TECHNOLOGY SERVICES MONTHLYELECTRONIC HEALTH RECORDS
1717 Arch Street, 39th Floor · Philadelphia, PA 19103 · www.mhhco.com
June 2018
MHH | Technology Services Group 2
Welcome to the June edition of the Mufson Howe Hunter TechnologyServices Monthly. This month, we highlight key themes and growth driversin the electronic health records space. Each month, our team aims toprovide you with a newsletter that contains thought-provoking contentand analysis, as well as updates on macroeconomic themes, equity capitalmarket performance, private capital market trends and noteworthy M&Aactivity–all of which is relevant to our core industry sectors:
We hope you find this information valuable, and we welcome anycomments or suggestions.
Sincerely,
Brandon K. EckManaging Director, Head of Technology Services
Cloud Services Healthcare IT Infrastructure Services Specialty Consulting
Digital Agencies Information Services IT OutsourcingTech-Enabled Business
Process Outsourcing
Tech-Enabled Solutions
InternetOutsourcing
ServicesMobile
Enterprise Software
Welcome to the MHH Technology Services Newsletter!
Select 2018 Franchise Themes
What we are reading…
Healthcare IT: The sweeping paradigm shift toward population health managementand value-based reimbursement models – will continue to drive robust demand forhealthcare IT products and services. Consulting Services, Data Analytics and PatientEngagement Technology will comprise a growing portion of the overall HCIT market,reaching an estimated $74 billion in annual spending by 2021 (Markets and Marketsand MHH calculations). Service providers and solutions that improve interoperabilityamong myriad disparate systems will be in high demand for many years to come. Foradditional insight see our May 2017 and September 2017 TSM.
Digital Transformation & Advisory: Business processes will continue to migrate fromlegacy systems to modern technology (cloud, edge computing, analytics, IoT,blockchain, AI, etc.). We expect to see continued growth in the digital transformationconsulting (DTC) channel. Trusted advisors with the ability to sell across seniorbusiness stakeholders within an organization (CMO, CRO, CCO, COO, CIO) and whoprovide thought leadership, commercial insights, targeted research and proprietary IPwill be leaders in the category. For additional insight see our November 2017 TSM.
IoT-Optimized Infrastructure Services: “Connected things” will streamline vendoroperational models while reducing customer costs. IoT will introduce tons of usefuldata to the cloud that needs to be captured and effectively managed. IaaS and PaaScompanies will be a direct beneficiary of this trend. Cisco expects database, analyticsand IoT workloads to account for 22% of total workloads by 2020 (Cisco, 2016). Foradditional insight, see our June 2017 TSM.
Next-gen EHRs: Epic, Allscripts and others reveal future of electronic health records
Halifax Health integrates EHR, cloud decision support to combat sepsis
A New Model of Interaction for Regulatory Technologies
What is the IoT? Everything you need to know about the Internet of Things right now
TECHNOLOGY SERVICES MONTHLY
Blockchain in Financial Services & Beyond: Although most widely associated withcryptocurrencies, some of the largest financial services firms are exploring usingblockchain technology to improve high-risk and/or time-consuming operations,including cross-border payments, AML & KYC compliance, IAM security protocols andsmart contracts. We also expect to see further adoption across a variety of otherindustries, including healthcare, automotive, manufacturing and retail, among others.For additional insight see our December 2017 TSM.
Regulation Technology: The rapid proliferation of new and increasingly complexregulations will continue to drive demand for RegTech solutions that provideoperational efficiencies and cost benefits when applied to compliance and riskmanagement practices. Increased regulation isn’t just a temporary challenge forglobal financial institutions – it’s the new reality. Financial services firms’ averagecosts to meet their obligations are $60 million; some are spending up to $500 millionon compliance with KYC and Customer Due Diligence (Thomson Reuters). Foradditional insight see our August 2017 TSM.
MHH | Technology Services Group 3
The Mufson Howe Hunter Technology Services Group serves growth-oriented, rapidly scalable businesses that leverage proprietary and enabling technologies to address the evolving needs of modern enterprise customers. We apply deep industry expertise and broad transaction experience to provide thoughtful, tailored
advice and solutions for our clients. Our clients turn to us for outstanding M&A advisory and capital-raising execution.
