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spk01: Hello, many thanks for your time today, and we are really looking forward to talking to you about the exciting future we have ahead of us at Cineverse. My name is Andrew Davis. I'm the CEO at Cineverse, and I have significant experience in the TMT sector from my time as CFO at Sprint, Veeam, Verizon Wireless, as well as at Vodafone's operations in India, Turkey, and Japan. Also with me is Simon Irvin, our CFO, and Mo Medji and Matt Turkle from M3 Brigade Acquisition Corp. I will now turn it over to them to introduce themselves before we jump into the presentation.
spk02: Hello, I'm Simon Irving and I'm the CFO of Cineverse. I've worked in the telecom sector for more than 20 years and I've held senior finance, operational and transformation roles in companies including T-Mobile, Cable & Wireless and Unify before joining Cineverse two years ago.
spk03: Thanks, Simon. This is Mo Megchi. It's very good to join you guys today. I'm the chairman and CEO of the M3 Brigade Acquisition Corp SPAC. This is my second SPAC. We did a deal in 2018 with a company called Infrastructure and Energy Alternatives. For our second SPAC, we teamed up with Brigade Capital. And Matt Perkle has joined me, who is his lead partner from Brigade on the SPAC. Matt?
spk00: Hello. I'm Matthew Perkle, partner and portfolio manager at Brigade Capital and executive vice president of the SPAC.
spk03: Well, thank you, Matt. With that, this is Mo Megji. I'm going to start us off here. I'm delighted to announce that Cineverse has entered into a definitive merger agreement with MBAC. which will result in Cineverse becoming a publicly traded company. The transaction values Cineverse at an enterprise value of $2.85 billion, or 12 times 2022 EBITDA. Over $1 billion of new capital is being invested into Cineverse to accelerate growth and deliver the business. This capital is coming from Twilio, the pipe investors, and SPAC Cash & Trust. Specifically, it includes up to $750 million from Twilio, a leading communications platform. Carlyle, as the primary owner of the company currently, is rolling 100% of its investment into the March company without any secondary sales of any amount and continues to have very strong belief in the long-term value opportunity here. Brigade Capital, which has historically been the company's largest lender of is investing $150 million into the pipe financing, and the MBAC sponsor entity is also investing $15 million into the common equity as part of the $265 million pipe commitment. The decrease in leverage for Cinevas will position the company very well to drive significant growth in the enterprise segment and also to pursue M&A opportunities. Let me now turn to Cineverse's kind of core business. Cineverse is very unique in that it provides mission-critical services to carriers across the global mobile ecosystem. It facilitates inter-carrier connectivity, roaming, and message delivery across the globe. Cineverse has the largest, most complete carrier network, comprising of 900-plus carriers globally. Its unique and highly defensible business offers secure connectivity, resulting in Cineverse being a leading provider to all the major North American carriers. The business has very strong revenue share for data clearing and P2P messaging, as well as IPX, and has very strong cash flow generation. Cineverse's enterprise segment revenue is forecasted to grow at a 27% annual growth rate through 2025, which will result in the overall Cineverse revenue CAGR of 14% over the next five years. Enterprise messaging is driven by a secular shift of businesses communicating with customers via text messaging. Message volume has been driven by high growth and adoption rates of CPaaS by large enterprises and digital native businesses. Cineverse's existing secure network allows it to capture the high growth enterprise messaging volume, which is a significant built-in advantage. Twilio's strategic investment will allow the company to turbocharge the enterprise segment's growth. Twilio is a leading communications platform growing at over 50% a year based on their most recent quarter. The revenue projections from Twilio for Cineverse currently only include U.S. messaging volumes and exclude any revenue from potential future international business, which represents... additional upside to the company's projections. And finally, the carrier segment growth we expect will resume and is going to be driven by a combination of 5G rollout and continued wireless device growth rates. Global mobile data traffic is projected to grow at a 31% CAGR through 2026 with the investment in 5G infrastructure. Carrier volumes and revenues will benefit from continued adoption of private networks, IoT, and RCS, or rich communication services. The company's carrier margins are very strong, so the projected increase in revenues will meaningfully impact earnings. I will now turn it over to Matt Perkle, who will walk you through the transaction summary as well as the valuation comparables.
spk00: As you can see from the sources and uses, in addition to the nearly $200 million of preferred equity, there's over half a billion dollars of common equity pipe at an approximate average price of $11 per share. We are very confident this deal is a great value for our shareholders at a near 10% discount to the pipe price. The transaction valuation provides a very attractive entry point at 12.1 times estimated 2022 EBITDA, with significant upside driven by both strong earnings growth and potential multiple expansion driven by revenue mix. Transaction processing companies and communication technology businesses are the most comparable to Cineverse. Transaction processing companies have similar attributes and trade at a median of 19 times 2022 EBITDA. Communication technology companies have high growth rates, which are similar to the enterprise segment, and trade at very high multiples, and oftentimes the market focuses on revenue multiples. Cineverse expects its enterprise segment to generate more than 50% of revenues by 2024, making the business more comparable to Cinch, which currently trades at 40 times EBITDA. Additionally, communication technology peers companies traded a median of 11 times 2022 revenue, while Cineverse is valued at 3.7 times 2022 revenue.
