DRAFT Los Angeles San Francisco New York Newport Beach Boston NTS, Inc. Presentation to the Board of Directors October [15],January 2013 Strictly Private and Confidential B. Riley & Co., LLC Member FINRA & SIPC www.brileyco.c

 

Qualification and Limiting Conditions This document has been prepared for the Board of Directors (the “Board”) of NTS, Inc. (“NTS” or the “Company”) by B. Riley & Co., LLC (“BRC”), in connection with its engagement by the Special Committee to the Board of Directors of NTS (the “Committee”) to provide an opinion as to the fairness, from a financial point of view, as of the date of the opinion, to the Board in respect of the cash consideration (the “Consideration”) to be received by the holders of Company common stock (other than any stockholders rolling over shares) from Tower Three Partners (“T3") in connection with the proposed acquisition of 100% of NTS’ common stock by T3 North Holdings, LLC (the “Proposed Transaction”). Neither this document nor the information contained herein is for investment purposes or for distribution to the public or any other entity without the express written permission of BRC. Any recipient of this document hereby agrees that all information contained herein is confidential, and that they will treat it as such, and will not, without prior written consent from BRC, directly or indirectly, disclose, copy or distribute such information. The corporate information contained in this presentation was furnished by the management of NTS. B. Riley has relied on, but did not assume any responsibility to independently investigate or verify the accuracy, completeness and fairness, of all such information provided during this engagement. The conclusions contained herein are conditioned upon the information being accurate, complete and fair in all respects. All estimates, budgets, forecasts and projections contained herein have been prepared by the management of NTS and involve numerous and significant subjective determinations. The estimates, budgets, forecasts and projections contained herein may or may not be achieved and differences between projected results and those actually achieved may be material. BRC assumed that the forecasts and projections provided herein were prepared on a basis reflecting the best currently available estimates and good faith judgments of NTS management as to future performance for all periods specified therein. No representation or warranty, expressed or implied, is made as to the accuracy, completeness, or fairness of such information and nothing contained herein is, or shall be relied upon as, a promise or representation of past or future results. Neither BRC nor any of its advisors take any responsibility for the accuracy or completeness of any of the accompanying information. BRC has not been requested to and did not make an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise known or unknown) of NTS. Confidential 1

 

Qualification and Limiting Conditions (cont’d) Consistent with applicable legal and regulatory requirements, BRC has adopted certain policies and procedures to establish and maintain the independence of BRC’s research departments and personnel. As a result, the research analysts of BRC and its affiliates may hold views, make statements or investment recommendations and/or publish research reports with respect to NTS, the Proposed Transaction and other participants in the Proposed Transaction that differ from the views of BRC’s investment banking personnel. In the ordinary course of its business, BRC and its affiliates may actively trade or hold (for their own accounts or for the accounts of their customers) equity and debt securities, bank debt and/or other financial instruments issued by NTS or other participants in the Proposed Transaction as well as derivatives thereof, and, accordingly, may at any time hold long or short positions in these securities, bank debt, financial instruments and derivatives. The type and amount of consideration payable in the Proposed Transaction were determined through negotiations between NTS and T3 and are subject to the approval of its Board. The decision to enter into the Proposed Transaction is solely that of the Board. The BRC fairness opinion (the “Opinion”) is just one of the many factors taken into consideration by the Board of NTS. Consequently, BRC’s analyses should not be viewed as determinative of the Board’s decision with respect to the fairness, from a financial point of view, of the consideration to be paid to the holders of Company common stock in the Proposed Transaction. The Opinion has been approved by BRC’s Fairness Opinion Committee in accordance with its established policies and procedures. Confidential 2

 

Table of Contents 1. Introduction 2. NTS, Inc. Company Overview 3. Valuation Analysis 4. Appendix Confidential 3

 

Introduction

 

Situation Overview NTS, Inc. (“NTS” or the “Company”) has reached an agreement to be acquired by T3 North Holdings, LLC (“T3 North”), a wholly-owned subsidiary of Tower Three Partners, LLC (“T3”), for cash consideration of $2.00 per share of NTS common stock (the “Proposed Transaction”) B. Riley & Co., LLC (“BRC” or “B. Riley”) has been engaged by the Special Committee to the Board of Directors (the “Committee”) of NTS to render an opinion (the “Opinion”) as to the fairness, as of the date of the Opinion, from a financial point of view, of the cash consideration to be received by the holders of Company common stock (other than any stockholders rolling over shares) in the Proposed Transaction B. Riley was engaged solely to render the Opinion and was not engaged to, and did not, solicit any indications of interest from any parties with respect to a sale of all or part of the Company or any alternative transaction. The Opinion does not address the relative merits of the Proposed Transaction as compared to any alternative transaction or opportunity that might be available to the Company, nor does it address the underlying business decision by the Company to engage in the Proposed Transaction. The Opinion does not constitute a recommendation as to how any holder of shares of Company common stock should vote on the Proposed Transaction or any matter related thereto. In addition, BRC has not been asked to address, and the Opinion does not address, the fairness to, or any other consideration of, the holders of any other class of securities, creditors or other constituencies of the Company Confidential 5

 

Situation Overview (cont'd) Based on B. Riley’s conversations with certain members of senior management of the Company and Board of Directors, we understand the Company has held discussions with strategic and financial buyers in evaluating alternatives to execute on its strategic growth plan: In August 2011, NTS signed Non-Disclosure Agreements (“NDAs”) with and entered into discussions with two strategic parties regarding a potential sale. It was determined that the build out of NTS’ fiber network was too early stage for an acquisition by the strategic parties In March 2013, T3 approached NTS via the Company’s financial advisor, Oberon Securities LLC (“Oberon”), to engage in preliminary discussions. Key events following the initial introduction are documented in subsequent pages As discussions between T3 and NTS progressed, Oberon approached two additional financial buyers / investors to gauge interest in pursuing a transaction with NTS in August 2013 • Both financial buyers entered into NDAs and received diligence materials, including financial projections prepared by management of the Company • One party indicated an interest in providing capital in the form of subordinated debt or preferred equity; the other party indicated a willingness to provide a PIPE at the then current market share price of approximately $1.50 Confidential 6

 

Situation Overview (cont'd) Review of select events March 14 Introductory call among NTS, T3 and Oberon Securities, LLC (“Oberon”), financial advisor to the Company April 10 NDA executed between NTS and T3 April 24-25 Principal meeting in Dallas, Texas, after which diligence materials are shared May 29 Principal meeting in Greenwich, Connecticut to discuss actionable consolidation opportunities August 2 T3 submits non-binding Letter of Intent indicating $2.00 per share purchase price and requesting 30-day period of exclusivity with the Company Weil, Gotshal & Manges, LLP retained as T3 counsel August 14 Principal meeting to update on organic growth initiatives and non-organic growth opportunities August 19 T3 submits diligence schedule and request list August 21 Letter of Intent executed and 30-day period of exclusivity commences Mid-August Special Committee to Board of Directors (the “Committee”) formed Mid-September Olshan, Frome, Wolosky LLP retained as Committee counsel Confidential 7

