Thomas A. StewartExecutive Director, The National Center for the Middle Market

Middle Market Update:F I N D I N G S F R O M N C M M ’ S Q 2 ‘ 1 4 I N D I C AT O R S U R V E Y

ACG Global Webinar Series | July 30, 2014 | 2:00-3:00 PM EST

+Comprehensive, Relevant Middle Market Research & Data+ Quarterly Middle Market Indicator+ Breakthrough research and insights on diverse topics including

globalization, innovation, talent management and operational excellence+ Interactive benchmarking tools to help middle market executives compare

company performance, supply chain resiliency and CEO compensation

+Expertise & Outreach+ Experts travel nationwide to share relevant research with middle market

companies, policymakers, media and academics

+Executive Training+ Executive seminars focused on solving real-world challenges + Informative webinars to build capabilities and facilitate best practices

THE NATIONAL CENTER FOR THE MIDDLE MARKET

†

2

Learn more about the NCMM at www.middlemarketcenter.org

THE MIGHTY MIDDLE MARKETD E F I N E D

ANNUAL REVENUE

$10MM – $1B

Business Services

26.7%

Manufacturing

16.7%

Wholesale

13.0%

Retail

12.0%

* Source: Market that Moves America Source: Last Available Census

NEARLY

200KBUSINESSES†

†

3

1/3PRIVATE SECTORU.S. JOBS*

OFALL

REPRESENTING

3%U.S. COMPANIES†

OFALL

THE MIGHTY MIDDLE MARKETI M PA C T

†

4

Quarterly Middle Market Indicator

A quarterly business performance update and economic outlook survey conducted among 1000 c-suite executives of companies with annual revenues between $10MM and $1B.

THE U.S. MIDDLE MARKETE X E C U T I V E S U M M A R Y

Source: 2Q 2014 Middle Market Indicator

6

• REVENUE GROWTH IS STABLE AND PREDICTED TO SURGE • COMPANIES MAINTAIN PACE OF HIRING

• CONFIDENCE, ALREADY HIGH, HAS INCREASED SLIGHTLY

• CAPITAL INVESTMENT PLANS REMAIN THE SAME

• CONCERNS ABOUT THE REGULATORY ENVIRONMENT CONTINUE TO SUBSIDE

THE U.S. MIDDLE MARKETQ 2 S N A P S H O T

REVENUE GROWTH

6.6%PAST 12 MONTHS

CAPITAL INVESTMENTEMPLOYMENT GROWTH

3.2%PAST 12 MONTHS

63%WILL INVEST

3.3%NEXT 12 MONTHS

3.4%S&P 500PAST 12 MO.

