Wall Street Mastermind Sector Spotlight - Media & Entertainment (October 2023).pdf

3
TABLE OF CONTENTS Media & Entertainment
4-7
Film/TV Sector Update
I.
8-13
Disney Snapshot
II.
14-21
Sports Sector Update
III.
22-26
Gaming Sector Update
IV.
27-39
Consolidated Comms. Take
Private Deal Analysis
V.

4
Film/TV Sector Update Media & Entertainment
4-7
I.
8-13
Disney Snapshot
II.
14-21
III.
22-26
IV.
27-39
Consolidated Comms.
Take Private Deal Analysis
V.

5
Commentary
• Over the last year, legacy media studios have increased the cost of their major ad-free
streaming services by 25% as they aim to make their streaming platforms profitable
• A survey of 1,287 U.S. adults reported that 60% of them subscribed to at least four
streaming services
o The average monthly household spends $54 on them per month, with that number
likely to continue to increase
• In August, the Financial Times wrote that ad-free subscriptions to Disney+, Netflix,
Peacock and Hulu cost $87 per month which is > than the $83 monthly average cable bill.
The growth of streaming by cord cutting was always partly due to the idea that it was
cheaper than cable. That is no longer the case and the gap will continue to widen.
• Legacy media has begun exploring options to create new pricing tiers, such as live sports
• Netflix has reported plans to raise the price of it’s ad-free service following the Hollywood
actor's strike
o As of 10/18/2023, Netflix will be prices in the US, UK and France. The basic plan
increased to $11.99 per month, and their premium package to $22.99 per month
o Warner Bros. Discovery announced that the monthly price of Discovery +’s ad-free
platform would rise to $8.99, up 28.6% from an original price point of $6.99
o As of 10/12/2023, the monthly price for Disney+’s Premium package increased to
$13.99, up 27.3% from an original price point of $10.99
o Similarly, Hulu (owned by Disney), on 10/12/2023, increased their add-free tier to
$17.99 per month, up 20.0% from an original price point of $14.99
o As of 10/25/2023, Apple increased TV streaming prices to $9.99 from $6.99
• The recent price increases are expected to be continued due to the writer's strike and the
eventual SAG strike agreement which now creates residual pay from streamers which
increases the prices associated with it
o In turn, streamers need to increase subscription prices to offset the costs
*Sources: SEC filings, Wall St. Journal, IndieWire
Legacy Media Studios and the Surge in Streaming Subscription Prices
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
2020 2021 2022 2023
Ad-Free Streaming Prices Per Month
2020-2023
Netflix Disney+ MAX Hulu Peacock Paramount+ Prime AppleTV
in $USD 2019 2020 2021 2022 2023
Disney+ $6.99 $6.99 $7.99 $10.99 $13.99
Netflix $12.99 $17.99 $17.99 $19.99 $19.99
MAX -- $14.99 $14.99 $14.99 $15.99
Hulu $11.99 $11.99 $12.99 $14.99 $17.99
Peacock -- $9.99 $9.99 $11.99 $11.99
Paramount+ $9.99 $9.99 $9.99 $9.99 $11.99
Prime $12.99 $12.99 $12.99 $14.99 $14.99
Apple TV $4.99 $4.99 $4.99 $4.99 $9.99
Cumulative $59.94 $89.92 $91.92 $102.92 $116.92

6
Commentary
• In efforts to crack down on password sharing, streamers have been exploring strategic
alternatives to keep consumers engaged while still being able to monetize their streaming
offerings
• Netflix was the first to take action introducing their paid sharing program
• In a recent Parks Associates finding, most consumers share their account credentials with
friends and family
• 50% of Paramount+ subscribers do so, as well as 62% of ESPN subscribers
• From 2019-2022, password sharing increased by 48%
• In a rapidly changing macroeconomic environment and with the secular headwinds
facing the media & entertainment business, the days of companies like Netflix
encouraging password sharing are long gone. Streamers need to recognize growth
through revenue (which comes from paid membership additions) as well as convert
that into operational profitability
• Netflix introduced the paid sharing option to combat password sharing
• Account owners of both the Standard or Premium package can share Netflix with
someone who doesn’t live with them by purchasing an extra member on their
account
• Disney’s Bob Iger said that the company is exploring account sharing for their streaming
platform
• Iger said that the paid sharing option will be rolled out in 2024, but acknowledges
that a total prevention of password sharing won’t be completed in 2024
*Sources: SEC filings, Wall St. Journal, IndieWire, Bain & Co.
Streamers Cracking Down on Password Sharing
% of people who used someone else's
paid subscription
Disney Netflix Hulu MAX Apple TV+ Prime Video
33%
30% 28% 28%
22%
22%
Industry
Average:
27%
Commentary
• The average US consumer borrows 1.02 accounts
• Average US consumer paid subscriptions: 2.93
• Password sharing is prevalent across all ages and income levels
• 43% of users between the ages of 18-24 share a
subscription
• 22% of users above the age of 35 share a subscription
• Film studios are looking to tap into this % of users as they aim to
bring their streaming services profits

7
*Sources: SEC filings, Wall St. Journal, SEC Filings
Netflix Posts Strong Q3’23 Earnings
• 9% YoY increase in average paid
memberships:
• Largely driven by price
sharing, strong
programming and the global
expansion of streaming
Commentary
• In efforts to crack down on password sharing, streamers have been
exploring strategic
• Netflix stock gained 16% post earnings
o Streaming makes up the largest share of US TV Screen time
(37.5%) – Netflix makes up 7.8% at #2 following YouTube
(9.0%)
• Despite a tough advertising market, ads membership increased
~70% QoQ and accounts for ~30% of all new sign-ups in Netlflix’s 12
ad countries
o Growth is attributed by offerings improvements such as two
streams, higher quality video and programming on par with
other offerings
• Management expects FY23 FCF to be ~$6.5bn, up 30% from a prior
forecast of $5bn
o Includes $1bn in lower-than-planned cash content spend in
FY23 due to the SAG-AFTRA and WGA strikes
o Expected cash content spend of $13bn in 2023 and $17bn in
2024, assuming the SAG-AFTRA strike is resolved soon
NFLX Summary Trading Valuation (as of 10/30/2023)
Share Price @ Market ($) $410.08
Shares Outstanding 445
Equity Value $182,608.6
(-) Cash & Cash Equivalents 7,867
(+) Total Debt 16,787
(+) Pref. Equity --
(+) Minority Interest --
Total Enterprise Value (TEV) $191,527.8
in millions $USD Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23E
Revenue $7,926 $7,852 $8,162 $8,187 $8,542 $8,692
YoY % growth 5.9% 1.9% 3.7% 2.7% 7.8% 10.7%
Operating Income (EBIT) $1,533 $550 $1,714 $1,827 $1,916 $1,160
Operating % Margin 19.3% 7.0% 21.0% 22.3% 22.4% 13.3%
Net Income $1,398 $55 $1,305 $1,488 $1,677 $956
Net Income % margin 17.6% 0.7% 16.0% 18.2% 19.6% 11.0%
Diluted EPS $3.10 $0.12 $2.88 $3.29 $3.73 $2.15
Global Streaming Paid Memberships 223.09 230.75 232.5 238.39 247.15
YoY % growth 4.5% 4.0% 4.9% 8.0% 10.8%
Global Streaming Paid Net Adds. (mm) 2.41 7.66 1.75 5.89 8.76
Cash from operating activities $557 $444 $2,179 $1,440 $1,992
Unlevered Free Cash Flow $472 $332 $2,117 $1,339 $1,888
Fullt Diluted Shares Outstanding 450 452 452 452 450

8
Disney Snapshot Media & Entertainment
4-7
I.
8-13
Disney Snapshot
II.
14-21
III.
22-26
IV.
27-39
Consolidated Comms.
V.