Brandon EckManaging Director,Head of Technology Services
Prior Experience:
Managing Director, Head of Technology & Services, Janney Montgomery Scott
Principal, Katalyst Securities
Principal, RCW Mirus
215.399.5411 [email protected]
18+ Years of Experience
60+ Transactions Completed
Education:
Gettysburg College (BA)
Senior Banking Team Sector Coverage
Andrew WilsonVice President,Technology Services
Prior Experience:
Senior Associate, Technology & Services, Janney Montgomery Scott
Associate, TMT, J.P. Morgan
Attorney, M&A, Wilson Sonsini Goodrich & Rosati
215.399.5406 [email protected]
8+ Years of Experience
20+ Transactions Completed
Education:
Duke University (JD, MBA)
U. North Carolina, Chapel Hill (BA)
Sell-side Advisory
Buy-side Assignments
Private Placements
Recapitalizations
Financial Advisory
Fairness Opinions
Tech-Enabled Solutions
Internet
Outsourcing Services
Mobile
Enterprise Software
IT Outsourcing
Healthcare IT
Digital Agencies
SpecialtyConsulting
InformationServices
InfrastructureServices
Tech-Enabled BPO
Cloud Services
TECHNOLOGY SERVICES PRACTICE OVERVIEW
Business Model Coverage
4
What is EHR?
EHR: A PHYSICIAN’S POINT OF VIEW
MHH | Technology Services Group
Electronic health record (EHR) systems are a central element of a sweeping effort to digitize the collection and sharing of medical records and treatment history – replacing archaic, paper-based charts with electronic records that can be updated in real time and travel with the patient.
The industry-wide push to establish a standards-based, population health management paradigm of care delivery demands that patient information be easily collected, aggregated, analyzed and shared across myriad providers and systems. In 2009, The American Recovery and Reinvestment Act mandated that all healthcare providers adopt and demonstrate meaningful use of EHR systems, as defined by a sequential series of escalating milestones.
The industry as a whole has also come to recognize that encouraging patients to take greater ownership in managing their own health is a powerful lever in improving long-term health outcomes and reducing expenditures on high-cost emergency care. Accordingly, most major EHR vendors also offer various elements of patient engagement technology (PET) to complement their core EHR offerings.
As emphasis continues to move “beyond the four walls” of the hospital setting toward a more holistic, clinically-integrated network model of care delivery, EHR vendors are increasingly expected to offer cloud-based, mobile-enabled platforms.
2.6
2.8
2.8
2.9
2.9
3.0
3.0
3.1
3.1
3.1
3.3
3.4
3.4
3.5
3.5
3.8
3.8
3.8
Top Rated EHR for Satisfaction 3
1 Healthcare Informatica, 2017 | 2 2018 CIO Agenda: Healthcare Provider Industry Insights, 2017 | 3 Medscape EHR Report 2016: Physicians Rate Top EHRs | 4 Rand, “Factors Affecting Physician Professional Satisfaction and Their Implications for Patient Care, Health Systems, and Health Policy”,2016 | 5 The Institute, “Focusing on Ways to Improve Electronic Health Records”, 2016
Where do EHR Vendors Need to Improve?
1 EHR vendors do not allow physicians to customize products to their specific needs 4
2 Physicians report low levels of technical support from vendors 4
3 EHR systems do not consistently support clinicians in providing “real care” or “substantially change the ways doctors think and access information, dividing tasks in ways not consistent with how physicians work” 5
4 EHR vendors do not allow physicians to customize products to their specific needs 434%
37%
72%
77%Improve Patient Billing 1
Eases communications with Payers 1
Detracts from Patient Care 2
Satisfaction with EHR vendor 2
How Physicians Feel about Their EHR
MARKETPLACE DYNAMICS & MARKET SHARE
10
115
8
359
636
10
1092
22
27
235
869
462
1050
3K
8K
12K
1K
25K
19K
3K
14K
17K
33K
83K
7K
15K
Market Dynamics
Consolidation
Vendor Consolidation: Large vendors and private equity players have been acquiring small to mid-size vendors.
Practice Consolidation: Small and solo medical practices are being acquired by hospitals and larger physician groups who mandate use of their EHR technology.
FragmentedMarket
According to Office of the National Coordinator’s dashboard, there are 632 EHR vendors providing certified EHR technology to physicians attesting for meaningful use.
