In preparing for its acquisition of iBiquity, DTS seems to have found much to be content with, including the company’s financials. The pending acquisition, announced last week, provides a bit more insight into the revenue side of iBiquity’s business.
DTS, a publicly held company, estimates that iBiquity’s revenue for 2015 will be about $40 million to $50 million, according to investor information on its website.
Radio stations pay licensing fees for iBiquity’s HD Radio technology, but in the big picture of iBiquity revenue, those fees are “a wholly immaterial part of our business model,” iBiquity President/CEO Bob Struble told Radio World last week. “We make our money on the sale in HD Radio receivers.”
DTS also lists iBiquity’s operating income for the year as $12 million–$18 million, with operating margins of 30% to 36%. And it noted $5 million of annual interest expense from debt financing.
The combined companies are expected to bring in $140 million to $145 million in revenue in 2015, with an operating income between $34 million and $38 million, DTS said. It expects the acquisition to begin adding to its earnings per share in 2016.
The $172 million transaction will be paid for with a combination of $135 million of new debt and $37 million in cash.
In announcing the acquisition, DTS listed reasons it finds iBiquity attractive. They include robust technology, strong content and significant penetration at top radio stations, in addition to an expanding footprint into the automotive market and opportunities for growth in the mobile and international markets. In its conference call last week with analysts and investors, DTS also highlighted iBiquity’s more than 100 patents and related intellectual property items.
Analyst Ralph Schackart of William Blair & Co. said the iBiquity acquisition makes sense from a financial perspective even more than for the strategic synergies. In a note released Sept. 2 and reported by Investors.com, he wrote, “The combined businesses should produce roughly $200 million in revenue and 30 percent-plus operating margins, with financial synergy opportunities through the elimination of redundant operating roles likely providing operating margin upside to our base 30 percent assumption.”