 

Current Summary of Key Transaction Terms Price per Share $2.00 per share Consideration 100% cash Rollover of one-third or approximately [2,606,600] shares held by Guy Nissenson, Chairman of the Board, President and Chief Executive Officer Required Financing Assumes requisite waivers and / or consents are obtained, as necessary, for rollover of existing debt, including notes payable to ICON Agent, LLC, Senior Unsecured Series A Bonds issued December 2007 and Rural Utilities Service (“RUS”) loans outstanding Approximately [94]% T3 Holdings, LLC Pro Forma Ownership Approximately [6]% Guy Nissenson [2.00]% NTS break-up fee in the case of a Go-Shop Excluded Party; [3.00]% NTS break-up fee in any other circumstance 1.50x reverse break-up fee equal to the higher of the NTS break-up fee. Alternatively, prior to termination of the agreement the Deal Protection Company can seek specific performance. The reverse break-up fee and specific performance are the Company’s remedies if the Company satisfies all of its conditions to closing, yet T3 determines not to close for any reason Go-Shop Provision [25] days Customary for transactions of this nature HSR approval Conditions to Close Shareholder vote Absence of Material Adverse Effect No material breach of representations and warranties and covenants ___________________________ Note: Defined terms have the same meaning as in the draft Agreement dated October 13, 2013. Confidential 8

 

Scope of Work BRC performed the following activities, among others, in formulating its Opinion Reviewed the financial terms of the draft Agreement and Plan of Merger (the “Agreement”) dated October 13, 2013; Reviewed certain publicly available information, which we believe to be relevant, concerning the business, financial condition and operations of NTS; Reviewed certain information internal to NTS concerning its business, financial condition and operations, prepared and furnished to us by the management of the Company; Reviewed NTS’ financial forecast furnished to us by the management of the Company; Reviewed certain internal financial analyses, estimates and forecasts, prepared and furnished to us by the management of the Company; Reviewed the Company’s annual and quarterly audited and unaudited financial statements through June 30, 2013; Held discussions with members of senior management of NTS concerning their evaluations of the Proposed Transaction, the business, operating and regulatory environment, financial condition, prospects, and strategic objectives of the Company, as well as such other matters as we deemed necessary or appropriate for purposes of rendering the Opinion; Reviewed certain publicly available financial data, stock market performance data and trading multiples of companies which we deemed to be generally comparable to the Company; Confidential 9

 

Scope of Work (cont'd) Reviewed the publicly available financial terms of certain other business combinations that we deemed to be relevant in industries similar to those in which the Company participates and the consideration received for such companies that we believe to be generally relevant; Performed a discounted cash flow analysis of NTS utilizing financial information prepared by and furnished to us by the management of the Company; Reviewed and analyzed premiums paid in business combinations involving publicly traded companies that BRC deemed to be generally comparable to NTS with respect to size and industry; and Performed such other financial studies, analyses and investigations, and considered such other matters, as we deemed necessary or appropriate for purposes of rendering the Opinion. Confidential 10

 

NTS, Inc. Company Overview

 

NTS, Inc. Overview NTS is a publicly traded telecommunications company LTM Revenues (NYSE/TASE: NTS) operating in the U.S. Offers a wide range of services, including broadband data, IPTV video services, local dial tone, point-to-point Fiber 34% long haul, mobile wireless services, long distance and international telephony, Toshiba telephone systems, Internet hosting MPLS data services and reselling opportunities Non-Fiber 66% Operates the largest "non-ILEC" telecommunications network in West Texas and has developed a Fiber-To-The-Premise (“FTTP”) platform enabling the Company to $60.0 Million provide a voice, video and data "triple play" offering to its customers LTM Fiber Revenues Broadband networks in underserved North Texas and Wholesale Revenues Louisiana communities funded by approximately $100 Residential 5% Revenues million of federal grants ($46 million) and loans ($54 42% million) from the USDA Rural Utility Service (“RUS”) Recently launched “metro build” strategy specifically targeting business customers in select markets: Wichita Falls (Q1 2013), Abilene (Q2 2013) and Amarillo (Q4 2013E) founded and is headquartered Business Revenues NTS was in 1981 in 53% Lubbock, Texas $20.6 Million ___________________________ Source: Company. Confidential 12

 

Summary Federally Funded FTTP Projects NTS’ “PRIDE Network Inc.” won approval of three applications for federal funding, representing the fifth largest recipient of broadband funding NTS was selected to receive approximately $100 million in total financing that will increase total passings by 30,000+ $46 million in the form of grants $54 million in the form of 19-year non-recourse loans to build two FTTP networks in North Texas and one FTTP network in Louisiana Due to the nature of RUS grants and loans, BRC notes limited Federal Stimulus funding may be available on a go-forward basis Residential Business Total Sales Project Project Name Total Investment Passings Passings Passings Commencement Completion⁽¹⁾ Levelland $12 million 5,400 310 5,710 Q4 2009 April 2010 $45 million North Texas [1] 11,252 2,200 13,452 Q2 2011 Q4 2013E ($22 million Grant) $19 million North Texas [2] 7,800 500 8,300 Q2 2011 Completed ($6 million Grant) $36 million Louisiana 6,745 2,978 9,723 Q2 2013 Q4 2013E ($18 million Grant) $112 million Total 31,197 5,988 37,185 ($46 million Grant) ___________________________ Source: Company. (1) Excludes installations. Confidential 13

 

NTS FTTP Network Footprint NTS’ fiber network is currently available in 18 communities in Texas As of Q2 2013 Passings Customers Take Rate ARPU Business 8,320 2,898 35% $348 Residential 38,935 7,894 20% $102 Total 47,255 10,792 23% $178 ・= Pre-PRIDE FTTP buildout N= 2011 FTTP buildout ・ = 2012 FTTP buildout ・ = 2013 FTTP buildout ・= Smart Build network ___________________________ Source: Company. Confidential 14

 

NTS Take Rates in Key Markets Pride 1 – Business Take Rates Pride 1 – Residential Take Rates 80% 80% Levelland Littlefield 70% 70% Whitharral Brownfield Slaton 60% 60% Wilson Lamesa Meadow Ropesville 50% 50% Plainview 40% 40% 30% 30% Levelland Littlefield 20% 20% Brownfield Slaton Wilson 10% 10% Lamesa Plainview 0% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 ___________________________ Source: Company. Confidential 15

 

