Really great presentation.
For his afternoon session, Peter Hopper, president and co-founder of DH Capital touched on a couple of the subjects that we’ve repeatedly found to be of tremendous significance to hosting providers: valuations for private companies and debt markets for private companies.
In illustrating the nature of the hosting market right now, he points to the fact that among public companies, valuations have rebounded considerably since their lows in the last year, in some cases more than 75 percent from their lowest point.
Among the big public companies in the sector, revenue growth is rebounding, particularly in the last quarter, as is percentage EBIDTA growth. Most of them are also trading at a higher price today than they were a year ago, which is a very significant number measure.
The point, generally, is that by every measure Hopper offered up, hosting is in a good place. By comparison, he showed a similar chart of cable TV carriers’ stock prices, all of which were trading between 30% and 60% lower than they were a year ago.
Among hosting company sales in 2009, valuations were down slightly from where they were in 2007 – EBIDTA multiples were somewhere in the high single digits – but not down tremendously.
The debt market isn’t quite as rosy. But it’s improving. Private debt market activity is likely to increase moving forward. Captial continues to view the hosting business as a bright spot. And public companies may become more active.
I’m just going to pause here and say there were a lot of numbers on these slides – it wasn’t really a presentation I could cover exhaustively. I’d suggest grabbing the deck from the Hosting Transformation Summit website after the event. There was a ton of information in there.
If you think you’re going to be looking for capital, or trying to sell, Hopper has a couple of recommendations.
You need to track your metrics (monthly recurring revenue – including a per-service breakdown, average revenue per square foot, average revenue per rack, raised floor in use, total raised floor available, power use, revenue per KwH).
Real estate issues (what are your lease terms and renewal options, do you have the ability to get a leasehold mortgate, what expansion potential do you have in the facility?).
Finally, what is your growth plan, your core strengths and your approach to sales and marketing? Can you articulate all that in a sensible way?
A lot of private equity capital did not get involved in this business in the last couple of years, but a lot of them, he thinks, are going to be looking to get involved in the next year or so.
