The Most Trusted Name in Human Capital Management. April 2006

Transcription

1 The Most Trusted Name in Human Capital Management April

2 Safe Harbor Statement This presentation may contain forward-looking statements that involve a number of risks and uncertainties. Various statements that we may make about our expectations for the future, our plans, and our prospects may constitute forward-looking statements for the purpose of the SEC Safe Harbor provisions. Our actual results may differ materially from those indicated as a result of various factors, including competitive pressures, general economic conditions, potential acquisitions, product delays, or possible disruption caused by terrorist activities and other risk factors detailed in our reports filed with the SEC. During this presentation, we will be referring to non-gaap financial measures. These non-gaap measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-gaap financial measures to the most directly comparable GAAP measures is included in the company s most recent earnings release, which is posted on the investor relations section of our website, under the heading Press Releases. 2

3 Agenda Kronos Today Growth Strategy Financial Review 3

4 Kronos Incorporated (Nasdaq: KRON) ,000 20,000,000+ Years of domain expertise Locations worldwide Quarters of profitability Quarters of revenue growth Employees Employees use a Kronos system 4

5 Kronos Has Evolved from Workforce Management to Human Capital Management 5

6 Kronos Is The Largest Pure Play Human Capital Management Vendor Kronos helps organizations manage the entire workforce. We do Human Capital Management better than any other company. 6

7 Industry Mix Government/ Education Healthcare Manufacturing Retail Services Transportation/ Distribution 13% 27% 29% 12% 11% 7% State Government Local Government Federal Government Social Services Public Sector Higher Education K-12 Hospitals Health Services Long-term Care Specialty Care Discrete Process Paper and Plastic Raw Materials Energy Construction Department General Food and Drug Specialty Hospitality Financial General Business Passenger Transport Distribution Warehousing Diverse customer base of tens of thousands of organizations worldwide. Growth in every segment. Percentages for Fiscal

8 Go-to to-market Strategy PRODUCT FOCUS COMPANY SIZE PERCENT OF KRONOS BUSINESS Workforce Management HRM 2,500+ Employees 500 2,500 Employees Enterprise Mid-Market Market 54% 26% Employees Small Business 20% Below 250 = Indirect Channel Percent of Kronos Business is an approximate value. 8

9 Enterprise Customer Momentum 532 of the Fortune of the Fortune of the Fortune 100 9

10 Enterprise Customer Momentum Enterprise Accounts 829 New Enterprise Accounts in 30 Months 58% Growth Customers 2,500 2,000 1,500 1, ,432 1,919 * 2,261 0 Sept-03 Sept-05 Mar-06 *Out of the 6,219 companies with 2,500 or more employees in North America (Dun and Bradstreet, March 2006) 10

11 Single-Source Source Provider in the Mid-Market Market and Lower Enterprise Market Emerging leader in HRM Leader in Workforce Management 11

12 Kronos: Positioned in the Leaders Quadrant for HRMS Magic Quadrant for U.S. Midmarket Human Resource Management Systems, 2006 Magic Quadrant for U.S. Midmarket Human Resource Management Systems, 2006 January 25, 2006, Jim Holincheck and Kirsten Recknagel, Gartner This Magic Quadrant graphic was published by Gartner, Inc. as part of a larger research note and should be evaluated in the context of the entire report. The Gartner report is available upon request from Kronos. The Magic Quadrant is copyrighted 2006 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the "Leaders" quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. 12

13 Compelling ROI of Kronos Solutions Because labor is the single largest controllable expense for most corporations, payroll and labor management tools are good candidates for low risk, high ROI. Average payback within 5 months More than 75% reported ROI above 250% Elimination of payroll errors paid for systems for 88% of users surveyed Rebecca Wetteman, Nucleus Research Reduction in total payroll cost Payroll Error Rate: 1.2% Payroll Processing Time: 0.47% Leave Time: 0.38% Labor Reporting: 0.75% Payroll Inflation: 0.72% Total: >3.0% Survey participants: 25 new installed Kronos customers, manual to automated; Company size range: ,000 employees; Industries: manufacturing, government, education, healthcare, retail 13

14 Momentum Driven By Customer Satisfaction Recipient of Omega NorthFace ScoreBoard award for five consecutive years 98% of customers said Kronos meets or exceeds their expectations Kronos continues to lead the industry with its unparalleled customer service record. Richard Castellano, Chief Customer Officer, Omega Management Group 14

15 Our Growth Strategy 15

16 But First Today Today s s Realities 16 Labor represents between 30-60% of operating costs one of the greatest uncontrolled expenses There are insufficient number of skilled workers to meet demand resulting in poor product and service quality Labor costs are on the rise putting pressure on margins Global Labor Arbitrage

17 The Top 10 Issues for Senior Executives 1... HCM is Top Of Mind! Attracting and retaining skilled staff Changing organizational culture Acquiring new customers Developing new processes and products Increasing customer loyalty and retention Managing risk Improving workforce performance Increasing shareholder value Using IT to reduce costs and create value Developing employees into capable leaders Percentage of Respondents 35% 33% 32% 29% 29% 29% 28% 27% 27% 26% Accenture study of 425 executives globally 17

18 The Next Big Business Cycle is HCM Supply Chain: Optimize Products CRM: Optimize Customers Human Capital Management: Optimize Workforce Kronos will lead this exciting new industry 18

