Investment Banking I Industry Spotlight - 53.com · Technology, Media, & Telecom I Industry...

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Technology, Media, & Telecom I Q4 2017

Investment Banking I Industry Spotlight

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Technology, Media, & Telecom I Industry Spotlight

Q4 2017

Key TMT Contacts

Investment Banking

Debt Capital Markets

Equity Capital Markets

Andrew Hensley Managing Director

[email protected]

Corporate Banking

Kevin Khanna Managing Director & Group Go-Head

[email protected]

Peter Foley Managing Director & Group Go-Head

[email protected]

Technology, Media, & Telecom Investment Banking

Coverage Responsibilities Capital Markets Capabilities

Focus on Middle Market and Mid-Cap Companies operating in the following industries and sectors:

Technology

Software

Services

Hardware

Semiconductors

Media

Digital Marketing & Advertising

Filmed Entertainment & TV

Publishing

TV Broadcasting

TV Networks

Radio Broadcasting

Telecom

Multichannel Video Operators

Towers

Business Process Outsourcing

Wireless

Wireline

Full-service Capital Markets platform staffed with over 200 professionals, offering the following capabilities:

Investment Banking

M&A Advisory

Capital Raising

Strategic Alternatives

Debt Capital Markets (DCM)

Loan Capital Markets:

– Pro Rata

– Institutional

Bond Capital Markets:

– Investment Grade

– High Yield

– Acquisition & Bridge Finance

Securitization & Private Placements

Equity Capital Markets (ECM)

Initial Public Offerings (IPO’s)

Follow-On Offerings

Convertible Debt

Technology, Media & Telecom Group Overview

Curtis Baker Vice President

[email protected]

Michael Ryan Managing Director

[email protected]

Susannah Lunke Director

[email protected]

Experienced Senior Leadership

Over 30 years experience in financial services primarily focusing on Mergers & Acquisitions and corporate finance advisory services

Seventeen years focused on media, telecom, and technology corporate finance and M&A advisory

BA – Colgate University

MBA – Fordham University

Over 30 years of financial services experience with a focus on buy and sell-side Mergers & Acquisitions and capital raises for Middle Market companies

Extensive experience with telecommunications and business services companies

BS – University of Virginia

MBA – Georgia State University

Jeffrey Hoff Managing Director

Alan McClure Managing Director

Jeffrey Hoff Managing Director

[email protected]

Zac Kennedy Associate

[email protected]

Alan McClure Managing Director

[email protected]

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Q4 2017

Total Addressable Market Statistics The EdTech industry is a highly fragmented and consolidating segment, exhibiting heightened M&A activity from strategic and financial acquirers over the past twelve months

Strategic acquisition activity in the first three quarters of 2017 remained similar to the same period in the prior fiscal year

Majority and minority acquisition activity from financial sponsors has increase in the first three quarters of 2017 when compared to the same period in 2016

Deal value has experienced an uptick in 2017, mainly driven by venture deals and large financial M&A transactions

Key EdTech Industry Drivers

Performance, Reporting, & Accountability

− Every Student Succeeds Act (“ESSA”) focuses on reporting outcomes across all domains of data with local control to states, districts, and schools

Parent Engagement & Transparency

− Involvement from parents, teachers, and administrators to close expectation gap

− Leveraging ubiquitous technology (e.g., email, text, smartphones, etc.)

Personalized Learning

− Individualized learning plans for each child targeting academic gaps

− Transition to digital tools generating more student performance data

Districts Consolidating Technology Purchasing

− Schools to consolidate purchasing a single comprehensive/ integrated platform

− Increased demand for platforms offering solutions addressing workflows

Formative Assessments

− Common Core and State standards driving districts to measure mastery of standards throughout the year in addition to end of year high stakes tests

− Formative assessment, integrated w/ data analytics, required for student mastery

Spend Analysis by Vertical

In the year-ended 2017, total EdTech U.S. user spends within the higher education and primary & secondary end-markets are expected to reach $15.2 billion and $11.6 billion, respectively

− Total market expected to reach ~ $26.8 billion in user spending

By 2021, education technology user spending within higher education and primary & secondary end-markets is expected to reach $30.9 billion

− Overall market expected to grow by a CAGR of ~4% from 2017 to 2021

Spend Analysis by Sub-Segment

No specific sub-segment represents more than ~33% of the overall education technology market comprising higher education and primary & secondary education

− EdTech software sub-segment accounts for largest portion of market in expected year-end 2017 (~33%)

− IT Services sub-segment represents second largest share of market (~21%)

The software industry segment is expected to grow at a 2017 to 2021 CAGR of ~7%

Market Insights: Education Technology (“EdTech”)

Source: Gartner, NCES as of 2015, S&P Capital IQ, Wall Street Research

AD Index

EV/EBITDA

trading above

10.0x as of

6/21

EdTech Market User Spending ($ in millions)

EdTech Higher Education User Spending by Sub-Segment ($ in millions)

EdTech Primary & Secondary User Spending by Sub-Segment ($ in millions)

56 & 61MM+ Students

Estimated # of students enrolled in primary & secondary schools in 2017 and by 2025 , respectively

20 & 23MM+ Students

Estimated # of students enrolled in postsecondary institutions in 2017

and by 2025, respectively

1.2T+ Expenditures

Estimated $ volume of expenditures in overall

education industry

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2015 YR 2016 YR 2017 YR 2018 YR 2019 YR 2020 YR 2021 YR