spk01: Thank you, Mo and Matt. In a nutshell, Cineverse may be the most important company you've never heard of we have had two timelines being we make mobile work and we're the world's most connected company. We are the trusted neutral intermediary and central nervous system that keeps devices, data traffic, and messages flowing seamlessly and securely across the globe. If you've ever sent a message to someone with another carrier, that's Cinebus. If you've traveled overseas and made a phone call there, that's also Cinebus. And if you've received a text message with any of a two-factor authentication code, an airport gate change notification, or a delivery reschedule, that's Synergy. And those are just a few simple, illustrative examples of how we enable and drive the evolution of the entire communications ecosystem. We power the connected world and the digital economy by connecting over 8 billion devices to the mobile ecosystem, allowing them to roam the globe seamlessly and securely. By connecting these 8 billion mobile devices, we move nearly three and a half exibits of data only over our IPX network, the largest private IP network on the planet. And for context, that volume of data is more than 10,000 times the data stored in the entire Library of Congress. And it gives us a substantial share of the global IPX market. On an annual basis, we process more than 2.2 trillion billable transactions under the leading clearing and settlement platform for the mobile industry for roaming and other services, both in North America and on a global basis. Our 30 year linkage of facilitating and operating mission critical communication solutions for carriers has also positioned us to become a leader in ATP enterprise messaging with unique direct connectivity to all major North American 10 DLC operators. ATP messaging and CPaaS represents a $7 billion opportunity today that will reach $25 billion by 2025. Combined growth rates in ATP and CPAS are expected to be north of 30% per year, and Cineverse is well positioned to capture this growth trend. For three decades now, Cineverse has been at the heart of driving change and advancement in the mobile ecosystem. We have a proven record of leading our carrier and enterprise customers through the technology evolution within this ecosystem, from 1G through 4G, and now into 5G. We developed the technologies and platforms that have allowed carriers to communicate with each other, allowing mobile users to have seamless connectivity, whether domestically or internationally. And we have also bridged ecosystems by enabling enterprises and OTT communications providers to interoperate with the messaging services of the mobile carriers. And all of this connectivity and interoperability is critical to powering the mobile digital economy. Simply put, without Cineverse's communications connectivity platform, a global mobile digital economy cannot exist. We're the only communication platform that creates seamless connectivity and interoperability across enterprises and carriers globally while providing an unrivaled solution set for both. Our foundational technologies are also a strong building point to evolve the ecosystem for 5G, private networks, IoT, and RCS messaging. As a result of Sylvius's history and position as a trusted intermediary for carriers and enterprises, we have a leadership position across both established and emerging markets, giving us a foundational carrier business that generates significant margins and cash flows and a high growth enterprise messaging and CPaaS business. Our leadership position is further validated by Cineverse enabling global connectivity for a significant number of blue chip enterprise customers and nearly all major communications providers. Cineverse has built a reputation with our customers as the expert in enabling communications to their customers and employees on a global basis due to the quality and reach of our services. We focus on providing our technology securely and reliably to all of our customers at carrier-grade service level. meaning five nines quality. Because of this, the number of customers and partners we serve has grown through the years, and we have excellent customer retention because of our quality and service levels. We have great customer diversification, with leading brands in every industry vertical where we provide service, and our quality, scale, and reliability also give us an advantage to look at other nascent verticals we could pursue, such as healthcare. Cineverse's communication platform and foundational carrier business enables our enterprise business to deliver global mobile connectivity for the other leading platforms around the world, making us the platform of platforms for enterprises focusing on the mobile-first economy, which brings us to Cineverse's relationship with Twilio. For those who are less familiar with Twilio, Twilio is a leading communications platform with over $2.2 billion in trailing 12-month revenue, and over 60% year-on-year growth in its most recent quarter. Twilio has 240,000 customers and over 10 million developer accounts on the platform. With its customer engagement platform, Twilio is enabling innovators across every industry, from emerging companies to the world's largest organizations, to reinvent how companies engage with their customers. Messaging is Twilio's largest product, which brings us to the relationship with Cineverse. The Cineverse and Twilio partnership creates new opportunities across the connected ecosystem for enterprise customers, and the partnership will drive significant messaging volumes for Cineverse, due to Twilio's position as a leading communications platform globally. Twilio has been a customer of Cineverse for over seven years. and Twilio's decision to enter into a strategic partnership with Cineverse was driven by Cineverse's unique position in the market as the trusted partner with strategic connectivity to all major US carriers. The rationale for Twilio's investment and strategic partnership with with Cineverse is multifaceted and includes the fact that it provides secure connectivity to the major US carriers for A2P messaging and provides additional options to connect to more than 900 carriers globally. Provides Cineverse with significant volumes from Trulio. It aligns a leading communications platform with a premier global mobility platform to accelerate the next wave of innovation in mobile communications. The increased financial flexibility and boundary capacity for Syllabus makes us well positioned to invest and drive innovation in areas such as advanced messaging and RCS. In addition to our leading global mobility platform and blue chip enterprise and carrier customers, we've got a strong, cohesive leadership team with deep expertise and bench strength within commercial, technology, operations, and all the supporting functions. We've also been strengthening selected teams to ensure a successful transition to a publicly listed company since early 2021. Now I'll hand over to Simon to provide an overview of the financials.