The Top 10 vendors account for 65% of the physician practice EHR market, leaving 35% of the market with 622 vendors.
These vendors dominate the smaller physician practice market – 10 physicians (small) to 50+ (large).
Hospital Owned vs.
IndependentPractices
Hospital-Owned Practices: Population Health-driven trend lean toward selecting vendors with integrated healthcare information systems (HIS).
Independent Practices: Owned by physicians and more likely to select vendors without an HIS.
Bu
yers
Targ
et
Jan-2018 Sep-2017 Jun-2017 May-2016
23%
9%
7%
5%
5%4%4%
3%
2%
2%
35%
Market Share 1
“Cross Over” Vendors 1
Other
Physician Practice Market Share
MD Practices Hospitals
MHH | Technology Services Group 5
1 2017 MD Vendor Overview, HIS Professionals, LLC, 2017
MHH | Technology Services Group 6
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18
S&P 500 NASDAQ Dow Jones Industrial Average
SP500 NSDQ DJIA
May 2.2% 5.3% 1.0%
LTM 12.2% 20.1% 16.6%
3-Year 28.4% 46.8% 35.6%
U.S. PPI, CPI and PCE
10-Year Treasury Rate
U.S. Unemployment & Labor
Sources: CapitalIQ , Federal Reserve Bank of St. Louis
U.S. ECONOMIC INDICATORS
Unemployment Rate
Labor Participation Rate
U.S. Market Indices
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18
10-Year Teasury Rate
61.8%
62.0%
62.2%
62.4%
62.6%
62.8%
63.0%
63.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18
Unemployment Rate Labor Participation Rate
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18
Consumer Price Index Producer Price Index Personal Consumption Expenditures
MHH | Technology Services Group 7
Company Investor Date Sector
May 29Infrastructure
Services
May 29Infrastructure
Services
May 17Information
Services
May 16 Healthcare IT
May 14 Healthcare IT
May 3 Healthcare IT
Source: Pitchbook*For deals with announced transaction value**Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size
U.S. TECH SERVICES MIDDLE-MARKET PRIVATE EQUITY: BUY-OUT ACTIVITYPE Buy-Outs, Trailing 8 Quarters, as of May 31
PE Buy-Outs, by Deal Size PE Buy-Outs, Historical Annual, as of May 31
Select May 2018 Buy-Outs**
30%
17%
11%
43%$0-25mm
$25-50mm
$50-100mm
$100-250mm
$0.0B
$0.2B
$0.4B
$0.6B
$0.8B
$1.0B
$1.2B
-
20
40
60
80
100
120
140
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
Total CapitalNumber of Deals
Add-Ons Platform Total Capital Invested*
$0.0B
$0.5B
$1.0B
$1.5B
$2.0B
$2.5B
$3.0B
$3.5B
$4.0B
$4.5B
-
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016 2017 2018
Total CapitalNumber of Deals
Deal Count Total Capital Invested*
MHH | Technology Services Group 8
U.S. TECH SERVICES MIDDLE-MARKET PRIVATE EQUITY: MINORITY ACTIVITY
Source: Pitchbook*For deals with announced transaction value**Please contact the MHH Technology Services Group directly for any information regarding valuation, deal size, and investors
Company Stage Date Sector
Early Stage VC May 29Infrastructure
Services
Early Stage VC May 22Information
Services
Late Stage VC May 9 Healthcare IT
Late Stage VC May 7 Healthcare IT