Software IT Services Data Center Systems Devices Telecom Services

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2015 YR 2016 YR 2017 YR 2018 YR 2019 YR 2020 YR 2021 YR

Software IT Services Data Center Systems Devices Telecom Services

$14,032 $14,526 $15,147 $15,764 $16,330 $16,922 $17,513

$10,773 $11,164 $11,619 $12,064 $12,465 $12,883 $13,357

$24,805 $25,690 $26,765 $27,828 $28,795 $29,804 $30,870

2015 YR 2016 YR 2017 YR 2018 YR 2019 YR 2020 YR 2021 YR

Higher Education Primary and Secondary

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Q4 2017

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

Telecom Index Media Index Technology Index S&P 500

(10%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

Telecom Index Media Index Technology Index S&P 500

Sub Sector Indices’ Stock Price Performance

5-Year Share Price Performance

80.9%

45.7%

5-Year EV / Forward EBITDA Performance1

Public Market Valuation Trends

87.5%

21.0%

11.9x

7.8x

11.3x

9.1x

Source: Company Filings, S&P Capital IQ See slide 14 for details on the composition of each subsector index 1MSFT excluded due to incorrect share count

Sub-SectorNumber of

Companies

Median Enterprise Value Median

% Change in Stock Price

Median TEV /

LTM Multiples

Median TEV /

Forward Multiples

$ in millions 1 Year 3 Years Revenue EBITDA Revenue EBITDA

Telecom 16 $42,649.0 3.9% 28.7% 2.6x 8.3x 2.6x 8.2x

Multichannel Video Operators 3 159,263.3 14.3% 0.7% 3.0x 10.8x 3.0x 10.4x

Towers 3 53,585.9 34.1% 41.8% 15.6x 24.3x 12.6x 22.2x

Wireless 4 206,862.9 (5.2%) 26.8% 2.2x 7.4x 2.1x 7.1x

Wireline 4 14,536.8 (53.0%) (76.1%) 1.9x 6.7x 1.9x 6.0x

Fiber 2 2,492.1 9.9% 29.9% 5.8x 15.4x 5.5x 13.5x

Media 22 $8,478.8 (1.3%) (4.9%) 2.4x 9.6x 2.6x 9.4x

TV Broadcasting 5 5,962.6 13.3% 35.6% 2.7x 9.6x 3.0x 9.8x

Radio Broadcasting 2 803.7 43.7% 76.2% 2.4x 11.2x NA NA

Entertainment 3 9,920.4 24.0% 23.2% 2.3x 12.9x 2.1x 13.5x

TV Networks 4 17,021.1 (5.1%) (26.5%) 2.7x 7.8x 2.6x 7.9x

Advertising 8 9,610.2 (9.6%) (6.6%) 1.9x 10.1x 1.9x 8.9x

Technology 16 $35,338.6 29.8% 66.2% 6.0x 17.8x 5.7x 14.4x

Software 5 185,248.4 29.8% 57.1% 4.9x 18.4x 4.8x 13.8x

Payment Processors 6 33,137.3 22.2% 81.3% 4.6x 17.1x 4.7x 15.1x

Semiconductors 5 15,100.5 34.0% 66.2% 6.0x 15.9x 5.7x 13.7x

EdTech Software 5 3,184.1 70.2% 123.8% 6.4x 34.9x 6.2x 25.7x

S&P 500 500 18.9% 27.9% 2.4x 12.2x 2.2x 10.5x

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Q4 2017 Public Company Comparables: Technology

Operating & Trading Statistics ($ in millions, except per-share data)

*Excluded from mean and median Source: Company Filings, S&P Capital IQ

Stock % of 52- Enterprise Value /

Price at Week Market Enterprise LTM Financials Revenue Growth LTM Margins Debt / Price / Revenue EBITDA

12/29/17 High Cap Value Revenue EBITDA '15A-'16E '16E-'17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E

Software

Alphabet Inc. $1,053.40 97.0% $729,458 $633,279 $104,596 $34,441 20.4% 21.3% 59.9% 32.9% 0.1x 35.2x 6.1x 5.8x 18.4x 14.4x

Microsoft Corporation 85.54 97.8% 659,906 615,246 92,560 32,108 5.4% 12.5% 62.5% 34.7% 2.8x 30.2x 6.6x 6.1x 19.2x 15.4x

International Business Machines Corporation 153.42 83.9% 142,035 176,292 76,657 16,839 (2.2%) (1.6%) 46.3% 22.0% 2.7x 12.8x 2.3x 2.2x 10.5x 9.2x

Oracle Corporation 47.28 89.0% 195,720 185,248 38,907 15,143 1.8% 3.4% 58.4% 38.9% 4.0x 20.3x 4.8x 4.8x 12.2x 10.3x

SAP SE 112.32 93.0% 134,660 135,345 27,634 6,959 3.1% 21.4% 69.6% 25.2% 1.0x 30.9x 4.9x 4.8x 19.4x 13.8x

Mean 5.7% 11.4% 59.3% 30.7% 2.1x 25.9x 4.9x 4.7x 15.9x 12.6x

Median 3.1% 12.5% 59.9% 32.9% 2.7x 30.2x 4.9x 4.8x 18.4x 13.8x

Payment Processors

Fidelity National Information Services, Inc. $94.09 97.3% $31,414 $39,907 $9,240 $2,529 40.1% (0.8%) 32.6% 27.4% 3.6x NM 4.3x 4.4x 15.8x 13.2x