9
Commentary
• 01/2023: Nelson Peltz (found of Trian Fund Management) launched a proxy battle with the
Walt Disney Company
o Peltz was seeking a seat on Disney’s board, criticizing the business for poor M&A
judgement, more specifically the $71bn acquisition of Fox, as well as bad succession
planning and destroying shareholder value
o From FY2019 – FY2022, Disney has spent ~$162bn on M&A, CapEx, and Content
which is 5.2% higher than Disney’s current market capitalization
o In that same time period, EPS was cut in half by 50%
o It’s evident Disney significantly overpaid for it’s $71bn acquisition of Fox’s
traditional media assets in 2018 and ramifications continue to linger – the deal
created $50bn of incremental goodwill, leading investors to question a potential Fox
write down
o Debt financings in the acquisition of Fox’s traditional media assets coupled with
Disney’s eventual purchase of their remaining stake in Hulu will keep leverage ratios
well above historical levels for years to come
o Shares have plummeted to 8-year lows
*Sources: Wall St. Journal, Trian Fund Management, CNBC
Nelson Peltz’s Activist Campaign Against Disney
Commentary (Contd.)
• 02/2023: subsequently following CEO Bob Iger’s massive
restructuring of the company, including a $5.5bn cost-
cutting plan
• 10/2023: Trian Fund Management increases their stake in
Disney to > $2.5bn, at a cumulative share count of 30mm
• Peltz is now seeking several board seats, relative to his
initial short-lived push in 1H’23, where he sought one board
seat for himself
• If Disney shuts down the proposal, Trian will be
eligible to nominate directors at the company’s
annual meeting this spring
• The shareholder nomination window is from 12/05
– 1/04
• If nominated, Peltz and his team will likely push for the
expedition of the sale of “non-core” assets like ABC
Networks, which CEO Bob Iger doesn’t seem ready to sell, as
well as reorganizing the board to ensure alignment with
shareholder interests
• 10/30/2023: Isaac Perlmutter offers support to Peltz in his
pursuit of Disney board seats
• Trian’s current holding; $33mm
• Former Marvel Executive Isaac Perlmutter has
entrusted his Disney stake to Trian, giving Peltz sole
voting power over Perlmutter’s shares
• Trian currently owns four times as many shares
relative to the original proxy battle
“While I was a Disney employee, I was not comfortable publicly stating my
views on the company and it’s performance…… as someone with a large
economic interest in Disney’s success, I can no longer watch the business
underachieve its great potential.”
- Isaac Perlmutter, Chairsperson of Marvel Entertainment

10
*Sources: SEC filings, Wall St. Journal
Nelson Peltz’s Activist History with The Walt Disney Company
75.00
80.00
85.00
90.00
95.00
100.00
105.00
110.00
115.00
The Walt Disney Company (NYSE:DIS) - Share Pricing Investor Activism Annotation
• 01/17/2023:
• The Trian Group submits a
Shareholder Proposal to DIS
• Disney says Peltz lacks media
experience to help the business
• 02/02/23:
• Disney sends a
letter to
shareholders
• 01/31/23:
• Disney solicits
proxies from
shareholders
• 02/07/23 – 02/08/2023:
• Trian Fund Management solicits
proxies from Disney
shareholders
• 02/09/2023:
• The Trian Group withdraws its
nomination of Peltz to the Board
• 10/08/2023:
• Trian Fund Management boosts
Disney stake to $2.5bn, seeking
multiple board seats

11
Hulu ownership
Background
Explained
Put/Call
Agreement
• There is a very low probability that the two valuations will be within 10% of each other for more reasons than for maximizing/minimizing payment. The contract
agreement between Disney and Comcast states that appraisals must value Hulu as if it were to be sold in the open market. The problem is that this hasn’t been done before.
• Firstly, there has never been a precedent transaction of a pureplay streaming services close to this size. In fact, there are very few pureplay streaming companies at all.
• Nearly every one of the large film/tv streaming services are owned by a film studio or technology company with many other larger divisions. Netflix and Roku are the
only significant pureplay comps and Roku is more of a technology company for streaming services that is subscription based than a traditional streaming service.
• Secondly, the two valuations also might substantially differ based on assumptions on valuing the asset (Hulu) in an isolated fashion or on its valued based on the synergies with
Disney+. Brian Roberts, in a September Goldman Sachs media conference stated that given the potential for synergies and reduction of churn with Disney (or any other media &
entertainment companies) is so substantial along with the content and financial position of Hulu that the stake would be worth a multiple of the floor agreement.
• Another possible although less likely challenge with the deal is regulation. Disney is currently facing a large antitrust lawsuit by a collection of YouTube TV subscribers who
argue that Disney's industry consolidation on live tv and streaming has allowed it to push up prices across the whole market. The acquisition of Hulu could further fuel this.
Possible
Challenges With
The Deal
• The Put /Call agreement states that as of January 2024 either Disney can force Comcast to sell, or Comcast can force Disney to purchase Comcast's 33.3% stake in Hulu at a
minimum valuation of $27.5 bn ($9.17 bn purchase price).
• After a period where Comcast's CEO Brian Roberts acted as if Comcast didn't have the intention to sell and Disney's CEO Bob Iger acted as if Disney wasn't going to purchase the
stake (largely negotiating tactics) it has now become quite clear that the option will be exercised, and Disney will purchase Comcast's stake of Hulu.
o The date of the start of the negotiations was moved up to September 30 and the date that the put/call agreement can now be exercised is November 30
• Comcast has hired the investment bank Morgan Stanley, and Disney has hired J.P. Morgan to conduct valuations of Hulu. The agreement states that if the two valuations are
within 10% of each other the stake will be sold at the average of those valuations.
o However, if these valuations are greater than 10% apart a third investment bank will be brought in to do an independent valuation of Hulu. The sale price would then
be the average of the 2 closest valuations. This in theory will disincentivize the two parties from attempting to dramatically over/under exaggerate the valuation as
then their valuation likely won't be utilized in calculating the purchase price.
• Hulu was originally owned primarily by Disney (30% stake), Comcast (30% stake), Fox (30% stake), and Warner Media (10%) stake. None of these companies had fully
created their own streaming service yet. Then in 2018 Disney acquired Fox which boosted Disney's stake to 60%. Within the Fox deal, Disney valued Hulu at $9.3 bn
• Immediately upon the close of the Disney Fox deal in 2019, AT&T(which owned Warner Media) sold its stake in Hulu back to Hulu(to Disney and Comcast) for a $15 bn
valuation which represented a 61.3% increase in valuation from just a few months ago
• The 10% stake was distributed to Disney and Comcast on a proportional ownership stake basis:
o Disney (60% stake/90%) =2/3 of the 10% AT&T stake. Disney total stake = 66.7% of Hulu
o Comcast (30% stake/90%) = 1/3 of the 10% AT&T stake. Comcast total stake = 33.3% of Hulu
• With Disney having operational control of Hulu, Comcast sought to exit its stake in the company. At the same time however, it was projecting massive increases in value over
the next few years that it wanted to maintain the value appreciation prior to a sale. Disney was afraid that Comcast would stop supplying content to Hulu.
• In May 2019 Comcast struck a deal with Disney in which they agreed to extend the Hulu license and live carriage agreement for NBC Universal channels to 2024 as well as grant
Disney operational control of Hulu in exchange for a Put/Call that would allow Comcast to exit the business at a preset date and at a preset floor valuation
Hulu Sale: The Impact of Disney & Comcast’s Put/Call Agreement