Summary Financial Performance Net Sales Passings and Take Rate ($ in millions) 3-Yr CAGR 3.9% -9.9% 35.0% Gross Profit and Margin⁽¹⁾ Adjusted EBITDA and Margin⁽²⁾ ($ in millions) ($ in millions) 30.9% 9.9% 3-Yr CAGR 3-Yr CAGR ___________________________ Source: Company filings and management forecast. (1) Excludes depreciation and amortization. (2) Adjusted EBITDA excludes stock-based compensation, asset impairments and cost savings. Confidential 16

 

NTS Historical Share Price Performance Confidential 17

 

Summary Financials Financial projections assume management base case ($ in 000s) Historical FYE Dec. 31, Projected FYE Dec. 31, LTM FY 2011A FY 2012A 6/30/13A 2013E 2014E 2015E 2016E 2017E 2018E Customers 7,267 9,460 10,792 12,060 16,993 19,703 21,206 21,764 22,253 ARPU $165 $182 $178 $183 $184 $182 $184 $185 $185 Passings 33,748 44,426 47,255 62,524 62,964 66,143 66,143 66,143 66,143 Take Rate 21.5% 21.3% 23.0% 19.3% 27.0% 29.8% 32.1% 32.9% 33.6% Fiber Revenue $13,023 $18,220 $20,633 $23,610 $32,068 $40,043 $45,277 $47,701 $48,899 Non-Fiber Revenue 44,635 41,651 39,352 36,922 32,685 29,965 27,797 25,869 23,880 Total Revenue 57,658 59,870 59,985 60,533 64,753 70,008 73,074 73,571 72,780 % Revenue Growth -- 3.8% 1.1% 1.1% 7.0% 8.1% 4.4% 0.7% (1.1%) Gross Profit⁽¹⁾ 29,632 32,381 33,066 34,397 39,320 44,265 47,502 48,426 48,266 % Margin 51.4% 54.1% 55.1% 56.8% 60.7% 63.2% 65.0% 65.8% 66.3% Sales & Marketing $3,558 $3,536 $3,386 $3,218 $3,334 $3,590 $3,795 $3,793 $3,804 General & Administrative 17,483 17,266 18,231 18,502 18,044 18,797 19,544 19,552 19,540 Depreciation & Amortization 5,351 6,274 6,636 6,819 7,432 7,946 8,314 2,170 2,170 Operating Income 3,241 5,304 4,814 5,858 10,508 13,932 15,849 22,911 22,752 % Margin 5.6% 8.9% 8.0% 9.7% 16.2% 19.9% 21.7% 31.1% 31.3% Depreciation & Amortization 5,351 6,274 6,636 6,819 7,432 7,946 8,314 2,170 2,170 Stock-Based Compensation 400 283 377 411 477 477 477 477 477 Nonrecurring Expenses⁽²⁾ -- -- 1,548 1,548 -- -- -- -- --Planned Cost Savings⁽³⁾ -- -- -- 64 1,077 1,484 1,484 1,484 1,484 Adjusted EBITDA 8,992 11,862 13,374 14,700 19,494 23,839 26,124 27,042 26,884 % Margin 15.6% 19.8% 22.3% 24.3% 30.1% 34.1% 35.8% 36.8% 36.9% Capital Expenditures 16,295 8,848 24,703 16,612 10,543 7,687 5,051 4,359 2,637 % of Total Revenue 28.3% 14.8% 41.2% 27.4% 16.3% 11.0% 6.9% 5.9% 3.6% ___________________________ Source: Company filings and management forecast. (1) Gross profit excludes depreciation and amortization. (2) Nonrecurring expenses include $1.0 million from an increase in bad debt expense and $519,000 due to the write-off of assets acquired during various acquisitions. (3) Reflects planned cost reductions in IT, payroll, transport and headquarters related expenses. Confidential 18

 

Valuation Analysis

 

Valuation Methodologies BRC utilized the following methodologies to value the Company The Market Approach, encompassing comparable public companies and selected transactions, utilizes ratios of enterprise value and equity value to different measures of cash flow and earnings as an indication of relative value. The stock prices are those of companies with similar investment and operational attributes to those of the company being valued. Some of the selected companies may not be directly comparable to the Company; the selected companies are nonetheless deemed to be Market affected by the same broad economic factors and business prospects. Multiples The Market Approach uses risk analyses to compare the Company to publicly traded firms in terms of size, diversity of operations and services, financial strength, profitability, growth, and other factors recognized as key indicators of risk. Although the companies used in the analyses may have different capital structures, specialization of assets, market share, geographical diversification, product mix and size, they can serve as a guide in measuring the investment market's expectations and perceptions of a particular industry. Precedent transaction multiples associated with recent and generally relevant acquisitions are reviewed for indications of relative value in change of control situations. Precedent The selected acquisitions are deemed to be relevant by virtue of similarities in underlying business factors between the subject company and Transactions acquisition targets captured by the analysis. Valuation multiples are observed as a function of revenue, EBITDA and other metrics as appropriate. The DCF approach utilizes the concept that the value of a business is best represented by the present value of the estimated cash flow streams it can generate in the future. The estimated cash flow streams of a business enterprise are then adjusted to reflect the time value of money as well as the associated business and economic risks of that enterprise. Discounted While the DCF approach is the most theoretically valid approach, it relies on the ability of the Company’s management to forecast cash flows with Cash Flow reasonable accuracy and assess the risk associated with those cash flows. The cost of capital is derived utilizing a model of expected returns as a function of risk. Typically, this model is the Capital Asset Pricing Model (CAPM), with adjustments for sources of abnormal returns not empirically observed in statistical tests of the CAPM model. The Premiums Paid Analysis observes premiums paid in precedent transactions involving publicly traded companies of similar size. The Premiums Paid Analysis expands the view of value derived from the Precedent Transactions analysis by enlarging the data set and focusing Premiums Paid strictly on premiums-to-market offered by acquirers to induce shareholders of target companies to sell their ownership stakes. Analysis Premiums paid generally encompass two sources of value: a control premium and consideration for operational synergies anticipated to be realized by the acquiror, if applicable. Confidential 20

 