First Data Corporation 16.71 86.9% 15,431 36,516 7,991 2,820 1.0% 53.3% 60.5% 35.3% 6.6x 22.0x 4.6x 3.0x 12.9x 12.0x

Alliance Data Systems Corporation 253.48 95.2% 14,004 34,161 3,160 1,503 10.8% 8.7% 22.4% 47.6% 15.6x 27.1x 10.8x 4.4x 22.7x 17.0x

Fiserv, Inc. 131.13 98.3% 27,327 32,113 5,611 1,763 4.8% 2.9% 46.6% 31.4% 2.9x 31.2x 5.7x 5.7x 18.2x 15.8x

Total System Services, Inc. 79.09 98.2% 14,540 17,100 4,787 986 50.0% (19.0%) 27.6% 20.6% 3.0x 35.1x 3.6x 5.1x 17.3x 14.4x

Global Payments Inc. 100.24 95.6% 15,952 20,190 4,277 1,191 30.3% (6.7%) 49.2% 27.9% 4.4x NM 4.7x 5.7x 16.9x 17.4x

Mean 22.8% 6.4% 39.8% 31.7% 6.0x 28.9x 5.6x 4.7x 17.3x 15.0x

Median 20.6% 1.0% 39.6% 29.6% 4.0x 29.2x 4.6x 4.7x 17.1x 15.1x

Semiconductors

Analog Devices, Inc. $89.03 94.7% $32,820 $39,623 $5,108 $2,117 49.3% 11.7% 67.0% 41.5% 3.7x 43.0x 7.8x 6.9x 18.7x 13.8x

Microchip Technology Incorporated 87.88 91.6% 20,556 22,259 3,721 1,398 56.8% 13.8% 59.2% 37.6% 2.2x 36.2x 6.0x 5.7x 15.9x 13.0x

Maxim Integrated Products, Inc. 52.28 94.3% 14,716 13,431 2,310 874 4.6% 3.6% 64.0% 37.8% 1.7x 25.6x 5.8x 5.6x 15.4x 13.7x

Xilinx, Inc. 67.42 89.7% 16,919 15,100 2,430 764 6.1% 5.3% 69.5% 31.4% 2.3x 28.4x 6.2x 6.1x 19.8x 19.3x

ON Semiconductor Corporation 20.94 94.5% 8,882 10,947 5,427 1,170 11.8% 38.1% 36.3% 21.6% 2.5x 22.8x 2.0x 2.0x 9.4x 8.8x

Mean 25.7% 14.5% 59.2% 34.0% 2.5x 31.2x 5.6x 5.3x 15.8x 13.7x

Median 11.8% 11.7% 64.0% 37.6% 2.3x 28.4x 6.0x 5.7x 15.9x 13.7x

EdTech Software

Tyler Technologies, Inc. $177.05 94.1% $6,651 $6,487 $816 $183 27.9% 11.6% 47.4% 22.4% 0.0x NM 7.9x 7.7x 35.4x 25.7x

Blackbaud, Inc. 94.49 90.4% 4,440 4,761 770 138 14.6% 8.1% 54.4% 18.0% 2.4x NM 6.2x 6.0x 34.4x 24.4x

2U, Inc. 64.51 93.1% 3,369 3,184 257 (19) 37.1% 38.5% 80.6% NM NM NM 12.4x 11.2x NM 300.1x *

Chegg, Inc. 16.32 97.9% 1,770 1,567 245 (6) (15.7%) (0.8%) 67.2% NM 0.0x NM 6.4x 6.2x NM 34.8x

Instructure, Inc. 33.10 90.4% 1,002 935 147 (47) 51.5% 41.1% 71.2% NM 0.0x NM 6.4x 6.0x NM NM

Mean 23.1% 19.7% 64.2% 20.2% 0.6x NM 7.9x 7.4x 34.9x 28.3x

Median 27.9% 11.6% 67.2% 20.2% 0.0x NM 6.4x 6.2x 34.9x 25.7x

Mean 19.5% 12.7% 54.9% 30.8% 3.1x 28.6x 6.0x 5.5x 18.5x 16.1x

Median 11.8% 8.7% 59.2% 31.4% 2.6x 29.3x 6.0x 5.7x 17.8x 14.4x

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Q4 2017 Public Company Comparables: Media






TV Broadcasting

TEGNA Inc. $14.08 52.8% $3,030 $5,963 $3,297 $1,077 9.5% (23.8%) 64.9% 32.7% 3.1x 8.2x 1.8x 2.3x 5.5x 7.4x

Sinclair Broadcast Group, Inc. 37.85 87.9% 3,851 7,271 2,720 848 23.3% (0.0%) 51.6% 31.2% 4.8x 14.6x 2.7x 2.7x 8.6x 9.0x

Nexstar Media Group, Inc. 78.20 97.2% 3,563 7,827 2,088 697 23.1% 118.4% 60.4% 33.4% 6.3x 28.9x 3.7x 3.2x 11.2x 9.7x

Gray Television, Inc. 16.75 95.7% 1,474 3,139 887 327 36.0% 7.6% 39.7% 36.9% 5.6x 9.2x 3.5x 3.6x 9.6x 11.3x

