Looking for Catherine Becks
Lazystudent101
20200429024149fin335_group.xlsxTitle Page
| This spreadsheet supports STUDENT analysis of the case “OutReach Networks: First Venture Round” (UVA-F-1683). | |
| This spreadsheet was prepared by Professor Susan Chaplinsky. Copyright © 2012 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. For customer service inquiries, send an e-mail [email protected]. No part of this publication may be reproduced, stored in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. | |
| Rev. May 15, 2017 | |
Ex.1-Projections
| Financial Performance and Projections | |||||||||||
| (dollars in millions) | |||||||||||
| 2009 | 2010 | 2011 | 2012P | 2013P | 2014P | 2015P | 2016P | 2017P | |||
| Revenue | $9.00 | $22.00 | $63.00 | $137.00 | $198.00 | $260.00 | $335.00 | $425.00 | $525.00 | ||
| Year-on-year growth | 144% | 186% | 117% | 45% | 31% | 29% | 27% | 24% | |||
| COGS | $4.20 | $10.90 | $37.20 | $82.40 | $117.10 | $153.40 | $194.30 | $242.30 | $290.00 | ||
| Gross Profit | $4.80 | $11.10 | $25.80 | $54.60 | $80.90 | $106.60 | $140.70 | $182.70 | $235.00 | ||
| Operating | Expenses | $2.79 | $4.32 | $8.50 | $15.76 | $20.78 | $29.90 | $41.85 | $57.35 | $77.15 | |
| EBITDA | $2.01 | $6.78 | $17.30 | $38.84 | $60.12 | $76.70 | $98.85 | $125.35 | $157.85 | ||
| EBITDA margin | 22.3% | 30.8% | 27.5% | 28.4% | 30.4% | 29.5% | 29.5% | 29.5% | 30.1% | ||
| Depreciation and Amortization | $0.05 | $0.11 | $0.32 | $0.69 | $0.99 | $1.30 | $1.68 | $2.13 | $2.63 | ||
| EBIT | $1.97 | $6.67 | $16.99 | $38.16 | $59.13 | $75.40 | $97.18 | $123.23 | $155.23 | ||
| EBIT margin | 21.83% | 30.32% | 26.96% | 27.85% | 29.86% | 29.00% | 29.01% | 28.99% | 29.57% | ||
| Interest Expense | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | ||
| Profit before Taxes | $1.97 | $6.67 | $16.99 | $38.16 | $59.13 | $75.40 | $97.18 | $123.23 | $155.23 | ||
| Taxes | 30% | $0.59 | $2.00 | $5.10 | $11.45 | $17.74 | $22.62 | $29.15 | $36.97 | $46.57 | |
| Net Income | $1.38 | $4.67 | $11.89 | $26.71 | $41.39 | $52.78 | $68.02 | $86.26 | $108.66 | ||
| Capital Expenditures | $1.00 | $1.00 | $1.45 | $1.90 | $2.45 | $3.10 | $3.83 | ||||
| Increase in Net Working Capital | $3.00 | $6.00 | $8.67 | $11.39 | $14.67 | $18.61 | $22.99 | ||||
| Free Cash Flow | $1.42 | $4.78 | $8.20 | $20.39 | $32.26 | $40.80 | $52.58 | $66.67 | $84.46 | ||
| Source: Author estimates. | |||||||||||
Ex. 2-Comparables
| Comparable Company Valuation Data | ||||||||
| (dollars in millions) | ||||||||
| Company Name (Ticker) | Market Capitalization | Revenue | Revenues, 1Yr Growth % | EBITDA Margin % | Total Debt/ Capital % | TEV/ Forward EBITDA | Forward P/E | Beta |
| Acme Packet, Inc. (APKT) | $2,244 | $295 | 45.6% | 30.1% | - | 13.7× | 24.3× | 1.50 |
| Aruba Networks, Inc. (ARUN) | $2,258 | $433 | 48.2% | 3.0% | - | 13.3× | 31.5× | 1.95 |
| Aviat Networks, Inc. (AVNW) | $108 | $463 | 3.9% | 0.2% | 7.6% | 4.2× | 21.3× | 1.35 |
| Cisco Systems (CSCO) | $100,206 | $43,724 | 4.7% | 25.3% | 26.3% | 6.4× | 10.3× | 1.20 |
| Summary Statistics | ||||||||
| Mean | $26,204 | $11,229 | 25.6% | 14.6% | 17.0% | 9.4× | 21.8× | 1.50 |
| Median | $2,251 | $448 | 25.2% | 14.1% | 17.0% | 9.9× | 22.8× | 1.43 |
| Notes: Valuation multiples are as of November 2011. The 10-year U.S Treasury rate was assumed to be 5% and the market risk premium 6.0%. | ||||||||
| Company descriptions: | ||||||||
