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Research: TMT
Mirriad Advertising’s FY20 revenues grew strongly by 91%, in line with forecasts. The EBITDA loss of £8.6m, a 25% reduction, was notably better than consensus forecast loss of £10.2m. This reflects careful husbandry of resource during the pandemic, after restructuring in FY19. FY20 has been well used in building recognition for Mirriad’s technology among platforms, brands and agencies, culminating in the framework agreement signed with a tier 1 entertainment group in Q420. In Q221, the group added a major global food and beverage brand and is working with all the major agency groups. December’s placing, raising £24.8m net, puts Mirriad in a strong position to continue to develop its technology and position its in-content advertising inventory centrally within the ecosystem.
Mirriad Advertising |
Gaining strong momentum
Media |
Spotlight research
13 May 2021 |
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Mirriad Advertising is a research client of Edison Investment Research Limited |
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Mirriad Advertising’s FY20 revenues grew strongly by 91%, in line with forecasts. The EBITDA loss of £8.6m, a 25% reduction, was notably better than consensus forecast loss of £10.2m. This reflects careful husbandry of resource during the pandemic, after restructuring in FY19. FY20 has been well used in building recognition for Mirriad’s technology among platforms, brands and agencies, culminating in the framework agreement signed with a tier 1 entertainment group in Q420. In Q221, the group added a major global food and beverage brand and is working with all the major agency groups. December’s placing, raising £24.8m net, puts Mirriad in a strong position to continue to develop its technology and position its in-content advertising inventory centrally within the ecosystem.
Market disruption increases opportunity
With Apple and Google’s changes on privacy and targeting and the surge of ad-free and ad-light streaming, the advertising market is in upheaval, while the content industry needs monetisation solutions acceptable to audiences. Mirriad’s in-content proposition opens a new potential revenue stream for content owners, with the added attraction of being able to target audiences by context. The group now has 20 broadcast and digital distribution partners under contract. While the retained element of the Tencent agreement expired in March, campaign delays have meant some revenues deferred into FY21, and a new contract is being negotiated. The US, the largest global advertising market, remains the key growth focus. The music industry also looks to be very promising for FY21, with artists looking to recoup lost income from their inability to tour. The Mirriad Music Alliance has been set up to develop this opportunity with major labels and with brands secured and looking for new channels to reach their audiences.
Operating loss reduced by 25%
Employee costs were the largest line item at 67% of total operating costs in FY20, with FY19’s restructuring contributing to a 7% year-on-year reduction. £2.43m of R&D was expensed, as previously, up 5% on prior year. The focus for spend now is on scalability and integration into the agency tech stacks, which eases a resistance point to wider adoption. The cash burn is currently around £0.7m a month, with net cash of £35.4m (£34.8m if lease liabilities are included) providing a good runway.
Valuation: Consensus shows FY21 acceleration
The FY21 revenue consensus estimate of £6.0m represents further acceleration as adoption broadens and more campaigns are run. The operating loss should narrow, but break-even is likely to be some way off. The recent upgrade of the US listing to OTC QX could generate much more interest in the equity story, as would further announcements of brand and platform partnerships, such as that with PepsiCo.
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Consensus estimates
Source: Mirriad Advertising accounts, Refinitiv. Note: *Normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. |
Focus on the US
The revenues from China and Singapore currently dominate the group, as shown below, accounting for 81% of total group revenue in the year. A new deal is being negotiated with Tencent that would remove the fixed cap of £2m in the earlier agreement. After two successful years providing proof of concept, the new arrangement (subject to contract confirmation) should allow Mirriad to scale more widely across Tencent’s video assets.
The US revenue base is building, growing from 7% of group in H120 to 20% in H220.
The geographic revenue split shown below is by origin, with the UK figure also including sales to customers in other territories, such as France and Turkey, where the number of campaigns is also stepping up.