Late Stage VC May 3 Healthcare IT
Late Stage VC May 1 Healthcare IT
PE Minority, by Stage PE Minority, Historical Annual, as of May 31
PE Minority, Trailing 8 Quarters, as of May 31Select May 2018 Minority Deals**
49%
26%
19%
6%
Angel / Seed
Early Stage VC
Later Stage VC
PE Growth/Expansion
$0.0B
$0.5B
$1.0B
$1.5B
$2.0B
$2.5B
-
50
100
150
200
250
300
3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
Total CapitalNumber of Deals
Deal Count Total Capital Invested*
$0.0B
$1.0B
$2.0B
$3.0B
$4.0B
$5.0B
$6.0B
$7.0B
$8.0B
$9.0B
0
200
400
600
800
1,000
1,200
2010 2011 2012 2013 2014 2015 2016 2017 2018
Total CapitalNumber of Deals
Deal Count Total Capital Invested*
MHH | Technology Services Group 9
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18
Source: CapitalIQ
VALUATION & PERFORMANCE METRICS
Median Operational KPIs
Median Valuation Metrics
IT Outsourcing: technology services and consulting solutions, including engineering, application development, knowledge management and business process management
Business Process Outsourcing: services for administering and managing select technology-enabled business processes, including outsourced product development, finance and accounting, human resources, research and analytics, and other industry-specific processes
Infrastructure Services: providers of managed, hosting and consulting services around planning, designing, implementing and managing mission-critical IT infrastructure
Information Services: providers of independent rating, benchmarking, research and data analytic services
Healthcare IT: software and technology-related services focused on the design, development, creation, use and maintenance of information systems for the healthcare industry
ITO
BPO
IFS
IS
HIT
Sector Indices Performance, as of May 31, 2018
SP500 NSDQ ITO BPO IFS IS HIT
May 2.2% 5.3% (2.4%) 7.7% 0.4% 4.3% 8.0%
LTM 12.2% 20.1% 16.0% 24.8% 10.5% 29.5% 2.8%
3-Year 28.4% 46.8% 27.0% 50.8% 55.3% 69.0% 7.8%
2.1x
3.1x
5.0x
7.0x
2.7x
ITO BPO IFS IS HIT
EV/2018E REVENUE
11.6x
14.4x
10.8x
17.0x
12.7x
ITO BPO IFS IS HIT
EV/2018E EBITDA
16.8x
27.5x
24.1x 23.1x
27.6x
ITO BPO IFS IS HIT
FWD PRICE/EARNINGS
10.9%
9.9%
15.2%
11.6%
6.1%
HIT
IS
IFS
BPO
ITO
2018E REVENUE GROWTH
57.7%
62.9%
63.8%
36.5%
31.5%
HIT
IS
IFS
BPO
ITO
LTM GROSS MARGIN
13.0%
39.2%
27.2%
14.5%
19.9%
HIT
IS
IFS
BPO
ITO
LTM EBITDA MARGIN
MHH | Technology Services Group 10
Valuation Metrics Relative Valuation
Select May 2018 Precedent Transactions*
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size
Announced Acquirer Target Description
May 23 Provides digital marketing and IT services
May 16 Provides IT consulting services
May 15 Provides IT consulting services
May 2 Provides consulting and analytics services
May 1 Information security consulting and advisory
services
IT OUTSOURCING
ACN
INFY
DXC
HCLTECH
GIB.A
BSE:507685
ENXTPA:ATO
SYNT
VRTU
PRFT
0.0 x
2.0 x
4.0 x
6.0 x
8.0 x
10.0 x
12.0 x
14.0 x
16.0 x
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
EV/EBITDA (2018E)