19 Kronos Will Continue to Grow By Extending our Leadership Kronos Expanding Globally Broadening our Offering 19

20 We Will Extend Our Leadership In Workforce Management 20

21 What We Mean by Extending Our Leadership Yesterday Punch Review and Edit Pay Today Plan Allocate Execute Analyze Customers Budget & Forecast Workload Labor Standards People Skills Availability Schedules Time & Labor Jobs & Activities Accruals Actual demand Payroll Productivity Compliance Quality Demand-Driven Workforce Management 21

22 We Started With Time and Labor 22

23 We Now Help Manage Leave Entitlements and Usage 23

24 And We Track What Gets Done in The Workplace 24

25 And We Help Plan Who Does the Work and When 25

26 Kronos Offers Much More Than Time and Labor Kronos helps organizations manage the entire workforce. We do Human Capital Management better than any other company. 26

27 We Will Expand Globally 27

28 The Logical Choice of the Global

29 Global Enterprise Deployments U.S. U.S. U.S. U.S. UK China Panama Canada Malaysia France Malaysia El Salvador Mexico Hong Kong Germany Hong Kong India Brazil China Portugal Singapore Argentina South Korea UK Spain Spain Australia Philippines 29

30 We Will Expand Our Offering 30

31 Interest in Adjacent Areas Recruiting Talent Management Performance Management Compensation Workforce Management Labor Management Scheduling Operational Workforce Planning Candidate Sourcing Applicant Mgmt Hiring Mgr Workflow Selection/Assessment Contingent Staffing On-boarding Performance Appraisals Career Planning Succession Planning Goal Alignment Competency Mgmt Comp Planning Incentive Mgmt Sales Comp Time & Labor Absence Management Labor Activities Budget and Forecast Workload Generation Staff Scheduling Learning Transactional Data Repository Org Structure/Position Mgmt Personnel records Payroll records Benefit plan information HR policies Self-Service View & edit personnel records View pay stubs Input benefits elections Integrate to portal Global & Domestic Payroll Functionality Record maintenance Benefits administration Health & safety tracking Grievance tracking Basic leave Reporting 31

32 Financial Overview 32

33 Revenue Streams and Sources Fiscal Year 2005 Revenue $518.7 M total revenue 43% product / 57% service New customer dynamics: automate for first time, move from competitor product Maintenance 33% Professional Services 24% Hardware 17% Software 26% New Customers 30% Existing Customers 70% Existing customer dynamics: upgrades, purchase new applications, centralization 33

34 Where Our Business Comes From Competitive Systems 22% In-House Systems 13% Manual Systems 27% Kronos Upgrades, New Products, Legacy Systems 38% Per Kronos pipeline report based on revenue 34

35 Consistent Revenue Growth Revenue Millions '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 35

36 Consistent Net Income Growth Net Income Millions $55 $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01* '02 '03 '04 '05 *Adjusted to exclude special charges. 36

37 Sustained Success Honor Roll Out of 552 public software companies, only four have grown year-to-year and been profitable for the past twelve years or more. Years of Profitable Growth Microsoft ($36.8 B) Kronos ($450.7 M) Manhattan Assoc ($214.9 M) Business Objects ($925.6 M) LEGEND: 1 st number is last fiscal year s annual revenue; 2 nd number is years of consecutive profitability and growth. List is as of March Copyright 2005 Cape Horn Strategies, Inc. 37

38 Statement of Operations Fiscal 2005 ($000 omitted, except EPS) Net Revenue Twelve Months Ended 9/30/05 9/30/04 $518,658 $450,694 % Change 15% Cost of Sales $200,038 $176,068 14% Gross Profit $318,620 $274,626 16% Expenses $237,082 $205,024 16% Income Before Tax $81,538 $69,602 17% Net Income $53,904 $46,250 17% Earnings Per Share $1.65 $ % 38

39 Statement of Operations Q1 Fiscal 2006 ($000 omitted, except EPS) Net Revenue Three Months Ended 12/31/05 1/1/05 $127,943 $ 118,276 Cost of Sales Gross Profit Expenses Income Before Tax Net Income Earnings Per Share (GAAP) Stock-Based Compensation Other Adjustments 1 Earnings Per Share (Non-GAAP) $ 54,531 $ 73,412 $ 63,796 $ 9,616 $ 6,224 $0.19 $0.08 $0.07 $0.34 $ 46,065 $ 72,211 $ 56,491 $ 15,720 $ 10,658 $0.33 $0.05 $ Other adjustments include revenue adjustments associated with the application of certain business combination accounting rules, expenses associated with the amortization of acquisition-related intangible assets, and the associated tax benefit. 39

40 Key Metrics Revenue Per Employee Cash and Investments $200 $150 $150 Thousands $100 $50 Millions $100 $50 $0 FY00 FY01 FY02 FY03 FY04 FY05 $0 Q1 FY05 Q1 FY06 Q1 FY05 Q1 FY06: Cash flow from operations: $85.6M Stock buybacks: $42.1M Acquisitions: $34.1 M 40

41 Key Metrics $200 Maintenance ( Recurring ) Revenue Stream Deferred Revenue and Professional Services Backlog $200 $150 $150 $ Millions $100 $ Millions $100 $50 $50 $0 FY01 FY02 FY03 FY04 FY05 $0 Q1 FY05 Q1 FY06 Backlog - Prof Svcs Deferred Revenue - Product Deferred Revenue - Prof Svcs Deferred Revenue - Maintenance 41

42 .Kronos Key Success Factors Market leadership and vision Technology innovation track record Unparalleled value for our customers Powerful growth strategy Strength and stability 42

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