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Research: TMT
Mirriad Advertising’s H120 numbers show strong top-line progress, up 109% on H119 and 26% ahead of H219. H120 revenues were up over 185% year-on-year in China and Singapore, with market confidence rebuilding. There are very promising new agreements in place with US media owners, with early moves in large adjacent markets, such as music video. There are advanced negotiations ongoing with Tier 1 entertainment platforms. These prospects significantly increase the attraction of Mirriad’s proposition to advertisers. Cash burn is now under £1m per month, with end-August cash of £13.3m (no debt). Market forecasts for FY20–22 are unchanged.
Mirriad Advertising |
On the cusp of potential widespread adoption
Media |
Spotlight research
11 September 2020 |
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Mirriad Advertising is a research client of Edison Investment Research Limited |
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Mirriad Advertising’s H120 numbers show strong top-line progress, up 109% on H119 and 26% ahead of H219. H120 revenues were up over 185% year-on-year in China and Singapore, with market confidence rebuilding. There are very promising new agreements in place with US media owners, with early moves in large adjacent markets, such as music video. There are advanced negotiations ongoing with Tier 1 entertainment platforms. These prospects significantly increase the attraction of Mirriad’s proposition to advertisers. Cash burn is now under £1m per month, with end-August cash of £13.3m (no debt). Market forecasts for FY20–22 are unchanged.
Growing customer base
The Tencent partnership (see July Initiation) delivers minimum monthly revenues, giving Mirriad a base from which to develop further commercial interests. It also gives validation through successful execution; over 40 brands ran campaigns in June. The group signed agreements in the US with Condé Nast, Tastemade and Meredith in H120, and has since added Fuse Media. It can now offer brands and agencies substantial online audiences and has already run campaigns for P&G. Management is working to broaden the group’s operations, initiating partnerships with ZigZag Productions and with B-Unique Records. Music video is an interesting opportunity, given artists’ current inability to tour or generate much merchandising income. COVID-19 has stretched the conversion timeline of prospects to contracts. We expect more progress in H220, given the high level of engagement being achieved with global agency groups, brands, platforms and content partners.
Operating loss reducing
With a growing top line and the benefits of last year’s restructuring, as well as some COVID-19 related savings (£0.3m of the £1.8 reduction in administration expenses), the group operating loss reduced from £7.2m in H119 to £4.9m in H220. R&D (fully expensed) was 7% up on H119, at £1.2m. This investment will continue to be crucial to maintain the group’s technological advantage and ensure that the Mirriad content can be seamlessly integrated with client delivery platforms. The group’s cash burn is now less than £1m per month (as previously disclosed). With cash balances of £14.4m at end June and £13.3m by end August, there should be a sufficient runway until at least Q321 before further funding may be needed.
Consensus forecasts unchanged; FY21 acceleration
The FY20 revenue forecast of £2.2m implies £1.3m in H2. This should be possible, given the momentum in interest within the traditional advertising space and newer applications. With growing awareness and adoption, the upward trajectory could be steeper. The recent US OTC listing could generate greater interest in the equity story.
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Consensus estimates
Source: Mirriad Advertising accounts, Refinitiv. Note: *Normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. |
Well managed: growing top line, reducing losses
The revenues from China and Singapore currently dominate the group, as shown below, accounting for 85% of total group revenue. Significantly increasing activity in the North American market has yet to translate into recognised revenues. We would expect these to step up in H2 as the newly won clients mentioned above start running their initial campaigns. Revenues from the UK and Europe are also yet to take off, but this again belies the amount of underlying activity.