Revenue Growth (2018E)
ACN
CTSH
INFY
DXC
HCLTECH
GIB.A
BSE:507685
ENXTPA:ATO
SYNT
VRTU
PRFT
0.0 x
0.5 x
1.0 x
1.5 x
2.0 x
2.5 x
3.0 x
3.5 x
0.0% 10.0% 20.0% 30.0% 40.0%
EV/Revenue (2018E)
Revenue Growth (2018E) + EBITDA Margin (LTM)
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2018E 2019E Margin 2018E 2019E Margin LTM 2018E 2019E LTM 2018E 2019E
Accenture plc (ACN) $100,154 $39,836 $42,462 31.5% $6,796 $7,328 16.2% 2.6x 2.4x 2.3x 14.0 x 14.3 x 13.3 x
Cognizant Technology Solutions Corporation (CTSH) $44,147 $16,237 $17,661 38.3% $3,420 $3,901 20.8% 2.6x 2.5x 2.3x 11.8 x 11.7 x 10.3 x
Infosys Limited (INFY) $39,205 $11,130 $12,070 34.8% $2,923 $3,135 27.0% 3.2x 3.2x 2.9x 11.9 x 12.1 x 11.3 x
DXC Technology Company (DXC) $26,232 $22,484 $21,984 26.9% $4,862 $4,982 20.4% 1.3x 1.4x 1.5x 6.3 x 6.6 x 6.5 x
FALSE $16,987 $8,833 $9,087 29.4% $1,612 $1,686 16.6% 2.1x 2.1x 2.0x 12.0 x 11.3 x 10.8 x
HCL Technologies Limited (NSEI:HCLTECH) $18,563 $8,141 $8,978 34.3% $1,910 $2,044 22.6% 2.2x 2.1x 1.9x 9.7 x 9.0 x 8.4 x
Wipro Limited (BSE:507685) $17,263 $8,211 $8,677 29.3% $1,583 $1,695 19.9% 1.9x 1.8x 1.7x 9.3 x 9.5 x 8.9 x
Atos SE (ATO) $14,196 $14,308 $14,926 14.5% $2,057 $2,208 12.6% 1.0x 1.0x 1.0x 7.4 x 7.0 x 6.6 x
Syntel, Inc. (SYNT) $2,613 $953 $969 38.1% $243 $250 27.6% 3.0x 3.0x 2.9x 10.5 x 11.6 x 11.2 x
Virtusa Corporation (VRTU) $1,441 $1,205 $1,370 28.9% $103 $133 7.2% 1.6x 1.3x 1.2x 16.0 x 15.7 x 12.2 x
Perficient, Inc. (PRFT) $915 $500 $528 34.6% $69 $78 11.6% 2.0x 1.9x 1.8x 13.6 x 14.0 x 12.5 x
Mean $25,611 $11,985 $12,610 31.0% $2,325 $2,495 18.4% 2.1x 2.1x 2.0x 11.2x 11.2x 10.2x
Median $17,263 $8,833 $9,087 31.5% $1,910 $2,044 19.9% 2.1x 2.1x 1.9x 11.8x 11.6x 10.8x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close May 31, 2018.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
MHH | Technology Services Group 11
3.
Valuation Metrics
Select May 2018 Precedent Transactions*
BUSINESS PROCESS OUTSOURCING
Announced Acquirer Target Description
May 31 Offers outsourced document management
services
May 29 Offers outsourced subscription-based analytics
services
May 24 Engages in B2B e-procurement business
May 14 Provides procurement consulting services
May 9 Provides outsourced telecommunications and
strategy services
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size
Relative Valuation
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2018E 2019E Margin 2018E 2019E Margin LTM 2018E 2019E LTM 2018E 2019E
Automatic Data Processing, Inc. (ADP) $57,277 $13,767 $14,701 42.8% $3,047 $3,441 21.3% 4.4x 4.1x 3.9x 19.4 x 18.7 x 16.6 x
Genpact Limited (G) $5,717 $2,975 $3,210 37.8% $494 $542 14.9% 2.4x 2.2x 2.1x 14.5 x 13.4 x 12.2 x
EPAM Systems, Inc. (EPAM) $6,578 $1,847 $2,245 36.0% $328 $406 14.5% 3.9x 3.3x 2.7x 21.9 x 18.5 x 14.9 x
WNS (Holdings) Limited (WNS) $2,579 $801 $885 33.6% $170 $204 14.5% 3.2x 3.1x 2.8x 17.4 x 14.4 x 12.0 x
Globant S.A. (GLOB) $1,840 $508 $609 36.5% $88 $106 13.6% 4.1x 3.5x 3.0x 23.4 x 20.4 x 17.0 x