Exhibit 1: Summary results by half year
£'000s |
H120 |
% change |
H220 |
% change |
FY20 |
% change |
UK |
71 |
2% |
29 |
-58% |
101 |
-28% |
US |
62 |
125% |
252 |
90% |
314 |
96% |
China and Singapore |
764 |
185% |
1,002 |
97% |
1,766 |
127% |
Total revenue |
897 |
109% |
1,283 |
81% |
2,180 |
109% |
EBITDA |
(4,658) |
(3,968) |
(8,626) |
|||
Operating Loss |
(4,891) |
(4,201) |
(9,092) |
Source: Mirriad accounts
Staff costs were down 7% year-on-year, with other general and administrative costs down by 22%, contributing to the reduction in the operating loss from £12.2m for FY19 to £9.1m for FY20.
Cash consumption for the year was £8.1m, with December’s oversubscribed placing raising £26.2m gross (£24.8m net) and transforming the balance sheet. Net cash at the year end was £35.4m (£34.8m when leases are taken into consideration).
The H121 appointments of a new chief technology officer and the creation of a new role of chief revenue officer would indicate that overheads will be higher in FY21, but this is necessary as the group grows and needs to deliver an efficient and professional service to high-profile and influential clients. We would expect the spend on technology and R&D to step up a degree as the group focuses on integration with existing industry practices. The range of possible financial outcomes for the year remains wide.
Driving the US opportunity
The significant effort being put into growing in the US market is starting to be reflected in revenues, and the major framework agreements already announced are yet to kick in to any meaningful extent. The timing of revenues will be difficult to predict, but we would expect that the number of campaigns run will increase notably as the year progresses. For the advertising industry as well a whole, Q221 is expected to be particularly strong due to the weak comparatives over the early months of the pandemic when ad spend was most curtailed. Q321 should also be a positive backdrop, with like-for-likes starting to get more onerous in the final weeks of the year. Mirriad’s growth dynamics, though, are far more related to its own efforts than market improvement. What is clear, though, is that the amount of available inventory for those ad dollars to buy is increasingly constrained as film and TV consumption continues to migrate away from ad-funded platforms.
Exhibit 2: Financial summary
Year end 31 December, IFRS |
£m |
2017 |
2018 |
2019 |
2020 |
|
INCOME STATEMENT |
||||||
Revenue |
|
|
0.874 |
0.416 |
1.140 |
2.180 |
Cost of Sales |
(0.181) |
(0.144) |
(0.178) |
(0.244) |
||
Gross Profit |
0.694 |
0.272 |
0.961 |
1.936 |
||
EBITDA |
|
|
(10.359) |
(11.931) |
(11.505) |
(8.626) |
Normalised operating profit |
|
|
(11.272) |
(14.429) |
(12.174) |
(9.092) |
Amortisation of acquired intangibles |
0.000 |
0.000 |
0.000 |
0.000 |
||
Exceptionals |
0.000 |
0.000 |
0.000 |
0.000 |
||
Share-based payments |
(1.675) |
(0.176) |
(0.360) |
(0.360) |
||
Reported operating profit |
(12.947) |
(14.605) |
(12.534) |
(9.452) |
||
Net Interest |
0.001 |
0.058 |
0.023 |
0.004 |
||
Joint ventures & associates (post tax) |
0.000 |
0.000 |
0.000 |
0.000 |
||
Exceptionals |
0.000 |
0.000 |
0.000 |
0.000 |
||
Profit Before Tax (norm) |
|
|
(11.271) |
(14.371) |
(12.151) |
(9.089) |
Reported tax |
0.209 |
0.042 |
0.056 |
0.032 |
||
Profit After Tax (norm) |
(11.089) |
(14.329) |
(12.095) |
(9.056) |
||
Minority interests |
0.000 |
0.000 |
0.000 |
0.000 |
||