Exhibit 1: Summary interim results
£'000s |
H119 |
% change |
H219 |
% change |
FY19 |
H120 |
% change |
UK |
70 |
800% |
70 |
117% |
140 |
71 |
2% |
US |
27 |
103% |
133 |
38% |
160 |
62 |
125% |
India |
39 |
0% |
(1) |
-104% |
39 |
- |
-100% |
China and Singapore |
268 |
306% |
508 |
252% |
776 |
764 |
185% |
Brazil |
25 |
-25% |
-100% |
25 |
- |
-100% |
|
Total revenue |
429 |
257% |
710 |
140% |
1,140 |
897 |
109% |
EBITDA |
(6,803) |
(4,702) |
(11,505) |
(4,658) |
|||
Operating Loss |
(7,179) |
(4,995) |
(12,174) |
(4,891) |
Source: Mirriad accounts
The group restructuring that took place in H119 significantly reduced the administrative expenses. The largest element of the £1.8m reduction was from staff costs, which reduced £874k against the comparative period. Advantageous exchange movements also gave a boost of £201k. Lower travel and expenses and rent, more COVID-19 related, saved a further £262k. R&D of £1.2m was slightly ahead of prior year (£1.1m) but represents an investment in the future growth potential of the business.
Mirriad had cash of £14.4m as at the end of June and the statement indicates that this had reduced to £13.3m by the end of August, implying a further slowdown in the rate of cash burn. On this trajectory, the group should have no need of additional external funding before Q321 at the earliest.
Clear strategy for growth
Management has articulated its growth strategy with some more granularity. There are three core elements:
1.
Expand partner footprint including Tier 1, drive adoption with advertisers, exploit new sources of content for scale.
The campaign to generate engagement with the relevant industry parties has been (and continues to be) wide-ranging and aims to be exhaustive. Management reports that it has established relationships with all five large agency holding companies, 55% of the 100 largest global advertisers, 80% of the leading global entertainment companies and numerous potential partners across the film and tv, and music businesses. Importantly, Mirriad has indicated that it is in negotiations with six of the seven largest US entertainment platforms, five of which are covered by non-disclosure agreements.
2.
Extend business model to include a direct-to-advertiser/agency marketplace approach.
To become a true part of the advertising ecosystem, Mirriad should offer a programmatic advertising solution, totally integrated. Mirriad is engaging with the key agency groups, with the aim of becoming a line-item within marketing budgets.
3.
Establish Mirriad as the leader in next generation brand and advertising experiences, powered by ground-breaking technology and innovation.
This would include being able to serve embedded advertising content in real time (or so close that the latency is imperceptible). Research commissioned by the group has demonstrated clear improved awareness and higher perceived brand value, particularly where the embedded content reinforces other advertising messages. It is also seen as considerably less intrusive by viewers, who no longer need to select to ‘skip ad’. The avoidance of brand safety/contextuality issues also adds to its attractions. Our July note contains more detail on Mirriad’s target markets and traction.
Mirriad’s technology currently stands at the cusp of more widespread adoption and is demanding attention. If it can move to the next phase and continue to prove its efficacy and scalability, the growth potential is substantial. The current market forecasts are shown below.
Exhibit 2: Market forecasts
FY19 |
FY20e |
FY21e |
FY22e |
|
Revenue (£m) |
1.1 |
2.2 |
6.0 |
11.0 |
Adjusted EBITDA (£m) |
(11.5) |
(11.2) |
(9.8) |
(6.8) |
Adjusted PBT (£m) |
(12.2) |
(11.6) |
(10.1) |
(7.1) |
Adjusted EPS (p) |
(8.1) |
(5.4) |
(4.8) |
(3.3) |
Source: Refinitiv
CEO Stephan Beringer discusses the group’s brand and platform relationships, and its commercial prospects, in more detail in the video below.