The E. W. Scripps Company 15.63 64.7% 1,280 1,552 889 140 31.8% (3.3%) 36.3% 15.7% 2.8x NM 1.7x 1.7x 11.1x 14.0x

Mean 24.7% 19.8% 50.6% 30.0% 4.5x 15.2x 2.7x 2.7x 9.2x 10.3x

Median 23.3% (0.0%) 51.6% 32.7% 4.8x 11.9x 2.7x 2.7x 9.6x 9.7x

Radio Broadcasting

Urban One, Inc. $1.75 50.0% $81 $1,030 $445 114 1.2% NA 69.2% 25.7% 8.7x NM 2.3x NA 9.0x NA

Beasley Broadcast Group, Inc. 13.40 73.7% 386 577 227 43 29.0% NA 25.8% 18.9% 4.8x 6.3x 2.5x NA 13.4x NA

Mean 15.1% NA 47.5% 22.3% 6.8x 6.3x 2.4x NA 11.2x NA

Median 15.1% NA 47.5% 22.3% 6.8x 6.3x 2.4x NA 11.2x NA

Entertainment

Twenty-First Century Fox, Inc. $34.53 96.3% $63,640 $78,539 $28,996 7,105 4.3% 2.2% 37.1% 24.5% 2.8x 21.3x 2.7x 2.7x 11.1x 10.8x

Live Nation Entertainment, Inc. 42.57 90.6% 8,803 9,920 9,589 670 15.3% 8.2% 26.3% 7.0% 3.5x NM 1.0x 1.1x 14.8x 14.0x

Lions Gate Entertainment Corp. 33.81 97.3% 6,812 9,131 3,955 416 36.4% 36.9% 44.1% 10.5% 5.9x 31.8x 2.3x 2.1x 21.9x * 15.3x

Mean 18.7% 15.8% 35.8% 14.0% 4.0x 26.5x 2.0x 2.0x 12.9x 13.3x

Median 15.3% 8.2% 37.1% 10.5% 3.5x 26.5x 2.3x 2.1x 12.9x 14.0x

TV Networks

Viacom, Inc. $30.81 65.9% $12,596 $22,658 $13,263 $2,966 6.2% 0.5% 45.0% 22.4% 3.7x 6.6x 1.7x 1.7x 7.6x 7.1x

Discovery Communications, Inc. 22.38 74.0% 12,200 20,096 6,383 2,524 1.6% 4.9% 62.7% 39.5% 5.8x 11.8x 3.1x 2.9x 8.0x 8.0x

Scripps Networks Interactive, Inc. 85.38 96.5% 11,092 13,946 3,401 1,525 12.7% 5.8% 67.6% 44.8% 1.7x 18.3x 4.1x 3.9x 9.1x 9.5x

AMC Networks Inc. 54.08 80.0% 3,346 6,169 2,808 876 6.8% 4.4% 53.5% 31.2% 3.6x 10.7x 2.2x 2.1x 7.0x 7.1x

Mean 6.8% 3.9% 57.2% 34.5% 3.7x 11.9x 2.8x 2.7x 7.9x 7.9x

Median 6.5% 4.6% 58.1% 35.4% 3.7x 11.3x 2.7x 2.5x 7.8x 7.5x

Advertising

WPP plc $18.13 69.6% $23,018 $29,650 $19,814 $3,570 (1.5%) 14.2% 86.3% 18.0% 2.7x 10.3x 1.5x 1.5x 8.3x 8.7x

Omnicom Group Inc. 72.83 83.3% 16,790 20,643 15,339 2,327 1.9% (1.2%) 18.1% 15.2% 2.1x 14.5x 1.3x 1.4x 8.9x 8.9x

Publicis Groupe S.A. 68.02 82.1% 15,374 17,775 11,207 1,969 (1.5%) 11.7% 38.7% 17.6% 1.9x NM 1.6x 1.5x 9.0x 8.7x

The Interpublic Group of Companies, Inc. 20.16 78.4% 7,834 9,493 7,806 1,105 3.1% 1.9% 35.3% 14.2% 1.9x 13.9x 1.2x 1.2x 8.6x 8.2x

Lamar Advertising Company 74.24 93.8% 7,308 9,728 1,530 651 10.9% 3.5% 65.1% 42.5% 3.8x 23.5x 6.4x 6.3x 14.9x 14.5x

Outfront Media Inc. 23.20 83.2% 3,216 5,438 1,059 388 0.0% 0.3% 45.2% 36.6% 5.7x 27.6x 5.1x 3.6x 14.0x 12.2x

Endurance International Group Holdings, Inc. 8.40 85.3% 1,205 3,093 1,175 277 49.9% 4.7% 50.5% 23.5% 7.1x NM 2.6x 2.7x 11.2x 9.5x

Web.com Group, Inc. 21.80 84.0% 1,063 1,720 748 152 30.7% 6.4% 68.9% 20.3% 4.4x 44.4x 2.3x 2.3x 11.3x 9.0x