spk02: Thank you, Andrew. Turning now to the financial performance. Synerverse is a high-quality business that offers strong, scalable revenue growth across multiple markets, together with impressive EBITDA that is underpinned by a culture of operating model optimization and cost control. Syllabus is unique in the breadth of capabilities that we offer, and this has given us the ability to service both carrier and enterprise customers. Our foundation in carrier provides exceptionally strong profits and cash flows with best-in-class growth that we have used and we will continue to use to invest in and grow our enterprise business. We expect the enterprise business to continue to grow very strongly while maintaining healthy margins. Messaging is a common element between the businesses. with both messages between carriers and messages from enterprises to their customers using the carrier networks being enabled by our platforms. And this allows us to bridge and monetize the carrier ecosystem with the enterprise customers for the benefit of the carriers and of the enterprises. Our enterprise business sits within a fast-growing ecosystem where enterprises engage with their customers through an increasing number of mobile channels. The CPaaS business has entered a phase of rapid growth as engagement with customers becomes more interactive. In mid-2020, we launched our CPaaS platform in North America, which generated strong growth for us. We expect CPaaS revenues to grow at approximately 40% CAGR through 2025 as we roll out the platform to other geographies and extend the range of services on the platform. We have a diversified customer base with all services provided under contracts with typical contract durations of 24 to 36 months. A significant proportion of our revenues arise from contracted month recurring charges with the balance being built on usage or consumption, which provides line of sight to strong top line growth. We expect to grow rapidly driven by continuing expansion in CPaaS and in enterprise messaging with steady growth in a high margin carrier business. We encourage everyone to read pages 26 to 28 of the distributed investor presentation, which outline revenue and profit numbers and growth rates. But I'll highlight some key numbers now. Enterprise revenue is forecast to grow from $209 million in 2020 to $679 million in 2025 at a 27% CAGR with approximately 30% direct margin. Carrier revenue is expected to grow from $436 million in 2020 to $558 million in 2025 as a 5% CAGR with 85% direct margin. Our business has inherent scalability with our platforms and operational costs already being dimensioned to service the volumes you'll foresee in the plan. Our continued focus on and attention to operating model optimization will result in EBITDA growing in dollar terms, at least in line with revenues, and EBITDA margin will be in the low 30s, remaining constant despite the change in revenue mix. EBITDA is forecast to grow from $210 million in 2020 to $416 million in 2025 at a 15% CAGR. Our revenue growth will come from multiple markets, driven by a variety of technology advances and business model changes in those markets. The partnership with Twilio is expected to drive significant incremental messaging volumes and revenues, and there are significant revenue upside opportunities that have not been included in the forecast. For example, we have been advised by Allegiant Strategic Consultancy that they see the potential for significantly higher growth in emerging technologies such as private networks and IoT than we have assumed in our projections. Furthermore, the new equity investments will allow us to significantly deleverage our balance sheet and reduce our cash interest burden by approximately $90 million per annum. Consequently, we will have strong operating cash flow out of the gate with which to pursue attractive organic and inorganic growth opportunities. So now I will hand you back over to Andrew for closing remarks.
spk01: Thank you, Simon. In conclusion, let me summarise the investment thesis for you. Our high margin and high cash flow generating carrier business will grow in line with that ecosystem driven by tailwinds from 5G, RCS, private networks, and IoT. In addition, the carrier business provides the foundational technology, platforms, and relationships for our enterprise solutions, very specifically on all things related to messaging. We will harness this symbiosis by driving continued strong growth in our enterprise business from the accelerating adoption of ATP messaging and CPaaS, all of which will be further strengthened by our strategic partnership with Twilio. The transaction valuation provides a very attractive entry point at just over 12 times estimated 2022 EBITDA, with significant upside driven by both strong earnings growth and potential multiple expansion as revenue mix shifts to our high-growth enterprise business. We've enjoyed speaking to you about the exciting future we have ahead of us at Cinebus, and thank you all for your time.
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