| Acme Packet provided session delivery network solutions that enabled the delivery of voice, video, data, and unified communications services and applications across Internet protocol (IP) networks. | ||||||||
| Aruba Networks, incorporated in 2002, was a provider of next-generation network access solutions for the mobile enterprise. Its products unified wired and wireless network infrastructures into one seamless access solution for corporate headquarters, mobile business professionals, and remote workers. | ||||||||
| Aviat Networks designed, manufactured, and sold wireless networking products, solutions, and services in North America and internationally. It offered point-to-point digital microwave transmission systems for first- and last-mile access, middle mile/backhaul, and long-distance trunking applications. It also provided broadband wireless access base stations and customer premises equipment. | ||||||||
| Cisco Systems designed, manufactured, and sold IP-based networking and other products related to the communications and IT industry worldwide. It offered routers that interconnected public and private IP networks for mobile, data, voice, and video applications, and switching products, which provided connectivity to end users, workstations, IP phones, access points, and servers. | ||||||||
| Data source: Capital IQ. | ||||||||
VC Method Valuation
| 1 | Calculate Valuation metric from the Comps provided in Exhibit 2 |
| EV/EBITDA = | |
| 2 | Calculate ORN’s value at exit using both comps.. |
| Apply comp ratios to ORN’s projected 2017 results: | |
| EV/EBITDA x Year 6 EBITDA | |
| 3 | Calculate the PV of ORN by discounting the year 6 value at the VC’s 50% required rate of return: |
| PV of terminal value | |
| 4 | Calculate Series A VC’s required ownership percentage by dividing today’s cash investment by the present value: |
| 5 | Calculate required shares to be issued (n): |
| n = (Existing shares x Acquired %) / (1 – Acquired %) | |
| n = | |
| 6 | Total shares outstanding = |
| 7 | Price per share |
| Formula: PV/Total Shares |
DCF Valuation
| Assumptions: | ||||||||
| Cost of Venture Capital rvc | 14% | |||||||
| TV Growth | 5% | |||||||
| APPLY SCENARIO ANALYSIS | ||||||||
| IF NO TIME, ASSUME 50% PROBABLILITY OF SUCCESS AND 50% PROBABILITY OF FAILURE ($0 VALUE) | ||||||||
| Discount Period | 0 | 1 | 2 | 3 | 4 | 5 | 6 | |
| Year | 2011A | 2012P | 2013P | 2014P | 2015P | 2016P | 2017P | |
| Scenario 1 - Utopia | ||||||||
| Free Cash Flow | $8.20 | $20.39 | $32.26 | $40.80 | $52.58 | $66.67 | $84.46 | |
| PV of FCF | ||||||||
| Terminal Value: | ||||||||
| Formula: 2017 FCF (1 + TV Growth) / (r - g) | ||||||||
| PV of Terminal Value | ||||||||
| Enterprise Value | ||||||||
| Discount Period | 0 | 1 | 2 | 3 | 4 | 5 | 6 | |
| 2011A | 2012P | 2013P | 2014P | 2015P | 2016P | 2017P | ||
| Scenario 2 - Living Dead | ||||||||
| Free Cash Flow | $8.20 | $8.20 | $8.20 | $8.20 | $8.20 | $8.20 | $8.20 | |
| PV of FCF | ||||||||
| Terminal Value: | ||||||||
| Formula: 2017 FCF (1 + TV Growth) / (r - g) | ||||||||
| PV of Terminal Value | ||||||||
| Enterprise Value | ||||||||
| Scenario 3 - Black Hole | ||||||||
| Enterprise Value | 0 | |||||||
| Expected Value | Probability | EV | ||||||
| Utopia | 25% | 0.0 | ||||||
| Living Dead | 25% | 0.0 | ||||||
| Black Hole | 50% | 0.0 | ||||||
| DCF Expected Value | $0.0 | |||||||
| Implied % Ownership | ||||||||
| Formula: Investment / EV |
