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ACG Cup - Valuation

The document provides an executive summary of valuation options for the IT Group. It outlines three main options to consider: 1) Divesting the SSIT segment and having an IPO of the IT Consulting segment, 2) conducting an LBO of the entire IT Group, or 3) maintaining the status quo. For each option, it discusses factors such as equity value, enterprise value, liquidity events, and maximizing overall value. It recommends that divesting SSIT and conducting an IPO of IT Consulting would maximize value while also protecting the family legacy.

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ACG Cup - Valuation MEWS CAPITAL CONSULTING IT GROUP STRATEGY
Team • MBA/MSF Candidate, 2017 • Bachelor’s in Political Science - 2015 • MBA Intern at Pratt and Whitney in San Diego, CA • Previous military service - US Army Nathan McCutcheon • MBA/MSF Candidate, 2017 • Bachelor’s in Accountancy –2013 • Accounting Supervisor at Motivate, Inc. in San Diego, CA Ike Ekeh Shreyas Sreekanth • MBA Candidate, 2017 • Bachelor’s in Accounting - 2010 • Previous military service in the Premier World Maritime Service - USCG David White • MBA Candidate, 2017 • Bachelor’s in Mechanical Engineering, 2012 • Quality Assurance at Cap Gemini India
Section 1 EXECUTIVE SUMMARY
Executive Summary Management Options Factors Evaluated Three-Options to Consider • Divest SSIT, then have an IPO of IT Consulting. • LBO entire IT Group • Maintain Status Quo • IPO of entire IT Group • Grow SSIT segment to increase IT Group’s equity value, then have an IPO of entire IT Group • Future Expectations • Equity/Enterprise Value of IT Group segments • Overall intrinsic values • Family’s ability to continue to have a meaningful stake in future decisions. • Maximizing value of IT Group • Create a liquidity event for Company IPO of Entire ITGroup • Keeps IT Group together • Family legacy is protected • Liquidity event • Does not maximize value Divest SSIT, IPO IT Consulting • Maximizes value of IT Group • Family legacy is protected (with split-share plan) • Relieves IT Group of debt burden Maintain Status Quo • Keeps IT Group together • Does not increase liquidity • Dream of public company may not be realized at full-potential
Section 2 VALUATION OF IT GROUP
IT Group Football Field Average Equity Value: $1,505.78 Million $1,803.64 $1,517.82 $1,047.75 $1,051.62 $2,204.45 $1,855.11 $1,280.59 $1,370.66 $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 DCF Perpetuity DCF Multiple Comparable - Companies Comparable - Precedence IT Group - Football Field
Comparable Companies Figures in Millions IT Group Comparable Companies Company Equity Value Enterprise Value Revenue EBITDA Net Income EV/EBITDA Perficient Inc. $590.07 $642.38 $450.21 $54.44 $21.86 11.8 Ciber, Inc. $283.60 $295.42 $812.19 $25.46 $7.76 11.6 Acxiom Corporation $1,724.06 $1,752.33 $1,033.37 $157.53 $7.80 11.1 Virtusa Corporation $1,704.59 $1,622.33 $526.86 $69.55 $44.53 23.3 Science Applications International Corporation $2,110.94 $3,078.94 $4,064.00 $281.00 $128.00 11.0 IT Group NA NA $568.98 $95.01 $54.45 NA All Comps Mean 1,282.65$ 1,478.28$ 1,377.33$ 117.59$ 41.99$ 13.8 Median 1,704.59$ 1,622.33$ 812.19$ 69.55$ 21.86$ 11.6 Best Comps Mean 1,177.17$ 1,442.27$ 1,589.94$ 129.60$ 41.36$ 11.4 Median 1,157.07$ 1,197.36$ 922.78$ 105.98$ 14.83$ 11.4 95.01$ 11.4X 1,079.78$ Net Debt 84.39$ Equity Value 1,164.17$ -10% 1,047.75$ 10% 1,280.59$ Implied Enterprise Value 2014 2014 EBITDA 2014 EV/EBITDA Multiplier
Comparable Transactions Transaction Announced Date Target Enterprise Value EV / Revenue EV / EBITDA 1 4/27/2015 4,453.64$ 3.46 17.9 2 10/5/2015 15.03$ 0.716 6.01 3 12/29/2014 55.80$ 1.65 11.01 4 12/23/2013 203.21$ 0.709 7.35 5 11/5/2013 1,964.82$ 4.03 13.88 6 2/21/2012 76.35$ 0.835 7.63 7 1/27/2012 13.43$ 0.666 14.81 8 12/12/2011 100.35$ 1.84 7.54 9 10/3/2011 20.14$ 0.282 6.91 10 8/16/2011 1,299.07$ 1.82 14.92 11 6/3/2011 140.94$ 1.45 13.87 12 4/1/2011 1,781.52$ 1.02 10.9 13 2/9/2011 63.89$ 0.71 15.37 14 11/4/2010 52.47$ 1.59 17.81 15 11/2/2010 93.92$ 0.49 17.49 Best Company Analysis Minimum 100.35$ 0.709 7.35 Maximum 1,964.82$ 4.03 14.92 Median 751.14$ 1.635 12.385 Mean 914.99$ 1.8115 11.41 All Companies Included Minimum 13.43$ 0.3 6.0 Maximum 4,453.64$ 4.0 17.9 Median 93.92$ 1.0 13.9 Mean 688.97$ 1.4 12.2 IT Comparable Transaction EBITDA 95.01$ Multiple 11.41X Enterprise Value 1,084.08$ Net Debt 84.39$ Equity Value 1,168.46$ -10% 1,051.62$ 10% 1,285.31$
DCF Discounted Cash Flow Analysis for IT Group Figures in millions, except per share Historical year ending December 31, Projected year ending December 31, 2012 2013 2014 2015 2016 2017 2018 2019 Sales $437.5 $520.7 $569.0 $624.5 $685.5 $752.4 $826.1 $907.1 Cost of goods sold 347.7 423.4 454.3 496.4 542.4 592.7 659.6 724.2 Gross Profit 89.8 97.3 114.7 128.1 143.0 159.6 166.5 182.8 SG&A 17.6 17.8 18.1 18.2 18.3 18.8 26.3 28.8 EBITDA 72.2 79.5 96.6 109.9 124.7 140.8 140.3 154.0 EBITDA Margin 16.5% 15.3% 17.0% 17.6% 18.2% 18.7% 17.0% 17.0% Less: Depreciation (1.4) (1.6) (1.8) (2.0) (2.2) (2.4) 4.0 6.3 Less: Amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBIT 71.0 78.0 95.0 108.1 122.7 138.6 144.5 160.5 Less: Taxes @ 40.0% (28.4) (31.2) (38.0) (43.2) (49.1) (55.4) (57.8) (64.2) Tax-effected EBIT 42.6 46.8 57.0 64.8 73.6 83.2 86.7 96.3 Plus: Depreciation and amortization 1.6 1.8 2.0 2.2 2.4 (4.0) (6.3) Less: Capital expenditures 2.5 4.1 3.4 5.5 6.4 7.9 5.8 6.3 Less: Additions to intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (Increase)/decrease in working capital (11.8) (14.7) (5.8) (6.3) (6.9) (7.6) (8.4) Unlevered Free Cash Flow $40.7 $47.6 $66.6 $75.9 $86.5 $80.8 $87.9 Operating Assumptions Sales growth NA 19.0% 9.3% 9.8% 9.8% 9.8% 9.8% 9.8% Cost of goods sold (as a % sales) 79.5% 81.3% 79.8% 79.8% 79.8% 79.8% 79.8% 79.8% SG&A (as a % sales) 4.0% 3.4% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% Capital Expenditure Assumptions CapEx (as a % sales) NA (0.8%) (0.6%) (0.7%) (0.7%) (0.7%) (0.7%) (0.7%) Depreciation (as a % of CapEx) NA (40.0%) (52.1%) (21.7%) 8.7% 39.1% 69.6% 100.0% Additions to Intangibles ($ amount) NA $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Amortization ($ amount) NA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Perpetuity Growth Method Weighted average cost of capital: 6.6% Net present value of free cash flow $327.0 Terminal growth rate 2.5% Terminal value $2,193.2 Present value of the terminal value 1,592.6 Enterprise value $1,919.7 Less: Net debt* 84.4 Equity value $2,004.0 -10% $1,803.64 10% $2,204.45 EBITDA Multiple Method Weighted average cost of capital: 6.6% Net present value of free cash flow $327.0 Terminal multiple 11.4x Terminal value $1,755.8 Present value of the terminal value 1,275.0 Enterprise value $1,602.1 Less: Net debt* 84.4 Equity value $1,686.5 -10% $1,517.82 10% $1,855.11
Section 3 VALUATION OF SSIT
Football Field SSIT Average Enterprise Value: $36.09 Million $25.00 $33.87 $35.13 $33.50 $34.91 $30.55 $41.39 $42.94 $40.95 $42.67 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 DCF Perpetuity DCF Multiple Comparable - Companies Comparable - Precedence LBO SSIT - Football Field
LBO Leveraged Buyout of SSIT Figures in millions, except per share Cumulative Pro Forma Transaction Assumptions Sources Amount % of Total EBITDA Current share price $0.00 Cash $6.3 13.9% 1.2x x Offer price premium 0.0% Bank debt 18.3 40.5% 4.7x Offer price per share $0.00 Subordinated debt 13.1 28.9% 7.2x Target diluted shares outstanding 0.000 Sponsor's equity 7.6 16.8% 8.6x Offer Value $26.3 Total sources $45.3 100.0% 8.6x + Debt 18.8 + Preferred 0.0 Uses Amount % of Total + Noncontrolling interest 0.0 Purchase of equity $26.3 57.9% - Cash & equivalents (6.3) Refinancing of existing debt 18.8 41.5% Transaction Value $38.8 Transaction expenses @ 1.0% 0.3 0.6% Total uses $45.3 100.0% Transaction Multiples Pro Forma IRR Returns Year 4 Year 5 Year 6 Transaction Value / Sales 0.46x 6.9x 99.6% 62.1% 50.2% Transaction Value / EBITDA 7.4x EBITDA Exit 7.4x 103.3% 64.9% 52.4% Transaction Value / EBIT 8.5x 7.9x 106.9% 67.5% 54.3% Pro Forma EBITDA $5.2 Pro Forma Projected year ending December 31, Credit stats 2014 2015 2016 2017 2018 2019 2020 2021 2022 Senior Debt / EBITDA 3.5x 2.6x 2.2x 1.7x 0.0x 1.0x 0.9x 0.9x 0.9x Total Debt / EBITDA 6.0x 4.9x 4.3x 3.6x 0.7x 1.7x 1.6x 1.6x 1.6x EBITDA / Interest -3.3x -3.9x -5.7x -5.8x -16.9x 0.0x 0.0x 0.0x 0.0x EBITDA - CapEx / Interest -4.9x -5.6x -8.4x -8.8x -12.7x 0.0x 0.0x 0.0x 0.0x