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Exhibit 3: Edison TV exclusive interview with CEO Stephan Beringer |
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Source: Edison Investment Research |
Exhibit 4: Financial summary
£'000s |
2017 |
2018 |
2019 |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||
Revenue |
|
|
874 |
416 |
1,140 |
Cost of Sales |
(181) |
(144) |
(178) |
||
Gross Profit |
694 |
272 |
961 |
||
EBITDA |
|
|
(10,359) |
(11,931) |
(11,505) |
Normalised operating profit |
|
|
(11,272) |
(14,429) |
(12,174) |
Amortisation of acquired intangibles |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
||
Share-based payments |
(1,675) |
(176) |
(360) |
||
Reported operating profit |
(12,947) |
(14,605) |
(12,534) |
||
Net Interest |
1 |
58 |
23 |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(11,271) |
(14,371) |
(12,151) |
Profit Before Tax (reported) |
|
|
(12,947) |
(14,547) |
(12,511) |
Reported tax |
209 |
42 |
56 |
||
Profit After Tax (norm) |
(11,089) |
(14,329) |
(12,095) |
||
Profit After Tax (reported) |
(12,738) |
(14,505) |
(12,455) |
||
Minority interests |
0 |
0 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
||
Net income (normalised) |
(11,089) |
(14,329) |
(12,095) |
||
Net income (reported) |
(12,738) |
(14,505) |
(12,455) |
||
Basic average number of shares outstanding (m) |
58.0 |
104.1 |
150.2 |
||
EPS - basic normalised (p) |
|
|
(19.11) |
(13.76) |
(8.05) |
EPS - diluted normalised (p) |
|
|
(19.11) |
(13.76) |
(8.05) |
EPS - basic reported (p) |
|
|
(21.95) |
(13.93) |
(8.29) |
Dividend (p) |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
- |
(52.4) |
174.0 |
||
Gross Margin (%) |
79.3 |
65.5 |
84.4 |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
||
Normalised Operating Margin |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
|||||
Fixed Assets |
|
|
2,280 |
770 |
1,125 |
Intangible Assets |
1,641 |
170 |
0 |
||
Tangible Assets |
426 |
414 |
913 |
||
Trade & other receivables |
213 |
186 |
212 |
||
Current Assets |
|
|
27,667 |
16,466 |
20,193 |
Stocks |
0 |
0 |
0 |
||
Debtors |
1,074 |
974 |
1,025 |
||
Cash & cash equivalents |
26,384 |
15,204 |
19,092 |
||
Other |
209 |
288 |
77 |
||
Current Liabilities |
|
|
(2,055) |
(1,659) |
(1,322) |
Creditors |
(2,055) |
(1,622) |
(1,298) |
||
Tax and social security |
0 |
(37) |
(25) |
||
Short term borrowings |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
Long term borrowings |
0 |
0 |
0 |
||
Other long term liabilities |
0 |
0 |
0 |
||
Net Assets |
|
|
27,892 |
15,577 |
19,996 |
Minority interests |
0 |
0 |
0 |
||
Shareholders' equity |
|
|
27,892 |
15,577 |
19,996 |
CASH FLOW |
|||||
Op Cash Flow before WC and tax |
(10,359) |
(11,931) |
(11,505) |
||
Working capital |
980 |
(332) |
(237) |
||
Exceptional & other |
0 |
0 |
0 |
||
Tax |
184 |
(7) |
248 |
||
Net operating cash flow |
|
|
(9,195) |
(12,269) |
(11,494) |
Capex |
(1,309) |
(1,016) |
(62) |
||
Acquisitions/disposals |
3 |
0 |
0 |
||
Net interest |
1 |
58 |
23 |
||
Equity financing |
25,069 |
1,926 |
15,290 |
||
Dividends |
0 |
0 |
0 |
||
Other |
(202) |
(169) |
(389) |
||
Net Cash Flow |
14,367 |
(11,470) |
3,367 |
||
Opening net debt/(cash) |
|
|
(12,017) |
(26,384) |
(15,204) |
FX |
0 |
0 |
0 |
||
Other non-cash movements |
0 |
290 |
520 |
||
Closing net debt/(cash) |
|
|
(26,384) |
(15,204) |
(19,092) |
Source: Company data
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Research: Consumer
Games Workshop’s (GAW) Q121 trading update was well ahead of expectations, indicating that the previously flagged strong post-lockdown demand has continued, helped by a major product re-release in the period. We upgrade our FY21e PBT forecast by 37% to £115.9m, reflecting higher revenue growth, c 12% versus 2% previously, and a higher operating margin pre-royalties of c 35% versus 27% previously. On our new forecasts the P/E for FY21 is 35.2x. The EV/sales multiple of 10.6x is a premium to GAW’s previous highest multiple.