2.1%SMALLBUSINESS

2.6%LARGEBUSINESS

CONFIDENCE

55%GLOBAL ECONOMY

2Q’13 48%

68%NATIONAL ECONOMY

2Q’13 64%

77%LOCAL ECONOMY

2Q’13 79%

5.8%NEXT 12 MONTHS

Source: 2Q 2014 Middle Market Indicator

7

THE U.S. MIDDLE MARKETC O N F I D E N T / S O M E W H AT C O N F I D E N T

55%GLOBAL ECONOMY

68%NATIONAL ECONOMY

77%LOCAL ECONOMY

Source: 2Q 2014 Middle Market Indicator

8

1Q '12 2Q '12 3Q '12 4Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '140

10

20

30

40

50

60

70

80

90

Global Economy National Economy Local Economy

THE U.S. MIDDLE MARKETE C O N O M I C O U T L O O K : W I L L G R O W

46%GLOBAL ECONOMY

62%NATIONAL ECONOMY

63%LOCAL ECONOMY

Source: 2Q 2014 Middle Market Indicator

9

1Q '12 2Q '12 3Q '12 4Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '140

10

20

30

40

50

60

70

Global Economy National Economy Local Economy

THE U.S. MIDDLE MARKETR E V E N U E G R O W T H : PA S T 1 2 M O N T H S

6.6%$10M - $1B

Source: 2Q 2014 Middle Market Indicator

10

1Q '12 2Q '12 3Q '12 4Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '140

1

2

3

4

5

6

7

8

9

6.9%6.1%

5.5%

7%

5.8% 5.8% 5.5%5%

6.5% 6.6%

7.9%

6.6%

0.8% 1.1%

5.6%

1.3%

3.4%3.9%

0.5%

3.4%

PAST 12 MONTHSREVENUE GROWTHPAST 12 MONTHS

3.4%S&P 500

THE U.S. MIDDLE MARKETR E V E N U E G R O W T H : N E X T 1 2 M O N T H S

5.8%$10M - $1B

Source: 2Q 2014 Middle Market Indicator

11

1Q '12 2Q '12 3Q '12 4Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '140

1

2

3

4

5

6

7

5.2%4.8%

3.7%

5.2%4.9% 5.1%

4.4% 4.3% 4.5%

5.8%

NEXT 12 MONTHSREVENUE GROWTHNEXT 12 MONTHS

THE U.S. MIDDLE MARKETE M P L O Y M E N T G R O W T H : PA S T 1 2 M O N T H S

3.2%$10M - $1B

Source: 2Q 2014 Middle Market Indicator

12

1Q '12 2Q '12 3Q '12 4Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '140

0.5

1

1.5

2

2.5

3

3.5

4

1.5%

2%

2.2%

2.7%

2.2%

2.6% 2.8%2.5%

3.7%3.2%

1.7%

2.4%

3.4%

2.1%

2.3%

2.2%2.4%

2.3%

2.6%

2.6%1.9% 2.3%

1.2% 1.2%

1.5% 1.6%1.8%

2% 2.1%2.1%

PAST 12 MONTHSEMPLOYMENT GROWTHPAST 12 MONTHS

2.1%SMALLBUSINESS

2.6%LARGEBUSINESS

THE U.S. MIDDLE MARKETE M P L O Y M E N T G R O W T H : N E X T 1 2 M O N T H S

3.3%$10M - $1B

Source: 2Q 2014 Middle Market Indicator

13

1Q '12 2Q '12 3Q '12 4Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '140

0.5

1

1.5

2

2.5

3

3.5

1.8%

1.3%

2.3%2.1%

2.5%

2.1% 2.2%

3.2% 3.3%

NEXT 12 MONTHSEMPLOYMENT GROWTHNEXT 12 MONTHS

THE U.S. MIDDLE MARKETI N V E S T M E N T A L L O C AT I O N

Source: 2Q 2014 Middle Market Indicator

14

63%WILL INVEST

CAPITAL INVESTMENT

4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 20140%

20%

40%

60%

80%

100%

41%37% 36% 39% 36% 36% 37%

59% 63% 64% 61% 64% 64% 63%

ACTIONS LIKELY WITH AN ADDITIONAL DOLLAR

Hold Cash Invest It

THE U.S. MIDDLE MARKETI N V E S T M E N T A L L O C AT I O N

Source: 2Q 2014 Middle Market Indicator

15

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q140

2

4

6

8

10

12

14

16

18

CapEx - Plant/Equip. Financial Investments Acquistions IT Training CapEx - Facilities Add Personnel

Other

THE U.S. MIDDLE MARKETT O P 5 B U S I N E S S C H A L L E N G E S

Source: 2Q 2014 Middle Market Indicator

16

COST OF HEALTHCARE

COST OF DOING BUSINESS

87%

82%

82%

ABILITY TO MAINTAIN MARGINS

UNCERTAINTY OF HOW GOVERNMENT ACTIVITIES WILL IMPACT BUSINESS

77%

ABILITY TO ATTRACT, TRAIN, AND RETAIN TALENT

77%

1Q 2014: 86% 2Q 2013: 91%

1Q 2014: 81% 2Q 2013: 85%

1Q 2014: 83% 2Q 2013: 84%

1Q 2014: 86% 2Q 2013: 83%

1Q 2014: 75% 2Q 2013: 78%

QUESTIONS?