Mean 11.7% 5.2% 51.0% 23.5% 3.7x 22.4x 2.8x 2.5x 10.8x 10.0x

Median 2.5% 4.1% 47.8% 19.2% 3.3x 19.0x 1.9x 1.9x 10.1x 8.9x

Mean 15.7% 10.2% 48.7% 25.5% 4.0x 17.8x 2.6x 2.5x 10.2x 10.1x

Median 11.8% 4.4% 45.1% 24.0% 3.8x 14.6x 2.4x 2.3x 9.6x 9.5x

7


Q4 2017


Public Company Comparables: Telecom





Multichannel Video Operators

Comcast Corporation $40.05 95.0% $187,185 $250,221 $83,636 $28,419 7.9% 5.3% 70.1% 34.0% 2.3x 19.2x 3.0x 3.0x 8.8x 8.9x

Charter Communications, Inc. 335.96 82.2% 83,946 159,263 41,254 14,781 197.3% * 43.6% 52.8% 35.8% 4.6x NM 3.9x 3.8x 10.8x 10.4x

DISH Network Corporation 47.75 71.8% 22,269 37,148 14,542 2,963 0.2% (3.0%) 33.0% 20.4% 5.5x 23.2x 2.6x 2.5x 12.5x 12.1x

Mean 4.0% 15.3% 52.0% 30.1% 4.1x 21.2x 3.1x 3.1x 10.7x 10.5x

Median 4.0% 5.3% 52.8% 34.0% 4.6x 21.2x 3.0x 3.0x 10.8x 10.4x

Towers

American Tower Corporation $142.67 91.9% $61,185 $81,393 $6,409 $3,861 21.3% 14.3% 69.0% 60.2% 5.0x NM 12.7x 12.3x 21.1x 20.2x

Crown Castle International Corp. 111.01 96.6% 45,101 53,586 3,436 2,206 7.0% 6.9% 63.4% 64.2% 6.9x NM 15.6x 12.8x 24.3x 22.4x

SBA Communications Corporation 163.36 93.9% 19,202 28,021 1,603 1,119 (0.3%) 5.0% 73.6% 69.8% 8.0x NM 17.5x 16.3x 25.0x 23.5x

Mean 9.3% 8.7% 68.7% 64.8% 6.6x NM 15.3x 13.8x 23.5x 22.0x

Median 7.0% 6.9% 69.0% 64.2% 6.9x NM 15.6x 12.8x 24.3x 22.4x

Wireless

Verizon Communications Inc. $52.93 96.5% $215,925 $330,721 $124,419 $43,975 (4.3%) (2.6%) 59.2% 35.3% 2.7x 13.6x 2.7x 2.7x 7.5x 7.4x

AT&T Inc. 38.88 90.4% 238,684 355,947 160,711 48,829 11.6% (1.5%) 53.4% 30.4% 3.4x 18.7x 2.2x 2.2x 7.3x 6.8x

T-Mobile US, Inc. 63.51 92.2% 52,838 83,005 39,055 10,612 16.2% 8.3% 56.3% 27.2% 2.9x 24.9x 2.1x 2.1x 7.8x 7.8x

Sprint Corporation 5.89 61.0% 23,562 55,528 33,172 11,176 3.6% 0.4% 57.9% 33.7% 3.4x NM 1.7x 1.7x 5.0x 5.1x

Mean 6.8% 1.1% 56.7% 31.6% 3.1x 19.0x 2.2x 2.2x 6.9x 6.8x

Median 7.6% (0.5%) 57.1% 32.0% 3.1x 18.7x 2.2x 2.1x 7.4x 7.1x

Wireline

CenturyLink, Inc. $16.68 60.4% $17,831 $42,649 $16,622 $5,941 (2.4%) (5.5%) 57.0% 35.7% 4.2x 28.7x 2.6x 2.6x 7.2x 7.2x

Frontier Communications Corporation 6.76 11.8% 530 18,014 9,320 3,645 59.5% 3.1% 61.6% 39.1% 4.9x NM 1.9x 2.0x 4.9x 5.0x

Windstream Holdings, Inc. 1.85 22.2% 338 11,059 5,664 1,806 (6.6%) 10.0% 47.6% 31.9% 6.0x NM 2.0x 1.9x 6.1x 5.6x

Cincinnati Bell Inc. 20.85 85.3% 880 2,098 1,147 282 1.5% (3.6%) 43.8% 24.6% 4.0x 22.4x 1.8x 1.8x 7.4x 7.2x

Mean 13.0% 1.0% 52.5% 32.8% 4.8x 25.6x 2.1x 2.1x 6.4x 6.2x

Median (0.4%) (0.2%) 52.3% 33.8% 4.5x 25.6x 1.9x 1.9x 6.7x 6.4x

Fiber

Zayo Group Holdings, Inc. $36.80 98.8% $9,103 $14,454 $2,338 $1,061 27.8% 13.6% 63.9% 45.4% 5.3x NM 6.2x 5.8x 13.6x 11.6x

Cogent Communications Holdings, Inc. 45.30 82.6% 2,028 2,492 465 146 9.3% 11.5% 58.1% 31.3% 4.9x NM 5.4x 5.1x 17.1x 14.8x

Mean 18.5% 12.5% 61.0% 38.3% 5.1x NM 5.8x 5.4x 15.4x 13.2x

Median 18.5% 12.5% 61.0% 38.3% 5.1x NM 5.8x 5.4x 15.4x 13.2x

Mean 10.2% 6.6% 57.5% 38.7% 4.6x 21.5x 5.2x 4.9x 11.7x 11.0x

Median 7.0% 5.1% 58.0% 34.7% 4.7x 22.4x 2.6x 2.6x 8.3x 8.4x

8


Q4 2017

$587

$700 $704$664

$612 $641 $618

$688 $715 $733 $739

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Cu

mu

lati

ve

Dry

Po

wd

er

($ i

n b

illi

on

s)