DCF Discounted Cash Flow Analysis for SSIT Figures in millions, except per share Historical year ending December 31, Projected year ending December 31, 2012 2013 2014 2015 2016 2017 2018 2019 x Sales $72.4 $78.6 $83.6 $86.9 $91.2 $95.8 $97.3 $98.9 Cost of goods sold 60.7 65.4 70.7 73.7 77.2 80.3 82.3 83.6 Gross Profit 11.7 13.2 12.9 13.1 14.0 15.5 15.0 15.3 SG&A 7.4 7.3 7.7 7.2 7.8 8.5 8.9 9.1 EBITDA 4.4 5.9 5.2 5.9 6.3 7.0 6.1 6.2 EBITDA Margin 6.0% 7.5% 6.3% 6.8% 6.9% 7.3% 6.3% 6.3% Less: Depreciation (0.6) (0.6) (0.7) (0.7) (0.7) (0.8) (2.4) (2.9) Less: Amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBIT 3.8 5.3 4.6 5.3 5.6 6.3 3.8 3.4 Less: Taxes @ 40.0% (1.5) (2.1) (1.9) (2.1) (2.2) (2.5) (1.5) (1.4) Tax-effected EBIT 2.3 3.2 2.8 3.2 3.4 3.8 2.3 2.0 Plus: Depreciation and amortization 0.6 0.7 0.7 0.7 0.8 2.4 2.9 Less: Capital expenditures (1.9) (2.9) (2.5) (2.6) (3.0) (2.8) (2.9) Less: Additions to intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (Increase)/decrease in working capital 0.3 1.1 (0.2) (0.1) (0.1) (0.1) (0.1) Unlevered Free Cash Flow $2.2 $1.6 $1.2 $1.4 $1.5 $1.7 $2.0 Operating Assumptions x Sales growth NA 8.5% 6.4% 1.6% 1.6% 1.6% 1.6% 1.6% Cost of goods sold (as a % sales) 83.8% 83.3% 84.5% 84.5% 84.5% 84.5% 84.5% 84.5% SG&A (as a % sales) 10.2% 9.3% 9.2% 9.2% 9.2% 9.2% 9.2% 9.2% Capital Expenditure Assumptions CapEx (as a % sales) NA 2.4% 3.4% 2.9% 2.9% 2.9% 2.9% 2.9% Depreciation (as a % of CapEx) NA 33.7% 23.4% 38.7% 54.0% 69.4% 84.7% 100.0% Additions to Intangibles ($ amount) NA $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Amortization ($ amount) NA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Perpetuity Growth Method Weighted average cost of capital: 7.9% Net present value of free cash flow $6.1 Terminal growth rate 1.6% Terminal value $31.7 Present value of the terminal value 21.6 Enterprise value $27.8 Less: Net debt* (12.5) Equity value $15.3 EBITDA Multiple Method Weighted average cost of capital: 7.9% Net present value of free cash flow $6.1 Terminal multiple 7.4x Terminal value $46.1 Present value of the terminal value 31.5 Enterprise value $37.6 Less: Net debt* (12.5) Equity value $25.1
Comparable Company Analysis Figures in Millions IT Group Comparable Companies Company Equity Value Enterprise Value Revenue EBITDA Net Income EV/EBITDA Alpha & Omega Semiconductor, Ltd. $199.64 $127.55 $321.16 $20.58 -$10.47 6.2 Fairchild Semiconductor International Inc. $1,925.31 $1,880.41 $1,389.60 $210.90 -$50.70 8.9 IXYS Corp. $397.95 $335.08 $326.56 $43.44 $20.68 7.7 Super Micro Computer, Inc. $1,340.57 $1,324.48 $2,067.45 $145.60 $94.70 9.1 SunEdison Semiconductor Limited $450.44 $572.14 $801.70 $79.70 -$116.10 7.2 SSIT NA NA $83.64 $5.24 $1.84 NA All Comps Mean $862.78 $847.93 $981.29 $100.04 -$12.38 7.8 Median $450.44 $572.14 $801.70 $79.70 -$10.47 7.7 Best Comps Mean $743.34 $728.80 $709.75 $88.65 -$39.15 7.5 Median $424.19 $453.61 $564.13 $61.57 -$30.59 7.4 $5.24 7.4X $39.03 -10% $35.13 10% $42.94 2014 2014 EBITDA 2014 EV/EBITDA Multiplier Implied Enterprise Value
Comparable Transactions Transaction Announced Date Target Enterprise Value EV / Revenue EV / EBITDA 1 9/22/2015 191.18$ 1.56 7.85 2 8/6/2015 1,171.59$ 1.2 7.87 3 6/5/2015 890.63$ 0.484 4.08 4 4/10/2015 674.58$ 1.3 5.72 5 1/6/2015 754.54$ 1.52 6.46 6 11/24/2014 561.23$ 0.665 5.76 7 10/13/2014 79.27$ 0.775 8.59 8 7/7/2014 365.00$ 2.37 10.25 9 6/30/2014 70.64$ 1.52 6.86 10 4/27/2014 93.37$ 1.5 6.75 11 4/11/2014 1,706.28$ 2.35 6.83 12 3/7/2014 62.42$ 1.32 7.26 13 10/14/2013 87.24$ 0.957 6.76 14 9/27/2013 596.25$ 1.38 9.08 15 7/9/2013 99.77$ 1.23 7.05 Best Company Analysis Minimum 62.42$ 0.67$ 5.72$ Maximum 754.54$ 1.56$ 9.08$ Median 99.77$ 1.32$ 6.86$ Mean 297.32$ 1.25$ 7.10$ All Companies Included Minimum 62.42$ 0.48$ 4.08$ Maximum 1,706.28$ 2.37$ 10.25$ Median 365.00$ 1.32$ 6.86$ Mean 493.60$ 1.34$ 7.14$ SSIT Comparable Transaction EBITDA 5.24$ Multiple 7.1X Enterprise Value 37.22$ -10% 33.50$ 10% 40.95$
Section 4 VALUATION OF STANDALONE IT CONSULTING GROUP
DCF Equity Value without SSIT $100M more than when combined *Includes expansion Cost estimates Discounted Cash Flow Analysis for ITC Figures in millions, except per share Historical year ending December 31, Projected year ending December 31, 2014-2019 2012 2013 2014 2015 2016 2017 2018 2019 CAGR Sales $437.5 $520.7 $569.0 $537.6 $594.2 $656.6 $753.8 $865.3 8.7% Cost of goods sold 347.7 423.4 454.3 422.7 465.2 512.5 601.8 690.9 Gross Profit 89.8 97.3 114.7 115.0 129.0 144.1 151.9 174.4 8.7% SG&A 17.8 18.1 18.2 11.1 11.1 10.9 24.2 27.7 EBITDA 72.0 79.2 96.5 103.9 117.9 133.2 127.8 146.7 8.7% EBITDA Margin 16.5% 15.2% 17.0% 19.3% 19.8% 20.3% 17.0% 17.0% Less: Depreciation 1.4 1.6 1.8 1.3 1.4 1.6 (3.7) (6.0) Less: Amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBIT 70.6 77.6 94.7 102.6 116.5 131.6 131.4 152.7 10.0% Less: Taxes @ 40.0% (28.2) (31.0) (37.9) (41.0) (46.6) (52.6) (52.6) (61.1) Tax-effected EBIT 42.4 46.6 56.8 61.6 69.9 79.0 78.9 91.6 10.0% Plus: Depreciation and amortization (1.6) (1.8) (1.3) (1.4) (1.6) 3.7 6.0 Less: Capital expenditures (2.5) (4.1) (3.4) (3.0) (7.5) (8.3) (5.3) (6.0) Less: Additions to intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (Increase)/decrease in working capital (39.9) (46.7) 21.2 (16.1) (17.7) (27.7) (31.7) Unlevered Free Cash Flow $0.9 $4.8 $78.5 $44.9 $51.4 $49.6 $59.9 65.3% Operating Assumptions Sales growth NA 19.0% 9.3% 7.8% 14.8% 14.8% 14.8% 14.8% Cost of goods sold (as a % sales) 79.5% 81.3% 79.8% 79.8% 79.8% 79.8% 79.8% 79.8% SG&A (as a % sales) 4.1% 3.5% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% Capital Expenditure Assumptions CapEx (as a % sales) NA 0.8% 0.6% 0.7% 0.7% 0.7% 0.7% 0.7% Depreciation (as a % of CapEx) NA (40.0%) (52.1%) (21.7%) 8.7% 39.1% 69.6% 100.0% Additions to Intangibles ($ amount) NA $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Amortization ($ amount) NA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Perpetuity Growth Method Weighted average cost of capital: 6.6% Net present value of free cash flow $194.0 Terminal growth rate 3.3% Terminal value $1,851.8 Present value of the terminal value 1,346.0 Enterprise value $1,540.0 Less: Net debt* 84.4 Equity value $1,624.4
Section 5 MANAGEMENT OPTIONS
Management Consideration 0 2 4 6 8 10 12 IPO (Current Structure) Divest SSIT Status Quo Divest SSIT, IPO ITC (Class B Shares) Option Analysis Liquidity Event Long-Term Ownershitp Growth Rate
Section 6 OUR RECOMMENDATION
Recommendation Divest SSIT • Divesting SSIT will create a liquidity event equivalent to $40M • Remove heavy debt burden created by 55% Debt – 45% Equity structure • Gives IT Consulting best shot at highest IPO offering IPO • IPO with IT Consulting • Generate a liquidity event, and return value to shareholder • Without SSIT, valuation $100M higher Class B Shares • Create a dual-class share structure • Class-B shares allow owner to maintain voting majority • Able to pass down to heir or family (non-transferable outward)
Section 7 APPENDIX AND SUPPORTING DOCUMENTATION
IT Group Income Statement Fiscal Year Ended December 31, 2011 2012 2013 2014 2015E 2016P 2017P Sales $395.5 $437.5 $520.7 $569.0 $624.5 $685.5 $752.4 % Growth 10.6% 19.0% 9.3% 9.8% 9.8% 9.8% Cost of Goods Sold 328.4 347.7 423.4 454.3 496.4 542.4 592.7 Gross Profit $67.1 $89.8 $97.3 $114.7 $128.1 $143.0 $159.6 Gross Profit Margin 17.0% 20.5% 18.7% 20.2% 20.5% 20.9% 21.2% Selling General & Admin Exp. $17.6 $17.8 $18.1 $18.2 $18.3 $18.8 $19.4 Depreciation & Amortization 1.2 1.4 1.6 1.8 2.0 2.2 2.4 Other Operating Expenses/(Income) - - - - - - - Total Operating Expenses $18.8 $19.2 $19.7 $20.0 $20.3 $21.0 $21.8 Operating Income $48.3 $70.6 $77.6 $94.7 $107.8 $122.0 $137.9 Operating Margin 12.2% 16.1% 14.9% 16.6% 17.3% 17.8% 18.3% Interest Expense, Net 2.5 2.6 2.6 2.5 3.3 3.3 3.3 Other (Income) / Expenses 1.5 1.5 1.5 1.5 1.5 1.5 1.5 EBT $44.3 $66.5 $73.6 $90.8 $103.0 $117.3 $133.1 Income Taxes (1) 17.7 26.6 29.4 36.3 41.2 46.9 53.2 Net Income Available to Common $26.6 $39.9 $44.1 $54.5 $61.8 $70.4 $79.8 Plus: Taxes $17.7 $26.6 $29.4 $36.3 $41.2 $46.9 $53.2 Plus: Interest Expense 2.5 2.6 2.6 2.5 3.3 3.3 3.3 Plus: Depreciation & Amortization 1.2 1.4 1.6 1.8 2.0 2.2 2.4 Adjusted EBITDA $48.1 $70.5 $77.8 $95.0 $108.4 $122.7 $138.8 Adjusted EBITDA Margin 12.2% 16.1% 14.9% 16.7% 17.3% 17.9% 18.4% Capital Expenditures $3.2 $2.5 $4.1 $3.4 $5.5 $6.4 $7.9 (1) Assuming 40% tax rate.