Public Company Comparables – Summary Descriptions CLEC and Telecom Comparables Alaska Communications Alaska Communications provides leading integrated communications services to business and consumer customers in and out Systems Group, Inc. of Alaska. The company’s communications network extends throughout Alaska and is connected to the contiguous states via (NASDAQ: ALSK) its two diverse undersea fiber optic cable systems: (i) the AKORN® system and (ii) the Northstar system. CenturyLink, Inc. Century Link is an integrated communications company which provides an array of communications services to the (NYSE: CTL) residential, business, governmental and wholesale customers. Services include local and long-distance, network access, private line, public access, broadband, data, managed hosting, colocation, wireless and video services. In certain local and regional markets, they also provide local access and fiber transport services to CLECs and security monitoring. Cincinnati Bell Inc. Cincinnati Bell provides data and voice communications services over wireline and wireless networks, managed and (NYSE: CBB) professional information technology services, and it resells information technology and telephony equipment. It provides telecommunications services to businesses and consumers in the Greater Cincinnati and Dayton, Ohio areas. Consolidated Consolidated Communications Holdings provides communications services to residential and business customers in Illinois, Communications Holdings, Texas, Pennsylvania, California, Kansas and Missouri. It offers local and long-distance service, high-speed broadband Internet Inc. (NASDAQ: CNSL) access, video services, digital telephone service (“VOIP”), custom calling features, private line services, carrier grade access services, network capacity services over our regional fiber optic networks, directory publishing and CLEC services. Frontier Communications Frontier Communications provides services to rural areas and small and medium-sized towns and cities in the U.S. It offers Corporation (NASDAQ: FTR) voice, data, Internet, and television services and products. The company provides both regulated and unregulated voice, data and video services to residential, business and wholesale customers. HickoryTech Corporation HickoryTech provides communications to business and residential customers in the upper Midwest through its multistate (NASDAQ: HTCO) fiber network. The Fiber and Data segment serves wholesale, enterprise and small to medium business customers with high-speed communications products. The company also offers local phone, long distance, high-speed Internet, digital TV, advanced business and IP networking services. Its products and services support Cisco' equipment sold to business customers. Windstream Holdings, Inc. Windstream Holdings provides telecommunication, high-speed Internet, long distance, network access and video services in (NASDAQ: WIN) 16 states. Windstream Yellow Pages publishes all its local directories and for more than 100 other independent telephone companies. Windstream Supply operates four warehouses across the United States which house a wide variety of products used to support voice, high-speed data and video applications. Confidential 21

 

Public Company Comparables – Summary Descriptions Cable Comparables Cablevision Systems Cablevision Systems is a telecommunications and media company that offers advanced digital television, voice and high-Corporation speed Internet services, local media and programming properties and movie theatres. The Telecommunications Services (XNYS: CVC) segment includes the company's cable television business, including its video, high-speed data, and Voice over Internet Protocol operations and the operations of the commercial high-speed data and voice services provided by Optimum Lightpath. The other segment, Newsday, includes the Newsday daily newspaper, amNew York, Star Community Publishing Group, and online websites, including newsday.com and exploreLI.com. Charter Communications, Charter Communications provides entertainment, information, and communications solutions to residential and commercial Inc. customers. The company offers cable video programming services, Internet services, Charter.net and telephone services. It (NASDAQ: CHTR) also provides broadband communications solutions to business and carrier organizations. Time Warner Cable Inc. Time Warner Cable provides video, high-speed data and voice services in the U.S. The company offers residential and (NYSE: TWC) business customers with video, high-speed data and voice services through its broadband cable systems. Its business services also include networking and transport services and, through its wholly owned subsidiary, NaviSite, Inc., manages and outsources information technology solutions and cloud services. It also provides advertising to a variety of national, regional and local customers. Confidential 22

 

Public Company Comparables – Key Financial Statistics NTS is significantly smaller than public comparables and will require high capex levels to build out its fiber network LTM Revenues LTM Gross Profit Margin⁽¹⁾ ($ in millions) Mean: 54.3% Median: 52.7% LTM Adjusted EBITDA Margin⁽²⁾ LTM Capex % Revenues Median: 35.8% Mean: 35.4% Mean: 17.7% Median: 16.6% ___________________________ Source: FactSet. (1) Excludes depreciation and amortization. (2) Excludes stock-based compensation. Confidential 23

 

Public Company Comparables – Relative Valuation Enterprise Value⁽¹⁾ Market Capitalization⁽¹⁾ ($ in millions) ($ in millions) 2013E Revenue Growth Enterprise Value / CY 2013E EBITDA⁽¹⁾ Implied NTS Share Price NTS 2013E EBITDA ($MM) $14.7 CLEC and Telecom Median $0.43 Cable Operators Median $1.06 Cable Operators Median 7.8x Mean: 6.7x Median: Mean: 6.4x -0.7% CLEC and (2) Telecom Median: -2.4% Median 5.9x ___________________________ (2) Source: FactSet. Note: Implied NTS share price utilizes treasury method and assumes conversion of in-the-money warrants and options in calculating diluted shares outstanding. (1) Price as of October 11, 2013. (2) HTCO 2013E revenue and EBITDA based on the mid point of management guidance. Confidential 24

 

Precedent Comparable Transactions The following precedent transactions were identified on the basis of underlying similarities in the acquired company business models and operations 2011 2013 Implied NTS Valuation 2013E Enterprise Share EBITDA Value Price $14.7 $118.5 $1.14 Average 8.1x⁽¹⁾ Total $1,100 $1,934 $2,590 $2,964 $2,245 $28 $530 $2,142 $6,600 $1,625 $22,184 $157 EV ___________________________ Source: FactSet and public filings. Note: Implied NTS share price utilizes treasury method and assumes conversion of in-the-money warrants and options in calculating diluted shares outstanding. (1) Average excludes Tower Three Partners / NTS, Inc. multiple. Confidential 25

 

Discounted Cash Flow Valuation Key Assumptions ($ in millions) For the Fiscal Years Ending December 31, 2013 2014 2015 2016 2017 2018 NTS cost of capital derived Revenue $60.5 $64.8 $70.0 $73.1 $73.6 $72.8 using CAPM adjusted for % growth 1.1% 7.0% 8.1% 4.4% 0.7% (1.1%) excess returns associated with company size Adj. EBITDA $14.7 $19.5 $23.8 $26.1 $27.0 $26.9 % margin 24.3% 30.1% 34.1% 35.8% 36.8% 36.9% Risk free rate of 2.5% based on 20-year U.S. Treasury Tax Provision⁽¹⁾ -- -- -- (1.7) (7.2) (7.6) yield curve rate as of October Capital Expenditures (16.6) (10.5) (7.7) (5.1) (4.4) (2.6) 11, 2013. Change in Net Working Capital 4.0 (0.6) (0.5) (0.5) (0.1) (0.3) Market risk premium of 6.6% Free Cash Flows $2.1 $8.3 $15.6 $18.9 $15.4 $16.3 Micro-cap size premium of Terminal Value $188.2 11.8% Implied Enterprise Value $144.1 Un-levered Beta of 0.42, drawn from subset of public comparables Marginal cost of debt assumed to be 11.7%, Implied Enterprise Value Implied Share Price excluding RUS loans Target capital structure assumed to be approximately EV / EBITDA EV / EBITDA 46.6% debt / market equity 5.5x 6.0x 6.5x 7.0x 7.5x 5.5x 6.0x 6.5x 7.0x 7.5x based on NTS current capital 14.0% $126.4 $133.4 $140.4 $147.4 $154.4 14.0% $1.32 $1.47 $1.63 $1.78 $1.93 structure 15.0% $121.9 $128.6 $135.2 $141.9 $148.6 15.0% $1.22 $1.36 $1.51 $1.66 $1.81 Resulting cost of equity of 16.0% $1.12 $1.26 $1.40 $1.55 $1.69 16.0% $117.5 $123.9 $130.3 $136.7 $143.1 WACC 17.9% WACC 17.0% $113.4 $119.5 $125.7 $131.8 $137.9 17.0% $1.03 $1.17 $1.30 $1.44 $1.57 WACC of 14.6% 18.0% $109.5 $115.3 $121.2 $127.1 $133.0 18.0% $0.94 $1.07 $1.20 $1.33 $1.46 ___________________________ Note: Implied NTS share price utilizes treasury method and assumes conversion of in-the-money warrants and options in calculating diluted shares outstanding. (1) Assumes full utilization of $22.9 million NOL as of June 30, 2013. Confidential 26

