Revenue patterns by region
Trading within the largest region, the Nordics, has been difficult over recent periods,
with six successive quarters of decline. This is primarily related to weak market
sentiment, which has particularly affected the travel sector. 9M25 revenue was 7.9%
below the prior year (Q3 down 3.9%). Adjusted EBITDA margin (adjusted EBITDA/revenue)
was 5.5% in the region in Q325, having averaged 6.4% in FY24 and 6.7% in FY23. We
expect progress to be limited for the remainder of the year, but comparatives should
start to ease in FY26.
The next largest region by revenue and the largest by EBITDA is DACH. Results here
have been impressive, with 9M25 revenues up 24.6% on the prior year, and include some
larger, international clients advertising in the region. Generally, having large clients
translates into higher achievable margins, and there has been a marked step-up in
EBITDA margin over recent reporting periods. For 9M25, the adjusted EBITDA margin
in the region was 14.4%, up from 8.4% in FY24 (FY23: 11.7%). Given the profile of
the client base, management regards this level of margin as sustainable.
For the UK and Ireland, 9M25 revenues were 5.7% ahead of the prior year, against tough
comparatives, despite a difficult backdrop of weak consumer sentiment. The adjusted
EBITDA margin improved in Q3 to 5.2%, up from 4.4% in Q225 although not yet reaching
the 6.6% achieved in Q125. We anticipate the challenging backdrop to continue through
the second half. For now, the results of the nascent US business are incorporated
into the reported UK and Ireland figures, which will also temper margins.
France and Benelux’s results have been affected by a specific issue: the diminution
of email marketing in the global mix as a result of regulatory changes respecting
data and privacy, which has hit Tradedoubler’s subsidiary, R-Advertising. This has
now worked its way through the numbers and the business looks more of a mirror to
operations in other regions. We anticipate that revenues will steady at these lower
levels, before picking up into FY26 as the benefit of newly won client accounts starts
to show through, leading to a recovery in margin.
The smallest region by revenue is ‘South’, which covers operations in Spain and Italy.
Here business has been picking up, a pattern reported by other industry participants,
and we expect performance to remain positive through the remainder of the year and
into FY26.
Revenue patterns by activity
While influencer marketing activity is currently only a small proportion of overall
group revenues, it is an area growing considerably faster than the more ‘traditional’
digital marketing. Management is giving greater emphasis to analysing the group by
this split. As it grows as a percentage, we would expect greater granularity of disclosure
that would facilitate modelling on this basis. With the H125 results, management shared
the quarterly splits to Q223 between partner marketing and influencer marketing, with
the figures for the last nine quarters illustrated in Exhibit 10 above.
In 9M25, partner marketing revenues were up 7%, with influencer marketing up 31%,
albeit from a much lower starting point. In Q125, partner marketing was flat, suppressed
by the issue at R-Advertising, referred to above, while influencer marketing grew
21%. Both showed a stronger performance in Q225 at +8% and +45%, respectively, moderating
slightly in Q325 to +5% and +29% respectively.
Our modelling assumes that influencer marketing continues to grow at high rate through
FY26 and starts to moderate slightly through FY27, by which point the split would
be nearer to 80%:20%.
Stable gross margins, operating leverage driving EBITDA margins
As explained above, the gross profit is a more meaningful representation of activity
than the revenue line for the performance marketing business. Group gross margins
have been relatively stable over recent periods and in a range of 19.5% to 21.7% across
FY20 to FY24. Our modelling assumes that a level of around 22% is sustainable for
the near future, supported by the growing share of higher-margin influencer marketing
services. Gross margin for 9M25 was 22.1% and for Q325 was 21.9%.
The next largest element of cost is the selling expenses and these have increased
from 11.6% of revenue in FY20 to 14.5% in FY24, as the group has paid closer attention
to account management, reducing churn and driving cross-selling of other group capabilities.
Administrative expenses are comparatively modest at around 4% of revenue, with R&D
spend hovering at the 2% of revenue level.
It is at the adjusted EBITDA level that the attractiveness of influencer marketing
becomes even more apparent, particularly in the important Q4 period, encompassing
Black Friday and Christmas trading. In Q424, influencer marketing achieved a 22.2%
EBITDA margin, giving a figure for the full year of 15.2%, well ahead of that achieved
by the performance marketing segment of 6.0%. Across 9M25, the differential has been
less marked, but still meaningful at 9.5% against 7.5%. We would expect a greater
seasonal divergence in Q4. Management noted that it had made the decision to invest
in Metapic during Q2 and Q3 to strengthen its ability to attract influencers to the
platform, which implies that it has scope to expand its margins further.
For Q325, the EBITDA to gross profit margin was 19%, below the company’s longer-term
25% target. For 9M25, the margin was 20% and we forecast 22% for the full year. Several
factors weighed on EBITDA in Q3, including currency (c SEK1m effect) and the one-off
correction of amounts owed to brands (c SEK1m effect).
Cash flow reflects low level of capital required
Tradedoubler typically operates with negative working capital as for partner marketing,
it receives payment from advertisers before paying commission across to publishers,
albeit on a quarterly basis this will fluctuate. In FY24, this reversed as the company
made a one-off catch-up payment to a publisher. For influencer marketing, payments
tend to be made to creators in advance of receiving the cash from advertisers and
this effect is particularly marked in Q4. As influencer marketing increases as a proportion
of revenue, this will partially offset the negative working capital position of partner
marketing.
Capex consists mainly of the capitalisation of development costs with a much smaller
investment in tangible assets and lease payments for right of use assets. Overall
capex including lease payments runs at c 2.5% of revenue.
The group acquired KAHA in 2023, which was folded into Metapic, with an initial cash
flow impact of €1.8m/SEK21m and earn-out payments scheduled through to FY28 (not exceeding
Influencer Marketing EBITDA). At the end of FY24, the contingent liability for the
earn-out was SEK49.5m, of which SEK26.3m was paid to the vendors in Q125, split between
working capital (SEK19m) and investment in subsidiaries (SEK7m).
Balance sheet improved by FY24 rights issue
During Q424, Tradedoubler completed a SEK50.5m rights issue, raising approximately
SEK20.5m in cash, before costs. Majority shareholder Reworld Media paid for its portion
of the shares through a set-off arrangement, meaning that Tradedoubler’s debt position
was reduced by approximately SEK30m through the rights issue. The amount owing to
Reworld Media at end FY24 was SEK41.1m. By end-H125, the interest-bearing liabilities
on the balance sheet totalled SEK36m. The facility from Reworld is on market terms,
running to June 2028 with a fixed interest rate of 3.52% until 30 June 2025, after
which the loan has an interest rate of 9%. The loan has a covenant that the entire
loan will be repaid in the event of a change in company control.
Reflecting favourable working capital movements in Q325, net cash was SEK68m at the
end of Q325 (gross cash of SEK104m less interest-bearing liabilities of SEK36m). We
expect that some of this working capital movement will reverse in Q4 and forecast
net cash of SEK57.2m by the end of FY25, rising to SEK166.8m by the end of FY27.