IT Group Balance Sheet Fiscal Year Ended December 31, 2011 2012 2013 2014 Current Assets Cash and Equivalents $40.5 $55.1 $83.1 $115.2 Accounts Receivable 60.7 75.8 92.5 113.4 Inventory 16.0 16.9 17.2 17.9 Total Current Assets $117.2 $147.8 $192.9 $246.5 Property and Equipment $12.6 $16.9 $22.4 $26.9 Land 8.6 8.1 8.4 9.1 Other Long-Term Assets 8.0 11.3 8.9 10.2 Total Assets $146.4 $184.1 $232.6 $292.7 Liabilities Accounts Payable $17.8 $14.6 $15.9 $17.7 Accrued Exp. 41.5 43.0 46.0 49.5 Current Portion of Long Term Debt 11.6 12.7 12.3 10.3 Other Current Liabilities 4.4 2.6 3.5 5.1 Total Current Liabilities $75.3 $72.9 $77.7 $82.6 Long-Term Debt 20.0 20.2 19.7 20.5 Total Liabilities $95.3 $93.1 $97.4 $103.1 Net Stockholder's Equity $51.1 $91.0 $135.2 $189.6 Total Liabilities And Stockholders' Equity $146.4 $184.1 $232.6 $292.7
SSIT Income Statement Fiscal Year Ended December 31, 2011 2012 2013 2014 2015E 2016P 2017P Sales $65.5 $72.4 $78.6 $83.6 $86.9 $91.2 $95.8 % Growth 10.6% 8.5% 6.4% 3.9% 5.0% 5.0% Cost of Goods Sold 55.2 60.7 65.4 70.7 73.7 77.2 80.3 Gross Profit $10.3 $11.7 $13.2 $12.9 $13.1 $14.0 $15.5 Gross Profit Margin 15.7% 16.2% 16.7% 15.5% 15.1% 15.4% 16.2% Selling General & Admin Exp. $6.2 $7.4 $7.3 $7.7 $7.2 $7.8 $8.5 Depreciation & Amortization 0.5 0.6 0.6 0.7 0.7 0.7 0.8 Other Operating Expenses/(Income) - - - - - - - Total Operating Expenses $6.8 $8.0 $7.9 $8.4 $7.9 $8.5 $9.3 Operating Income $3.5 $3.8 $5.2 $4.6 $5.2 $5.5 $6.2 Operating Margin 5.4% 5.2% 6.7% 5.5% 6.0% 6.1% 6.5% Interest Expense, Net 1.2 1.5 1.6 1.5 1.1 1.2 1.1 Other (Income) / Expenses 0.0 (0.1) 0.0 0.0 0.0 0.0 0.0 EBT $2.3 $2.4 $3.7 $3.1 $4.1 $4.3 $5.1 Income Taxes (1) 0.9 1.0 1.5 1.2 1.7 1.7 2.1 Net Income Available to Common $1.4 $1.4 $2.2 $1.8 $2.5 $2.6 $3.1 Plus: Taxes $0.9 $1.0 $1.5 $1.2 $1.7 $1.7 $2.1 Plus: Interest Expense 1.2 1.5 1.6 1.5 1.1 1.2 1.1 Plus: Depreciation & Amortization 0.5 0.6 0.6 0.7 0.7 0.7 0.8 Adjusted EBITDA $4.1 $4.5 $5.9 $5.2 $5.9 $6.3 $7.0 Adjusted EBITDA Margin 6.2% 6.1% 7.5% 6.3% 6.8% 6.9% 7.3% Capital Expenditures $1.5 $1.9 $2.9 $2.5 $2.6 $3.0 $3.7 (1) Assuming 40% tax rate.
SSIT Balance Sheet Fiscal Year Ended December 31, 2011 2012 2013 2014 Current Assets Cash and Equivalents $5.3 $5.8 $6.4 $6.3 Accounts Receivable 6.0 6.6 7.2 7.7 Inventory 13.1 15.2 14.9 15.1 Total Current Assets $24.5 $27.6 $28.5 $29.0 Property and Equipment $8.9 $9.5 $13.3 $16.7 Land 3.3 3.4 3.4 3.5 Other Long-Term Assets 4.2 6.7 6.1 4.8 Total Assets $40.9 $47.3 $51.3 $54.0 Liabilities Accounts Payable $6.0 $6.4 $6.7 $7.4 Accrued Exp. 9.2 10.9 11.0 11.7 Other Current Liabilities 0.4 0.0 0.2 0.6 Total Current Liabilities $15.6 $17.3 $17.9 $19.6 Long-Term Debt 15.2 18.4 19.7 18.8 Total Liabilities $30.8 $35.7 $37.6 $38.4 Net Stockholder's Equity $10.1 $11.5 $13.7 $15.6 Total Liabilities And Stockholders' Equity $40.9 $47.3 $51.3 $54.0
Comparable Capitalization Comparable Company Analysis - Capitalization ($ in millions) Total Market Ticker Company Debt Capitalization Cash AOSL Alpha & Omega Semiconductor, Ltd. $0.8 $199.6 $72.9 FCS Fairchild Semiconductor International Inc. 198.0 1,925.3 243.1 IXYS IXYS Corp. 54.0 398.0 116.9 SMCI Super Micro Computer, Inc. 94.8 1,340.6 110.9 SEMI SunEdison Semiconductor Limited 212.5 450.4 90.8 Total Market Ticker Company Debt Capitalization Cash PRFT Perficient Inc. $61.0 $590.1 $8.7 CBR Ciber, Inc. 30.0 283.6 18.2 ACXM Acxiom Corporation 209.2 1,724.1 180.9 VRTU Virtusa Corporation - 1,704.6 178.5 SAIC Science Applications International Corporation 1,131.0 2,110.9 163.0
Comparable Company Multiples Comparable Company Multiples (figures in millions except per share amount) SSIT Comparable Companies Shares LTM LTM LTM LTM Company Ticker Stock Price Outstanding Debt Cash Sales EBITDA EBIT Earnings Alpha & Omega Semiconductor, Ltd. AOSL $8.88 22.5 $0.8 $72.9 $321.2 $20.6 ($6.3) ($10.5) Fairchild Semiconductor International Inc. FCS 16.68 115.4 198.0 242.9 1,389.6 210.9 73.6 (50.7) IXYS Corp. IXYS 12.46 31.9 54.0 116.9 326.6 43.4 28.1 20.7 Super Micro Computer, Inc. SMCI 28.21 47.5 94.8 110.9 2,067.5 145.6 136.6 94.7 SunEdison Semiconductor Limited SEMI 10.75 41.9 212.5 90.8 801.7 79.7 (30.8) (116.1) IT Group Comparable Companies Shares LTM LTM LTM LTM Company Ticker Stock Price Outstanding Debt Cash Sales EBITDA EBIT Earnings Perficient Inc. PRFT $16.72 35.3 $61.0 $8.7 $450.2 $54.4 $35.6 $21.9 Ciber, Inc. CBR 3.57 79.4 30.0 18.2 812.2 25.5 19.7 7.8 Acxiom Corporation ACXM 22.12 77.9 209.2 180.9 1,033.4 157.5 67.7 7.8 Virtusa Corporation VRTU 57.43 29.7 - 82.3 526.9 69.6 56.2 44.5 Science Applications International Corporation SAIC 45.86 46.0 1,131.0 163.0 4,064.0 281.0 246.0 128.0
Comparable Performance Comparable Company Multiples ($ in millions) LTM Operating Indications LTM Margins 2-Year Compound Annual Growth Rate SSIT Comparable Companies Gross Net CapEx Gross Net Company Revenue Profit EBITDA EBIT Income CapEx % of Rev. Profit EBITDA EBIT Income Revenues EBITDA EBIT Net Income Alpha & Omega Semiconductor, Ltd. $321.2 $57.4 $20.6 ($6.3) ($10.5) $25.1 7.8% 17.9% 6.4% -2.0% -3.3% -0.7% -15.3% NM NM Fairchild Semiconductor International Inc. 1,389.6 456.3 210.9 73.6 (50.7) $64.9 4.7% 32.8% 15.2% 5.3% -3.6% -0.3% 13.2% 63.3% NM IXYS Corp. 326.6 102.4 43.4 28.1 20.7 $6.9 2.1% 31.4% 13.3% 8.6% 6.3% 6.5% 24.6% 45.7% 111.0% Super Micro Computer, Inc. 2,067.5 323.3 145.6 136.6 94.7 $40.0 1.9% 15.6% 7.0% 6.6% 4.6% 31.2% 80.3% 90.8% 83.6% SunEdison Semiconductor Limited 801.7 85.5 79.7 (30.8) (116.1) $105.9 13.2% 10.7% 9.9% -3.8% -14.5% -7.7% 2.2% NM NM Low $321.2 $57.4 $20.6 ($30.8) ($116.1) $6.9 1.9% 10.7% 6.4% -3.8% -14.5% -7.7% -15.3% 45.7% 83.6% High 2,067.5 456.3 210.9 136.6 94.7 105.9 13.2% 32.8% 15.2% 8.6% 6.3% 31.2% 80.3% 90.8% 111.0% Median 801.7 102.4 79.7 28.1 (10.5) 40.0 4.7% 17.9% 9.9% 5.3% -3.3% -0.3% 13.2% 63.3% 97.3% Mean 981.3 205.0 100.0 40.2 (12.4) 48.6 5.9% 21.7% 10.4% 2.9% -2.1% 5.8% 21.0% 66.6% 97.3% LTM Operating Indications LTM Margins 2-Year Compound Annual Growth Rate IT Group Comparable Companies Gross Net CapEx Gross Net Company Revenue Profit EBITDA EBIT Income CapEx % of Rev. Profit EBITDA EBIT Income Revenues EBITDA EBIT Net Income Perficient Inc. $450.2 $151.9 $54.4 $35.6 $21.9 $3.5 0.8% 33.7% 12.1% 7.9% 4.9% 14.5% 12.9% 5.8% 3.8% Ciber, Inc. 812.2 211.7 25.5 19.7 7.8 $6.6 0.8% 26.1% 3.1% 2.4% 1.0% -3.6% 7.3% 11.4% NM Acxiom Corporation 1,033.4 228.6 157.5 67.7 7.8 $60.0 5.8% 22.1% 15.2% 6.5% 0.8% -2.0% -8.7% -18.3% -60.8% Virtusa Corporation 526.9 189.1 69.6 56.2 44.5 $15.6 3.0% 35.9% 13.2% 10.7% 8.5% 20.8% 21.7% 22.8% 18.9% Science Applications International Corporation 4,064.0 372.0 281.0 246.0 128.0 $18.0 0.4% 9.2% 6.9% 6.1% 3.1% -5.4% -1.9% -6.6% -6.4% Low $450.2 $151.9 $25.5 $19.7 $7.8 $3.5 0.4% 9.2% 3.1% 2.4% 0.8% -5.4% -8.7% -18.3% -60.8% High 4,064.0 372.0 281.0 246.0 128.0 60.0 5.8% 35.9% 15.2% 10.7% 8.5% 20.8% 21.7% 22.8% 18.9% Median 812.2 211.7 69.6 56.2 21.9 15.6 0.8% 26.1% 12.1% 6.5% 3.1% -2.0% 7.3% 5.8% -1.3% Mean 1,377.3 230.7 117.6 85.0 42.0 20.8 2.2% 25.4% 10.1% 6.7% 3.6% 4.9% 6.3% 3.0% -11.1%
