 - $20.00 $15.00 $114.6 60.3% 9.1% $762.2 2.3% 7.1% (13.3%) - - Paylocity Holdings (NasdaqGS:PCTY) 01/30/14 03/18/14 $14.00 - $16.00 $17.00 $137.7 66.3% 10.9% $831.7 41.4% 40.1% 18.1% - - TriNet (NYSE:TNET) 11/21/13 03/26/14 $15.00 - $17.00 $16.00 $276.0 87.0% 22.0% $1,093.2 19.4% 31.3% 38.4% - - Benefitfocus (NasdaqGM:BNFT) 08/14/13 09/17/13 $21.50 - $24.50 $26.50 $150.4 52.9% 12.3% $644.3 102.1% 80.9% 47.0% - - Follow-Ons Priced Benefitfocus (NasdaqGM:BNFT) 07/01/14 07/16/14 - $38.50 $110.7 87.0% 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 $614.1 87.0% 3.8% $16,505.2 2.0% 4.7% (8.5%) 1.3% (2.5%) LinkedIn (NYSE:LNKD) 09/03/13 09/04/13 - $223.00 $1,380.0 87.0% 5.2% $28,022.8 11.4% 14.9% (20.4%) (9.4%) (6.7%) Halogen Software (TSX:HGN) 08/21/13 08/21/13 - $13.50 $23.3 87.0% 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 $138.1 87.0% 0.0% $1,370.1 13.4% 8.9% 1.9% (1.3%) (1.3%)

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HR Technology

Public Company Analysis 11

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.

HR Technology Indexed Stock Price Performance (2014 YTD)

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

Source: FactSet as of July 31, 2014 70 80 90 100 110 120 130

SaaS HR Solutions (-13.4%) Online Employment Solutions (-9.3%) HR Tech-Enabled Services (-2.2%) All HR Technology (-6.9%) NASDAQ (+5.5%)

5.2x 31.5x _29.0x 6.3x 14.7x 25.7x 3.5x 12.5x 19.7x EV / 2014 Revenue EV / 2014 EBITDA EV / 2014 FCF

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HR Technology

12 Public Company Analysis

Comparable-Company Analysis

Close Market Cap Enterprise Value Enterprise Value/Revenue Enterprise Value/EBITDA Enterprise Value/FCF '13A - '14E Revenue 2014E EBITDA 07/31/14 ($ MM) ($ MM) LTM 2014 2015E LTM 2014 2015E LTM 2014 2015E Growth Margin

SaaS HR Solutions Benefitfocus $38.54 $965.9 $915.2 8.20x 6.85x 5.38x nmf nmf nmf nmf nmf nmf 27.3% -39.0% Callidus Software $10.72 $492.7 $477.5 4.05x 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 $2,151.8 10.50x 7.99x 5.86x nmf nmf nmf nmf nmf nmf 36.4% 1.1% Halogen $7.67 $167.8 $114.6 2.30x 1.84x 1.51x nmf nmf nmf nmf nmf nmf 21.6% -11.4% HealthStream $24.96 $688.1 $576.4 3.80x 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 $726.0 6.20x 5.15x 4.02x 56.5x 38.3x 22.8x nmf nmf 35.4x 28.4% 13.4% Paylocity $19.59 $971.0 $882.0 8.79x 7.32x 5.88x nmf nmf nmf nmf nmf nmf 24.6% 2.0% The Ultimate Software Group $134.96 $3,825.9 $3,744.9 8.18x 7.40x 6.02x 55.9x 31.5x 23.8x nmf nmf 59.6x 22.9% 23.5% WageWorks $41.74 $1,465.3 $1,141.5 5.06x 4.73x 4.29x 22.2x 17.1x 14.7x na na na 10.5% 27.7% Workday $83.84 $15,510.4 $14,128.5 26.31x 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 $3,942.2 14.51x 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 $588.3 2.47x 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 $302.9 17.21x 12.48x 12.48x nmf nmf nmf nmf nmf nmf 0.0% 1.2% LinkedIn $180.64 $21,994.6 $19,693.5 11.74x 9.26x 6.98x nmf 37.8x 26.2x nmf nmf nmf 32.7% 24.5% Monster Worldwide $6.50 $591.6 $757.0 0.95x 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 $5,917.9 8.67x 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 $108.34 $604.6 $500.3 4.32x 3.92x 3.45x 21.7x 13.8x 10.5x na 30.6x 23.1x 13.5% 28.4% Zhaopin $14.40 $719.2 $657.5 4.20x 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 $37,368.4 3.06x 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 $554.4 0.24x 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 $14,339.5 5.69x 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 $2,095.3 1.16x 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%

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HR Technology

Venture Capital Activity 13

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 2013. The disproportionate increase in disclosed transaction value can be partly attributed to the $750 million Kronos private placement that occurred in 2014.