12
Hulu Sale Continued: Financial and Subscriber Analysis
• Disney does not break out any specific financials about Hulu within its earnings reports other than subscriber counts and average monthly revenue per paid subscriber
for the quarter or year for its two segments. Therefore, while it would be difficult to ascertain profitability for the service without significant assumptions, the revenue by
quarter or year can reasonably be approximated
• Disney has confirmed that for the past few years Hulu has had positive and generally growing operating income. That makes it an exception with it and Netflix being the
only “primary” streaming services to be profitable while Disney+ Peacock (Comcast), Paramount+, and Max (WBD) had $10 bn combined operating losses in 2022
• The main takeaways from this financial breakdown are that 1. Live TV+SVOD (streaming video on demand) subscriptions have flatlined for the past year, even as cable
cord cutting has escalated. One would assume that that would lead to higher growth for Hulu Live TV as cord cutters switch to live tv options like YouTube TV or Hulu.
o 2. LTM revenue is (estimated) in decline driven by average monthly revenue per subscriber decline for SVOD. This is due to cheaper bundling options
• Disney will argue that Hulu’s stagnating to declining revenue minimizes its value since most streaming services have continued to have revenue growth
o Comcast will argue that Hulu’s recent revenue has been artificially compressed by Disney who has been converting more users to the bundled Disney+, Hulu, &
ESPN+ package which is much cheaper to reduce churn: Disney has been trying to improve its overall DTC performance at the expense of Hulu individually
Commentary
Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022 Fiscal Year 2023
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2020 2021 2022 LTM (As of Q3)
Paid Subscribers in millions:
Hulu
SVOD Only 27.2 28.8 32.1 32.5 35.4 37.8 39.1 39.7 40.9 41.4 42.2 42.8 43.5 43.7 44.0 32.5 39.7 42.8 44.0
Live TV+ SVOD 3.2 3.3 3.4 4.1 4.0 3.8 3.7 4.0 4.3 4.1 4.0 4.4 4.5 4.4 4.3 4.1 4.0 4.4 4.3
Total Hulu 30.4 32.1 35.5 36.6 39.4 41.6 42.8 43.8 45.3 45.6 46.2 47.2 48.0 48.2 48.3 36.6 43.7 47.2 48.3
Average Monthly Revenue per Paid Subscriber in USD:
Hulu
SVOD Only $13.15 $12.06 $11.39 $12.59 $13.51 $12.08 $13.15 $12.75 $12.96 $12.77 $12.92 $12.23 $12.46 $11.73 $12.39 $12.24 $12.86 $12.72 $12.19
Live TV+ SVOD $59.47 $67.75 $68.11 $71.90 $75.11 $81.83 $84.09 $84.89 $87.01 $88.77 $87.92 $86.77 $87.90 $92.32 $91.80 $67.24 $81.35 $87.62 $90.67
Average Monthly Revenue in $mm USD :
Hulu
SVOD Only 357.7 347.3 365.6 409.2 0.0 478.3 456.6 514.2 506.2 530.1 528.7 545.2 523.4 542.0 512.6 545.2 397.8 510.5 544.4 536.5
Live TV+ SVOD 190.3 223.6 231.6 294.8 0.0 300.4 311.0 311.1 339.6 374.1 364.0 351.7 381.8 395.6 406.2 394.7 275.7 325.4 385.5 389.9
Estimated Average Quarterly Revenue $mm USD (Average Monthly Revenue*3)
Hulu
SVOD Only 1073.0 1042.0 1096.9 1227.5 0.0 1434.8 1369.9 1542.5 1518.5 1590.2 1586.0 1635.7 1570.3 1626.0 1537.8 1635.5 4773.6 6126.5 6533.0 6438.1
Live TV+ SVOD 570.9 670.7 694.7 884.4 0.0 901.3 932.9 933.4 1018.7 1122.4 1091.9 1055.0 1145.4 1186.7 1218.6 1184.2 3308.2 3904.8 4626.3 4678.7
Total 1,644.0 1,712.7 1,791.6 2,111.9 2,336.1 2,302.7 2,475.9 2,537.2 2,712.6 2,677.9 2,690.7 2,715.7 2,812.7 2,756.4 2,819.7 8,081.8 10,031.3 11,159.3 11,116.8
Revenue Growth 24% 11% -0.4%
Annual

13
Hulu Sale Continued: Financial and Subscriber Analysis
• Given that Netflix is the most suitable comparable company to Hulu, the valuation could be surmised to be significantly above the floor minimum.
• Tim Nollen, a Macquarie Analyst, estimates that Hulu is worth $35.5-$37.5 bn ($11.83 -$12.5 bn stake value) while Keybanc and Rosenblatt Securities analysts have said
that the $27.5 bn floor price is what the company should still be valued at since even though it has grown the overall market has begun to value streaming assets much
more conservatively since 2022 which has led to many media stocks having massive price declines in the past 2 years
• However, we believe that it is most likely for the valuation to be above $35 bn
• 1. Hulu by nearly any metric is the No. 2 or No.3 streaming service in the market. It is only behind Netflix and YouTube TV in terms of aggregate connected TV
time spent, only behind Netflix in terms of operating income (most other streaming services have operating losses), and has the highest ARPU
• 2. Disney+ needs quality content that minimizes churn and the amount of content spend that have to undertake. Hulu solves many of these issues. Its rarity in
positive operating income makes it an incredibly rare asset in the space and not susceptible to the downward pricing pressure the market has been putting on
other media companies for their continued streaming losses.
• 3. Disney’s under a significant amount of pressure to get the deal done soon because in May 2023, Bob Iger already announced that the company will launch a
one app experience that incorporates Hulu content into Disney+ at the end of this year. This gives Comcast more leverage in the negotiations
• Besides cementing
• If the price is driven up to a close to $40 bn valuation which would be a $13.3 bn purchase price, Disney will have some difficulty in figuring the deal.
• As we described in last months newsletter, the higher the price Disney must pay for Hulu, the more pressure they will be under to sell other assets like ABC to minimize
the risk of significant financial deterioration: It only has around $10 bn of cash on its balance sheet and is suffering a near decade low stock price.
Deal Valuation Final Thoughts
Commentary
• Without specific profitability metrics on Hulu and lack of pureplay
comps it is difficult to ascertain relative valuations.
• Even looking at the two most suitable comparable companies for
Hulu (Netflix and Roku), Hulu’s implied EV is significantly varied
• Using Netflix as the main comparable implies Hulu would
be worth around $60 bn which is over 2x what the floor
agreement states.
• Using Roku as the main comparable implies Hulu would be
worth less than half of that and is worth less than the
$27.5 bn floor valuation set in 2019
*Sources: Business Insider, Hollywood Reporter, CapIQ
LTM Revenue 32,742.50
$ 3,216.60
$
EV/LTM Revenue 5.37x 2.39x
Hulu LTM Revenue 11,116.80
$ 11,116.80
$
Hulu Implied EV 59,697.22
$ 26,569.15
$
LTM Comps
2023E Revenue 33,616.13
$ 3,368.30
$
EV/2023E Revenue 5.59x 2.28x
Hulu 2023E Revenue 11,339.14
$ 11,339.14
$
Hulu Implied EV 63,385.77
$ 27,100.54
$
2023E Comps

14
Sports Sector Update Media & Entertainment
4-7
I.
8-13
Disney Snapshot
II.
14-21
III.
22-26
IV.
27-39
Consolidated Comms.
V.