Comparable – Balance Sheet Stats Comparable Company Analysis - Balance Sheet Statistics ($ in millions) SSIT Comparable Companies Total Net Income Net Income Current Quick Inventory A/R A/P Net Working Company Assets ROA ROE Ratio Ratio Turnover Days Days Capital Alpha & Omega Semiconductor, Ltd. $308.5 -1.2% -4.0% 2.9 1.8 4.0 41.1 55.4 $44.6 Fairchild Semiconductor International Inc. 1,590.5 2.8% -4.3% 3.3 1.7 3.4 39.3 43.0 288.8 IXYS Corp. 388.0 4.5% 7.6% 3.0 1.9 2.5 45.4 23.0 101.0 Super Micro Computer, Inc. 1,082.0 8.9% 16.7% 2.1 1.0 4.3 43.4 47.6 462.9 SunEdison Semiconductor Limited 1,082.5 -1.6% -17.6% 1.5 0.8 6.1 48.7 57.5 33.6 Max $1,590.5 8.9% 16.7% 3.3 1.9 6.1 48.7 57.5 $462.9 Min 308.5 -1.6% -17.6% 1.5 0.8 2.5 39.3 23.0 33.6 Mean 890.3 2.7% -0.3% 2.6 1.4 4.1 43.6 45.3 186.2 Median 1,082.0 2.8% -4.0% 2.9 1.7 4.0 43.4 47.6 101.0 IT Group Comparable Companies Total Net Income Net Income Current Quick Inventory A/R A/P Net Working Company Assets ROA ROE Ratio Ratio Turnover Days Days Capital Perficient Inc. $450.8 5.0% 6.9% 3.1 2.9 NA 92.9 16.7 $77.2 Ciber, Inc. 500.4 2.4% 2.6% 2.0 1.8 NA 84.5 14.9 92.0 Acxiom Corporation 1,152.6 3.4% 0.3% 2.0 1.7 NA 51.6 20.6 38.3 Virtusa Corporation 522.7 7.1% 10.7% 4.3 3.9 NA 74.3 10.9 79.2 Science Applications International Corporation 2,158.0 8.6% 34.2% 1.4 1.2 NA 58.4 37.4 183.0 Max $2,158.0 8.6% 34.2% 4.3 3.9 NA 92.9 37.4 $183.0 Min 450.8 2.4% 0.3% 1.4 1.2 NA 51.6 10.9 38.3 Mean 956.9 5.3% 10.9% 2.6 2.3 NA 72.3 20.1 94.0 Median 522.7 5.0% 6.9% 2.0 1.8 NA 74.3 16.7 79.2
Comparable Transactions Comparable Company Analysis - Comparable Transactions ($ in millions) Announced Target EV / EV / Transaction Date Enterprise Value Revenue EBITDA Transaction 1 09/22/15 191.2 1.56 x 7.9 x Transaction 2 08/06/15 1,171.6 1.20 x 7.9 x Transaction 3 06/05/15 890.6 0.48 x 4.1 x Transaction 4 04/10/15 674.6 1.30 x 5.7 x Transaction 5 01/06/15 754.5 1.52 x 6.5 x Transaction 6 11/24/14 561.2 0.67 x 5.8 x Transaction 7 10/13/14 79.3 0.78 x 8.6 x Transaction 8 07/07/14 365.0 2.37 x 10.3 x Transaction 9 06/30/14 70.6 1.52 x 6.9 x Transaction 10 04/27/14 93.4 1.50 x 6.8 x Transaction 11 04/11/14 1,706.3 2.35 x 6.8 x Transaction 12 03/07/14 62.4 1.32 x 7.3 x Transaction 13 10/14/13 87.2 0.96x 6.8x Transaction 14 09/27/13 596.3 1.38x 9.1x Transaction 15 07/09/13 99.8 1.23x 7.1x Min $62.4 0.5x 4.1x Max 1,706.3 2.4x 10.3x Median 278.1 1.3x 6.9x Mean 493.6 1.3x 7.1x Comparable Company Analysis - Comparable Transactions (IT Group) ($ in millions) Announced Target EV / EV / Transaction Date Enterprise Value Revenue EBITDA Transaction 1 04/27/15 $4,453.6 3.46 x 17.9 x Transaction 2 10/05/15 15.0 0.72 x 6.0 x Transaction 3 12/29/14 55.8 1.65 x 11.0 x Transaction 4 12/23/13 203.2 0.71 x 7.4 x Transaction 5 11/05/13 1,964.8 4.03 x 13.9 x Transaction 6 02/21/12 76.4 0.84 x 7.6 x Transaction 7 01/27/12 13.4 0.67 x 14.8 x Transaction 8 12/12/11 100.4 1.84 x 7.5 x Transaction 9 10/03/11 20.1 0.28 x 6.9 x Transaction 10 08/16/11 1,299.1 1.82 x 14.9 x Transaction 11 06/03/11 140.9 1.45 x 13.9 x Transaction 12 04/01/11 1,781.5 1.02 x 10.9 x Transaction 13 02/09/11 63.9 0.71 x 15.4 x Transaction 14 11/04/10 52.5 1.59 x 17.8 x Transaction 15 11/02/10 93.9 0.49 x 17.5 x Min $13.4 0.3x 6.0x Max 4,453.6 4.0x 17.9x Median 93.9 1.0x 13.9x Mean 689.0 1.4x 12.2x
WACC Analysis - SSIT Comparable Company WACC Analysis (dollars in millions) Debt to Preferredto Equity to Preferred Market Value Total Debt Total Total Total Debt Stock of Equity Capitalization to Equity Capitalization Capitalization Capitalization Alpha & Omega Semiconductor, Ltd. $0.8 $0.0 $199.6 $200.4 0.4% 0.4% 0.0% 99.6% Fairchild Semiconductor International Inc.198.0 0.0 1,925.3 2,123.3 10.3% 9.3% 0.0% 90.7% IXYS Corp. 54.0 0.0 398.0 451.9 13.6% 11.9% 0.0% 88.1% Super Micro Computer, Inc. 94.8 0.0 1,340.6 1,435.4 7.1% 6.6% 0.0% 93.4% SunEdison Semiconductor Limited 212.5 0.0 450.4 662.9 47.2% 32.1% 0.0% 67.9% All Companies Included Median $94.8 $0.0 $450.4 $662.9 10.3% 9.3% 0.0% 90.7% Mean 112.0 0.0 862.8 974.8 15.7% 12.1% 0.0% 87.9% Best Companies Included Median 126.0 0.0 424.2 557.4 0.1 0.1 0.0 0.9 Mean 116.3 0.0 743.3 859.6 0.2 0.1 0.0 0.9 Levered Unlevered Equity Risk Size Risk Cost of Cost of Cost of Beta Beta Premium (1) Premium (2) Equity Debt Preferred WACC Alpha & Omega Semiconductor, Ltd. 1.45 1.45 6.00% 5.82% 17.1% 4.2% 0.0% 17.1% Fairchild Semiconductor International Inc. 1.67 1.57 6.00% 1.60% 14.2% 4.5% 0.0% 13.1% IXYS Corp. 1.81 1.68 6.00% 2.56% 16.0% 5.5% 0.0% 14.5% Super Micro Computer, Inc. 1.51 1.45 6.00% 1.50% 13.2% 3.9% 0.0% 12.4% SunEdison Semiconductor Limited 1.66 1.30 6.00% 2.56% 15.1% 4.3% 0.0% 11.1% Median 1.66 1.45 15.1% 4.3% 0.0% 13.1% Mean 1.62 1.49 15.1% 4.5% 0.0% 13.7% Best Companies Included Median 1.7 1.5 0.1 0.0 0.2 0.0 0.0 0.1 Mean 1.6 1.5 0.1 0.0 0.2 0.0 0.0 0.1
WACC Analysis - ITGroup Comparable Company WACC Analysis (dollars in millions) Debt to Preferredto Equity to Preferred Market Value Total Debt Total Total Total Debt Stock of Equity Capitalization to Equity Capitalization Capitalization Capitalization Perficient Inc. $61.0 $0.0 $590.1 $651.1 10.3% 9.4% 0.0% 90.6% Ciber, Inc. 30.0 0.0 283.6 313.6 10.6% 9.6% 0.0% 90.4% AcxiomCorporation 209.2 0.0 1,724.1 1,933.3 12.1% 10.8% 0.0% 89.2% Virtusa Corporation 0.0 0.0 1,704.6 1,704.6 0.0% 0.0% 0.0% 100.0% Science Applications International Corporation 1,131.0 0.0 2,110.9 3,241.9 53.6% 34.9% 0.0% 65.1% All Companies Included Median $61.0 $0.0 $1,704.6 $1,704.6 10.6% 9.6% 0.0% 90.4% Mean 286.2 0.0 1,282.7 1,568.9 17.3% 12.9% 0.0% 87.1% Best Companies Included Median 135.1 0.0 1,157.1 1,292.2 0.1 0.1 0.0 0.9 Mean 357.8 0.0 1,177.2 1,535.0 0.2 0.2 0.0 0.8 Levered Unlevered Equity Risk Size Risk Cost of Cost of Cost of Beta Beta Premium Premium Equity Debt Preferred WACC Perficient Inc. 0.28 0.26 6.00% 2.56% 6.8% 2.6% 0.0% 6.3% Ciber, Inc. 1.61 1.51 6.00% 5.82% 18.1% 4.5% 0.0% 16.6% AcxiomCorporation 0.68 0.63 6.00% 1.60% 8.3% 5.5% 0.0% 7.7% Virtusa Corporation 1.31 1.31 6.00% 1.60% 12.0% 4.3% 0.0% 12.0% Science Applications International Corporation 0.81 0.61 6.00% 1.60% 9.0% 4.3% 0.0% 6.8% All Companies Included Median 0.81 0.63 9.0% 4.3% 0.0% 7.7% Mean 0.94 0.87 10.9% 4.2% 0.0% 9.9% Best Companies Included Median 0.74 0.62 0.1 0.0 0.1 0.0 0.0 0.1 Mean 0.84 0.76 0.1 0.0 0.1 0.0 0.0 0.1

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ACG Cup - Valuation

  • 1.
