RNTS Media
Written by
RNTS Media |
Strong momentum to continue into FY17 |
Trading update |
Media |
14 February 2017 |
Share price performance
Business description
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Analysts
RNTS MediaRNTS Media is a research client of Edison Investment Research Limited |
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RNTS Media’s FY16 preliminary update points to pro forma (PF) FY16 revenue growth of at least 65%, in line with its recently raised guidance and our forecasts. RNTS reached EBITDA break-even during Q4, as expected. Contingent on planned financing, FY17 guidance for revenue growth of 30% and EBITDA profitability of over €3m has been introduced, a clear signal of ongoing strong momentum; we leave forecasts unchanged.
Year end |
Revenue |
EBITDA |
EBIT |
PBT cont** (€m) |
PBT |
EV/sales |
12/14 |
64.0 |
0.7 |
(1.5) |
(2.0) |
(10.8) |
5.6 |
12/15 |
81.1 |
(13.7) |
(15.2) |
(18.6) |
(40.3) |
4.3 |
12/16e |
170.0/215.0* |
(10.2)/(5.1)* |
(13.7) |
(23.7) |
(32.9) |
2.1/1.6* |
12/17e |
275.0 |
3.9 |
(0.4) |
(7.9) |
(14.9) |
1.4 |
Note: *Pro forma. **PBT is normalised, excluding amortisation of acquired intangibles, discontinued operations, exceptional items and share-based payments.
FY16 prelims: In line with forecasts
RNTS has deferred the publication of its full year results to July 2017 following a change of auditor. The release of these strong preliminary results, shortly after this announcement, provides us with comfort that this is a capacity issue rather than a trading one. PF FY16 revenues increased by at least 65% to more than €215m, in line with our forecasts, and PF EBITDA break-even was achieved in Q4 as per the company’s recently increased guidance, with a full-year adjusted EBITDA loss of less than €6m achieved.
FY17 guidance points to ongoing strong momentum
RNTS increased revenue guidance twice during FY16 and the preliminary results point to ongoing strong momentum, with Q4 growth of approximately 40%. This momentum has clearly continued into 2017, with management providing revenue guidance for FY17 of over €280m (c 30% y-o-y growth) and EBITDA of over €3m. This is broadly in line with our forecasts, which we leave unchanged.
Valuation: Reflects leading growth rates
As a network effect business, valuation in this industry tends to differentiate based on scale, growth and profitability. RNTS, which has made three strategic acquisitions over the last two years, is now one of the fastest growing ad tech companies in the sector. The FY17 EV/gross sales rating of 1.3x, while at the top end of sector peers (average ad tech rating of 0.6x), is aligned to those that offer similar revenue growth rates (although higher EBITDA margins) such as Criteo and The Trade Desk. While the group continues to invest in its technology stack and sales capacity, the two platforms at its core are scalable and, with break-even reached, we expect the strong top-line growth should start to translate to an expanding EBITDA margin profile. Evidence of this as well as ongoing strong momentum would further underpin its current rating. Putting in place additional funding this quarter to satisfy the earn-outs for the acquisitions of Inneractive and Heyzap and to provide the means to execute its strategy is the next key hurdle for the group.
