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US momentum accelerating

Mirriad Advertising 12 May 2022 Update
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Mirriad Advertising

US momentum accelerating

FY21 results

Media

12 May 2022

Price

21.5p

Market cap

£60m

Net cash (£m) at 31 December 2021

24.5

Shares in issue

279.2m

Free float

96.1%

Code

MIRI

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.4

30.3

(62.3)

Rel (local)

6.8

37.6

(63.2)

52-week high/low

55p

16p

Business description

Mirriad's market-first solution seamlessly integrates with existing subscription and advertising models, improving the viewer experience by limiting commercial interruptions, whiledelivering dramatically increased reach and impact for advertisers. Mirriad operates in North America, Europe and China.

Next events

AGM

July 22

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

Mirriad Advertising is a research client of Edison Investment Research Limited

Mirriad is making significant progress in building partnerships on the content supply side and with blue-chip advertisers and agencies, particularly in the important North American market. Newly defined KPIs will help clarify further headway here. Technical development continues to focus on offering full programmatic delivery, which is key to Mirriad’s innovative advertising solution becoming totally assimilated into the ecosystem. FY21 results were as flagged in February’s trading update, with year-end net cash of £24.5m. We reinstate illustrative forecasts, remaining cautious on our assumptions of the speed of industry adoption.

Year end

Revenue (£m)

EBITDA
(£m)

PBT*
(p)

EPS*
(p)

P/E
(x)

Yield
(%)

12/20

2.2

(8.6)

(9.1)

(4.2)

N/A

N/A

12/21

2.0

(11.6)

(12.0)

(3.9)

N/A

N/A

12/22e

3.3

(15.0)

(15.2)

(5.4)

N/A

N/A

12/23e

7.8

(12.9)

(13.0)

(4.7)

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

US now driving the growth into FY22

FY21’s figures were affected by the change in business model at Tencent in China, moving from a guaranteed payment on an exclusive basis to a more typical commercial arrangement, with the shift coming at a time when advertiser confidence in the Chinese market was depressed by continuing COVID-19 lockdowns. This resulted in revenues in the territory dropping from £1.8m to £1.0m (of which £0.2m came in H221). This masks the growing momentum in the key US market, with £0.3m of revenues in H121 doubling to £0.6m in H221, representing over 70% of group revenues in H221. We have reinstated tentative forecasts, which come with the proviso that there is limited visibility over campaign numbers and timings. With the new KPIs articulating progress on the supply (partnerships, available minutes of inventory) and demand sides (relationships, partnerships and number of advertisers running campaigns), we should be able to track progress in a more meaningful way. We expect North America to lead the way.

Investing in delivering revenue sooner

Mirriad has made a number of fundamental appointments to help deliver growth, recently adding a head of programmatic partnerships (ex-Verizon, Brightroll) to accelerate the integration of Mirriad’s platform into the adtech ecosystem and a head of studio partnerships (ex-Hallmark, Netflix) to develop content supply from producers and networks (see Flash note). This should help Mirriad step up both the volume and scale of deals. The group had £24.5m of net cash at the year-end, which should see it through to FY23e, despite the higher rate of cash absorption.

Valuation: Discounting good revenue growth

With limited visibility, traditional multiples are unhelpful. A reverse DCF suggests the current share price is factoring in FY24–30 revenue CAGR of 38%, assuming EBITDA margins reach 25% from FY27e (WACC: 10%, 2% terminal growth).

US progress offset by China

Within the reported results, the obvious detractor was the performance in China. Here, the group previously had an exclusive arrangement with Tencent (ie Mirriad could not work with other parties) and was paid a good level of minimum guaranteed income in return. That deal was renegotiated in H121 to a more ‘normal’ commercial arrangement, which enables Mirriad to offer relevant contextual opportunities to advertisers, rather than selling show by show, and removes the restrictions imposed by the exclusivity. The timing of the transfer to the new arrangements was unfortunate in that it coincided with reduced advertiser demand, given the reintroduction of lockdowns that undermined advertiser confidence – particularly global luxury brands wanting to address the Chinese market.

