Cloud Valuations in the Web Hosting SaaS industry - A macro look on how concerns will change the face of the Web Hosting Industry and spur valuations. These slides are from HostingCon 2010 - Austin, Texas - Presented by Tom Millitzer President of Millitzer Capital 239-282-5550

1. Tom Millitzer, President - NCC
Tom Millitzer – President
NCC International
Cloud
Telecom
Valuations
MatriXIn A New

2. Tom Millitzer, President - NCC
Tom Millitzer – President
NCC International
 Internet M&A Firm Founded 1994
 Over 300 Completed Assignments
 Sold our first Hosting Firm in 1997
 Represent Selers

3. Tom Millitzer, President - NCC
Tom Millitzer – President
NCC International
I want to do business
with you....
tm@com-broker.com

4. Tom Millitzer, President - NCC
What we will do today…
 Valuation Theory in the 4th
and 6th
Dimension
 Deals
 Cloud Valuation and the New Matrix
 Where does this Cloud between Internet and Telecom…
 Deal Strategy Timing

5. Tom Millitzer, President - NCC
The provider…End user. . .

6. Tom Millitzer, President - NCC
Rule of 4 – Valuation Theory
 Multiple of EBITDA
 Multiple of Revenues

7. Tom Millitzer, President - NCC
…. Operating in the 4th
Dimension
Classic “Shared Hosting” 1X Annual Revenues
.25 X 4 = 1
The base acquisition should pay back in 4 years.
25% EBITDA

8. Operating in SYNERGY Dimension
• SYNERGY………

9. Tom Millitzer, President - NCC
… WE Reduce Costs
… WE Build On Our Efficiencies
… WE Leverage Assets

10. Tom Millitzer, President - NCC
…. WE Operate in the 6th
Dimension
6 x EBITDA = 4 x Post Synergy
• Synergy should move most deals to
a 40% Accretive EBITDA

11. Tom Millitzer, President - NCC
…. Operating in the 6th
Dimension
Tex
t
4 X 6 X

12. Tom Millitzer, President - NCC
…base 4 to 6 X EBITDA Valuation Range
4-6 EBITDA is often the “comfort” or “negotiating start range ”
The greater the synergy the greater outcome and possibly the
new decent “Inverted Synergy” outcome.

13. Tom Millitzer, President - NCC
…base 4 to 6 X EBITDA Valuation Range
is the floor for Cloud services

14. Tom Millitzer, President - NCC
…ENOUGH …
We want to look at some real
deals…

15. Tom Millitzer, President - NCC
… March 2010 TDS acquires

16. Tom Millitzer, President - NCC
– (NYSE:TDS, TDS.S)
• 8th
Largest Telephone Company
• 750 thousand customers
• $5 billion in annual revenues
• $670 million cash on hand.
• Visi – Managed Hosting – Cloud entrant
• $10-12 million Annual Revenues –

17. Tom Millitzer, President - NCC
…TDS / Visi --- the deal
• $17.5 Million Cash
• 1.45 to 1.75 X annual revenues
• 5.8 X EBITDA (assuming $12m rev X 25%)
• $17.5 Million Cash
• 1.45 to 1.75 X annual revenues
• 5.8 X EBITDA (assuming $12m rev X 25%)
Signal Hill - Represented Visi

18. Tom Millitzer, President - NCC
…TDS / Visi deal - revealed
• - Visi has been transitioning - ISP to Hosting Company.• - Visi has been transitioning - ISP to Hosting Company.
- Revenues 50% broadband - 50% Hosting Related.
Hosting portion possibly: 2X Annual Revenues
8X EBITDA
May have been higher.
- Visi launched Cloud in December 2009

19. Tom Millitzer, President - NCC
…TDS / Visi –….
• - They speak the same language.• - They speak the same language.
- TDS acquired product line to sell into 200,000 (est.) SMB’s
- A product to increase customer stickiness and loyalty.
- TDS understands DSL and Broadband - Will achieve synergies.
- TDS obtained a product line outside of PUC rate regulation.