Financial summary
Exhibit 1: Financial summary
|
|
€000s |
2014 |
2015 |
2016e |
2017e |
Year end 31 December |
|
|
Pro forma |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
||||||
Revenue |
|
|
64,024 |
81,076 |
170,000 |
275,000 |
Cost of Sales |
(39,641) |
(56,739) |
(122,055) |
(199,083) |
||
Gross Profit |
24,383 |
24,337 |
47,945 |
75,918 |
||
EBITDA - continuing |
|
685 |
(13,740) |
(10,175) |
3,939 |
|
Operating Profit (before amort. and except.) |
(1,546) |
(15,196) |
(13,675) |
(402) |
||
Intangible Amortisation |
(2,292) |
(2,469) |
(3,315) |
(2,700) |
||
Exceptionals |
(3,439) |
(2,915) |
(3,373) |
(1,837) |
||
Other |
(3,021) |
(16,305) |
(2,500) |
(2,500) |
||
Operating Profit |
(10,298) |
(36,885) |
(22,863) |
(7,439) |
||
Net Interest |
(495) |
(3,397) |
(9,998) |
(7,500) |
||
Profit Before Tax (norm) |
(2,041) |
(18,593) |
(23,673) |
(7,902) |
||
Profit Before Tax (FRS 3) |
(10,793) |
(40,282) |
(32,861) |
(14,939) |
||
Tax |
215 |
2,348 |
0 |
0 |
||
Profit After Tax (norm) |
(1,484) |
(16,245) |
(23,673) |
(7,902) |
||
Profit After Tax (FRS 3) |
(20,173) |
(37,934) |
(32,861) |
(14,939) |
||
Average Number of Shares Outstanding (m) |
114.5 |
114.5 |
114.5 |
114.8 |
||
EPS - normalised (c) |
|
(1.3) |
(14.2) |
(20.7) |
(6.9) |
|
EPS - normalised fully diluted (c) |
(1.2) |
(13.6) |
(18.1) |
(5.8) |
||
EPS - (IFRS) (c) |
|
(17.6) |
(33.1) |
(28.7) |
(13.0) |
|
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
38.1 |
30.0 |
28.2 |
27.6 |
||
EBITDA Margin (%) |
1.1 |
-16.9 |
-6.0 |
1.4 |
||
Operating Margin (before GW and except.) (%) |
-2.4 |
-18.7 |
-8.0 |
-0.1 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
173,152 |
160,814 |
215,766 |
234,723 |
|
Intangible Assets |
159,729 |
157,929 |
211,881 |
231,180 |
||
Tangible Assets |
674 |
2,195 |
3,195 |
2,854 |
||
Investments |
12,749 |
690 |
690 |
690 |
||
Current Assets |
|
51,423 |
119,737 |
111,060 |
106,473 |
|
Stocks |
556 |
408 |
408 |
408 |
||
Debtors |
17,246 |
25,214 |
54,400 |
88,000 |
||
Cash |
21,078 |
79,123 |
41,260 |
3,073 |
||
Other |
12,543 |
14,992 |
14,992 |
14,992 |
||
Current Liabilities |
|
(33,518) |
(47,067) |
(73,329) |
(97,166) |
|
Creditors |
(24,606) |
(47,067) |
(73,329) |
(97,166) |
||
Short term borrowings |
(8,912) |
0 |
0 |
0 |
||
Long Term Liabilities |
|
(19,042) |
(89,253) |
(139,253) |
(139,253) |
|
Long term borrowings |
(2,869) |
(88,572) |
(138,572) |
(138,572) |
||
Other long term liabilities |
(16,173) |
(681) |
(681) |
(681) |
||
Net Assets |
|
|
172,015 |
144,231 |
114,243 |
104,778 |
CASH FLOW |
||||||
Operating Cash Flow |
|
(13,723) |
(10,884) |
(13,099) |
(5,824) |
|
Net Interest |
N/A |
(1,041) |
(9,998) |
(7,500) |
||
Tax |
N/A |
(690) |
0 |
0 |
||
Capex |
N/A |
(6,321) |
(4,600) |
(4,635) |
||
Acquisitions/disposals |
N/A |
(10,455) |
(60,167) |
(20,227) |
||
Financing |
N/A |
0 |
0 |
0 |
||
Dividends |
N/A |
0 |
0 |
0 |
||
Net Cash Flow |
N/A |
(29,391) |
(87,863) |
(38,187) |
||
Opening net debt/(cash) |
2,553 |
(9,297) |
9,449 |
97,312 |
||
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(11,803) |
10,645 |
0 |
(0) |
||
Closing net debt/(cash) |
|
(9,297) |
9,449 |
97,312 |
135,499 |
|
Source: RNTS Media accounts (historical numbers), Edison Investment Research (forecasts)
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