ExlService Holdings, Inc. (EXLS) $1,950 $851 $926 34.5% $150 $167 14.4% 2.3x 2.1x 1.9x 13.2 x 11.8 x 10.7 x
Luxoft Holding, Inc. (LXFT) $1,224 $930 $1,050 37.4% $118 $150 10.8% 1.2x 1.2x 1.1x 8.9 x 9.5 x 7.5 x
Mean $11,024 $3,097 $3,375 37.0% $628 $717 14.8% 3.1x 2.8x 2.5x 16.9x 15.3x 13.0x
Median $2,579 $930 $1,050 36.5% $170 $204 14.5% 3.2x 3.1x 2.7x 17.4x 14.4x 12.2x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close May 31, 2018.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
ADP
G EPAM
WNS
GLOB
EXLS
LXFT
0.0 x
5.0 x
10.0 x
15.0 x
20.0 x
25.0 x
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
EV/EBITDA (2018E)
Revenue Growth (2018E)
ADP
G
EPAM
WNS GLOB
EXLS
LXFT
0.0 x
0.5 x
1.0 x
1.5 x
2.0 x
2.5 x
3.0 x
3.5 x
4.0 x
4.5 x
0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
EV/Revenue (2018E)
Revenue Growth (2018E) + EBITDA Margin (LTM)
MHH | Technology Services Group 12
Valuation Metrics
Select May 2018 Precedent Transactions*
INFRASTRUCTURE SERVICES
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size
Announced Acquirer Target Description
May 30 Provides end-to-end automation services
May 29 Provides cloud computing and infrastructure
solutions
May 8 Provides data hosting and IaaS services
May 7 Provides data center services
May 3 Provides cloud-based business and storage
solutions
Relative Valuation
EQIX VRSN
UTDI ZAYO
GDDY
WIX
EIGI
WEB
INAP
0.0 x
5.0 x
10.0 x
15.0 x
20.0 x
25.0 x
30.0 x
35.0 x
40.0 x
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
EV/EBITDA (2018E)
Revenue Growth (2018E)
EQIX
VRSN
UTDI
ZAYO GDDY
WIX
EIGI
WEB INAP
0.0 x
2.0 x
4.0 x
6.0 x
8.0 x
10.0 x
12.0 x
14.0 x
0.0% 20.0% 40.0% 60.0% 80.0%
EV/Revenue (2018E)
Revenue Growth (2018E) + EBITDA Margin (LTM)
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2018E 2019E Margin 2018E 2019E Margin LTM 2018E 2019E LTM 2018E 2019E
Equinix, Inc. (REIT) (EQIX) $31,533 $5,106 $5,682 49.4% $2,418 $2,738 44.2% 8.8x 8.0x 7.1x 18.2 x 16.8 x 14.8 x
VeriSign, Inc. (VRSN) $16,055 $1,213 $1,260 83.8% $866 $897 65.2% 13.7x 13.3x 12.8x 19.6 x 18.6 x 18.0 x
United Internet AG (UTDI) $12,779 $5,970 $6,335 35.3% $1,404 $1,534 22.3% 2.9x 2.5x 2.4x 12.7 x 10.7 x 9.8 x
Zayo Group Holdings, Inc. (ZAYO) $8,650 $2,636 $2,759 63.8% $1,315 $1,409 45.8% 5.5x 5.4x 5.1x 11.1 x 10.8 x 10.0 x
GoDaddy Inc. (GDDY) $11,227 $2,634 $2,945 65.7% $748 $807 14.3% 5.6x 5.0x 4.5x 30.7 x 17.7 x 16.4 x
Wix.com Ltd. (WIX) $4,077 $597 $753 82.2% $108 $172 -8.2% 8.1x 6.4x 5.1x NM 35.2 x 22.2 x
Endurance International Group Holdings, Inc. (EIGI) $1,277 $1,154 $1,166 51.5% $315 $320 25.1% 2.6x 2.7x 2.6x 8.8 x 9.8 x 9.6 x
Web.com Group, Inc. (WEB) $851 $749 $766 67.8% $186 $196 19.5% 2.0x 2.0x 1.9x 8.8 x 8.0 x 7.6 x
Internap Corporation (INAP) $214 $323 $340 54.7% $111 $119 29.3% 3.1x 2.7x 2.6x 10.1 x 7.8 x 7.3 x
Mean $9,629 $2,265 $2,445 61.6% $830 $910 29.7% 5.8x 5.3x 4.9x 15.0x 15.0x 12.9x