2017

2016

2015

2014

2013

2012

2011

2010

2009

Overhang by Vintage

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

U.S. corporate cash balances remain at record levels and are driving activity in strategic buyer M&A

Historically, M&A cycles have not extended past seven years; 2017 was year eight of the current cycle

2017 demonstrated signs that the buyout cycle is slowing, however, numerous positive drivers remain

− The public equity bull market continues to support M&A activity and elevated valuation multiples

Note: This data represents the entire U.S. market (all industries) Source: PitchBook, S&P Capital IQ, and S&P Capital IQ LCD

0

4,000

8,000

12,000

16,000

20,000

24,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Under $25mm $25 to $500mm Above $500mm Undisclosed

Transaction Volume

Recession Recession

▼ 9% ▲30%

S&P 500 – Aggregate Corporate Cash & Equivalents

Over $1.7 trillion

Global Private Equity Capital Overhang by Year

Private equity firms continue to sit on a built up level of dry powder, driving a need to deploy it for acquisitions

Over $735 billion

U.S. M&A Volume and Valuation Trends M&A activity remains elevated, driven by the public equity market’s thirst for growth and excess capital

($ in billions) ($ in billions)

9


Q4 2017

M&A activity has experienced a slight slowdown in 4Q 2017 from a an deal volume perspective, but has increased in in announced aggregate value Q-o-Q from 3Q 2017

The TMT sector’s M&A growth was driven by large transaction announcements − The Walt Disney Company’s

announced acquisition of Twenty-First Century Fox on December 14, 2017 for $70.1 billion

− Broadcom Limited’s announced acquisition of QUALCOMM Incorporated on November 6, 2017 at an enterprise value of $89.9 billion

Deal volume was slightly lower than 4Q 2016 and slightly lower when compared to the previous quarter

The average FYR 2017 deal multiple for middle market transactions edged higher, while the large transaction average multiple decreased when compared to 2016 − Both averages still remain over

10.0x Strategic buyers continue to

aggressively pursue transactions as a means for growth

Financial buyers have capital to deploy

U.S. TMT M&A Announced Deal Value ($ in billions)

U.S. TMT M&A Announced Deal Volume

U.S. TMT M&A Closed Deal Average EV / EBITDA Multiple

Source: Fifth Third Securities, S&P Capital IQ Note: Middle Market defined as transactions with disclosed deal values less than $1 billion. EV – Enterprise Value NA – Not Available

M&A Trends TMT Specific Activity

$0

$50

$100

$150

$200

$250

1Q

201

0

2Q

201

0

3Q

201

0

4Q

201

0

1Q

201

1

2Q

201

1

3Q

201

1

4Q

201

1

1Q

201

2

2Q

201

2

3Q

201

2

4Q20

12

1Q

201

3

2Q

201

3

3Q

201

3

4Q

201

3

1Q

201

4

2Q

201

4

3Q20

14

4Q

201

4

1Q

201

5

2Q

201

5

3Q

201

5

4Q

201

5

1Q

201

6

2Q

201

6

3Q

201

6

4Q

201

6

1Q

201

7

2Q

201

7

3Q

201

7

4Q

201

7

Middle Market >$1 Billion

0

200

400

600

800

1,000

1Q

201

0

2Q

201

0

3Q

201

0

4Q

201

0

1Q

201

1

2Q

201

1

3Q

201

1

4Q

201

1

1Q

201

2

2Q

201

2

3Q

201

2

4Q

201

2

1Q20

13

2Q

201

3

3Q

201

3

4Q

201

3

1Q

201

4

2Q

201

4

3Q

201

4

4Q

201

4

1Q

201

5

2Q

201

5

3Q

201

5

4Q

201

5

1Q

201

6

2Q

201

6

3Q

201

6

4Q20

16

1Q

201

7

2Q

201

7

3Q

201

7

4Q

201

7

12.9x 13.2x 13.2x 13.1x 14.2x13.0x

10.9x13.4x

10.3x

14.5x11.8x 10.9x

16.1x17.7x

13.9x11.5x

0.0x

5.0x

10.0x

15.0x

20.0x

2010 2011 2012 2013 2014 2015 2016 2017

Middle Market >$1 Billion

10


Q4 2017

Technology, Media, and Telecom ($ in millions)

Source: Company Filings, S&P Capital IQ; PitchBook

M&A Trends Sector Transaction Detail

Announced Enterprise LTM LTM

Date Acquirer Target Value (EV) Revenue EBITDA Revenue EBITDA

Telecom

11/27/2017 Zayo Group Holdings, Inc. (NYSE:ZAYO) Spread Networks, LLC $127 NA NA - -

11/27/2017 RiverStreet Management Services, LLC Peoples Mutual Telephone Company and Peoples Mutual Long Distance Company $21 NA NA - -

10/31/2017 American Tower Corporation (REIT) (NYSE:AMT) Over 500 Sites in United States $465 NA NA - -

10/30/2017 SBA Communications Corporation (NasdaqGS:SBAC) 35 Communication Sites $24 NA NA - -

8/21/2017 GTT Americas, LLC Transbeam, Inc. $28 NA NA - -

8/1/2017 Verizon Communications Inc. (NYSE:VZ) WideOpenWest, Inc., Fiber-Optic Network Assets $225 NA NA - -