15
Sports Streaming Landscape
Youtube TV +
NFL Sunday
Ticket
Amazon Prime +
Thursday Night
Football
Apple TV+ MLS
Season Pass
Apple TV+
Friday Night
Baseball
Hulu
+
Live TV
Max
+
B/R Sports
• Cable companies are paying top dollar to hold onto sports media rights
• Multiple sports leagues have come to agreements with major streaming
companies to allow them to stream live sporting events
o This has come at a large cost as sports media rights are expensive thus
making it currently unprofitable for streaming companies to invest in
o However, many streaming companies justify the costs due to their
competition offering live sports
• AppleTV is reported to have made a bid of $2B annually for F1 media rights;
doubling the current F1 media rights revenue
• Global sports media rights are estimated to grow to $60B by the end of 2024
Streaming Platforms Competing Bids For Sports Media
Rights
Paramount +
Live Sports
Tubi
+
Live Sports
Peacock
+
MLB Sunday
Leadoff
NFL announces Amazon
Prime Video as Home of
Thursday Night Football
NFL, Google announce
agreement to distribute NFL
Sunday Ticket on Youtube TV
Warner Bros. Discovery’s Max
announces it will launch a
Live Sports Tier
September
2023
December
2022
May
2021
Apple and MLS announce
MLS Season Pass
November
2022
Recent
Developments
Sports media rights will get increasingly expensive as streaming
platforms continue to compete with cable companies for exclusive
rights, packaging them into new subscription tiers
Peacock and NBC Sports
Announces 2023 MLB Sunday
Leadoff
January
2023

16
Apple Bids For F1 Distribution Rights
Sources: WSJ, SEC Filings, ESPN
92,000 124,743
38,000
288,000
586,000
788,000
743,000
833,500
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Feburary March April May June July
2023 New Monthly Subscribers
MLS Season Pass Apple TV+
• Apple received MLB’s Friday Night Baseball and MLS’s exclusive streaming
rights in 2022 as an ongoing effort to grow it service segment
• Lionel Messi’s commitment to play for Inter Miami brought in over 250,000
and 110,000 new MLS Season Pass subscriptions in June and on Messi’s debut
• Apple now turns to Formula 1 for exclusive broadcasting rights at $2bn per
year for 7 years in attempt to replicate MLS success
• Apple’s $2bn offering is 2x F1’s current media rights revenue
• Despite overall decrease in TV viewership, F1’s US audience grew 36% from
2021-2022 with average age of their viewers being 32
• This growth in the US alongside with a young fanbase fits into Apple’s vision of
growing a service that compliments its own existing young audience
• Netflix’s F1 documentary success showed Apple an opportunity to expanding
into sports streaming
Apple’s $2 Billion Bid for Formula 1
F1 Statistics
(in millions except total races) 2018 2019 2020 2021 2022
Revenue $1,827 $2,022 $1,145 $2,136 $2,573
Adjusted OIBDA $400 $482 $56 $495 $593
OIBDA Margin 21.9% 23.8% 4.9% 23.2% 23.0%
TV Viewership 1,590 1,900 1,500 1,550 1,540
YoY Growth 19.5% -21.1% 3.3% -0.6%
Total Races 21 21 17 22 22
TV Viewership per Race 75.7 90.5 88.2 70.5 70.0

17
Max / BR Sports
Overview
Package Details
• Max to offer Sports tier subscription starting October 5th, in partnership with Bleacher
Report
• Bleacher Report to record pre- and post-game programming including sports coverage,
commentary, documentaries, and highlights
• Warner Bros. Discovery intends to target younger audience hence using the Bleacher Report
brand name
• Sports tier will be offered to all current subscribers for no additional charge for a
promotional period
• Promotional period ends February 29th, 2024
• After promotional period, the add-on price will be $9.99 per month
• 300 live sports broadcasts from MLB, NHL, NBA, and others to be aired annually
• Includes live games on TNT, TBS, and TruTV
Battle for Global Streaming Dominance
• This news coming shortly after the streaming platform underwent a name change from HBO
Max to Max and relaunched with a new streaming app
• The streaming platform looks to compete with Netflix for global streaming dominance
• Netflix currently does not offer any live sport packages and management has
constantly iterated they will stay away from the sports market
Paid Subscribers
(in millions)1
Global Streaming
Platforms
247.1
Netflix
200.0
Amazon
146.1
Disney+
95.8
Max
61.0
Paramount+
48.1
Hulu
Sources: Bloomberg, SEC Filings, ESPN
1. Streaming paid subscribers numbers reflect the latest available
figures from public filings and estimates

18
Endeavor Potentially Replacing LIV in PGA Tour Merger
Commentary
• Endeavor Group and Fenway are exploring the possibility of investing in the PGA Tour, a
move that could potentially delay the merger with Saudi Arabia’s Public Investment Fund.
o Other potential Investors: private investors (that includes Henry Kravis, co-founder
of KKR)
• Under the original merger plan with LIV Golf, the PGA Tour was expected to take on a
controlling role in the new entity, LIV as the initial investor holding exclusive rights to
additional financial injections. The Saudi Arabia Public Investment Fund will act as the
financial backer for the new entity
• Endeavor need to address the company's high debt levels, as its debt-to-equity ratio and
debt load currently exceeds industry peers. EDR might face limitations on how it can fund
its investment in the PGA Tour but regulations are loosening up
• But it’s a swing and a miss for Endeavor in PGA Tour Bid as it got turned down. The US
golf's most esteemed league was reluctant to meet the financial terms set as conditions – a
$25 million-per-year service fee
• Endeavor is exploring pathways to enhance its company’s value other than their stake in
PGA Tour however, the PE firm, Silver Lake, is working on a proposal to take Endeavor
private
Endeavor’s Financial Summary and Credit Statistics
Endeavor’s Financial Health

19
Sports Betting Market Overview
Sources: IBIS World, WSJ, Hollywood Reporter
Global Sports Betting ($bn) Disney Enters Gambling
• Disney finally enters the sports betting realm through a partnership deal,
worth $2bn over 10 years, with Penn Entertainment that will launch an
ESPN branded sportsbook in November this year
• Disney’s CEO Bob Iger has been a long-standing opposer of the strategy to
enter the gambling industry, stating concerns of contradictions to Disney’s
family friendly image
• The lucrative success of the sportsbook business was finally able to convince
Iger to take on this bet, as Disney continues to struggle with the profitability
of its DTC streaming business
• The grand success of this partnership remains in question as this is not
the first time an entertainment giant has partnered the launch of sportsbook
• Flutter Entertainment/FOX Bet and NBC/PointsBet
$39.6
$2.1
$16.0
$2.9
$-
$10.0
$20.0
$30.0
$40.0
$50.0
Revenue Net Income
in
billions
Entertainment ESPN
Disney’s DMEA division’s profitability has been
mainly upheld by ESPN as its unprofitable DTC
business continues to eat into earnings margins
* Entertainment includes streaming services, film and studio, and other TV networks
Online Gambling Market Share (%)
Flutter Entertainment PLC 33.7%
DraftKings 22.5%
Mgm Resorts International 21.2%
Caesars Entertainment Inc 2.1%
Others 20.5%
$91.7
$182.1
$-
$50.0
$100.0
$150.0
$200.0
$250.0
2023 2024 2025 2026 2027 2028 2029 2030

20
Sports Betting Legalization
Sports Betting Legalization
1992
Congress passed the Professional and
Amateur Sports Protection Act (PASPA).
Effectively banning sports gambling
nationwide with exception to a few
states that have already voted to legalize
online gambling
2006
The passing of the Unlawful Internet Gambling
Enforcement Act (UIGEA) made it illegal for
gambling businesses to accept payments
associated with unlawful online gambling
2018
SCOTUS strikes down PASPA
and deemed it as
unconstitutional, which
returned the power to legalize
sports gambling back to state
government
2020
COVID-19 outbreak shifted consumers
from physical casinos to online gambling
platforms. Online sports betting revenue
skyrocketed by 91.6% in the USA
2023
As of today, sports betting is
completely legal or legal to a
certain extent in 36 states.
District of Columbia, with many
other states looking to join the
legal sports betting industry
Commentary
Sources: IBIS World, CNBC, CapIQ, ESPN
• The U.S. Senate voted in strong favor of banning the wager of sports with the
purpose of protecting the integrity of sports
• Following SCOTUS’s 2018 ruling, many state governments began to allow the
practice of sports wagering as an opportunity for additional tax revenue
• Professional sports leagues and media companies began to target online sports
betting companies as way to diversify revenue streams and increase fan
engagement
• In 2020, DraftKings and Caesars Entertainment partnered up with ESPN to become
the media giant’s co-exclusive sportsbook and fantasy sports provider
• Despite fast acceleration of states adopting sports gambling, the max potential of
this industry has not been achieved yet with the practice still being illegal in
California and Texas, the two biggest states in terms of population