Median $8,650 $1,213 $1,260 63.8% $748 $807 27.2% 5.5x 5.0x 4.5x 11.9x 10.8x 10.0x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close May 31, 2018.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
MHH | Technology Services Group 13
TECHNOLOGY SERVICES: INFORMATION SERVICES
Valuation Metrics
Select May 2018 Precedent Transactions*
INFORMATION SERVICES
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size
Announced Acquirer Target Description
May 31 Provides analytics and news for credit market
professionals
May 17 . Provides ratings and research services
May 11 Provides credit reporting services
May 3 Provides shareholder engagement consulting
services
May 1 Provides patent risk management and discovery
services
Relative Valuation
SPGI
MCO Q
INFO
VRSK
MSCI IT
FDS
0.0 x
4.0 x
8.0 x
12.0 x
16.0 x
20.0 x
24.0 x
-30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0%
EV/EBITDA (2018E)
Revenue Growth (2018E)
SPGI MCO
Q
INFO
VRSK
IT
FDS
0.0 x
1.0 x
2.0 x
3.0 x
4.0 x
5.0 x
6.0 x
7.0 x
8.0 x
9.0 x
10.0 x
0.0% 20.0% 40.0% 60.0% 80.0%
EV/Revenue (2018E)
Revenue Growth (2018E) + EBITDA Margin (LTM)
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2018E 2019E Margin 2018E 2019E Margin LTM 2018E 2019E LTM 2018E 2019E
S&P Global Inc. (SPGI) $49,632 $6,459 $6,849 71.8% $3,185 $3,407 48.4% 8.6x 8.2x 7.7x 17.2 x 16.6 x 15.5 x
Moody's Corporation (MCO) $32,732 $4,692 $5,002 71.0% $2,271 $2,461 47.1% 8.5x 7.9x 7.4x 17.0 x 16.3 x 15.1 x
IQVIA Holdings Inc. (Q) $20,245 $10,246 $10,760 42.5% $2,185 $2,361 21.0% 3.6x 2.9x 2.8x 16.3 x 13.7 x 12.7 x
IHS Markit Ltd. (INFO) $19,284 $3,872 $4,095 62.8% $1,522 $1,653 31.5% 6.4x 6.0x 5.7x 16.6 x 15.4 x 14.2 x
Verisk Analytics, Inc. (VRSK) $17,557 $2,384 $2,552 63.0% $1,130 $1,224 45.5% 9.1x 8.5x 7.9x 19.9 x 17.9 x 16.5 x
MSCI Inc. (MSCI) $14,473 $1,440 $1,573 79.0% $788 $881 52.4% 11.9x 10.9x 10.0x 21.5 x 19.9 x 17.8 x
Gartner, Inc. (IT) $12,111 $3,989 $4,403 60.6% $741 $841 11.4% 4.1x 3.7x 3.4x 29.5 x 20.1 x 17.7 x
FactSet Research Systems Inc. (FDS) $7,814 $1,373 $1,470 52.0% $469 $512 32.8% 6.2x 5.9x 5.5x 17.5 x 17.3 x 15.9 x
Mean $21,731 $4,307 $4,588 62.8% $1,536 $1,667 36.3% 7.3x 6.8x 6.3x 19.4x 17.2x 15.7x
Median $18,421 $3,930 $4,249 62.9% $1,326 $1,438 39.2% 7.4x 7.0x 6.6x 17.3x 17.0x 15.7x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close May 31, 2018.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
MHH | Technology Services Group 14
TECHNOLOGY SERVICES: INFORMATION SERVICES
Announced Acquirer Target Description
May 31 Provides performance management software
solutions for healthcare practices
May 29 Develops web and mobile medical billing
solutions
May 9 Designs and develops user experience solutions
for monitoring patient compliance
May 4 Develops software solutions for health
information exchanges and patient engagement
May 2 Developer of a cloud-based solution for
laboratory management
Valuation Metrics
Select May 2018 Precedent Transactions*
HEALTHCARE IT
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size**Excluded: CSLT
Relative Valuation**
(aka Zone3W Inc.)