Annual Venture Capital Detail

($ in millions)

2009 2010 2011 2012 2013 LTM 07/13 LTM 07/14

Transaction Value $228 $119 $339 $492 $522 $578 $1,461

Number of Transactions 15 15 27 37 40 45 61

Note: Exhibits exclude transactions less than $3 million in transaction value Source: Capital IQ as of July 31, 2014

$0 $5,000 $10,000 $15,000

$20,000 ₀₄₀80120160200

Transaction Value # of Transactions

0 10 20 30 40 50 60 70 $0 $300 $600 $900 $1,200 $1,500 Transaction Value Number of Transactions

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HR Technology

14 William Blair Selected HR Technology Transactions

William Blair Selected HR Technology Transactions

$532,500,000

has been acquired by WEX

$276,000,000

$137,729,750

$138,076,762

Follow-on Offering

$155,418,768

Follow-on Offering

Not Disclosed

has been acquired by Compass Investment

Partners

$120,750,000

Follow-on Offering

Not Disclosed

has merged with BenefitMall

$67,275,000

$60,734,375

Follow-On Offering

$156,975,000

$115,000,000

has been acquired by Paychex

$263,062,500

Not Disclosed

significant investment from Calera Capital

$34,499,985

Not Disclosed

has been acquired by ADP Not Disclosed has acquired Centive Valuation Analysis $54,000,000 Private Placement $62,625,000

$59,850,000

Not Disclosed

has been acquired by ADP

$285,618,000

Follow-on Offering

$56,000,000

Common Stock PIPEs Sole Manager

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HR Technology

William Blair HR Technology Equity Research Coverage 15

William Blair HR Technology Equity Research Coverage

HR Technology 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

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HR Technology

16 William Blair HR Technology Contacts

William Blair HR Technology Contacts

Brent Gledhill

Global Head of Investment Banking [email protected] +1 312 364 5475

John Ettelson Chief Executive Officer [email protected] +1 312 364 8620 North America Andrew Arno [email protected] +1 415 248 5905 Robert Metzger [email protected] +1 312 364 8517 Dan Connolly [email protected] +1 312 364 8544 Chris Lane [email protected] +1 415 796 6492 Britt Trukenbrod [email protected] +1 312 364 8840

U.S. Venture Capital Coverage Brandon Lower [email protected] +1 212 237 2716 Anu Sharma [email protected] +1 415 248 5912 Jonathan Skinner [email protected] +1 312 364 7522 Charles Watson [email protected] +1 312 364 8997 Jamie Wildman [email protected] +1 312 364 8076 Europe Raphael Grunschlag [email protected] +44 20 7868 4501 Matt Gooch [email protected] +44 20 7868 4478 Stewart Licudi [email protected] +44 20 7868 4512 Asia-Pacific Andrew Kaye [email protected] +011 86 21 2327 2233 Mergers & Acquisitions Mark Brady [email protected] +1 312 364 8853 Robert Abbe [email protected] +1 415 248 2876 Equity Capital Markets

Brett Paschke

[email protected] +1 312 364 8657

Institutional Sales & Trading John Moore [email protected] +1 312 364 8836 Private Capital Kelly Martin [email protected] +1 312 364 8832 Equity Research Bhavan Suri [email protected] +1 312 364 5341 Justin Furby [email protected] +1 312 364 8201 Tim McHugh [email protected] +1 312 364 8229 Adam Klauber [email protected] +1 312 364 8232

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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 60606 | +1 312 236 1600 | williamblair.com

July 31, 2014

HR Technology

Disclosures 17

Disclosures

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HR Technology Insights

August 2014