Exhibit 1: Half-year by half-year geographic breakdown

H121

% ch

H221

% ch

2021

%

UK

51,121

(28)

93,188

218

144,309

43

US

266,440

332

617,808

145

884,248

182

China and Singapore

819,727

7

161,437

(84)

981,164

(44)

Total

1,137,288

27

872,433

(32)

2,009,721

(8)

Source: Company accounts

Our modelling assumes a gentle pick-up in revenues from China from the H221 base, despite further lockdowns.

The operating loss widened in FY21 from £9.1m to £12.0m, as employee costs rose from £7.6m to £9.4m and general and administration costs went up from £3.4m to £4.6m. The bulk of this additional spend was in building the technology team, which grew from 42 to 47 people over the year, and the US team, which increased from seven to 12 staff and has since increased further with investment in sales, account management and business development.

The main engine for growth for the group from FY22 is set to be North America (a partnership was announced in February 2022 with Canada’s ‘largest TV and digital media conglomerate’, which we would assume to be Bell Media).

While we are now reinstating forecasts, they are illustrative rather than definitive. Mirriad’s offering is still a new technology and the pace of adoption is unlikely to be linear, with each project separately assembled and sold. With no committed income (post the expiry of the smaller Tencent rollover payments to March 2022), it will be a while before patterns of repeat purchases/recurring income became apparent, at which point forecasting methodology can become more robust.

The additional investment in headcount, as described above, are primarily to support the North American sales operation and will inevitably mean an increase in operating costs, so we have modelled a higher operating loss for FY22 of £15.2m against £12.0m. This suggests the group would still have around £8.5m of cash by the year-end but would need to look for additional funding during FY23.

Adoption, integration and automation

It is key to Mirriad’s success that it builds both the supply and demand sides of the equation in parallel. The more content that has been ingested and analysed, the more inventory suitable for advertising opportunities is identified. The more inventory that is available, the more attractive the proposition should be for advertisers. For the content providers, the advantage is it should not detract from the viewing experience but gives them another revenue stream. For the advertisers, they are accessing a new channel to reach consumers that increases reach, brand recognition and purchase consideration (supported by research from Nielsen) in a brand-safe environment. ‘Content providers’ is also a category that extends well beyond the streamers, encompassing music video, influencer and other content.

The goal is that Mirriad’s in-content advertising should become a line item in a brand’s marketing budgeting. For that to be achieved to the fullest extent, the inventory needs to be made available programmatically. Amazon’s recent announcement that it is beta testing its own version of virtual product placement has, if anything, accelerated interest in Mirriad’s solution and adds a further stamp of commercial credibility.

Exhibit 2: Financial summary

£m

2019

2020

2021

2022e

2023e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1.140

2.180

2.010

3.300

7.750

Cost of Sales

(0.178)

(0.244)

(0.294)

(0.495)

(1.163)

Gross Profit

0.961

1.936

1.716

2.805

6.588

EBITDA

 

 

(11.505)

(8.626)

(11.579)

(15.000)

(12.850)

Operating profit (before amort. and excepts. & SBP)

(12.174)

(9.092)

(12.019)

(15.200)

(13.000)

Amortisation of acquired intangibles

0.000

0.000

0.000

0.000

0.000

Exceptionals

0.000

0.000

0.000

0.000

0.000

Share-based payments

(0.360)

(0.350)

(0.815)

(0.800)

(0.800)

Operating profit

(12.534)

(9.442)

(12.834)

(16.000)

(13.800)

Net Interest

0.023

0.004

(0.001)

(0.001)

(0.001)

Joint ventures & associates (post tax)

0.000

0.000

0.000

0.000

0.000

Exceptionals

0.000

0.000

0.000

0.000

0.000

Profit Before Tax (norm)

 

 

(12.151)

(9.089)

(12.020)

(15.201)

(13.001)

Reported tax

0.056

0.032

1.048

0.000

0.000

Profit After Tax (norm)

(12.095)

(9.056)

(10.972)

(15.201)

(13.001)