    ACG Cup -Valuation MEWS CAPITAL CONSULTING IT GROUP STRATEGY
  • 2.
    Team • MBA/MSF Candidate, 2017 •Bachelor’s in Political Science - 2015 • MBA Intern at Pratt and Whitney in San Diego, CA • Previous military service - US Army Nathan McCutcheon • MBA/MSF Candidate, 2017 • Bachelor’s in Accountancy –2013 • Accounting Supervisor at Motivate, Inc. in San Diego, CA Ike Ekeh Shreyas Sreekanth • MBA Candidate, 2017 • Bachelor’s in Accounting - 2010 • Previous military service in the Premier World Maritime Service - USCG David White • MBA Candidate, 2017 • Bachelor’s in Mechanical Engineering, 2012 • Quality Assurance at Cap Gemini India
  • 3.
  • 4.
    Executive Summary Management Options Factors Evaluated Three-Options to Consider •Divest SSIT, then have an IPO of IT Consulting. • LBO entire IT Group • Maintain Status Quo • IPO of entire IT Group • Grow SSIT segment to increase IT Group’s equity value, then have an IPO of entire IT Group • Future Expectations • Equity/Enterprise Value of IT Group segments • Overall intrinsic values • Family’s ability to continue to have a meaningful stake in future decisions. • Maximizing value of IT Group • Create a liquidity event for Company IPO of Entire ITGroup • Keeps IT Group together • Family legacy is protected • Liquidity event • Does not maximize value Divest SSIT, IPO IT Consulting • Maximizes value of IT Group • Family legacy is protected (with split-share plan) • Relieves IT Group of debt burden Maintain Status Quo • Keeps IT Group together • Does not increase liquidity • Dream of public company may not be realized at full-potential
  • 5.
  • 6.
    IT Group FootballField Average Equity Value: $1,505.78 Million $1,803.64 $1,517.82 $1,047.75 $1,051.62 $2,204.45 $1,855.11 $1,280.59 $1,370.66 $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 DCF Perpetuity DCF Multiple Comparable - Companies Comparable - Precedence IT Group - Football Field
  • 7.
    Comparable Companies Figures inMillions IT Group Comparable Companies Company Equity Value Enterprise Value Revenue EBITDA Net Income EV/EBITDA Perficient Inc. $590.07 $642.38 $450.21 $54.44 $21.86 11.8 Ciber, Inc. $283.60 $295.42 $812.19 $25.46 $7.76 11.6 Acxiom Corporation $1,724.06 $1,752.33 $1,033.37 $157.53 $7.80 11.1 Virtusa Corporation $1,704.59 $1,622.33 $526.86 $69.55 $44.53 23.3 Science Applications International Corporation $2,110.94 $3,078.94 $4,064.00 $281.00 $128.00 11.0 IT Group NA NA $568.98 $95.01 $54.45 NA All Comps Mean 1,282.65$ 1,478.28$ 1,377.33$ 117.59$ 41.99$ 13.8 Median 1,704.59$ 1,622.33$ 812.19$ 69.55$ 21.86$ 11.6 Best Comps Mean 1,177.17$ 1,442.27$ 1,589.94$ 129.60$ 41.36$ 11.4 Median 1,157.07$ 1,197.36$ 922.78$ 105.98$ 14.83$ 11.4 95.01$ 11.4X 1,079.78$ Net Debt 84.39$ Equity Value 1,164.17$ -10% 1,047.75$ 10% 1,280.59$ Implied Enterprise Value 2014 2014 EBITDA 2014 EV/EBITDA Multiplier
  • 8.
    Comparable Transactions Transaction AnnouncedDate Target Enterprise Value EV / Revenue EV / EBITDA 1 4/27/2015 4,453.64$ 3.46 17.9 2 10/5/2015 15.03$ 0.716 6.01 3 12/29/2014 55.80$ 1.65 11.01 4 12/23/2013 203.21$ 0.709 7.35 5 11/5/2013 1,964.82$ 4.03 13.88 6 2/21/2012 76.35$ 0.835 7.63 7 1/27/2012 13.43$ 0.666 14.81 8 12/12/2011 100.35$ 1.84 7.54 9 10/3/2011 20.14$ 0.282 6.91 10 8/16/2011 1,299.07$ 1.82 14.92 11 6/3/2011 140.94$ 1.45 13.87 12 4/1/2011 1,781.52$ 1.02 10.9 13 2/9/2011 63.89$ 0.71 15.37 14 11/4/2010 52.47$ 1.59 17.81 15 11/2/2010 93.92$ 0.49 17.49 Best Company Analysis Minimum 100.35$ 0.709 7.35 Maximum 1,964.82$ 4.03 14.92 Median 751.14$ 1.635 12.385 Mean 914.99$ 1.8115 11.41 All Companies Included Minimum 13.43$ 0.3 6.0 Maximum 4,453.64$ 4.0 17.9 Median 93.92$ 1.0 13.9 Mean 688.97$ 1.4 12.2 IT Comparable Transaction EBITDA 95.01$ Multiple 11.41X Enterprise Value 1,084.08$ Net Debt 84.39$ Equity Value 1,168.46$ -10% 1,051.62$ 10% 1,285.31$
  • 9.
    DCF Discounted Cash FlowAnalysis for IT Group Figures in millions, except per share Historical year ending December 31, Projected year ending December 31, 2012 2013 2014 2015 2016 2017 2018 2019 Sales $437.5 $520.7 $569.0 $624.5 $685.5 $752.4 $826.1 $907.1 Cost of goods sold 347.7 423.4 454.3 496.4 542.4 592.7 659.6 724.2 Gross Profit 89.8 97.3 114.7 128.1 143.0 159.6 166.5 182.8 SG&A 17.6 17.8 18.1 18.2 18.3 18.8 26.3 28.8 EBITDA 72.2 79.5 96.6 109.9 124.7 140.8 140.3 154.0 EBITDA Margin 16.5% 15.3% 17.0% 17.6% 18.2% 18.7% 17.0% 17.0% Less: Depreciation (1.4) (1.6) (1.8) (2.0) (2.2) (2.4) 4.0 6.3 Less: Amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBIT 71.0 78.0 95.0 108.1 122.7 138.6 144.5 160.5 Less: Taxes @ 40.0% (28.4) (31.2) (38.0) (43.2) (49.1) (55.4) (57.8) (64.2) Tax-effected EBIT 42.6 46.8 57.0 64.8 73.6 83.2 86.7 96.3 Plus: Depreciation and amortization 1.6 1.8 2.0 2.2 2.4 (4.0) (6.3) Less: Capital expenditures 2.5 4.1 3.4 5.5 6.4 7.9 5.8 6.3 Less: Additions to intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (Increase)/decrease in working capital (11.8) (14.7) (5.8) (6.3) (6.9) (7.6) (8.4) Unlevered Free Cash Flow $40.7 $47.6 $66.6 $75.9 $86.5 $80.8 $87.9 Operating Assumptions Sales growth NA 19.0% 9.3% 9.8% 9.8% 9.8% 9.8% 9.8% Cost of goods sold (as a % sales) 79.5% 81.3% 79.8% 79.8% 79.8% 79.8% 79.8% 79.8% SG&A (as a % sales) 4.0% 3.4% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% Capital Expenditure Assumptions CapEx (as a % sales) NA (0.8%) (0.6%) (0.7%) (0.7%) (0.7%) (0.7%) (0.7%) Depreciation (as a % of CapEx) NA (40.0%) (52.1%) (21.7%) 8.7% 39.1% 69.6% 100.0% Additions to Intangibles ($ amount) NA $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Amortization ($ amount) NA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Perpetuity Growth Method Weighted average cost of capital: 6.6% Net present value of free cash flow $327.0 Terminal growth rate 2.5% Terminal value $2,193.2 Present value of the terminal value 1,592.6 Enterprise value $1,919.7 Less: Net debt* 84.4 Equity value $2,004.0 -10% $1,803.64 10% $2,204.45 EBITDA Multiple Method Weighted average cost of capital: 6.6% Net present value of free cash flow $327.0 Terminal multiple 11.4x Terminal value $1,755.8 Present value of the terminal value 1,275.0 Enterprise value $1,602.1 Less: Net debt* 84.4 Equity value $1,686.5 -10% $1,517.82 10% $1,855.11
  • 10.
  • 11.
    Football Field SSIT AverageEnterprise Value: $36.09 Million $25.00 $33.87 $35.13 $33.50 $34.91 $30.55 $41.39 $42.94 $40.95 $42.67 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 DCF Perpetuity DCF Multiple Comparable - Companies Comparable - Precedence LBO SSIT - Football Field
  • 12.
    LBO Leveraged Buyout ofSSIT Figures in millions, except per share Cumulative Pro Forma Transaction Assumptions Sources Amount % of Total EBITDA Current share price $0.00 Cash $6.3 13.9% 1.2x x Offer price premium 0.0% Bank debt 18.3 40.5% 4.7x Offer price per share $0.00 Subordinated debt 13.1 28.9% 7.2x Target diluted shares outstanding 0.000 Sponsor's equity 7.6 16.8% 8.6x Offer Value $26.3 Total sources $45.3 100.0% 8.6x + Debt 18.8 + Preferred 0.0 Uses Amount % of Total + Noncontrolling interest 0.0 Purchase of equity $26.3 57.9% - Cash & equivalents (6.3) Refinancing of existing debt 18.8 41.5% Transaction Value $38.8 Transaction expenses @ 1.0% 0.3 0.6% Total uses $45.3 100.0% Transaction Multiples Pro Forma IRR Returns Year 4 Year 5 Year 6 Transaction Value / Sales 0.46x 6.9x 99.6% 62.1% 50.2% Transaction Value / EBITDA 7.4x EBITDA Exit 7.4x 103.3% 64.9% 52.4% Transaction Value / EBIT 8.5x 7.9x 106.9% 67.5% 54.3% Pro Forma EBITDA $5.2 Pro Forma Projected year ending December 31, Credit stats 2014 2015 2016 2017 2018 2019 2020 2021 2022 Senior Debt / EBITDA 3.5x 2.6x 2.2x 1.7x 0.0x 1.0x 0.9x 0.9x 0.9x Total Debt / EBITDA 6.0x 4.9x 4.3x 3.6x 0.7x 1.7x 1.6x 1.6x 1.6x EBITDA / Interest -3.3x -3.9x -5.7x -5.8x -16.9x 0.0x 0.0x 0.0x 0.0x EBITDA - CapEx / Interest -4.9x -5.6x -8.4x -8.8x -12.7x 0.0x 0.0x 0.0x 0.0x
  • 13.