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2018E 2019E Margin 2018E 2019E Margin LTM 2018E 2019E LTM 2018E 2019E
Cerner Corporation (CERN) $19,803 $5,371 $5,820 84.5% $1,626 $1,783 26.2% 3.8x 3.6x 3.3x 13.6 x 11.9 x 10.8 x
Veeva Systems Inc. (VEEV) $11,075 $829 $975 69.1% $277 $327 23.6% 14.1x 12.2x 10.4x 44.2 x 36.7 x 31.1 x
athenahealth, Inc. (ATHN) $6,080 $1,354 $1,485 54.1% $376 $418 16.8% 4.9x 4.6x 4.2x 23.1 x 16.5 x 14.8 x
Allscripts Healthcare Solutions, Inc. (MDRX) $2,251 $2,178 $2,288 49.6% $432 $468 7.6% 2.3x 2.0x 1.9x 22.8 x 10.0 x 9.2 x
Inovalon Holdings, Inc. (INOV) $1,584 $564 $644 66.3% $161 $194 12.8% 3.2x 2.4x 2.1x 18.8 x 8.6 x 7.1 x
Quality Systems, Inc. (QSII) $1,124 $537 $563 54.5% $84 $89 8.4% 2.1x 2.1x 2.0x 19.9 x 13.4 x 12.7 x
National Research Corporation (NRC) $848 NA NA 58.2% NA NA 32.1% 6.9x NM NM 20.4 x NM NM
HealthStream, Inc. (HSTM) $900 $229 $239 57.3% $39 $43 11.0% 2.8x 3.1x 3.0x 24.0 x 17.9 x 16.4 x
Computer Programs and Systems, Inc. (CPSI) $440 $291 $301 55.6% $52 $51 13.1% 2.0x 2.0x 1.9x 12.9 x 11.1 x 11.3 x
Castlight Health, Inc. (CSLT) $490 $154 $181 61.4% ($14) $7 -38.1% 3.0x 2.7x 2.3x NM NM NM
Mean $4,459 $1,279 $1,388 61.1% $337 $376 11.3% 4.5x 3.9x 3.5x 22.2x 15.8x 14.2x
Median $1,354 $564 $644 57.7% $161 $194 13.0% 3.1x 2.7x 2.3x 20.4x 12.7x 12.0x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close May 31, 2018.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
CERN
VEEV
ATHN
MDRX INOV
QSII
NRC
0.0 x
5.0 x
10.0 x
15.0 x
20.0 x
25.0 x
30.0 x
35.0 x
40.0 x
0.0% 10.0% 20.0% 30.0%
EV/EBITDA (2018E)
Revenue Growth (2018E)
CERN
VEEV
ATHN
MDRX
INOV
QSII NRC
0.0 x
2.0 x
4.0 x
6.0 x
8.0 x
10.0 x
12.0 x
14.0 x
0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
EV/Revenue (2017E)
Revenue Growth (2017E) + EBITDA Margin (LTM)
TECHNOLOGY SERVICES MONTHLY
The Mufson Howe Hunter Technology Services IndicesIT Outsourcing is currently comprised of: ACN, CTSH, INFY, NESI:HCLTECH, GIB.A, WIT, ENXTPA:ATO, SYNT, VRTU, PRFT; Business Process Outsourcing Index is currently comprised of: ADP, G, EPAM, LXFT, EXLS, WNS,GLOB; Infrastructure Services Index is currently comprised of: EQIX, ZAYO, UTDI, VRSN, DFT, GDDY, EIGI, WIX, WEB, INAP; Information Services Index is currently comprised of: SPGI, Q, MCO, INFO, VRSK, IT, MSCI, FDS;and, Healthcare IT is currently comprised of: CERN, VEEV, ATHN, MDRX, WBMD, INOV, QSII, HSTM, NRCI.B, CPSI, CSLT.
The companies that comprise each Index periodically change as a result of mergers, acquisitions, initial public offerings and other transactions; therefore, comparisons to historical time periods and historicalperformance for each Index may not entirely correspond and correlate to the Index’s current performance. Historical performance is not a guarantee or prediction of future results. The information and statistical datacontained herein have been obtained from sources that Mufson Howe Hunter believes are reliable, but Mufson Howe Hunter makes no representation or warranty as to the accuracy or completeness of any suchinformation and data and expressly disclaims any and all liability relating to or resulting from your use of these materials. The information and data contained herein are current only as of the date(s) indicated andMufson Howe Hunter has no intention, obligation or duty to update these materials after such date(s). These materials do not constitute an offer to sell or the solicitation of an offer to buy any securities.
Copyright © January 2018 Mufson Howe Hunter & Company LLC. All rights reserved. Technology Services Monthly is produced monthly by Mufson Howe Hunter. Mufson Howe Hunter provides a full range of investment
banking services to Technology Services companies. For more information, visit www.mhhco.com.Icons by Flaticon.
1717 Arch Street, 39th Floor · Philadelphia, PA 19103 · www.mhhco.com
Brandon EckManaging Director,
Head of Technology Services
215.399.5411 [email protected]
For more information, please contact:
Andrew WilsonVice President,
Technology Services
215.399.5406 [email protected]