RENT 10-8-12

Oct 08, 2012
Media
NasdaqNM
RENT
Buy
Rating Unchanged
Current Price
$16.93
Target Price
$24.00
Market Capitalization
188.62M
Shares Outstanding
11.14M
Float
9.07M
Institutional Holdings
48.20%
12-month Low/High
$12.16/$23.27
Average 90-day Volume
24,040
Fiscal Year End
Mar 30
Revenues ($ MIL)
Period 2011A 2012A 2013E
Q1 24.8A 22.4A 23.2A
Q2 24.5A 21.9A 22.6E
Q3 23.7A 22.2A 24.0E
Q4 24.1A 24.6A 27.5E
97.1A 91.0A 97.3E
EPS ($ MIL)
Period 2011A 2012A 2013E
Q1 0.01A 0.03A 0.01A
Q2 0.04A 0.03A (0.03)E
Q3 (0.04)A 0.02A (0.04)E
Q4 (0.07)A (0.17)A 0.04E
(0.07)A (0.09)A (0.08)E

Rentrak
Recent Meetings Strengthen Conviction in RENT
Story
Recent meetings with management strengthened our conviction in the Rentrak story; TV
Essentials appears to be an inflection point; Rentrak remains one of our favorite stories in
the digital media space
The meetings and recent investor day highlighted the revenue opportunities of their
Essentials business, which we conservatively expect to increase from $56 million this year
to $140 million in fiscal 2015
We believe the recent pullback in RENT shares presents an opportunity for investors;
RENT is trading at an implied multiple of less than 9X next year's Essentials EBITDA,
despite projected EBITDA growth of nearly 50%
We reiterate our Buy rating and $24 price target, based on 2013 estimates; we believe
RENT shares could be worth far more in 2014, if it achieves its Essentials targets
Equity Research
Christopher Ferris, Senior Research Analyst, Digital Media and Technology
(646) 429-1727 cferris@noblefcm.com
Michael Kupinski, Director of Research
(561) 994-5734 mkupinski@noblefcm.com
Noble Financial Capital Markets
Trading: (561) 998-5489 Sales: (561) 998-5491
www.noblefcm.com
Refer to the last two pages of this report for Disclosures
Page: 1 of 10

Recent investor meetings with management strengthened our conviction in the Rentrak story. The company
appears to have momentum with TV Essentials, continues to expand its Box Office and OnDemand
measurement businesses, and is managing the decline of its legacy Home Video business. The following are a
few key takeaways from the meetings:
TV Essentials is on track to double in 2013. Management emphasized its TV measurement capabilities,
which are gaining acceptance in the marketplace, particularly among local TV station groups. Rentrak has
grown its stations customers from virtually zero two years ago to nearly 200 today, with well over 400
additional stations available with existing customers (see figure below). The pace of customer acquisition has
been strong this year, and the company recently announced the addition of the Univision networks as
customers. Rentrak expects to double their revenue in the TV business in each of the next several years,
driven by new customers and substantial double-digit prices increases. Our expectations are slightly more
modest, but still imply a TV revenue ramp from $9 million last year to nearly $60 million by fiscal 2015.
Management reiterated TV should be profitable by fiscal 2014.
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Rentrak RENT | CURRENT PRICE $16.93 | Buy | 10/08/2012
Christopher Ferris cferris@noblefcm.com (646) 429-1727 | Michael Kupinski mkupinski@noblefcm.com (561) 994-5734

Rentrak's product is challenging Nielsen. While Rentrak's TV measurement capability has been well
documented in other reports, we think it's important to note that Nielsen is discussing incorporating set-top
box data into its existing sample. We believe this is largely in response to Rentrak and the success it is
having in the local markets and with cable networks. While the timing and form of Nielsen's roll out of limited
set-top box data is unclear, it does not appear that the addition of the set-top-boxes will have much of an
effect in terms of the sample size and quality of the Nielsen rating, particularly compared to Rentrak. As the
Page: 3 of 10

TV viewing world becomes increasingly multi-screen and as traditional business models come under
pressure, content providers and advertisers are demanding better measurement, which favors Rentrak
versus incumbent platforms. In June, Sinclair, a top 10 TV station group, cancelled their Nielsen service in
several markets and replaced it with Rentrak. Sinclair has threatened to choose Rentrak for additional
stations. We believe a decision on the status of the Sinclair stations may come over the next quarter or so,
and could act as a catalyst for Rentrak, should Sinclair adopt Rentrak on a wider basis. Nielsen will likely
always be the currency on which advertising is sold. However, Rentrak can replace Nielsen in some markets
(as we've already seen) and can be a strong supplemental service for networks, stations, and advertisers
alike.