    DCF Discounted Cash FlowAnalysis for SSIT Figures in millions, except per share Historical year ending December 31, Projected year ending December 31, 2012 2013 2014 2015 2016 2017 2018 2019 x Sales $72.4 $78.6 $83.6 $86.9 $91.2 $95.8 $97.3 $98.9 Cost of goods sold 60.7 65.4 70.7 73.7 77.2 80.3 82.3 83.6 Gross Profit 11.7 13.2 12.9 13.1 14.0 15.5 15.0 15.3 SG&A 7.4 7.3 7.7 7.2 7.8 8.5 8.9 9.1 EBITDA 4.4 5.9 5.2 5.9 6.3 7.0 6.1 6.2 EBITDA Margin 6.0% 7.5% 6.3% 6.8% 6.9% 7.3% 6.3% 6.3% Less: Depreciation (0.6) (0.6) (0.7) (0.7) (0.7) (0.8) (2.4) (2.9) Less: Amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBIT 3.8 5.3 4.6 5.3 5.6 6.3 3.8 3.4 Less: Taxes @ 40.0% (1.5) (2.1) (1.9) (2.1) (2.2) (2.5) (1.5) (1.4) Tax-effected EBIT 2.3 3.2 2.8 3.2 3.4 3.8 2.3 2.0 Plus: Depreciation and amortization 0.6 0.7 0.7 0.7 0.8 2.4 2.9 Less: Capital expenditures (1.9) (2.9) (2.5) (2.6) (3.0) (2.8) (2.9) Less: Additions to intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (Increase)/decrease in working capital 0.3 1.1 (0.2) (0.1) (0.1) (0.1) (0.1) Unlevered Free Cash Flow $2.2 $1.6 $1.2 $1.4 $1.5 $1.7 $2.0 Operating Assumptions x Sales growth NA 8.5% 6.4% 1.6% 1.6% 1.6% 1.6% 1.6% Cost of goods sold (as a % sales) 83.8% 83.3% 84.5% 84.5% 84.5% 84.5% 84.5% 84.5% SG&A (as a % sales) 10.2% 9.3% 9.2% 9.2% 9.2% 9.2% 9.2% 9.2% Capital Expenditure Assumptions CapEx (as a % sales) NA 2.4% 3.4% 2.9% 2.9% 2.9% 2.9% 2.9% Depreciation (as a % of CapEx) NA 33.7% 23.4% 38.7% 54.0% 69.4% 84.7% 100.0% Additions to Intangibles ($ amount) NA $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Amortization ($ amount) NA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Perpetuity Growth Method Weighted average cost of capital: 7.9% Net present value of free cash flow $6.1 Terminal growth rate 1.6% Terminal value $31.7 Present value of the terminal value 21.6 Enterprise value $27.8 Less: Net debt* (12.5) Equity value $15.3 EBITDA Multiple Method Weighted average cost of capital: 7.9% Net present value of free cash flow $6.1 Terminal multiple 7.4x Terminal value $46.1 Present value of the terminal value 31.5 Enterprise value $37.6 Less: Net debt* (12.5) Equity value $25.1
  • 14.
    Comparable Company Analysis Figuresin Millions IT Group Comparable Companies Company Equity Value Enterprise Value Revenue EBITDA Net Income EV/EBITDA Alpha & Omega Semiconductor, Ltd. $199.64 $127.55 $321.16 $20.58 -$10.47 6.2 Fairchild Semiconductor International Inc. $1,925.31 $1,880.41 $1,389.60 $210.90 -$50.70 8.9 IXYS Corp. $397.95 $335.08 $326.56 $43.44 $20.68 7.7 Super Micro Computer, Inc. $1,340.57 $1,324.48 $2,067.45 $145.60 $94.70 9.1 SunEdison Semiconductor Limited $450.44 $572.14 $801.70 $79.70 -$116.10 7.2 SSIT NA NA $83.64 $5.24 $1.84 NA All Comps Mean $862.78 $847.93 $981.29 $100.04 -$12.38 7.8 Median $450.44 $572.14 $801.70 $79.70 -$10.47 7.7 Best Comps Mean $743.34 $728.80 $709.75 $88.65 -$39.15 7.5 Median $424.19 $453.61 $564.13 $61.57 -$30.59 7.4 $5.24 7.4X $39.03 -10% $35.13 10% $42.94 2014 2014 EBITDA 2014 EV/EBITDA Multiplier Implied Enterprise Value
  • 15.
    Comparable Transactions Transaction AnnouncedDate Target Enterprise Value EV / Revenue EV / EBITDA 1 9/22/2015 191.18$ 1.56 7.85 2 8/6/2015 1,171.59$ 1.2 7.87 3 6/5/2015 890.63$ 0.484 4.08 4 4/10/2015 674.58$ 1.3 5.72 5 1/6/2015 754.54$ 1.52 6.46 6 11/24/2014 561.23$ 0.665 5.76 7 10/13/2014 79.27$ 0.775 8.59 8 7/7/2014 365.00$ 2.37 10.25 9 6/30/2014 70.64$ 1.52 6.86 10 4/27/2014 93.37$ 1.5 6.75 11 4/11/2014 1,706.28$ 2.35 6.83 12 3/7/2014 62.42$ 1.32 7.26 13 10/14/2013 87.24$ 0.957 6.76 14 9/27/2013 596.25$ 1.38 9.08 15 7/9/2013 99.77$ 1.23 7.05 Best Company Analysis Minimum 62.42$ 0.67$ 5.72$ Maximum 754.54$ 1.56$ 9.08$ Median 99.77$ 1.32$ 6.86$ Mean 297.32$ 1.25$ 7.10$ All Companies Included Minimum 62.42$ 0.48$ 4.08$ Maximum 1,706.28$ 2.37$ 10.25$ Median 365.00$ 1.32$ 6.86$ Mean 493.60$ 1.34$ 7.14$ SSIT Comparable Transaction EBITDA 5.24$ Multiple 7.1X Enterprise Value 37.22$ -10% 33.50$ 10% 40.95$
  • 16.
    Section 4 VALUATION OFSTANDALONE IT CONSULTING GROUP
  • 17.
    DCF Equity Value withoutSSIT $100M more than when combined *Includes expansion Cost estimates Discounted Cash Flow Analysis for ITC Figures in millions, except per share Historical year ending December 31, Projected year ending December 31, 2014-2019 2012 2013 2014 2015 2016 2017 2018 2019 CAGR Sales $437.5 $520.7 $569.0 $537.6 $594.2 $656.6 $753.8 $865.3 8.7% Cost of goods sold 347.7 423.4 454.3 422.7 465.2 512.5 601.8 690.9 Gross Profit 89.8 97.3 114.7 115.0 129.0 144.1 151.9 174.4 8.7% SG&A 17.8 18.1 18.2 11.1 11.1 10.9 24.2 27.7 EBITDA 72.0 79.2 96.5 103.9 117.9 133.2 127.8 146.7 8.7% EBITDA Margin 16.5% 15.2% 17.0% 19.3% 19.8% 20.3% 17.0% 17.0% Less: Depreciation 1.4 1.6 1.8 1.3 1.4 1.6 (3.7) (6.0) Less: Amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EBIT 70.6 77.6 94.7 102.6 116.5 131.6 131.4 152.7 10.0% Less: Taxes @ 40.0% (28.2) (31.0) (37.9) (41.0) (46.6) (52.6) (52.6) (61.1) Tax-effected EBIT 42.4 46.6 56.8 61.6 69.9 79.0 78.9 91.6 10.0% Plus: Depreciation and amortization (1.6) (1.8) (1.3) (1.4) (1.6) 3.7 6.0 Less: Capital expenditures (2.5) (4.1) (3.4) (3.0) (7.5) (8.3) (5.3) (6.0) Less: Additions to intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (Increase)/decrease in working capital (39.9) (46.7) 21.2 (16.1) (17.7) (27.7) (31.7) Unlevered Free Cash Flow $0.9 $4.8 $78.5 $44.9 $51.4 $49.6 $59.9 65.3% Operating Assumptions Sales growth NA 19.0% 9.3% 7.8% 14.8% 14.8% 14.8% 14.8% Cost of goods sold (as a % sales) 79.5% 81.3% 79.8% 79.8% 79.8% 79.8% 79.8% 79.8% SG&A (as a % sales) 4.1% 3.5% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% Capital Expenditure Assumptions CapEx (as a % sales) NA 0.8% 0.6% 0.7% 0.7% 0.7% 0.7% 0.7% Depreciation (as a % of CapEx) NA (40.0%) (52.1%) (21.7%) 8.7% 39.1% 69.6% 100.0% Additions to Intangibles ($ amount) NA $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Amortization ($ amount) NA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Perpetuity Growth Method Weighted average cost of capital: 6.6% Net present value of free cash flow $194.0 Terminal growth rate 3.3% Terminal value $1,851.8 Present value of the terminal value 1,346.0 Enterprise value $1,540.0 Less: Net debt* 84.4 Equity value $1,624.4
  • 18.
  • 19.
    Management Consideration 0 2 4 6 8 10 12 IPO (CurrentStructure) Divest SSIT Status Quo Divest SSIT, IPO ITC (Class B Shares) Option Analysis Liquidity Event Long-Term Ownershitp Growth Rate
  • 20.
  • 21.
    Recommendation Divest SSIT • DivestingSSIT will create a liquidity event equivalent to $40M • Remove heavy debt burden created by 55% Debt – 45% Equity structure • Gives IT Consulting best shot at highest IPO offering IPO • IPO with IT Consulting • Generate a liquidity event, and return value to shareholder • Without SSIT, valuation $100M higher Class B Shares • Create a dual-class share structure • Class-B shares allow owner to maintain voting majority • Able to pass down to heir or family (non-transferable outward)
  • 22.
    Section 7 APPENDIX ANDSUPPORTING DOCUMENTATION
  • 23.
    IT Group IncomeStatement Fiscal Year Ended December 31, 2011 2012 2013 2014 2015E 2016P 2017P Sales $395.5 $437.5 $520.7 $569.0 $624.5 $685.5 $752.4 % Growth 10.6% 19.0% 9.3% 9.8% 9.8% 9.8% Cost of Goods Sold 328.4 347.7 423.4 454.3 496.4 542.4 592.7 Gross Profit $67.1 $89.8 $97.3 $114.7 $128.1 $143.0 $159.6 Gross Profit Margin 17.0% 20.5% 18.7% 20.2% 20.5% 20.9% 21.2% Selling General & Admin Exp. $17.6 $17.8 $18.1 $18.2 $18.3 $18.8 $19.4 Depreciation & Amortization 1.2 1.4 1.6 1.8 2.0 2.2 2.4 Other Operating Expenses/(Income) - - - - - - - Total Operating Expenses $18.8 $19.2 $19.7 $20.0 $20.3 $21.0 $21.8 Operating Income $48.3 $70.6 $77.6 $94.7 $107.8 $122.0 $137.9 Operating Margin 12.2% 16.1% 14.9% 16.6% 17.3% 17.8% 18.3% Interest Expense, Net 2.5 2.6 2.6 2.5 3.3 3.3 3.3 Other (Income) / Expenses 1.5 1.5 1.5 1.5 1.5 1.5 1.5 EBT $44.3 $66.5 $73.6 $90.8 $103.0 $117.3 $133.1 Income Taxes (1) 17.7 26.6 29.4 36.3 41.2 46.9 53.2 Net Income Available to Common $26.6 $39.9 $44.1 $54.5 $61.8 $70.4 $79.8 Plus: Taxes $17.7 $26.6 $29.4 $36.3 $41.2 $46.9 $53.2 Plus: Interest Expense 2.5 2.6 2.6 2.5 3.3 3.3 3.3 Plus: Depreciation & Amortization 1.2 1.4 1.6 1.8 2.0 2.2 2.4 Adjusted EBITDA $48.1 $70.5 $77.8 $95.0 $108.4 $122.7 $138.8 Adjusted EBITDA Margin 12.2% 16.1% 14.9% 16.7% 17.3% 17.9% 18.4% Capital Expenditures $3.2 $2.5 $4.1 $3.4 $5.5 $6.4 $7.9 (1) Assuming 40% tax rate.
