Agreed with this. Tellier claimed that 82% of clients are in a steady state or increasing. The 18% that takes up 40% of revenue are the guys at risk. Even if this were to go to zero, with zero growth in online and zero growth in the other 82%, 60% of $1,329 in revenue is about $800M. Let’s say EBITDA margin declines to 40%, that would be $320M a year, the absolute, positive floor.
Reasonable analysis below:
http://www.stockhouse.com/Bullboards/MessageDetail.aspx?p=0&m=31036861&l=0&r=0&s=YLO&t=LIST
Fair market value = 2.5 x EBITDA annually, however, not sure where you get $200 million for annualized EBITDA. The quarterly EBITDA this quarter alone is $146 million.
You can look at four cases, on opposite ends of the spectrum to understand fair value assessment using the 2.5 EBITDA multiplier…
Best case: If EBITDA stayed the same all year (unlikely) then 2.5*4*146 = 1.46 B fair value.
If EBITDA declines linearly by 25% over the year, then you`re looking at a mean quartery EBITDA of 128Million. In this case, Fair value = 2.5 x 4 x 128 = 1.28 B.
If EBITDA declines linearly by 50% over the year, then mean quartery EBITDA is 109.5 Million and fair value is at 1.1 Billion or so.
Worst reasonable case: Finally, if print revenue drops to zero and online does not change, then with a linear 70% EBITDA drop (since online equals 30% right now and margin is similar to print), mean quarterly EBITDA would be 95.5 million and fair value would be 955 million.
http://www.stockhouse.com/Bullboards/MessageDetail.aspx?p=0&m=31036847&l=0&r=0&s=YLO&t=LIST
AT&T’s YPG Q1 EBITDA was $197M. YLO’s was $146M. Since the Cerberus deal occured in April, I’m pretty sure they had a pretty clear look into Q1 so they took that into account when making a deal. $146M/$197M is 74.1%. Valuing the AT&T business at $1,792M, 74.1% of that is $1,328M, a far cry higher than stockbagger’s BS version.
Also, a strong case can be made that the YLO business should be valued much higher than the AT&T one. YLO’s EBITDA dropped 23% on over 50% EBITDA margin quarter over quarter. YPG’s dropped 33% on 26.5% EBITDA margin. AT&T’s business is toxic and got purchased. Their EBITDA margin declined an additional 2% from Q4. There’s nothing wrong with YLO’s business other than the fact that it’s scaling down, it’s only the capital structure that’s messed up. YLO’s EBITDA margin rose from Q4 3.5%. I know that comparing Q4 to Q1 is supposedly not apt thanks to seasonality, but in this case it is since online revenues as a % of total are higher than ever and it shows that the supposed decline in profitability once the business transforms is greatly overexaggerated.
Tellier is an absolute goof to use the YPG business as an excuse to draw down the goodwill. Will either a goof or a snake to make a restructure deal look more plausible. Maybe it’s option #2.