 

Premiums Paid Analysis Data Set Premiums Paid to Prior Close and Month-Ago Closing Price⁽¹⁾ 51 selected change-of-control transactions dating back to January 2010 North American listed public companies Premium to 1-year VWAP Market capitalization range from 55.5% $25 million to $100 million Aggregate deal value of $2.9 billion Premia assessed based on VWAP due to limited trading volume in NTS stock Premium to 30-day VWAP 25.3% Premium to 90-day VWAP 19.7% ___________________________ Source: Factset and BRC analysis. (1) Last Trade as of October 11, 2013. Confidential 27

 

Summary Valuation NTS 52-Week Trading Range $0.83 $1.80 Public Company Comparables⁽¹⁾ Non-Fiber Business FIBER CLEC and Telecom Comparables EV / 2013E EBITDA (4.5x - 6.5x) $0.53 $1.01 Fiber Business NON-FIBER Cable Operator Comparables EV / 2013E EBITDA (6.5x - 8.5x) M&A Transaction Comparables⁽²⁾ Telecommunication Services $0.80 $1.45 EV / 2013E EBITDA (7.0x - 9.0x) Discounted Cash Flow Analysis⁽³⁾ Assumptions $1.20 $1.63 WACC 14% - 18% Terminal Multiple 6.5x EV/EBITDA Premiums Paid⁽⁴⁾ 29.8% - 76.2% Premium $1.67 $2.27 1-year VWAP $1.29 Per Share $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 $2.50 Current Price Offer Price $1.57⁽⁵⁾ $2.00 ___________________________ Note: Implied NTS share price utilizes treasury method and assumes conversion of in-the-money warrants and options in calculating diluted shares outstanding. (1) Valuation based on a sum-of-the-parts analysis. (2) Interquartile range of EV/LTM EBITDA multiples for comparable M&A transactions. (3) See page 26 for detailed discounted cash flow analysis. (4) Interquartile range of premiums paid in comparable size transactions involving changes of control. (5) Price as of October 11, 2013. Confidential 28

 

Appendix

 

Detailed Public Comparable Company Analysis ($ in millions, except per share data) ######### Market Ent. 2013E LTM Operating Results Company Price ⁽¹⁾ Cap Value Growth Revenue GP % Adj. EBITDA % NI % CLEC and Telecom Alaska Communications Systems Group, Inc. (ALSK) $2.54 $118.5 $624.1 (6.8%) 380.7 234.9 61.7% 131.4 34.5% 58.2 15.3% CenturyLink, Inc. (CTL) 31.19 18,735.1 40,562.5 (1.6%) 18,192.0 10,687.0 58.7% 7,581.8 41.7% 1,070.0 5.9% Cincinnati Bell Inc. (CBB) 2.70 561.6 2,877.8 (15.8%) 1,380.6 704.1 51.0% 453.1 32.8% (41.8) NM Consolidated Communications Holdings, Inc. (CNSL) 17.45 700.0 1,943.1 21.2% 619.9 387.6 62.5% 250.2 40.4% 16.9 2.7% Frontier Communications Corporation Class B (FTR) 4.23 4,228.8 12,009.7 (5.0%) 4,881.0 3,254.0 66.7% 2,253.1 46.2% 98.9 2.0% HickoryTech Corporation (HTCO) 10.94 148.2 284.9 NA 188.3 75.8 40.3% 47.9 25.4% 8.1 4.3% Windstream Holdings, Inc. (WIN) 8.05 4,772.1 13,890.2 (2.2%) 6,079.8 3,183.8 52.4% 2,225.2 36.6% 137.7 2.3% Top Quartile (1.7%) 5,480.4 3,218.9 62.1% 2,239.2 41.0% 118.3 5.5% Mean (1.7%) 4,531.8 2,646.7 56.2% 1,849.0 36.8% 192.6 5.4% Median (3.6%) 1,380.6 704.1 58.7% 453.1 36.6% 58.2 3.5% Bottom Quartile (6.3%) 500.3 311.3 51.7% 190.8 33.7% 12.5 2.4% NTS, Inc. $1.57 $70.7 $137.4 1.1% 60.0 33.1 55.1% 13.4 22.3% (1.1) NM Enterprise Value / Price / LTM Leverage Multiples Revenue EBITDA Net Income Debt/ Debt/ Company LTM CY2013E CY2014E LTM CY2013E CY2014E LTM CY2013E CY2014E Adj. EBITDA Mkt. Cap Alaska Communications Systems Group, Inc. (ALSK) 1.6x 1.8x 2.0x 4.7x 5.8x 6.8x 2.0x 3.8x 26.3x 4.0x 444.2% CenturyLink, Inc. (CTL) 2.2x 2.2x 2.3x 5.3x 5.5x 5.6x 18.0x 11.5x 11.6x 2.7x 111.1% Cincinnati Bell Inc. (CBB) 2.1x 2.3x 2.4x 6.4x 7.3x 7.7x nm nm 14.9x 4.8x 390.0% Consolidated Communications Holdings, Inc. (CNSL) 3.1x 3.2x 3.2x 7.8x 6.9x 6.9x 44.7x 22.2x 21.9x 4.9x 174.9% Frontier Communications Corporation Class B (FTR) 2.5x 2.5x 2.6x 5.3x 5.4x 5.5x 42.3x 20.5x 18.3x 3.6x 192.9% HickoryTech Corporation (HTCO) 1.5x nm nm 6.0x nm nm 18.5x nm nm 2.8x 91.8% Windstream Holdings, Inc. (WIN) 2.3x 2.3x 2.3x 6.2x 6.0x 6.0x 35.0x 21.9x 17.8x 4.0x 187.4% Top Quartile 2.4x 2.5x 2.5x 6.3x 6.7x 6.9x 40.5x 21.9x 21.0x 4.4x 291.4% Mean 2.2x 2.4x 2.5x 6.0x 6.1x 6.4x 26.8x 16.0x 18.5x 3.9x 227.5% Median 2.2x 2.3x 2.4x 6.0x 5.9x 6.4x 26.8x 20.5x 18.1x 4.0x 187.4% Bottom Quartile 1.9x 2.3x 2.3x 5.3x 5.6x 5.7x 18.2x 11.5x 15.6x 3.2x 143.0% NTS, Inc. 2.3x 2.3x 2.1x 10.3x 9.3x 7.0x nm nm 13.4x 5.6x 106.7% ___________________________ Source: Factset and company filings. (1) Price as of October 11, 2013 Confidential 30