21
The Future Of The Sports Business
• Women’s sports are reaching new milestones and gaining more viewership. This will be where investors look next
o The Paris 2024 Olympic Games will have 20 mixed-gender events and golf and cricket might launch mixed-gender team
competitions
• Fans engagement becomes a priority in the entertainment space and Sport betting checks some of the boxes.
o The Global Sports Betting Market was valued at USD 81.03 Billion in the year 2022 and is forecast to reach a value of USD
167.50 Billion by the year 2030
• In the coming years, Institutions that have invested in sport begin to explore exit options after having achieved growth and profit
(or not)
Digital to transform fans’ experience
•Electric-based sports e.g., Formula E, eSkootr, E1 Powerboat Series, will increase in popularity, reflecting the preferences of Gen Z
and Alpha
•The popularity of new sports and formats with younger audiences will likely come at the expense of some traditional sports that do
not innovate.
• Organizations are investing in digital capabilities. Emerging tech (blockchain, virtual reality) is changing the way bets are placed in
the betting market.
o Blockchain technology: increase of transparency, security in the sports betting industry and reduce risks of frauds
o VR: placing bets on a live game while being virtually transported to the stadium. Sports betting becoming part of fans
experience
Evolving Sports Market
Space for non-traditional sports
Gen Z fans consume sports differently
0% 10% 20% 30% 40% 50%
Watched a live sporting event from
home
Attended a live sporting event in
person
Followed other brands or athletes
Bought a physical product
Played a video game
Used a sports betting app (21+ yrs)
Bought a digital asset

22
Gaming Sector Update Media & Entertainment
4-7
I.
8-13
Disney Snapshot
II.
14-21
III.
22-26
IV.
27-39
Consolidated Comms.
V.

23
Gaming Leader EA Shows Improving Performance
Ticker EA WACC
Date 10/14/23 Market Cap 35,568
Year end 3/31/24 % of Equity 94.1%
Current Share Price 131.29
$ Cost of Equity 8.75%
Diluted Shares @ Current Price: 278 Risk Free Rate 4.70%
5-year Beta 0.81
in millions $USD ($mm) MAR' 2020 MAR' 2021 MAR' 2022 MAR' 2023 MAR' 2024E MAR' 2025E MAR' 2026E MAR' 2027E MAR' 2028E MAR' 2029E Market Risk Premium 5.00%
Revenue 5,466 5,659 7,005 7,241 7,603 8,059 8,623 9,227 9,873 10,564
% growth 4% 24% 3% 5% 6% 7% 7% 7% 7% Debt 2217
% of Debt 5.87%
EBIT 1,388 1,081 1,142 1,360 2,281 2,418 2,587 2,768 2,962 3,169 Cost of Debt 2.62%
% of sales 25% 25% 15% 16% 30% 30% 30% 30% 30% 30% Tax Rate 40.00%
Less: Taxes 912 967 1,035 1,107 1,185 1,268 Total 37,785
% rate 40% 40% 40% 40% 40% 40%
WACC 8.33%
EBIAT 1,369 1,451 1,552 1,661 1,777 1,902
Plus: D&A 150 181 486 471 380 403 431 461 494 528 Implied Value (in $mm except per share items)
% of sales 3% 3% 7% 7% 5% 5% 5% 5% 5% 5% Terminal Growth Rate 3.00%
Terminal Value 51,393
Less: CapEx 119 140 124 188 228 242 259 277 296 317 Present Value of Terminal Value 34,549
% of sales 2% 2% 2% 3% 3% 3% 3% 3% 3% 3% Present Value of All UFCF 11,040
Changes in NWC 127 624 425 (115) 393 417 446 477 510 546 Enterprise Value 45,589
% of sales 2% 11% 6% -2% 5% 5% 5% 5% 5% 5% (+) Cash 2,602
(-) Debt 2,217
Unlevered FCF 1,914 2,028 2,170 2,322 2,485 2,659 Equity Value 45,974
Present Value of FCF 1,878 1,878 1,855 1,832 1,810 1,787 Diluted Shares 278
Period 0.46 1.46 2.46 3.46 4.46 5.46 Implied Stock Price $165.38
Discount Period 0.23 0.96 1.96 2.96 3.96 4.96 Implied Gain / (Loss) 26%
The DCF analysis shows EA as a
reemerging leader in the gaming
industry despite recent
macroeconomic downturns, at an
implied stock price of with an
implied gain of 26%.
• EA reported a 15% year-over-year growth in bookings for the fiscal fourth quarter, yet its forward P/E ratio is now 11.5% lower at 18.7,
which is considered conservative for a leading video game company
• EA's growth is attributed to existing franchises with dedicated player bases: the latest FIFA release, now called EA Sports FC, is the best-
selling in the series. FIFA 23's success is expected to drive a strong launch later this year
• Apex Legends and The Sims 4 also contributed to strong performance with over 70 million players. Additionally, Star Wars Jedi: Survivor,
released in April, has received favorable reviews
• More in the pipeline: a sequel to the beloved Dragon Age franchise and a college football title set for a 2024 release, featuring real college
athlete likeness, benefiting from the NCAA’s NIL policy in 2021

24
Microsoft Completes Acquisition of Activision Blizzard for $69 Billion USD
• Microsoft's acquisition of Activision Blizzard will
significantly enhance Xbox Game Pass by adding a vast
library of games
• In 2023, PlayStation Plus boasts 50.1 million
subscribers, while Xbox, including Game Pass Core, has
41.7 million subscribers. However, Xbox Game Pass
outperforms PS Plus in terms of tier variety and pricing
• By the end of 2023, nearly half of Xbox Game Pass
subscribers are expected to be on the Ultimate tier ($17
a month), in contrast to PS Plus, where about two-thirds
are projected to opt for the more affordable Essential tier
($6.67 a month)
• The dominance of subscription models in the gaming
industry as the primary revenue source is still uncertain,
with potential financial challenges for blockbuster game
development
• The acquisition is likely to increase Game Pass
subscriptions, but it could reduce publishers' bargaining
power and lead to fewer individual high-priced game
purchases, potentially affecting the visibility of indie
games and the overall value of the gaming industry
Xbox Game Pass
• Microsoft's acquisition of Activision Blizzard is seen as a
strategic move in the mobile gaming market, notably with
the inclusion of Candy Crush creator King, which enhances
its position in this sector
• IDG forecasts mobile games to generate over $122 billion in
revenues in 2023, surpassing console and PC gaming,
which are expected to generate $59 billion and $46 billion,
respectively
• Microsoft's acquisition of Activision Blizzard may trigger
a response from Sony, leading to potential acquisitions of
gaming giants like Electronic Arts (EA) and Ubisoft
• Sony and other gaming companies are eyeing Unity, a 3D
content creator, to bolster their metaverse world creation
capabilities, while Roblox is a target for smaller players
looking to expand in the gaming industry
• Analysts emphasize Sony's need for substantial
acquisitions to strengthen its gaming product portfolio
and content offerings, with EA standing out for its
impressive game catalog
• In a highly competitive gaming industry, companies are
aggressively pursuing mergers and acquisitions to claim
a share of the estimated $33.5 billion in 2023 industry
revenues
• Microsoft's acquisition of Activision Blizzard makes it the
third-largest gaming company globally, but Sony's stock
declined over 12% post-announcement, raising
concerns about its future access to popular titles like "Call
of Duty" and "World of Warcraft"
Offer Per
Share
Gross Value
$95.00
$79,590.14
TEV/EBITDA
TEV/REV
Implied TEV
27.2x
7.6x
$68,987.14
EqV/BV
EqV/NI
Implied
EqV
3.6x
34.8x
$75,330.75
Transaction Statistics (in $mm except per share)
Mobile Gaming Market Impact Competition Between Gaming Giants