Discontinued operations |
0.000 |
0.000 |
0.000 |
0.000 |
||
Net income (normalised) |
(11.089) |
(14.329) |
(12.095) |
(9.056) |
||
Basic average number of shares outstanding (m) |
58.0 |
104.1 |
150.2 |
215.7 |
||
EPS - basic normalised (p) |
|
|
(19.1) |
(13.8) |
(8.1) |
(4.2) |
EPS - diluted normalised (p) |
|
|
(19.1) |
(13.8) |
(8.1) |
(4.2) |
EPS - basic reported (p) |
|
|
(22.0) |
(13.9) |
(8.3) |
(4.4) |
Dividend (p) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Revenue growth (%) |
- |
(52.4) |
174.0 |
91.3 |
||
Gross Margin (%) |
79.3 |
65.5 |
84.4 |
88.8 |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
||
Normalised Operating Margin |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
2.280 |
0.770 |
1.125 |
0.823 |
Intangible Assets |
1.641 |
0.170 |
0.000 |
0.000 |
||
Tangible Assets |
0.426 |
0.414 |
0.913 |
0.637 |
||
Trade & other receivables |
0.213 |
0.186 |
0.212 |
0.186 |
||
Current Assets |
|
|
27.667 |
16.466 |
20.193 |
36.970 |
Stocks |
0.000 |
0.000 |
0.000 |
0.000 |
||
Debtors |
1.074 |
0.974 |
1.025 |
1.476 |
||
Cash & cash equivalents |
26.384 |
15.204 |
19.092 |
35.421 |
||
Other |
0.209 |
0.288 |
0.077 |
0.073 |
||
Current Liabilities |
|
|
(2.055) |
(1.659) |
(1.696) |
(2.317) |
Creditors |
(2.055) |
(1.622) |
(1.298) |
(1.914) |
||
Tax and social security |
0.000 |
(0.037) |
(0.025) |
(0.013) |
||
Short term borrowings |
0.000 |
0.000 |
0.000 |
0.000 |
||
Lrease liabilities |
0.000 |
0.000 |
(0.373) |
(0.390) |
||
Long Term Liabilities |
|
|
0.000 |
0.000 |
(0.423) |
(0.204) |
Long term borrowings |
0.000 |
0.000 |
0.000 |
0.000 |
||
Long term lease liabilities |
0.000 |
0.000 |
(0.423) |
(0.204) |
||
Net Assets |
|
|
27.892 |
15.577 |
19.200 |
35.271 |
Minority interests |
0.000 |
0.000 |
0.000 |
0.000 |
||
Shareholders' equity |
|
|
27.892 |
15.577 |
19.200 |
35.271 |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
(10.359) |
(11.931) |
(11.505) |
(8.626) |
||
Working capital |
0.980 |
(0.332) |
(0.237) |
0.165 |
||
Exceptional & other |
0.000 |
0.000 |
0.000 |
0.000 |
||
Tax |
0.184 |
(0.007) |
0.248 |
0.082 |
||
Net operating cash flow |
|
|
(9.195) |
(12.269) |
(11.494) |
(8.379) |
Capex |
(1.309) |
(1.016) |
(0.062) |
(0.025) |
||
Acquisitions/disposals |
0.003 |
0.000 |
0.000 |
0.000 |
||
Net interest |
0.001 |
0.058 |
0.023 |
0.004 |
||
Equity financing |
25.069 |
1.926 |
15.290 |
24.779 |
||
Dividends |
0.000 |
0.000 |
0.000 |
0.000 |
||
Other |
(0.202) |
(0.169) |
(0.389) |
(0.333) |
||
Net Cash Flow |
14.367 |
(11.470) |
3.367 |
16.046 |
||
Opening net debt/(cash) |
|
|
(12.017) |
(26.384) |
(15.204) |
(19.092) |
FX |
0.000 |
0.000 |
0.000 |
0.000 |
||
Other non-cash movements |
0.000 |
0.290 |
0.520 |
0.315 |
||
Closing net debt/(cash) |
|
|
(26.384) |
(15.204) |
(19.092) |
(35.421) |
Source: Company data
|
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Research: TMT
Checkit reported 23% y-o-y revenue growth for Q122. Normalising for the acquisition of Checkit US at the start of the quarter, group revenue increased 15% y-o-y. Recurring revenue made up 35% of total revenue, up from 32% in Q121 (normalised), as Checkit continues to transition customers to subscription contracts. The company is accelerating investment in sales, marketing and product to drive customer acquisition. Q122 annual recurring revenue (ARR) grew 7% q-o-q and, while early in the year, is on track to meet our 34% growth target for FY22. We maintain our estimates.