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Business Description
Leading provider of workforce management solutions serving more than half of the Fortune 500 across 100+ countries. The
company operates under a perpetual software license model with price driven by # of employees. The company is
headquartered in Massachusetts and has 3,700 employees worldwide.
94% of Kronos revenue is generated from Labor management and scheduling products that provide labor analytics,
budgeting and forecasting, scheduling, time and attendance management.
o Addtl products include talent management, Core HR and Payroll
End market breakdown: 24% retail and hospitality, 25% healthcare, 24% mfg, 14% services & distribution and 13% public
sector and education
Blackstone and GIC Special investments Pte Ltd acquired 42% of Kronos for $750m for an implied EV of 4.5b (13x
EBITDA) from original sponsors Hellman Friedman and JMI who purchased the company for 1.8b in 2007 (21x)
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Cap Table
Positives
Leading shares with 25% worldwide share and 37% NA share of workforce management ahead of ADP with 12% and 19%
respectively. Also, share has been growing the past several years
Strong track record of historical growth both EBITDA and topline with strong industry trends
Recurring revenue base with ~70% of revenues recurring from 50% of sales being maintenance/cloud, 10% re-occurring
product sales and 10% re-occurring services
o 95%+ retention rate on maintenance contracts with annual price escalators of 3-4%
Little/no customer concentration
Negatives
high leverage at 4.4x first lien and 7x total
Small size with Revenues ~1b competing with much larger companies such as ADP with >10b in revenues
Little actual equity remaining with original sponsor putting gin 720m, but receiving back 1.6b through dividends.
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o Blackstone did just put in 750m of fresh equity, but that is little compared to the amount of debt
Loose credit agreement
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Thesis
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Recent Results:
Strong 1Q16 with Revenues +5.5% aned EBITDA +21% Yoy
Product bookings +13% (15% CC)
SaaS mix at 27% vs 16% YoY
Announced acquisition of Empower software solutions, which was founded in 07 and offers time and attendance, scheduling.
Payroll, etc software for 100m
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Acquisitions
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Company Strategy
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Management Team
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Legal/Regulatory/Environmental
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Notes
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