25
Artificial Intelligence's (AI) disruption in the video game industry
• Cloud-based and AI-powered solutions are boosting online gaming
uptake and innovation worldwide. Cloud gaming is growing, and AI
and deep learning technologies are improving game design and
reducing cloud computing platform restrictions
• Increasing player desire for more interactive and immersive game
experiences, as well as rising interest and investment in such
technologies among game publishers and developers, are the key
reasons driving the generative AI gaming business
AI in gaming has several applications, transforming the business. These are some of
the most impressive game AI uses:
• Making intelligent and adaptive NPCs
• Creating more realistic gaming experiences
• Detecting and preventing cheats in multiplayer games
• Generating game content
• Testing debugging applications
• Enhancing images and visuals in games
• Analyzing and protecting users’ data
• North America: North America is poised to lead the generative AI gaming
market due to the presence of major gaming companies as well as increasing
demand for personalized gaming experiences
• Europe: Europe is expected to become the second-largest market for generative
AI gaming due to the increasing popularity of mobile gaming and advances in AI
technology
• Asia-Pacific: Asia-Pacific’s market for generative AI gaming should experience
rapid expansion due to an increasing mobile gaming population and adoption of
AI technology across gaming industry segments
• Rest of the World: While emerging markets will likely represent a smaller share
in terms of market size for generative AI gaming technologies, they should
experience growth due to increasing consumer demand for personalized gaming
experiences
Regional Snapshot

26
Nvidia's New Emerging Opportunity Within The Cloud Gaming Space
• GeForce Now, Nvidia's cloud gaming service, will include RTX 4080 graphics cards
• Users may stream RTX 4080-powered games on their devices and enjoy high-
end games without buying pricey hardware
• RTX 4080 cloud gaming servers can give five times the graphics performance
of Microsoft's Xbox Series X console and 1.75x that of its RTX 3080 predecessors
• Cloud gaming allows players to broadcast games to their local device—a
PC, smartphone, or TV—over the internet while faraway data centers process them
• Cloud gaming subscriptions are cheaper, which might benefit Nvidia. Prior to
its launch, Nvidia had 12 million GeForce Now customers
• Nvidia is offering RTX 4080 class cloud gaming with the GeForce Now
Ultimate membership tier, priced at $19.99 for a monthly subscription and $99.99
for a six-month subscription. Priority membership for GeForce Now is $9.99 per
month or $49.99 for six months. However, the Priority tier restricts game streaming
to 1080p and 60 fps. Nvidia's GeForce Now library of 1,500 titles is another draw for
players
• After two strong years of growth in 2020 and 2021, demand for graphics cards
used in personal computers (PCs) has decreased drastically, hurting Nvidia's (NVDA-
0.23%) video gaming industry
• The company is doubling down despite the headwinds in this segment
• Recent estimates put the worldwide cloud gaming industry at $2.4bn. According to Newzoo,
that's a 74% rise over 2021. By 2022, the cloud gaming industry had 31.7mm paying members,
according to the company
• The cloud gaming space is seeing a healthy annual growth rate of 47.5% through 2028 and
generated nearly $14bn in revenue at the end of the forecast period
• Nvidia's latest quarterly profits exceeded expectations with record sales of $13.5bn, a 101% year-
over-year increase
• The gaming sector sold $2.49bn, up 11% from the prior quarter and 22% from last year. Gaming
accounted for 18% of income
The State of Nvidia Gaming Sector
Nvidia's 4080 Graphics Card Information
GeForce Now Subscription
Revenue Nvidia Generated in Q1 2023
Cloud Gaming Market information

27
Sports Sector Update Media & Entertainment
4-7
I.
8-13
Disney Snapshot
II.
14-21
III.
22-26
IV.
27-39
Consolidated Comms.
Take Private Deal
Analysis
V.

28
Transaction Overview
Deal
Breakdown
• Consolidated Communications Holdings (NASDAQ: CNSL) has agreed to be bought out by
Searchlight Capital Partners and British Columbia Investment Management Corporation in a
$3.1bn, $4.70 per share, all-cash transaction
• Original proposal was $4/share but one shareholder urged CNSL BOD to not accept any
offers below $14/share
• This offer tags an approximate 70% control premium on unaffected share price as of
4/12/23
• The $3.1bn enterprise value implies a 9.6x TTM EBITDA multiple, pro-forma for the
previously disclosed sales of certain non-core operations, including expected sales of
Washington assets
• Searchlight Capital currently owns 34.3% of CNSL’s outstanding common stock and all its Class
A preferred
• This deal is expected to close in first quarter of 2025, and CNSL will be delisted and taken
private afterwards
• Goldman Sachs and J.P. Morgan will be lead advisors on this deal for Searchlight
CNSL 2022
Financial
Statistics
(YOY Change)
EPS: $0.87/share
Operating Loss*: $93.2mm (-168.9%)
Cash per Share: $4.70
Cashflow from Operations: $223.7mm (-29.8%)
Net Income*: $140.6mm (231.8%)
Adjusted EBITDA: $413.6mm (-18.4%)
EBITDA: $220.4mm (-33.9%)
*High YOY change in operating loss was driven by an asset impairment expense of $131.7mm to its Kansas City operations
*High YOY change in net income was driven by the sale of its wireless partnership to Cellco for $490mm, yielding a $389.9mm one-time gain
Consolidated Communications provides broadband and
communication solutions across three main channels in the U.S.:
consumer, commercial, and carrier. They are a top 10 internet
fiber provider in the U.S. with close to 59K miles of fiber route
Company Profiles
Searchlight Capital Partners is a middle market British private
equity firm with ~$12bn in AUM. Half of its portfolio comprises
of companies in the TMT sector, with another quarter in
consumer. Searchlight closed on investment agreement with
CNSL in 12/2021

29
Consolidated Communications Background
• Consolidated Communications Holdings, Inc. (“Consolidated
Communications” or “The Company”) is an 1894 founded Mattoon, Illinois
headquartered broadband and business communications service provider
• Services include high speed internet, video, phone and home security, data
center, data and internet solutions; amongst other various offerings
• Consolidated Communications trades on the Nasdaq under the ticker “CNSL”
• Operating Revenues are broken down into four major categories:
1. Consumer: Serves residential and consumer customers
2. Commercial: Services business and enterprise customers
3. Carrier: Services national interexchange and wireless carriers
4. Subsidies: Consist of federal and state subsidies to expand services to
rural and low-income areas
• The company operates in 20+ states and has a fiber network that spans 58,000
miles
$0.48B
$1.14B
$0.35B
~ 3,200
6.86x
6.08x
• Joined: 2002
• Previously Vice Chairman at RCN
• Years of Experience: 40+
Robert Currey | Chairman
• Joined: 1993
• Previously COO at TXU
Bob Udell | President & CEO
• Joined: 2022
• Previously CFO at Brinks Home
Fred Graffam | EVP & CFO
Market Cap (as of 10/25/2023)
LTM Revenue (as of 06/30/2023)
LTM Adjusted EBITDA (as of 06/30/2023)
EV/LTM Adjusted EBITDA (as of 06/30/2023)
Debt/LTM Adjusted EBITDA (as of 06/30/2023)
Employees
Consolidated Communications By The Numbers
Management Team
Major Developments
Company Overview
• Sep. 13, 2020 – Searchlight Capital through a subsidiary invests $425M in the
company
• The investment was completed over two stages ending Dec. 7, 2021 with
Searchlight owning 34% of the entity
• Sep 13, 2022 – Completed the sale of its 5 limited partnership interests to Cellco
for $490M
• Nov. 30, 2022 - Closed on multiple transactions to sell all the company’s assets
located in the Kansas City market; receiving gross cash proceeds of $82.1M
• Oct. 16, 2023 – Searchlight acquires the company in an all-cash transaction
valued at $3.1B