 

Detailed Public Comparable Company Analysis (Cont'd) ($ in millions, except per share data) ######### Market Ent. 2013E LTM Operating Results Company Price ⁽¹⁾ Cap Value Growth Revenue GP % Adj. EBITDA % NI % Cable Operators Cablevision Systems Corporation Class A (CVC) $16.75 $3,572.1 $12,870.8 (7.1%) 6,430.3 3,149.3 49.0% 1,611.1 25.1% (66.5) NM Charter Communications, Inc. Class A (CHTR) 131.55 13,345.0 26,113.0 8.7% 7,682.0 3,661.0 47.7% 2,698.0 35.1% (265.0) NM Time Warner Cable Inc. (TWC) 111.46 31,853.3 55,351.3 3.8% 21,873.0 11,609.0 53.1% 7,968.0 36.4% 2,193.0 10.0% Top Quartile 6.3% 14,777.5 7,635.0 51.0% 5,333.0 35.8% 1,063.3 10.0% Mean 1.8% 11,995.1 6,139.8 49.9% 4,092.4 32.2% 620.5 10.0% Median 3.8% 7,682.0 3,661.0 49.0% 2,698.0 35.1% (66.5) 10.0% Bottom Quartile (1.6%) 7,056.1 3,405.1 48.3% 2,154.6 30.1% (165.8) 10.0% NTS, Inc. $1.57 $70.7 $137.4 1.1% 60.0 33.1 55.1% 13.4 22.3% (1.1) NM Enterprise Value / Price / LTM Leverage Multiples Revenue EBITDA Net Income Debt/ Debt/ Company LTM CY2013E CY2014E LTM CY2013E CY2014E LTM CY2013E CY2014E Adj. EBITDA Mkt. Cap Cablevision Systems Corporation Class A (CVC) 2.0x 2.1x 2.0x 8.0x 7.8x 7.5x 19.3x 56.1x 49.9x 6.3x 285.1% Charter Communications, Inc. Class A (CHTR) 3.4x 3.2x 2.9x 9.7x 9.1x 8.1x nm nm 53.4x 4.7x 96.0% Time Warner Cable Inc. (TWC) 2.5x 2.5x 2.4x 6.9x 6.9x 6.7x 15.4x 17.0x 14.5x 3.3x 83.8% Top Quartile 3.0x 2.8x 2.7x 8.8x 8.5x 7.8x 18.3x 46.3x 51.7x 5.5x 190.6% Mean 2.6x 2.6x 2.4x 8.2x 8.0x 7.4x 17.3x 36.5x 39.3x 4.8x 155.0% Median 2.5x 2.5x 2.4x 8.0x 7.8x 7.5x 17.3x 36.5x 49.9x 4.7x 96.0% Bottom Quartile 2.3x 2.3x 2.2x 7.5x 7.4x 7.1x 16.3x 26.8x 32.2x 4.0x 89.9% NTS, Inc. 2.3x 2.3x 2.1x 10.3x 9.3x 7.0x nm nm 13.4x 5.6x 106.7% ___________________________ Source: Factset and company filings. (1) Price as of October 11, 2013 Confidential 31

 

Detailed Cost of Capital Calculation ASSUMPTIONS BETA CALCULATION Levered Total Mkt. Val. Debt / Unlevered Marginal Tax Rate 35.0% Ticker Name Beta⁽⁵⁾ Debt Equity⁽⁶⁾ Equity Beta⁽⁷⁾ Risk-Free Rate of Return⁽¹⁾ 2.5% CLEC and Telecom Market Risk Premium⁽²⁾ 6.6% ALSK Alaska Communications Systems Group, Inc. 0.89 526.4 121.8 432.3% 0.23 Micro-Cap Size Premium⁽³⁾ 11.8% CTL CenturyLink, Inc. 0.70 20,822.0 19,954.5 104.3% 0.42 Target Debt/Capital⁽⁴⁾ 31.8% CBB Cincinnati Bell Inc. 1.36 2,190.2 563.7 388.5% 0.39 Target Debt/Equity⁽⁴⁾ 46.6% CNSL Consolidated Communications Holdings, Inc. 1.04 1,224.3 718.0 170.5% 0.49 Marginal Cost of Debt 11.7% FTR Frontier Communications Corporation 0.77 8,158.8 4,408.8 185.1% 0.35 HTCO HickoryTech Corporation 0.70 136.0 154.1 88.2% 0.44 WIN Windstream Holdings, Inc. 0.89 8,944.7 5,038.9 177.5% 0.41 COST OF EQUITY CALCULATION Cable Operators Market Risk Premium 6.6% CVC Cablevision Systems Corporation 1.37 10,185.5 4,350.6 234.1% 0.54 Multiplied by Levered Beta 0.55 CHTR Charter Communications, Inc. 0.75 12,812.0 13,819.7 92.7% 0.47 Adjusted Risk Premium 3.6% TWC Time Warner Cable Inc. 0.69 26,692.0 33,090.7 80.7% 0.45 Add: Risk-Free Rate of Return 2.5% Add: Micro-Cap Size Premium 11.8% Average Unlevered Beta for Comps 0.42 Cost of Equity 17.9% Target Debt/Equity⁽⁴⁾ 46.6% Multiplied by Equity / Total Capital 68.2% Marginal Tax Rate 35.0% Cost of Equity Portion 12.2% Levered Beta 0.55 Marginal Cost of Debt 11.7% Marginal Tax Rate 35.0% After-Tax Cost of Debt 7.6% Multiplied by Debt/Total Capital 31.8% Cost of Debt Portion 2.4% Weighted Average Cost of Capital 14.6% ___________________________ Source: Company filings and Factset. (1) Long-term (20-year) U.S. Treasury Coupon Bond Yield (Ibbotson, 2012). (2) Historical equity risk premium (Ibbotson, 2012). (3) Micro-cap return in excess of CAPM (Ibbotson, 2012). (4) Target debt / capital ratio excludes cost of government-sponsored debt instruments. (5) Levered Beta = Unlevered Beta * (1+((D/E)*(1-T))) (6) Market data as of October 11, 2013. (7) Unlevered Beta = Levered Beta / (1+((D/E)*(1-T))) Confidential 32

 