Box Office has more upside than we expected. Management has been emphasizing its box office
opportunity. Rentrak is the dominant player, with the business growing at a double digit pace. Rentrak has
announced several new products, such as "PostTrak," which could help drive growth. Rentrak has also
partnered with several companies in China to measure box office and TV - Rentrak is the only company with
government permission to do so. With China's box office receipts set to pass the U. S. in the next several
years, there could be a large revenue opportunity for Rentrak. The company believes Box Office Essentials
could be a $50 - 75 million business in several years, compared to less than $25 million in revenue this year.
We reiterate our Buy rating and $24 price target
RENT shares are no longer inexpensive on this year's estimates, but the recent pullback in the share price has
presented investors with an opportunity to buy the shares at a very reasonable level, based on fiscal 2014
numbers. Our 2014 estimates imply 40% revenue and nearly 50% EBITDA growth from the Essentials division.
Our $24 price target is based on a 20x multiple of fiscal 2013 EBITDA. Based on 2014 estimates, we believe
RENT shares are worth considerably more than $24 per share (see SOP model).
At current levels, we believe investors are paying roughly $160 million or $13 per share for the implied value of
the Essentials businesses (See Implied Value Model). As we have noted previously, RENT shares have traded
at a multiple of 30x implied Essentials EBITDA in the the past, with considerably less TV customers and
revenue. At current levels, investors are paying just over 9x fiscal 2014's implied value. If the company can hit
its target of doubling revenue over the next several years, which we believe is achievable, given the growth in
customers and price increases, RENT shares should appreciate substantially.
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Valuation Summary
Our $24 target is supported by sum-of-the-parts based on fiscal 2013 estimates. Our model assumes no value
for the Home Entertainment business and a 20x multiple of Advanced Media & Information (AMI) EBITDA of
$12 million. We view the 20x multiple on AMI division is justified given the expected acceleration in revenue and
income growth from the Essentials businesses over the coming quarters.

Page: 7 of 10

Page: 8 of 10

DISCLAIMER
All statements or opinions contained herein that include the words "we", "us", or "our" are solely the responsibility of Noble Financial and do not
necessarily reflect statements or opinions expressed by any person or party affiliated with the company mentioned in this report. Any opinions
expressed herein are subject to change without notice. All information provided herein is based on public and non-public information believed to be
accurate and reliable, but is not necessarily complete and cannot be guaranteed. No judgment is hereby expressed or should be implied as to the
suitability of any security described herein for any specific investor or any specific investment portfolio. The decision to undertake any investment
regarding the security mentioned herein should be made by each reader of this publication based on its own appraisal of the implications and risks of
such decision.
This publication is intended for information purposes only and shall not constitute an offer to buy/sell or the solicitation of an offer to buy/sell any
security mentioned in this report, nor shall there be any sale of the security herein in any state or domicile in which said offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities laws of any such state or domicile. This publication and all information,
comments, statements or opinions contained or expressed herein are applicable only as of the date of this publication and subject to change without
prior notice. Past performance is not indicative of future results.
IMPORTANT DISCLOSURES
Within the past 30 days, a Noble Financial Company Research employee and/or their immediate supervisors have not effected a transaction for their
own account(s) in the investment(s) referred to in this report, nor will such a transaction take place within 5 days of its publication.
A Noble Financial Company intends to seek investment banking business with this company in the next three months.

A Noble Financial Company is not a market maker in the subject company.
Page: 9 of 10

WARNING
This report is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is
appropriate for any recipient particular investment objectives, financial situation or particular needs. Prior to making any investment decision,
recipients should assess, or seek advice from their advisors, on whether any relevant part of this report is appropriate to their individual
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RESEARCH ANALYST CERTIFICATION
Independence Of View
All views expressed in this report accurately reflect my personal views about the subject securities or issuers.
Receipt of Compensation
All or part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views in the research report.
Ownership and Material Conflicts of Interest
Neither I nor anybody in my household has a financial interest in the securities of the subject company or any other company mentioned in this report.
Additional information is available upon request. Any recipient of this report that wishes further information regarding the subject company or the
disclosure information mentioned herein, should contact Noble Financial by mail or phone.
Noble International Investments, Inc., dba Noble Financial Capital Markets is a FINRA registered broker/dealer.
Member - SPIC (Securities Investor Protection Corporation)
NFCM RATING DEFINITIONS % OF STOCKS COVERED % OF IB CLIENTS
   BUY: potential return is >15% above the current price 53% 20%
   HOLD: potential return is -15% to 15% of the current price 39% 7%
   SELL: potential return is >15% below the current price 6% 0%
Report ID: 5877
Page: 10 of 10

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