7/31/2017 RigNet, Inc. (NasdaqGS:RNET) Energy Satellite Services, LLC $22 NA NA - -

7/24/2017 SpeedCast International Limited (ASX:SDA) UltiSat Inc. $100 $60 $9 1.7x 11.6x

7/18/2017 Crown Castle International Corp. (NYSE:CCI) Lightower Fiber Networks LLC $7,100 NA NA - -

7/10/2017 Cincinnati Bell Inc. (NYSE:CBB) Hawaiian Telcom Holdco, Inc. (NasdaqGS:HCOM) $662 $380 $103 1.7x 6.4x

Media

12/14/2017 The Walt Disney Company (NYSE:DIS) Twenty-First Century Fox, Inc. (NasdaqGS:FOXA) $70,171 $28,996 $7,089 2.4x 9.9x

12/5/2017 Cineworld Group plc (LSE:CINE) Regal Entertainment Group (NYSE:RGC) $5,925 $3,114 $601 1.9x 9.9x

12/4/2017 Discovery Communications, Inc. (NasdaqGS:DISC.A) The Oprah Winfrey Network, LLC $70 NA NA - -

11/26/2017 Meredith Corporation (NYSE:MDP) Time Inc. (NYSE:TIME) $2,813 $2,884 $388 1.0x 7.2x

9/26/2017 Educational Media Foundation, Inc. KSWD(FM), KSWD-FM2, KSOQ-FM, WGGI(FM), And WGGI-FM1 $58 NA NA - -

9/22/2017 Round Hill Music, LLC Carlin America, Inc. $245 NA NA - -

9/18/2017 Standard General L.P. National CineMedia, Inc. (NasdaqGS:NCMI) $1,620 $425 $188 3.8x 8.6x

9/13/2017 HC2 Holdings, Inc. (NYSE:HCHC) Class A and Low Power Television Stations $29 NA NA - -

8/30/2017 RTL Group SA (BDL:006146252) SpotXchange, Inc. $404 NA NA - -

8/1/2017 The E. W. Scripps Company (NYSE:SSP) Katz Broadcasting, LLC $307 NA NA - -

7/31/2017 Discovery Communications, Inc. (NasdaqGS:DISC.A) Scripps Networks Interactive, Inc. (NasdaqGS:SNI) $14,920 $3,472 $1,604 4.3x 9.3x

Technology

12/13/2017 Target Corporation (NYSE:TGT) Shipt, LLC $550 NA NA - -

12/11/2017 Iron Mountain Incorporated (NYSE:IRM) IO Data Centers, LLC $1,375 $144 NA 9.6x -

11/30/2017 Altran US Aricent Inc. $2,000 $687 $192 2.9x 10.4x

11/29/2017 Aristocrat Technologies, Inc. Big Fish Games, Inc. $990 $458 $83 2.2x 11.9x

11/28/2017 Appen Limited (ASX:APX) Leapforce, Inc. $80 $47 $9 1.7x 9.1x

11/27/2017 Thoma Bravo, LLC Barracuda Networks, Inc. (NYSE:CUDA) $1,406 $367 $33 3.8x 43.1x

11/27/2017 Marlin Equity Partners, LLC Bazaarvoice, Inc. (NasdaqGS:BV) $524 $206 NM 2.5x NM

11/20/2017 Marvell Technology Group Ltd. (NasdaqGS:MRVL) Cavium, Inc. (NasdaqGS:CAVM) $6,643 $950 $180 7.0x 36.8x

11/6/2017 Broadcom Limited (NasdaqGS:AVGO) QUALCOMM Incorporated (NasdaqGS:QCOM) $89,865 $22,291 $6,472 4.0x 13.9x

10/26/2017 Fintrax Group Holdings Ltd. Planet Payment, Inc. (NasdaqCM:PLPM) $246 $53 $13 4.6x -

10/26/2017 Elliott Management Corporation; Elliott International Capital Advisors Inc. Gigamon Inc. (NYSE:GIMO) $1,484 $303 NA 4.9x -

10/23/2017 Cisco Systems, Inc. (NasdaqGS:CSCO) BroadSoft, Inc. (NasdaqGS:BSFT) $1,917 $362 $24 5.3x 80.7x

10/20/2017 First Data Corporation (NYSE:FDC) BluePay, Inc. $760 NA NA - -

10/17/2017 Siris Capital Group, LLC IntraLinks Holdings, Inc. $1,021 $296 $22 3.5x 46.1x

10/8/2017 bpost SA/NV (ENXTBR:BPOST) Radial, Inc. $820 NA NA - -

9/28/2017 Dassault Systèmes Simulia Corp. Exa Corporation $386 $73 $1 5.3x NM

9/18/2017 Itron, Inc. (NasdaqGS:ITRI) Silver Spring Networks, Inc. (NYSE:SSNI) $958 $452 NM 2.1x NM

8/29/2017 Vista Equity Partners Education Advisory Board $1,550 NA NA - -

11


Q4 2017

U.S. Private Equity deal flow was down during the fourth quarter of 2017 on both a volume and deal value basis

Several factors may be fueling the reluctance to complete deals, with two of the biggest centering on price and quality

− Pricing pressures persist with median deal multiples remaining above 10.0x, and the number of viable targets is likely lower than normal following the record levels in 2015 and 2016 on both the strategic and PE sides

− Low yields and low returns on cash holdings may increase the pressure firms feel who want committed capital put to work

Technology, Media, and Telecom capital invested in 4Q 2017 continued to be driven by large and middle market deals, including:

− Thoma Bravo’s $1.4 billion go-private acquisition of Barracuda Networks, Inc.