Minority interests

0.000

0.000

0.000

0.000

0.000

Discontinued operations

0.000

0.000

0.000

0.000

0.000

Net income (normalised)

(12.095)

(9.056)

(10.972)

(15.201)

(13.001)

Average Number of Shares Outstanding (m)

150.2

215.7

279.1

279.1

279.1

EPS - normalised (p)

 

 

(8.1)

(4.2)

(3.9)

(5.4)

(4.7)

EPS - normalised fully diluted (p)

 

 

(8.1)

(4.2)

(3.9)

(5.4)

(4.7)

EPS - basic reported (p)

 

 

(8.3)

(4.4)

(4.2)

(5.7)

(4.9)

Dividend (p)

0.0

0.0

0.0

0.0

0.0

Revenue growth (%)

174.0

91.3

(7.8)

64.2

134.8

Gross Margin (%)

84.4

88.8

85.4

85.0

85.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

Normalised Operating Margin

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

1.125

0.823

0.930

0.910

1.221

Intangible Assets

0.000

0.000

0.000

0.000

0.000

Tangible Assets

0.913

0.637

0.767

0.642

0.592

Trade & other receivables

0.212

0.186

0.163

0.268

0.628

Current Assets

 

 

20.193

36.970

27.510

12.184

7.796

Stocks

0.000

0.000

0.000

0.000

0.000

Debtors

1.025

1.476

1.892

2.532

5.945

Cash & cash equivalents

19.092

35.421

24.501

8.537

0.735

Other

0.077

0.073

1.116

1.116

1.116

Current Liabilities

 

 

(1.696)

(2.317)

(3.087)

(2.933)

(11.590)

Creditors

(1.298)

(1.914)

(2.867)

(2.712)

(6.370)

Tax and social security

(0.025)

(0.013)

(0.002)

(0.002)

(0.002)

Short term borrowings

0.000

0.000

0.000

0.000

(5.000)

Lrease liabilities

(0.373)

(0.390)

(0.218)

(0.218)

(0.218)

Long Term Liabilities

 

 

(0.423)

(0.204)

(0.412)

(0.412)

(0.412)

Long term borrowings

0.000

0.000

0.000

0.000

0.000

Long term lease liabilities

(0.423)

(0.204)

(0.412)

(0.412)

(0.412)

Net Assets

 

 

19.200

35.271

24.941

9.750

(2.985)

Minority interests

0.000

0.000

0.000

0.000

0.000

Shareholders' equity

 

 

19.200

35.271

24.941

9.750

(2.985)

CASH FLOW

Operating Cash Flow

(11.505)

(8.626)

(11.579)

(15.000)

(12.850)

Working capital

(0.237)

0.165

0.560

(0.794)

0.244

Exceptional & other

0.000

0.318

0.568

0.000

0.000

Tax

0.248

0.082

0.026

0.000

0.000

Net operating cash flow

 

 

(11.494)

(8.061)

(10.426)

(15.794)

(12.606)

Capex

(0.062)

(0.025)

(0.159)

(0.075)

(0.100)

Acquisitions/disposals

0.000

0.000

0.000

0.000

0.000

Net interest

0.023

0.000

0.000

0.000

0.000

Equity financing

15.290

24.779

0.044

0.000

0.000

Dividends

0.000

0.000

0.000

0.000

0.000

Other

(0.389)

(0.363)

(0.380)

(0.096)

(0.096)

Net Cash Flow

3.367

16.330

(10.920)

(15.965)

(12.802)

Opening net debt/(cash)

 

 

(15.204)

(19.092)

(35.421)

(24.501)

(8.537)

FX

0.000

0.000

0.000

0.000

0.000

Other non-cash movements

0.520

0.000

0.000

0.000

0.000

Closing net debt/(cash)

 

 

(19.092)

(35.421)

(24.501)

(8.537)

4.265

Source: Company accounts, Edison Investment Research


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This report has been commissioned by Mirriad Advertising and prepared and issued by Edison, in consideration of a fee payable by Mirriad Advertising. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Mirriad Advertising and prepared and issued by Edison, in consideration of a fee payable by Mirriad Advertising. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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