20. Tom Millitzer, President - NCC
…Visi deal – great timing….
- Total tax savings up to $1,940,000 – 11.1% of the deal.
- $20 million to obtain the same result as of January 1, 2011

21. Tom Millitzer, President - NCC
…8x8, Inc. Acquires Central Host – May
2010

22. Tom Millitzer, President - NCC
• (Nasdaq:EGHT)
• VOIP Company
• 20,000 SMBs (avg rev - $250/mo.)
• $63 million annual rev (ttm)
• $17 million cash on hand.
Central Host – Managed Hosting
$1 million Annual Revenues –
Avg account $2,300/mo.

23. Tom Millitzer, President - NCC
…8x8 / Central Host --- the deal
• $1.6 Million
• 1.6 X annual revenues
• 6.4 X EBITDA
• $1.6 Million
• 1.6 X annual revenues
• 6.4 X EBITDA
NCC International - Represented Central Host

24. Tom Millitzer, President - NCC
……what 8x8 acquired…
- 8x8 acquired product line to sell into 20,000 SMB’s
- A product to increase customer stickiness and loyalty.
- Leverage a great sales organization.
- Increase margins and increase Avg. Rev.

25. Tom Millitzer, President - NCC
…Savvis Acquires Fusepoint –
May/June 2010

26. Tom Millitzer, President - NCC
(Nasdaq:SVVS)
• IT – Cloud – Managed – Colo - Bandwidth
• 4,200 IT customers – Likes vertical markets
• $870 million in annual revenues
• $146 million cash on hand. (3-31-10)
• 25% EBITDA
Fusepoint –
- Managed Hosting – Cloud entrant - Toronto
- $47.5 million Annual Revenues –
- 50% managed servers, 30% Colo, 20% App Services
- 25% EBITDA

27. Tom Millitzer, President - NCC
…Savvis / Fusepoint --- the deal
Signal Hill - Represented Fusepoint
• $124.5 M Cash transaction
• $47.5 M Annual
Revenues
• 2.62 X Annual Revenues
• 10.4 X EBITDA

28. Tom Millitzer, President - NCC
……what Savvis acquired…
- Savvis has a large vertical Financial market sector, lucrative…
- Fusepoint – right place – great reputation – right time.
- Wanted immediate Canada expansion…Toronto financial hub.
- Savvis not sure what to do w/ SaaS
- Savvis stated: “near” immediate $8 million reduction in
costs – REALLY 6-7 EBITDA? (vs 10.4)

29. Tom Millitzer, President - NCC
• (NYSE:CBB
• $525 million cash transaction
• Data Center deal –
• 12.5X EBITDA
• 9X rev
• 163,000 sq ft of datacenter @ $3220 per sq ft.
• (NYSE:CBB
• $525 million cash transaction
• Data Center deal –
• 12.5X EBITDA
• 9X rev
• 163,000 sq ft of datacenter @ $3220 per sq ft.
Jan 2008--Cincinnati Bell acquired GramTel USA, a disaster recovery,, data
backup and co-location services. in a transaction valued at approximately
$20 million. Est – 3.5X annual revenues.
Acquires CyrusOne

30. Tom Millitzer, President - NCC
And just to note…the market shift…

31. Tom Millitzer, President - NCC
....the Cloud today –
The Cloud will create
what I term…..

32. Tom Millitzer, President - NCC
…Inverted Synergy Paradigm

33. Tom Millitzer, President - NCC
…. Inverted Synergy Paradigm
WHERE...
• Synergy improves my Base EBITDA
• The acquisition dramatically
improves my base business.
• My business experiences a true
paradigm shift.

34. Tom Millitzer, President - NCC
… U Reduce OUR Costs
… WE Build On YOUR Efficiencies
… WE Reconfigure OUR Assets
…WHERE

35. Tom Millitzer, President - NCC
Where is that 4 year Payback now?

36. Tom Millitzer, President - NCC
- Growth like this equals =
Great
Valuations......

37. Tom Millitzer, President - NCC
Visit go to the press
release section of
www.com-broker.com
Want more
detail?

38. Tom Millitzer, President - NCC
Thank You
Please Fill out the Comment Form
@ HostingCon Call or Text 239-938-6566
tomm@com-broker.com
www.com-broker.com
239-282-5550