− Siris Capital Group’s $1.0 billion acquisition of IntraLinks Holdings, Inc.

Overall U.S. Private Equity Deal Flow ($ in billions)

Source: Fifth Third Securities, PitchBook ND – No Transaction Values Disclosed *4Q17 preliminary PitchBook data

Private Equity Activity

U.S. TMT Private Equity Deal Flow ($ in billions)

U.S. TMT Private Equity Exits ($ in millions)

$190 $190$168 $162

$309$330

$205

$344

81 107134 141

198 202 206

283

2010 2011 2012 2013 2014 2015 2016 2017

Median Deal Size ($) # of Exits

$26 $39

$51 $72

$54 $53

$174 $74

418477 512 537

624 658 686781

2010 2011 2012 2013 2014 2015 2016 2017

Capital Invested ($) # of Deals Closed

0

500

1,000

1,500

$0

$50

$100

$150

$200

$250

1Q

11

2Q11

3Q11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

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2Q

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3Q

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4Q

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1Q

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3Q

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4Q

16

1Q

17

2Q17

3Q17

4Q

17*

Deal Value ($) # of Deals Closed

12


Q4 2017

Note: This data represents the entire U.S. middle market (all industries) Note: The middle market is defined as deal size < $100 million and borrower sales < $500 million [1] Includes both non-sponsored and sponsored transactions; sufficient data not available for MM NR loans in 1Q15 and 1Q17 Source: Bloomberg, S&P Capital IQ LCD, and Thomson Reuters LPC

U.S. Middle Market Loan Market Trends

Loan Volume: Low Level of Supply Continues Yields Decline for Middle Market B-rated & Non-rated Issuers [1]

Middle Market Covenant-Lite Volume Declines in 3Q 2017 Leverage Multiples Remain Aggressive on Middle Market LBOs

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

Non-Sponsored Sponsored($ in billions)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

MM B-rated MM NR

5.97%

5.90%

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

MM Covenant-Lite Volume($ in billions)

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

1st Lien Debt to EBITDA Junior Debt to EBITDA

13


Q4 2017 Economic Dashboard

Retail Gas Prices Consumer Sentiment Housing Starts

Source: Energy Information Administration Source: University of Michigan

National Unemployment Rate Real GDP Growth Additions to Non-Farm Payrolls

Housing Starts

Source: Bureau of Economic Analysis Source: Bureau of Labor Statistics Source: Bureau of Labor Statistics

Source: United States Census Bureau

(in thousands of employees)

(in thousands of units)

2.3%2.0%

2.6%

2.0%

0.9% 0.8%1.4%

3.5%

2.1%

1.4%

2.6%3.0%

4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

'15 '16 '170

100

200

300

400

750

850

950

1,050

1,150

1,250

1,350

4.0%

5.0%

6.0%

75

80

85

90

95

100

105

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

14


Q4 2017 Notes & Definitions

S&P 500 Index- A broad index that includes American Companies. EBITDA- A company's earnings before interest, taxes, depreciation, and amortization, is an accounting measure calculated using a company's net earnings, before interest expenses, taxes, depreciation and amortization are subtracted, as a proxy for a company's current operating profitability. Dry Powder- Refers to cash reserves kept on hand to cover future obligations or to purchase assets. GDP- Gross domestic product is the market value of the goods and services produced by labor and property located in the United States Consumer Sentiment Index- The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan. The index is normalized to have a value of 100 in December 1964 National Unemployment Rate- the percentage of the total labor force that is unemployed but actively seeking employment and willing to work. Non-Farm Payroll- Nonfarm payroll employment is a compiled name for goods, construction and manufacturing companies in the US. It does not include farm workers, private household employees, non-profit organization employees, or government employees . It is an economic indicator released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labor market. Housing Starts- are the number of new residential construction projects that have begun during any particular month. The Economist- offers authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them LBO -- leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. Industrial Production Index (IPI)- is an economic indicator published by the Federal Reserve Board of the United States that measures the real production output of manufacturing, mining, and utilities Capital Goods Orders. Covenant-lite loans- means that debt is being issued, both personally and commercially, to borrowers with less restrictions on collateral, payment terms, and level of income. IRR-Internal Rate of Return. Composition of Public Company Indices From Slide 4: Telecom: CHTR, CMCS.A, DISH, AMT, SBAC, CCI, VZ, T, TMUS, S, CTL, FTR, CBB, WIN, ZAYO, CCOI, LMOS Media: NXST, SBGI, GTN, SSP, TGNA, ROIA.K, BBGI, FOXA, LGF.A, LYV, AMCX, VIAB, DISC.A, SNI, OMC, IPG, LSE:WPP, ENXTPA:PUB, WEB, EIGI, OUT, LAMR Technology: GOOGL, MSFT, ORCL, IBM, DB:SAP, FISV, FIS, TSS, GPN, FDC, ADS, ADI, XLNX, MCHP, MXIM, ON, TYL, BLKB, TWOU, CHGG, INST

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