Detailed Precedent Transactions Date Total EV TEV / LTM Announced Acquirer Target Target Business Description ($MM) EBITDA 10/02/13 Zayo Group Fiberlink Dark fiber network operator N/A N/A 09/04/13 Cox Communications EasyTEL Voice, data and video services N/A N/A 08/19/13 Zayo Group Access Communications Metro fiber network $40 N/A 04/30/13 Global Telecom & Technology Neutral Tandem IP transit and Ethernet services 53 N/A 03/19/13 Liberty Media Corporation Charter Communications (27.3% Stake) Cable operator 22,184 8.4x 02/26/13 Telephone and Data Systems, Inc. Baja Broadband Rural cable operator 268 N/A 02/07/13 Charter Communications Bresnan Broadband Holdings Regional cable operator 1,625 7.0x 12/27/12 Berkshire Sidera and Lightower CLEC 2,000 N/A 12/14/12 Zayo Group Litecast Baltimore LLC Fiber infrastructure connectivity and ethernet 22 N/A 10/17/12 Zayo Group First Telecom Services, LLC Owner and operator of fiber optic network 110 N/A 07/18/12 BC Partners; CPP Investment Board; Management Cequel Communications (Suddenlink) Cable system operator 6,600 8.9x 07/12/12 Hawaiian Telecom Wavecom CLEC 13 N/A 06/05/12 Zayo Group FiberGate, Inc. Owner and operator of fiber optic network 117 N/A 03/21/12 Zayo Group Arialink Broadband Fiber optic Internet services 18 N/A 03/19/12 Zayo Group AboveNet Inc. High-bandwidth connectivity solutions 2,142 11.1x 02/06/12 Consolidated Communications Holdings, Inc. SureWest Communications ILEC/CLEC 530 6.7x 12/06/11 HickoryTech Corporation IdeaOne Telecom Rural CLEC 28 5.8x 10/07/11 Zayo Group 360networks Corporation Intercity fiber network 345 N/A 08/01/11 Windstream PAETEC Holding Corp. Voice, data and business services 2,245 7.0x 04/27/11 CenturyLink, Inc. SAVVIS, Inc. Cloud infrastructure and hosted IT solutions 2,964 13.0x 04/11/11 Level3 Global Crossing Broadband, voice, data, multimedia 2,590 6.1x 02/14/11 EchoStar Corp. Hughes Communications, Inc. Satellite broadband networks 1,934 8.7x 01/19/11 ACF Industries Holding Corp. XO Holdings, Inc. IP communications and intelligent networking 1,100 6.0x 10/01/10 EarthLink ITC^DeltaCom Integrated telecommunication services 516 5.8x 09/14/10 Lightower Lexent Custom built dark fiber networks 110 12.2x 09/13/10 PAETEC Holding Corp. Cavalier High capacity fiber network 460 5.1x 08/26/10 Court Square Capital Partners Fibertech Regional provider of fiber optic bandwidth 535 10.3x 08/17/10 Windstream KDL-Norlight Regional fiber transport and CLEC 782 8.4x 07/20/10 NTELOS WV FiberNet Metro and regional fiber network 170 6.8x 06/30/10 Zayo Group American Fiber System Metro fiber network 100 10.0x 05/25/10 Lightower Veroxity Fiber based data and Internet connectivity 21 9.5x 04/22/10 CenturyTel Qwest Diversified telecommunications provider 22,600 5.2x 03/24/10 Zayo Group AGL Networks Regional fiber network 71 9.7x 03/05/10 Abry Partners RCN Metro Provides triple-play services in metro areas 496 7.8x Top Quartile 9.7x Mean 8.2x Median 8.1x Bottom Quartile 6.3x ___________________________ Source: Factset. Confidential 33

 

Transaction Premia Analysis Market Cap Day Closing Stock Before Closing Stock Price 1 Month Transaction Price Per Date of Announcement Price Day Before Before Day Prior One Month Prior Target Acquirer Value Share Announcement (in millions) Announcement Announcement Premium Premium 1. O.A.K. Financial Corp. Chemical Financial Corp. $76.8 $28.41 01/08/2010 48.65 $18.00 $18.55 57.8% 53.1% 2. Sirit, Inc. Federal Signal Corp. $72.1 $0.44 01/14/2010 40.49 $0.25 $0.18 76.9% 141.8% 3. Global Med Technologies, Inc. Haemonetics Corp. $48.7 $1.22 02/01/2010 26.89 $0.74 $0.78 64.9% 56.4% 4. Bancinsurance Corp. Bancinsurance Corp. /Private Group $11.4 $8.50 03/22/2010 26.03 $5.00 $5.38 70.0% 58.1% 5. Northeast Bancorp FHB Formation LLC $32.4 $13.93 03/31/2010 32.62 $14.05 $11.86 -0.9% 17.5% 6. EF Johnson Technologies, Inc. Francisco Partners Management LLC $41.5 $1.50 05/17/2010 27.29 $1.03 $1.08 45.6% 38.9% 7. Central Jersey Bancorp Kearny Financial Corp. $69.4 $7.50 05/25/2010 30.11 $3.25 $3.45 130.6% 117.4% 8. VCG Holding Corp. Family Dog LLC $51.7 $2.25 07/22/2010 28.56 $1.65 $1.56 36.4% 44.2% 9. Comm Bancorp, Inc. F.N.B. Corp. (Pennsylvania) $67.8 $39.36 08/09/2010 41.33 $23.99 $17.31 64.1% 127.4% 10. ADAM, Inc. Ebix, Inc. $67.1 $6.11 08/30/2010 31.61 $3.17 $3.22 92.6% 89.6% 11. Henry Bros. Electronics Kratos Defense & Security Solutions $54.9 $8.20 10/06/2010 27.83 $4.60 $4.01 78.3% 104.5% 12. Monroe Bancorp Old National Bancorp $83.2 $12.73 10/06/2010 33.52 $5.38 $4.50 136.6% 182.9% 13. Madison National Bancorp, Inc. Modern Capital Advisors LLC $33.5 $9.09 10/22/2010 28.11 $7.63 $7.25 19.2% 25.4% 14. COMFORCE Corp. ABRY Partners LLC $123.5 $2.50 11/02/2010 28.17 $1.62 $1.40 54.3% 78.6% 15. Arbinet Corp. Primus Telecommunications Group $19.5 $5.03 11/11/2010 37.54 $6.82 $7.18 -26.2% -29.9% 16. Matrixx Initiatives, Inc. H.I.G. Capital Management, Inc. $58.2 $8.75 12/14/2010 48.12 $5.12 $5.31 70.9% 64.8% 17. Technology Research Corp. Coleman Cable, Inc. $36.8 $7.20 01/18/2011 25.83 $3.90 $3.58 84.6% 101.1% 18. Emergent Group, Inc. Universal Hospital Services, Inc. $58.8 $8.46 02/07/2011 41.80 $6.06 $6.55 39.6% 29.1% 19. XETA Technologies, Inc. PAETEC Holding Corp. $62.5 $5.50 02/09/2011 41.20 $3.84 $3.09 43.2% 78.0% 20. Community Capital Corp. Park Sterling Corp. $32.4 $3.22 03/31/2011 27.61 $2.75 $2.76 16.9% 16.5% 21. Fremont Michigan InsuraCorp, Inc. The American Automobile Association $64.5 $36.15 04/18/2011 47.75 $26.75 $25.70 35.1% 40.7% 22. DEI Holdings, Inc. Charlesbank Capital Partners LLC $114.6 $4.47 05/12/2011 39.86 $1.56 $1.68 186.5% 166.1% 23. Ophthalmic Imaging Systems, Inc. Merge Healthcare, Inc. $29.5 $0.96 06/06/2011 25.76 $0.85 $1.00 12.7% -4.2% 24. Hampshire First Bank NBT Bancorp, Inc. $42.0 $15.10 11/16/2011 28.37 $9.10 $9.25 66.0% 63.3% 25. Indiana Community Bancorp Old National Bancorp $82.4 $24.09 01/25/2012 49.65 $14.51 $14.40 66.0% 67.3% ___________________________ Source: Factset. Confidential 34