30
Searchlight Capital Background
• Searchlight Capital Partners (“Searchlight” or “The Firm”) is a New York City
headquartered private equity firm, founded in 2010, with deep knowledge in
the communications, media, financial services, and business services sectors
• The company makes equity investments, performs leveraged buy outs, and
takes part in corporate debt issuances
• Investment philosophy aims at being active managers alongside the
management team of their portfolio companies
o Investments are made on a global scale with the help of a global team
o Searchlight has offices in New York, London, Toronto, and Miami
• The investment portfolio currently consists of major companies like Hyve,
Netspend, Gymboree, Cengage Learning, and many more
$11.60B
40
1.9x
120
1.6x
25% , 53%
• Previously Senior Partner at Apollo
Management
• Years of experience: 30+
Eric Zinterhofer | Founding Partner
• Previously Head of Private Equity at
Ontario Teacher’s Pension Plan
Erol Uzumeri | Founding Partner
• Previously Senior Partner at KKR
Oliver Haarmann | Founding Partner
AUM (as of 10/25/2023)
Private Equity Investments (as of 10/25/2023)
Fund II Net Return Multiple
Fund III Net Return Multiple
Funds II, III Net IRR
Employees
Searchlight Capital By The Numbers
Company Overview
• Oct. 2, 2020 – Completes stage one of Consolidated Communications investment
at $350M
• Included the refinancing of the company’s debt
• Positions the company for long-term growth as leading fiber broadband
service provider
• Nov. 18, 2020 – Closes Fund III at $3.4B
• Targeted investments in North America and Europe
• Dec. 2022 – Launches Fund IV, aimed at raising $4B
• Expects to make 15 – 17 investments within the range of $100 – $300M
Management Team
Major Developments

31
Deal Rationale: Investment Opportunities
Diminishing Stock Performance Since IPO
• The company has faced financial difficulties in recent years, with its share
price dropping significantly. Therefore, it's seen as a very attractive
investment opportunity for buyers.
• Fiber-optic technology is favored for its faster, more
reliable connectivity compared to copper wiring.
• Fiber-optic cables use photons, which travel at the
speed of light, resulting in lightning-fast speeds
• Fiber-optic cables have higher bandwidth, lower
latency, and less signal degradation over long
distances compared to copper
• They are also more durable, lighter, and smaller,
leading to lower maintenance costs and a longer
lifespan
• CNSL's transition to fiber is considered "future-
proof," and it aligns with the government's
investments in broadband infrastructure, making it
a promising choice in the digital communication
sector
Strategy Pivot
• CNSL operates in markets with a high degree
of market power: 11% monopolistic, 83%
duopolies, and 6% oligopolies, making up
94% of its markets
• This competitive advantage leads to stronger
pricing and higher EBITDA margins
compared to other fiber companies
• CNSL aims to increase fiber passings to
70% of total passings by 2026, up from the
current 38%, potentially boosting revenue
per user by around 20% and fostering
further growth in this metric
• The global fiber optics market was worth
$8.76 billion in 2022 and is projected to
experience a 7-year CAGR of 6.9%
Dominant Market Position
• CNSL has a significant amount of debt,
primarily due to front-running capital
expenditure, which will impact their
balance sheet in the coming years
• To address the capital expenditure, the
company is divesting assets for cash; but
their abilities to divest have hit a lower
bound
• Their loans are favorable with low rates,
and the majority of their debt matures in
2027 and 2028, with some carrying
interest rates of 4.25%, 5%, and 6%
Debt
Financials (Figures in $mm)
203.6
Cash
2,152.2
Debt
567.9
CapEx
6.9x
Debt/EBITDA
2,780.6
TEV
474.1
EqV

32
Deal Rationale: Risks and Concerns
• Fairness Valuation provider, Julie & Holleman, express concerns about potential conflicts
due to Consolidated's largest shareholder's desire to take control of the company
• Searchlight, the major shareholder, has previously obtained two seats
on Consolidated's board and access to insider information
• Searchlight's leverage may have been used to acquire the rest of the company at
a considerable discount
• The deal price of $4.70 per share is notably below the company's 52-week high of $5.50
per share and even lower than the $8 per share trading prices from just a year ago
Fairness Concerns
Valuation Concerns
• Despite its significant debt, Stock Info from seeking alpha views CNSL
• The company is seen as undervalued, with a market cap of $474 million and an
enterprise value expected to increase as the company expands
• CNSL holds $200 million in cash, contributing to almost half the value of its current
market cap, which is attributed to the market's tendency to undervalue highly
indebted companies
• CNSL is considered a growth company with plans to manage and reduce debt without
taking on more
• By 2026, the company is expected to reduce capital expenditure significantly
and operate with an EBITDA in the range of $600 to $800 million, aided by the
cost-effective nature of fiber
• Stock Info anticipate that CNSL will successfully achieve its goals earlier than expected,
leading to improved cash flow, debt reduction, and a stronger balance sheet
• The company's valuation, at 0.5x the projected EBITDA for 2026-2028, is deemed too
low if they meet their targets
• Consolidated's substantial amount of debt and their ability to repay or refinance it or
incur additional debt in the future
• CNSL's need for a significant amount of cash to service and repay the debt restrictions
contained in our debt agreements that limit the discretion of management in operating
the business
• The risk that regulatory approvals required for the investment are not obtained on a
timely basis or at all
• Some risks associated with CNSL discontinuing paying dividends on our common stock.
• Rapid development and introduction of new technologies and intense competition in the
telecommunications industry
Risk Concerns

33
Selected Telecommunications Precedent Transactions Analysis
Ann.
Date
08/2021
09/2023 03/2020 12/2019 07/2017 02/2017
EV $7.5bn $7.7bn $2.9bn $200mm $650mm $950mm
Target
Buyer
5.0x
Min
5.8x
Q1
7.4x
Mean
6.4x
Median
8.5x
Q3
12.0x
Max
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
12.0x
5.5x
7.6x
6.4x 6.1x
9.4x
Telecommunications Transactions EV/LTM EBITDA Multiples

34
Trading Comparables
Commentary
• Consolidated Communications has experienced a notable decrease in its EBITDA, with a decline of 22.32%
over the past year and a 5.67% decrease in 2021. Its cash flow is also exhibiting a downward trend, registering
a decline of 215.15% in 2021 and 134.98% in 2022, raising concerns around the profitability of the firm
o Searchlight Capital will have to restructure the capital stack of its target post-acquisition as the
current debt load is 175.9 times higher than the cash flow. If the PE firm is able to generate a positive
cash flow and repay debt, the company can trim down its interest expenses and strengthen its
financial position
• Consolidated Communications seems to be an attractive target for firms with the capital and resources to
invest in and grow the business. The current financial state of the company allows potential acquirers the
opportunity to acquire the business at an appealing price. For Searchlight Capital, it means achieving a higher
IRR upon the successful execution of their strategic restructuring plan
CNSL Valuation and Capitalization

