EVC - Entravision Communications (EVC) - Financial Flexibility With Recent Buyout
Accelerates timetable to buy the rest of Cisneros. The Company acquired the remaining 49% interest in Cisneros Interactive that it did not already own, accelerating the timetable to buy the stake by 2 years. Notably, we estimate that the company paid $29 million for its original 51% ownership interest in Oct. 2020. The purchase solidifies the company as a leading digital media company, with over 70% of its consolidated revenue from its Digital Media businesses.Attractive terms. Entravision will pay the remaining shareholders of Cisneros in 1/3rd increments in each of the next 3 years. The annual payout will be 6 times EBITDA of the prior year end period times 49% divided by 3, an attractive valuation given the strong growth profile of Cisneros. The sellers will receive incremental upside from acquisitions that Cisneros makes. The buyout takes the place of the earn out that the sellers had.Raising Adjusted EBITDA estimates. We are raising our Q3 adj. EBITDA estimate roughly $800,000 to $20.2 million and our Q4 adj. EBITDA estimate to $24.6 million. Our full year 2021 and 2022 adj. EBITDA estimates are $76.7 million and $88.7 million (which we view could be conservative). Financially attractive structure. As of June 30, the company had $182.5 million in cash, cash equivalents, marketable securities and restricted cash and has the financial means to complete the transaction. The upcoming annual payments for the next three years is estimated to be roughly $35 million to $40 million per year, largely equating to the Cisneros' current cash flow. As such, we expect that the company will largely maintain its current large cash position. Raising price target. We are raising our price target from $10 to $12 to reflect our upwardly revised 2022 adj. EBITDA estimate. Near current levels, the EVC shares trade at 7.9 times EV to our upwardly revised 2022 adjusted EBITDA estimate. In our view, the shares are compelling trading below recent trading averages. Read More >>