  • 24.
    IT Group BalanceSheet Fiscal Year Ended December 31, 2011 2012 2013 2014 Current Assets Cash and Equivalents $40.5 $55.1 $83.1 $115.2 Accounts Receivable 60.7 75.8 92.5 113.4 Inventory 16.0 16.9 17.2 17.9 Total Current Assets $117.2 $147.8 $192.9 $246.5 Property and Equipment $12.6 $16.9 $22.4 $26.9 Land 8.6 8.1 8.4 9.1 Other Long-Term Assets 8.0 11.3 8.9 10.2 Total Assets $146.4 $184.1 $232.6 $292.7 Liabilities Accounts Payable $17.8 $14.6 $15.9 $17.7 Accrued Exp. 41.5 43.0 46.0 49.5 Current Portion of Long Term Debt 11.6 12.7 12.3 10.3 Other Current Liabilities 4.4 2.6 3.5 5.1 Total Current Liabilities $75.3 $72.9 $77.7 $82.6 Long-Term Debt 20.0 20.2 19.7 20.5 Total Liabilities $95.3 $93.1 $97.4 $103.1 Net Stockholder's Equity $51.1 $91.0 $135.2 $189.6 Total Liabilities And Stockholders' Equity $146.4 $184.1 $232.6 $292.7
  • 25.
    SSIT Income Statement FiscalYear Ended December 31, 2011 2012 2013 2014 2015E 2016P 2017P Sales $65.5 $72.4 $78.6 $83.6 $86.9 $91.2 $95.8 % Growth 10.6% 8.5% 6.4% 3.9% 5.0% 5.0% Cost of Goods Sold 55.2 60.7 65.4 70.7 73.7 77.2 80.3 Gross Profit $10.3 $11.7 $13.2 $12.9 $13.1 $14.0 $15.5 Gross Profit Margin 15.7% 16.2% 16.7% 15.5% 15.1% 15.4% 16.2% Selling General & Admin Exp. $6.2 $7.4 $7.3 $7.7 $7.2 $7.8 $8.5 Depreciation & Amortization 0.5 0.6 0.6 0.7 0.7 0.7 0.8 Other Operating Expenses/(Income) - - - - - - - Total Operating Expenses $6.8 $8.0 $7.9 $8.4 $7.9 $8.5 $9.3 Operating Income $3.5 $3.8 $5.2 $4.6 $5.2 $5.5 $6.2 Operating Margin 5.4% 5.2% 6.7% 5.5% 6.0% 6.1% 6.5% Interest Expense, Net 1.2 1.5 1.6 1.5 1.1 1.2 1.1 Other (Income) / Expenses 0.0 (0.1) 0.0 0.0 0.0 0.0 0.0 EBT $2.3 $2.4 $3.7 $3.1 $4.1 $4.3 $5.1 Income Taxes (1) 0.9 1.0 1.5 1.2 1.7 1.7 2.1 Net Income Available to Common $1.4 $1.4 $2.2 $1.8 $2.5 $2.6 $3.1 Plus: Taxes $0.9 $1.0 $1.5 $1.2 $1.7 $1.7 $2.1 Plus: Interest Expense 1.2 1.5 1.6 1.5 1.1 1.2 1.1 Plus: Depreciation & Amortization 0.5 0.6 0.6 0.7 0.7 0.7 0.8 Adjusted EBITDA $4.1 $4.5 $5.9 $5.2 $5.9 $6.3 $7.0 Adjusted EBITDA Margin 6.2% 6.1% 7.5% 6.3% 6.8% 6.9% 7.3% Capital Expenditures $1.5 $1.9 $2.9 $2.5 $2.6 $3.0 $3.7 (1) Assuming 40% tax rate.
  • 26.
    SSIT Balance Sheet FiscalYear Ended December 31, 2011 2012 2013 2014 Current Assets Cash and Equivalents $5.3 $5.8 $6.4 $6.3 Accounts Receivable 6.0 6.6 7.2 7.7 Inventory 13.1 15.2 14.9 15.1 Total Current Assets $24.5 $27.6 $28.5 $29.0 Property and Equipment $8.9 $9.5 $13.3 $16.7 Land 3.3 3.4 3.4 3.5 Other Long-Term Assets 4.2 6.7 6.1 4.8 Total Assets $40.9 $47.3 $51.3 $54.0 Liabilities Accounts Payable $6.0 $6.4 $6.7 $7.4 Accrued Exp. 9.2 10.9 11.0 11.7 Other Current Liabilities 0.4 0.0 0.2 0.6 Total Current Liabilities $15.6 $17.3 $17.9 $19.6 Long-Term Debt 15.2 18.4 19.7 18.8 Total Liabilities $30.8 $35.7 $37.6 $38.4 Net Stockholder's Equity $10.1 $11.5 $13.7 $15.6 Total Liabilities And Stockholders' Equity $40.9 $47.3 $51.3 $54.0
  • 27.
    Comparable Capitalization Comparable CompanyAnalysis - Capitalization ($ in millions) Total Market Ticker Company Debt Capitalization Cash AOSL Alpha & Omega Semiconductor, Ltd. $0.8 $199.6 $72.9 FCS Fairchild Semiconductor International Inc. 198.0 1,925.3 243.1 IXYS IXYS Corp. 54.0 398.0 116.9 SMCI Super Micro Computer, Inc. 94.8 1,340.6 110.9 SEMI SunEdison Semiconductor Limited 212.5 450.4 90.8 Total Market Ticker Company Debt Capitalization Cash PRFT Perficient Inc. $61.0 $590.1 $8.7 CBR Ciber, Inc. 30.0 283.6 18.2 ACXM Acxiom Corporation 209.2 1,724.1 180.9 VRTU Virtusa Corporation - 1,704.6 178.5 SAIC Science Applications International Corporation 1,131.0 2,110.9 163.0
  • 28.
    Comparable Company Multiples ComparableCompany Multiples (figures in millions except per share amount) SSIT Comparable Companies Shares LTM LTM LTM LTM Company Ticker Stock Price Outstanding Debt Cash Sales EBITDA EBIT Earnings Alpha & Omega Semiconductor, Ltd. AOSL $8.88 22.5 $0.8 $72.9 $321.2 $20.6 ($6.3) ($10.5) Fairchild Semiconductor International Inc. FCS 16.68 115.4 198.0 242.9 1,389.6 210.9 73.6 (50.7) IXYS Corp. IXYS 12.46 31.9 54.0 116.9 326.6 43.4 28.1 20.7 Super Micro Computer, Inc. SMCI 28.21 47.5 94.8 110.9 2,067.5 145.6 136.6 94.7 SunEdison Semiconductor Limited SEMI 10.75 41.9 212.5 90.8 801.7 79.7 (30.8) (116.1) IT Group Comparable Companies Shares LTM LTM LTM LTM Company Ticker Stock Price Outstanding Debt Cash Sales EBITDA EBIT Earnings Perficient Inc. PRFT $16.72 35.3 $61.0 $8.7 $450.2 $54.4 $35.6 $21.9 Ciber, Inc. CBR 3.57 79.4 30.0 18.2 812.2 25.5 19.7 7.8 Acxiom Corporation ACXM 22.12 77.9 209.2 180.9 1,033.4 157.5 67.7 7.8 Virtusa Corporation VRTU 57.43 29.7 - 82.3 526.9 69.6 56.2 44.5 Science Applications International Corporation SAIC 45.86 46.0 1,131.0 163.0 4,064.0 281.0 246.0 128.0
  • 29.
    Comparable Performance Comparable CompanyMultiples ($ in millions) LTM Operating Indications LTM Margins 2-Year Compound Annual Growth Rate SSIT Comparable Companies Gross Net CapEx Gross Net Company Revenue Profit EBITDA EBIT Income CapEx % of Rev. Profit EBITDA EBIT Income Revenues EBITDA EBIT Net Income Alpha & Omega Semiconductor, Ltd. $321.2 $57.4 $20.6 ($6.3) ($10.5) $25.1 7.8% 17.9% 6.4% -2.0% -3.3% -0.7% -15.3% NM NM Fairchild Semiconductor International Inc. 1,389.6 456.3 210.9 73.6 (50.7) $64.9 4.7% 32.8% 15.2% 5.3% -3.6% -0.3% 13.2% 63.3% NM IXYS Corp. 326.6 102.4 43.4 28.1 20.7 $6.9 2.1% 31.4% 13.3% 8.6% 6.3% 6.5% 24.6% 45.7% 111.0% Super Micro Computer, Inc. 2,067.5 323.3 145.6 136.6 94.7 $40.0 1.9% 15.6% 7.0% 6.6% 4.6% 31.2% 80.3% 90.8% 83.6% SunEdison Semiconductor Limited 801.7 85.5 79.7 (30.8) (116.1) $105.9 13.2% 10.7% 9.9% -3.8% -14.5% -7.7% 2.2% NM NM Low $321.2 $57.4 $20.6 ($30.8) ($116.1) $6.9 1.9% 10.7% 6.4% -3.8% -14.5% -7.7% -15.3% 45.7% 83.6% High 2,067.5 456.3 210.9 136.6 94.7 105.9 13.2% 32.8% 15.2% 8.6% 6.3% 31.2% 80.3% 90.8% 111.0% Median 801.7 102.4 79.7 28.1 (10.5) 40.0 4.7% 17.9% 9.9% 5.3% -3.3% -0.3% 13.2% 63.3% 97.3% Mean 981.3 205.0 100.0 40.2 (12.4) 48.6 5.9% 21.7% 10.4% 2.9% -2.1% 5.8% 21.0% 66.6% 97.3% LTM Operating Indications LTM Margins 2-Year Compound Annual Growth Rate IT Group Comparable Companies Gross Net CapEx Gross Net Company Revenue Profit EBITDA EBIT Income CapEx % of Rev. Profit EBITDA EBIT Income Revenues EBITDA EBIT Net Income Perficient Inc. $450.2 $151.9 $54.4 $35.6 $21.9 $3.5 0.8% 33.7% 12.1% 7.9% 4.9% 14.5% 12.9% 5.8% 3.8% Ciber, Inc. 812.2 211.7 25.5 19.7 7.8 $6.6 0.8% 26.1% 3.1% 2.4% 1.0% -3.6% 7.3% 11.4% NM Acxiom Corporation 1,033.4 228.6 157.5 67.7 7.8 $60.0 5.8% 22.1% 15.2% 6.5% 0.8% -2.0% -8.7% -18.3% -60.8% Virtusa Corporation 526.9 189.1 69.6 56.2 44.5 $15.6 3.0% 35.9% 13.2% 10.7% 8.5% 20.8% 21.7% 22.8% 18.9% Science Applications International Corporation 4,064.0 372.0 281.0 246.0 128.0 $18.0 0.4% 9.2% 6.9% 6.1% 3.1% -5.4% -1.9% -6.6% -6.4% Low $450.2 $151.9 $25.5 $19.7 $7.8 $3.5 0.4% 9.2% 3.1% 2.4% 0.8% -5.4% -8.7% -18.3% -60.8% High 4,064.0 372.0 281.0 246.0 128.0 60.0 5.8% 35.9% 15.2% 10.7% 8.5% 20.8% 21.7% 22.8% 18.9% Median 812.2 211.7 69.6 56.2 21.9 15.6 0.8% 26.1% 12.1% 6.5% 3.1% -2.0% 7.3% 5.8% -1.3% Mean 1,377.3 230.7 117.6 85.0 42.0 20.8 2.2% 25.4% 10.1% 6.7% 3.6% 4.9% 6.3% 3.0% -11.1%
  • 30.