 

Transaction Premia Analysis (Cont'd) Market Cap Day Closing Stock Before Closing Stock Price 1 Month Transaction Price Per Date of Announcement Price Day Before Before Day Prior One Month Prior Target Acquirer Value Share Announcement (in millions) Announcement Announcement Premium Premium 26. VIST Financial Corp. Tompkins Financial Corp. $84.5 $12.82 01/26/2012 45.46 $6.90 $6.33 85.9% 102.6% 27. Swank, Inc. Randa Accessories Leather Goods LLC $55.9 $10.00 02/03/2012 26.49 $4.75 $3.59 110.5% 178.6% 28. North Central Bancshares, Inc. National Australia Bank Ltd. $41.5 $30.58 03/13/2012 29.91 $22.04 $20.64 38.7% 48.2% 29. Southern Community Financial Corp. Capital Bank Financial Corp. $74.3 $3.11 03/27/2012 33.01 $1.96 $1.78 58.5% 74.7% 30. Imperial Sugar Co. Louis Dreyfus et Cie SA $146.5 $6.35 05/01/2012 49.49 $4.05 $4.69 56.8% 35.4% 31. Central Bancorp, Inc. Independent Bank Corp. $51.6 $32.00 05/01/2012 30.52 $18.05 $18.20 77.3% 75.8% 32. EDGAR Online, Inc. R.R. Donnelley & Sons Co. $60.0 $1.09 05/22/2012 25.28 $0.72 $0.76 51.7% 43.7% 33. BancTrust Financial Group, Inc. Trustmark Corp. $55.4 $3.08 05/29/2012 34.14 $1.90 $2.09 62.2% 47.5% 34. First Trust Bank BNC Bancorp $36.0 $7.53 06/04/2012 28.18 $5.90 $5.40 27.7% 39.5% 35. Micronetics, Inc. Mercury Systems, Inc. $71.4 $14.80 06/10/2012 35.42 $7.74 $7.90 91.2% 87.3% 36. Network Equipment Technologies Sonus Networks, Inc. $68.7 $1.35 06/19/2012 36.09 $1.18 $1.01 14.4% 33.7% 37. Unicom Engineering, Inc. UNICOM Systems, Inc. $54.0 $1.45 06/19/2012 33.32 $0.78 $0.84 85.5% 72.6% 38. Blackwater Midstream Corp. ArcLight Capital Holdings LLC $44.8 $0.64 06/29/2012 29.93 $0.53 $0.50 20.8% 28.0% 39. Conmed Healthcare Management Correct Care Solutions LLC $37.9 $3.95 07/16/2012 47.99 $3.45 $3.44 14.5% 14.8% 40. Fidelity Bancorp, Inc. WesBanco, Inc. $71.0 $23.13 07/19/2012 38.81 $12.65 $10.68 82.9% 116.7% 41. The Savannah Bancorp, Inc. SCBT Financial Corp. $67.1 $9.31 08/08/2012 39.95 $5.55 $5.30 67.8% 75.7% 42. Western Liberty Bancorp Western Alliance Bancorp $54.5 $4.05 08/17/2012 38.38 $2.85 $2.85 42.1% 42.1% 43. KSW, Inc. Related LP $18.7 $5.00 09/10/2012 26.00 $4.07 $3.78 22.9% 32.3% 44. ECB Bancorp, Inc. VantageSouth Bancshares, Inc. $54.4 $18.74 09/25/2012 33.49 $11.75 $10.99 59.5% 70.6% 45. First Investors Financial Services Aquiline Capital Partners LLC $88.7 $13.87 09/26/2012 45.34 $10.13 $8.88 37.0% 56.3% 46. Luzerne National Bank Corp. Penns Woods Bancorp, Inc. $46.2 $68.06 10/18/2012 26.35 $38.80 $35.38 75.4% 92.4% 47. Versant Corp. Garnett & Helfrich Capital LLC $13.8 $13.00 11/21/2012 32.12 $11.80 $11.42 10.2% 13.8% 48. San Diego Trust Bank Pacific Premier Bancorp, Inc. $29.3 $13.62 03/06/2013 25.59 $14.63 $14.55 -6.9% -6.4% 49. Commerce National Bank Sterling Financial Corp. $40.2 $15.10 05/02/2013 30.00 $11.45 $10.63 31.9% 42.1% 50. SoundBite Communications, Inc. Permira Holdings Ltd. $68.0 $5.00 05/20/2013 49.39 $2.99 $3.02 67.2% 65.8% 51. Frozen Food Express Industries, Inc. Duff Brothers Capital Corp. $79.3 $2.10 07/15/2013 30.75 $1.70 $1.71 23.5% 22.8% Upper Quartile 76.2% 83.0% Mean 55.5% 63.4% Median 57.8% 56.4% ___________________________ Source: Factset. Lower Quartile 29.8% 34.5% Confidential 35

 

Disclosure – Privileged and Proprietary The information contained in this presentation, including any and all discussions, views, opinions and financial advice expressed or communicated by B. Riley is proprietary and highly confidential. It has been prepared by B. Riley for the sole benefit of NTS, Inc., and as such may not be referred to, shared or disseminated without the prior written consent of B. Riley in each instance. Los Angeles Newport Beach San Francisco 11100 Santa Monica Blvd. 4695 MacArthur Court 425 California St. Suite 800 Suite 100 Suite 900 Los Angeles, CA 90025 Newport Beach, CA 92660 San Francisco, CA 94104 T: 310-966-1444 T: 949-852-9911 T: 415-692-0073 New York Boston 237 Park Ave. 470 Atlantic Ave. Suite 9022 Suite 4051 New York, NY 10017 Boston, MA 02210 T: 212-225-8484 T: 617-273-8133 Confidential 36