35
CNSL Discounted Cash Flow Analysis
DCF Commentary:
• Management forecasts Y/Y growth in revenue and EBITDA to begin in 2024 with an expected EBITDA CAGR in the mid teens from 2024E-2026E
• Given operational trends varying from previous forecasts, coupled with accelerating declines in voice revenues and a slowdown in enterprise growth, we believe an
EBITDA CAGR of 12.59% from 2024E – 2026E is more feasible, as well as an EBITDA CAGR of 11.47% from 2023E – 2028E
• Forecast assumes an effective tax rate of 13.20%, the most recently reported effective tax rate
• Sale of Operating Subsidies 2024E:
• On 07/10/2023, CNSL entered into a definitive agreement to sell all of the issued and outstanding stock of Consolidated Communications of Washington Company
(directly owned by Consolidated Communications of Comerco Company, “CCCC”)
• Sale is expected to generate $73mm in gross cash proceeds and is expected to close in the second half of 2024
• Post-closing of the Searchlight x BCI merger, the two sponsors will likely continue to sell of assets to generate cash to pay down a high debt load; said assets are likely to include
CNSL wholly owned subsidiaries
• Management forecasts a decline in CapEx since most growth initiatives were put into place over the last two years
2020A 2021A 2022A 2023E 2024E 2025E 2026E 2027E 2028E
EBITDA $473.0 $445.9 $355.8 $310.3 $347.3 $402.6 $495.7 $550.4 $595.2
Operating Income (EBIT) 148.1 145.3 55.7 13.4 17.0 93.7 143.8 194.9 237.1
Less: Taxes (33.6) (3.2) (7.4) (1.8) (2.2) (12.4) (19.0) (25.7) (31.3)
Net Operating Profit After Taxes (NOPAT) 114 142 48 11.6 14.8 81.3 124.8 169.2 205.8
Plus: D&A 274.2 261.1 269.3 323.4 335.7 345.3 354.9 367.6 375.0
Plus: Stock Based Compensations 7.5 10.1 10.8 9.3 9.0 8.7 8.4 8.1 7.8
Less: CapEx (217.6) (480.3) (620.0) (495.0) (453.3) (400.0) (350.0) (305.0) (265.0)
Plus: Sale of Operating Subsidies 55.7 53.8 70.6 0.0 73.0 0.0 0.0 0.0 0.0
Net Working Capital (55.7) (53.8) (70.6) (58.1) (59.5) (61.4) (64.8) (68.3) (71.0)
(+/-): Increase/(Decrease) in Net Working Capital 1.9 (16.8) 12.5 (1.4) (1.8) (3.5) (3.5) (2.7)
Unlevered Free Cash Flows $179 -$65 -$308 -$138 -$22 $33 $135 $236 $321
1 2 3 4 5 6
Discounted Unlevered Free Cash Flows -$129 -$20 $27 $103 $169 $215

36
Deal Valuation: CNSL Present Value of Terminal Value & Unlevered Free Cash Flows
Commentary
• Our DCF analysis yields an implied price per
share of $5.38, a 94.9% premium to its
04/12/2023 $2.76 stock price, the day the
news that Searchlight and BCI submitted a
take private proposal
o The market had a positive reaction to
the announced planned transaction;
the stock price jumped to $3.83, a
38.8% increase
• Due to high leverage levels and preferred
equity, share prices at various multiples tend
to be negative
o DCF Midpoint Valuation:
o TV Multiples: 5.9x – 6.9x
o WACC: 5.88% - 7.88%
o Range: $2.39 - $8.66
o Midpoint: $5.38
Offer Price: $4.70
• The terminal value EBITDA multiple was
derived by taking the median ‘23E
EBITDA multiple of its peer group
o Its comparable set includes
Lumen Technologies, IDT Corp.,
WideOpenWest Inc., Cogent
Communications, and Comcast
Terminal Value
Terminal Multiple 6.4x
Terminal Value 3,809
Discount Rate (WACC) 6.88%
Present Value of Cash Flows
Total Present Value of Cash Flows 366
Mid Year Adjustment 379
Present Value of Terminal Value 2,555
Implied Enterprise Value 2,934
Plus: Cash & Short Term Investments 203.6
Less: Total Debt 2,152.2
Less: Pref. Equity 350.0
Less: Total Minority Interest 8.0
Total Implied Equity Value 627
Shares Outstanding 116.5
Implied Price Per Share $5.38
5.4x 5.9x 6.4x 6.9x 7.4x 7.9x
4.88% $4.58 $6.50 $8.41 $10.33 $12.25 $14.17
WACC 5.88% $3.22 $5.04 $6.85 $8.66 $10.47 $12.29
6.88% $1.96 $3.67 $5.38 $7.10 $8.81 $10.52
7.88% $0.77 $2.39 $4.01 $5.63 $7.25 $8.87
8.88% -$0.35 $1.18 $2.72 $4.25 $5.78 $7.31
9.88% -$1.40 $0.05 $1.50 $2.95 $4.40 $5.86
TV Multiple
Implied Share Price At Assumed WACC & TV Multiples

37
Consolidated Communications Capital Structure Situation
in $USD
Capital Structure as of Q2'23 (June 30, 2023)
Description Principal Due % of total Coupon/Base Rate Floating Rate Maturity
5.00% Senior Notes Due 2028 $400.0 18.3% 5.00% NA 10/1/2028
6.50% Senior Notes Due 2028 $750.0 34.2% 6.50% NA 10/1/2028
Finance Leases $41.9 1.9% 6.60% NA 2023-2040
Revolving Credit Facility --- --- NA Benchmark 10/2/2027
Term Loan $999.0 45.6% NA SOFR + 3.50% 10/2/2027
Total Principal Due $2,190.9
Available Credit
Undrawn Revolving Credit $214.6
Total Undrawn Credit $214.6
Credit Ratios
Total Debt/Capital 70.5%
LT Debt/Capital 70.0%
Total Liabilities/Total Assets 76.1%
EBITDA/Interest Exp. 2.3
Total Debt/EBITDA 6.9x
Net Debt/EBITDA 6.2x
• A broad swath of factors impacting the
Company’s capital structure and access to
liquidity:
o Operational trends facing secular
headwinds including accelerating declines
in voice revenues as well as slower
enterprise growth
o High leverage levels with the potential
risk of tapping their undrawn revolver
o Unpredictability surrounding the interest
rate environment
• Consolidated Communications, simultaneously
with the signing of the merger agreement, has
amended its existing credit agreement
o The amendment will provide additional
flexibility under the consolidated first lien
leverage ratio financial covenant through
09/2026
• Existing financial covenant:
o Consolidated first lien leverage ratio requirement (end of any quarter):
o < or = to 6.35x; subsequent step-downs of 5.85x (in each case if the revolver utilization > 35%
• In accordance with the amendment:
o Maximum consolidated first lien leverage ratio increases to 7.75x from and including the amendment effective date to and including 12/31/2024 with subsequent
quarterly stepdown of 5.85x over time
• The existing maximum consolidated first lien leverage ratio financial covenant will return to current levels by 08/01/2025
o Contingent on the Company not receiving at least $300mm in new cash proceeds from equity contributions by then
• Upon the acquisition, Searchlight will be providing these new cash proceeds

38
Consolidated Communications Weighted Average Cost of Capital Analysis (WACC)
Commentary
• Cost of Equity (Re):
• Calculated using the Capital Asset Pricing Model (CAPM)
• Levered Beta as of 10/30/2023 (5Y Monthly Beta)
• Risk Free Rate represents the U.S. 30-Year Treasury rate as of
10/27/2023
• Cost of Debt (Rd):
• 6.72%: Provided by management
• Cost of Preferred Stock:
• As per 2022 10K filing:
• Holders of preferred stock are entitled to receive cumulative
dividends on the liquidation preference of 9% per year, paid
semi-annually until 10/2/2027
• Weighted Average Cost of Capital:
• Calculated as follows:
• Debt/Total Capital * Rd + (1- Tax Rate) + Equity/Total Capital *
Re + Preferred/Total Capital * Rp
Sources: CapIq, Aswath Domodaran
Notes: Market Data as of 10/30/2023, Rd, Re, & Rp : Cost of Debt, Cost of Equity and Cost of Preferred respectively
Cost of Equity Calculation (CAPM)
Levered Beta 1.27
Debt/Cap 70.5%
Tax Rate 13.2%
Equity Risk Premium 5.0%
Risk Free Rate 4.9%
Cost of Equity 11.2%
Cost of Debt 6.72%
After-Cost of Debt 5.83%
Cost of Preferred Stock 9.00%
WACC Analysis
Total Debt 2,152.2
Equity Value 472.9
Preferred Equity 350.0
Total Capital 3,051
Weighted Average Cost of Capital 6.88%

Wall Street Mastermind Sector Spotlight - Media & Entertainment (October 2023).pdf

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