    Comparable – BalanceSheet Stats Comparable Company Analysis - Balance Sheet Statistics ($ in millions) SSIT Comparable Companies Total Net Income Net Income Current Quick Inventory A/R A/P Net Working Company Assets ROA ROE Ratio Ratio Turnover Days Days Capital Alpha & Omega Semiconductor, Ltd. $308.5 -1.2% -4.0% 2.9 1.8 4.0 41.1 55.4 $44.6 Fairchild Semiconductor International Inc. 1,590.5 2.8% -4.3% 3.3 1.7 3.4 39.3 43.0 288.8 IXYS Corp. 388.0 4.5% 7.6% 3.0 1.9 2.5 45.4 23.0 101.0 Super Micro Computer, Inc. 1,082.0 8.9% 16.7% 2.1 1.0 4.3 43.4 47.6 462.9 SunEdison Semiconductor Limited 1,082.5 -1.6% -17.6% 1.5 0.8 6.1 48.7 57.5 33.6 Max $1,590.5 8.9% 16.7% 3.3 1.9 6.1 48.7 57.5 $462.9 Min 308.5 -1.6% -17.6% 1.5 0.8 2.5 39.3 23.0 33.6 Mean 890.3 2.7% -0.3% 2.6 1.4 4.1 43.6 45.3 186.2 Median 1,082.0 2.8% -4.0% 2.9 1.7 4.0 43.4 47.6 101.0 IT Group Comparable Companies Total Net Income Net Income Current Quick Inventory A/R A/P Net Working Company Assets ROA ROE Ratio Ratio Turnover Days Days Capital Perficient Inc. $450.8 5.0% 6.9% 3.1 2.9 NA 92.9 16.7 $77.2 Ciber, Inc. 500.4 2.4% 2.6% 2.0 1.8 NA 84.5 14.9 92.0 Acxiom Corporation 1,152.6 3.4% 0.3% 2.0 1.7 NA 51.6 20.6 38.3 Virtusa Corporation 522.7 7.1% 10.7% 4.3 3.9 NA 74.3 10.9 79.2 Science Applications International Corporation 2,158.0 8.6% 34.2% 1.4 1.2 NA 58.4 37.4 183.0 Max $2,158.0 8.6% 34.2% 4.3 3.9 NA 92.9 37.4 $183.0 Min 450.8 2.4% 0.3% 1.4 1.2 NA 51.6 10.9 38.3 Mean 956.9 5.3% 10.9% 2.6 2.3 NA 72.3 20.1 94.0 Median 522.7 5.0% 6.9% 2.0 1.8 NA 74.3 16.7 79.2
  • 31.
    Comparable Transactions Comparable CompanyAnalysis - Comparable Transactions ($ in millions) Announced Target EV / EV / Transaction Date Enterprise Value Revenue EBITDA Transaction 1 09/22/15 191.2 1.56 x 7.9 x Transaction 2 08/06/15 1,171.6 1.20 x 7.9 x Transaction 3 06/05/15 890.6 0.48 x 4.1 x Transaction 4 04/10/15 674.6 1.30 x 5.7 x Transaction 5 01/06/15 754.5 1.52 x 6.5 x Transaction 6 11/24/14 561.2 0.67 x 5.8 x Transaction 7 10/13/14 79.3 0.78 x 8.6 x Transaction 8 07/07/14 365.0 2.37 x 10.3 x Transaction 9 06/30/14 70.6 1.52 x 6.9 x Transaction 10 04/27/14 93.4 1.50 x 6.8 x Transaction 11 04/11/14 1,706.3 2.35 x 6.8 x Transaction 12 03/07/14 62.4 1.32 x 7.3 x Transaction 13 10/14/13 87.2 0.96x 6.8x Transaction 14 09/27/13 596.3 1.38x 9.1x Transaction 15 07/09/13 99.8 1.23x 7.1x Min $62.4 0.5x 4.1x Max 1,706.3 2.4x 10.3x Median 278.1 1.3x 6.9x Mean 493.6 1.3x 7.1x Comparable Company Analysis - Comparable Transactions (IT Group) ($ in millions) Announced Target EV / EV / Transaction Date Enterprise Value Revenue EBITDA Transaction 1 04/27/15 $4,453.6 3.46 x 17.9 x Transaction 2 10/05/15 15.0 0.72 x 6.0 x Transaction 3 12/29/14 55.8 1.65 x 11.0 x Transaction 4 12/23/13 203.2 0.71 x 7.4 x Transaction 5 11/05/13 1,964.8 4.03 x 13.9 x Transaction 6 02/21/12 76.4 0.84 x 7.6 x Transaction 7 01/27/12 13.4 0.67 x 14.8 x Transaction 8 12/12/11 100.4 1.84 x 7.5 x Transaction 9 10/03/11 20.1 0.28 x 6.9 x Transaction 10 08/16/11 1,299.1 1.82 x 14.9 x Transaction 11 06/03/11 140.9 1.45 x 13.9 x Transaction 12 04/01/11 1,781.5 1.02 x 10.9 x Transaction 13 02/09/11 63.9 0.71 x 15.4 x Transaction 14 11/04/10 52.5 1.59 x 17.8 x Transaction 15 11/02/10 93.9 0.49 x 17.5 x Min $13.4 0.3x 6.0x Max 4,453.6 4.0x 17.9x Median 93.9 1.0x 13.9x Mean 689.0 1.4x 12.2x
  • 32.
    WACC Analysis -SSIT Comparable Company WACC Analysis (dollars in millions) Debt to Preferredto Equity to Preferred Market Value Total Debt Total Total Total Debt Stock of Equity Capitalization to Equity Capitalization Capitalization Capitalization Alpha & Omega Semiconductor, Ltd. $0.8 $0.0 $199.6 $200.4 0.4% 0.4% 0.0% 99.6% Fairchild Semiconductor International Inc.198.0 0.0 1,925.3 2,123.3 10.3% 9.3% 0.0% 90.7% IXYS Corp. 54.0 0.0 398.0 451.9 13.6% 11.9% 0.0% 88.1% Super Micro Computer, Inc. 94.8 0.0 1,340.6 1,435.4 7.1% 6.6% 0.0% 93.4% SunEdison Semiconductor Limited 212.5 0.0 450.4 662.9 47.2% 32.1% 0.0% 67.9% All Companies Included Median $94.8 $0.0 $450.4 $662.9 10.3% 9.3% 0.0% 90.7% Mean 112.0 0.0 862.8 974.8 15.7% 12.1% 0.0% 87.9% Best Companies Included Median 126.0 0.0 424.2 557.4 0.1 0.1 0.0 0.9 Mean 116.3 0.0 743.3 859.6 0.2 0.1 0.0 0.9 Levered Unlevered Equity Risk Size Risk Cost of Cost of Cost of Beta Beta Premium (1) Premium (2) Equity Debt Preferred WACC Alpha & Omega Semiconductor, Ltd. 1.45 1.45 6.00% 5.82% 17.1% 4.2% 0.0% 17.1% Fairchild Semiconductor International Inc. 1.67 1.57 6.00% 1.60% 14.2% 4.5% 0.0% 13.1% IXYS Corp. 1.81 1.68 6.00% 2.56% 16.0% 5.5% 0.0% 14.5% Super Micro Computer, Inc. 1.51 1.45 6.00% 1.50% 13.2% 3.9% 0.0% 12.4% SunEdison Semiconductor Limited 1.66 1.30 6.00% 2.56% 15.1% 4.3% 0.0% 11.1% Median 1.66 1.45 15.1% 4.3% 0.0% 13.1% Mean 1.62 1.49 15.1% 4.5% 0.0% 13.7% Best Companies Included Median 1.7 1.5 0.1 0.0 0.2 0.0 0.0 0.1 Mean 1.6 1.5 0.1 0.0 0.2 0.0 0.0 0.1
  • 33.
    WACC Analysis -ITGroup Comparable Company WACC Analysis (dollars in millions) Debt to Preferredto Equity to Preferred Market Value Total Debt Total Total Total Debt Stock of Equity Capitalization to Equity Capitalization Capitalization Capitalization Perficient Inc. $61.0 $0.0 $590.1 $651.1 10.3% 9.4% 0.0% 90.6% Ciber, Inc. 30.0 0.0 283.6 313.6 10.6% 9.6% 0.0% 90.4% AcxiomCorporation 209.2 0.0 1,724.1 1,933.3 12.1% 10.8% 0.0% 89.2% Virtusa Corporation 0.0 0.0 1,704.6 1,704.6 0.0% 0.0% 0.0% 100.0% Science Applications International Corporation 1,131.0 0.0 2,110.9 3,241.9 53.6% 34.9% 0.0% 65.1% All Companies Included Median $61.0 $0.0 $1,704.6 $1,704.6 10.6% 9.6% 0.0% 90.4% Mean 286.2 0.0 1,282.7 1,568.9 17.3% 12.9% 0.0% 87.1% Best Companies Included Median 135.1 0.0 1,157.1 1,292.2 0.1 0.1 0.0 0.9 Mean 357.8 0.0 1,177.2 1,535.0 0.2 0.2 0.0 0.8 Levered Unlevered Equity Risk Size Risk Cost of Cost of Cost of Beta Beta Premium Premium Equity Debt Preferred WACC Perficient Inc. 0.28 0.26 6.00% 2.56% 6.8% 2.6% 0.0% 6.3% Ciber, Inc. 1.61 1.51 6.00% 5.82% 18.1% 4.5% 0.0% 16.6% AcxiomCorporation 0.68 0.63 6.00% 1.60% 8.3% 5.5% 0.0% 7.7% Virtusa Corporation 1.31 1.31 6.00% 1.60% 12.0% 4.3% 0.0% 12.0% Science Applications International Corporation 0.81 0.61 6.00% 1.60% 9.0% 4.3% 0.0% 6.8% All Companies Included Median 0.81 0.63 9.0% 4.3% 0.0% 7.7% Mean 0.94 0.87 10.9% 4.2% 0.0% 9.9% Best Companies Included Median 0.74 0.62 0.1 0.0 0.1 0.0 0.0 0.1 Mean 0.84 0.76 0.1 0.0 0.1 0.0 0.0 0.1

Editor's Notes

  • #14 Switch projected year to begin in 2015