Reflecting the closer integration of its assets, RNTS will rename to Fyber. Revenue growth of 17% in Q1 falls short of full-year targets but is expected to accelerate as the year progresses and management has reiterated its full year targets of revenues over €280m and EBITDA over €3m. Putting in place additional financing would lift a significant overhang on the shares.
Written by
RNTS Media |
Taking its divisional name, Fyber |
Q1 update |
Software & comp services |
2 June 2017 |
Share price performance
Business description
Next events
Analysts
RNTS Media is a research client of Edison Investment Research Limited |
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Reflecting the closer integration of its assets, RNTS will rename to Fyber. Revenue growth of 17% in Q1 falls short of full-year targets but is expected to accelerate as the year progresses and management has reiterated its full year targets of revenues over €280m and EBITDA over €3m. Putting in place additional financing would lift a significant overhang on the shares.
Year end |
Revenue |
EBITDA |
EBIT |
PBT |
PBT |
EV/sales |
12/14 |
64.0 |
0.7 |
(1.5) |
(2.0) |
(10.8) |
4.7 |
12/15 |
81.1 |
(13.7) |
(15.2) |
(18.6) |
(40.3) |
3.7 |
12/16e |
170.0/218.1* |
(10.9)/(5.8)* |
(14.4) |
(24.4) |
(33.6) |
1.5/1.8* |
12/17e |
285.0 |
3.9 |
(0.5) |
(4.2) |
(11.2) |
1.2 |
Note: *Pro forma assuming Heyzap and Inneractive acquired as of 1 Jan 2016. **PBT is normalised, excluding amortisation of acquired intangibles, discontinued operations, exceptional items and share-based payments.
Decent Q1 but must accelerate to hit FY17 targets
Pro forma Q117 revenues increased by 17% to €49.7m. While this falls short of the c 30% growth rate targeted by management for the year, Q1 is typically a seasonally small quarter and management believes it is on course to deliver its full year targets. Gross margins at 29.4% were down y-o-y (Q116: 31.0%), due to the strong growth of lower-margin Fyber RTB and margin pressure in Inneractive which is sacrificing some margin in the short term as it expands its position in China. Despite this, gross margins are tracking ahead of our forecasts due to continued expansion at Fyber RTB which is now close to the group average. RNTS moved back into adjusted EBITDA loss of €5m in Q1, a function of seasonality with operational expenses only slightly up on Q416, reflecting the expansion into China.
Becoming Fyber
RNTS continues to focus on the technical integration of the Fyber and Inneractive platforms which should help it to fully leverage its increasing scale; this could be accelerated if additional funding is put in place to enable the advanced payment of the Inneractive earnouts. With the integrations proceeding, the holding company structure is no longer appropriate and the group plans to rename to Fyber. It will also convert the form of the shares from bearer to registered, a further step in improving transparency. Near term, RNTS needs to put in place additional financing to satisfy earnout obligations in relation to Heyzap and Inneractive as well as ongoing working capital requirements; within Fyber it has added a €7.5m working capital facility and negotiations on other facilities are progressing.
Valuation: Adding facilities key to supporting rating
Through acquisition and strong organic growth, RNTS has grown into its valuation over the last two years. Management is now working towards widening its funding options to ensure it can continue to execute its growth strategy which is focused on mobile, programmatic and video advertising. The convertible restructuring in April was a major step forward and adding facilities should lift a significant overhang on the shares which are no longer trading at a premium to peers on an EV/gross sales basis of 1.2x (Tradedesk 1.4x, Criteo 1.5x, Taptica 1.4x, RhythmOne 0.9x).
Exhibit 1: Financial summary
|
|
€'000s |
2014 |
2015 |
2016e |
2017e |
December |
|
|
Pro-forma for Fyber acquisition |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
||||||
Revenue |
|
|
64,024 |
81,076 |
170,000 |
285,000 |
Cost of Sales |
(39,641) |
(56,739) |
(121,824) |
(208,653) |
||
Gross Profit |
24,383 |
24,337 |
48,176 |
76,348 |
||
EBITDA - continuing |
|
|
685 |
(13,740) |
(10,875) |
3,885 |
Operating Profit (before amort. and except.) |
(1,546) |
(15,196) |
(14,375) |
(456) |
||
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) |
(23,563) |
(7,493) |
||
Net Interest |
(495) |
(3,397) |
(9,998) |
(3,750) |
||
Profit Before Tax (norm) |
|
|
(2,041) |
(18,593) |
(24,373) |
(4,206) |
Profit Before Tax (FRS 3) |
|
|
(10,793) |
(40,282) |
(33,561) |
(11,243) |
Tax |
215 |
2,348 |
0 |
0 |
||
Profit After Tax (norm) |
(1,484) |
(16,245) |
(24,373) |
(4,206) |
||
Profit After Tax (FRS 3) |
(20,173) |
(37,934) |
(33,561) |
(11,243) |
||
Average Number of Shares Outstanding (m) |
114.5 |
114.5 |
114.5 |
114.6 |
||
EPS - normalised (c) |
|
|
(1.3) |
(14.2) |
(21.3) |
(3.7) |
EPS - normalised fully diluted (c) |
|
(1.2) |
(13.6) |
(18.6) |
(3.1) |
|
EPS - (IFRS) (c) |
|
|
(17.6) |
(33.1) |
(29.3) |
(9.8) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
38.1 |
30.0 |
28.3 |
26.8 |
||
EBITDA Margin (%) |
1.1 |
-16.9 |
-6.4 |
1.4 |
||
Operating Margin (before GW and except.) (%) |
-2.4 |
-18.7 |
-8.5 |
-0.2 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
173,152 |
160,814 |
215,766 |
228,411 |
Intangible Assets |
159,729 |
157,929 |
211,881 |
224,867 |
||
Tangible Assets |
674 |
2,195 |
3,195 |
2,854 |
||
Investments |
12,749 |
690 |
690 |
690 |
||
Current Assets |
|
|
51,423 |
119,737 |
111,004 |
117,310 |
Stocks |
556 |
408 |
408 |
408 |
||
Debtors |
17,246 |
25,214 |
54,400 |
91,200 |
||
Cash |
21,078 |
79,123 |
41,204 |
10,710 |
||
Other |
12,543 |
14,992 |
14,992 |
14,992 |
||
Current Liabilities |
|
|
(33,518) |
(47,067) |
(73,974) |
(99,830) |
Creditors |
(24,606) |
(47,067) |
(73,974) |
(99,830) |
||
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 |
113,543 |
106,637 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(13,723) |
(10,884) |
(13,154) |
(7,058) |
Net Interest |
N/A |
(1,041) |
(9,998) |
(3,750) |
||
Tax |
N/A |
(690) |
0 |
0 |
||
Capex |
N/A |
(6,321) |
(4,600) |
(4,686) |
||
Acquisitions/disposals |
N/A |
(10,455) |
(60,167) |
(15,000) |
||
Financing |
N/A |
0 |
0 |
0 |
||
Dividends |
N/A |
0 |
0 |
0 |
||
Net Cash Flow |
N/A |
(29,391) |
(87,919) |
(30,495) |
||
Opening net debt/(cash) |
|
2,553 |
(9,297) |
9,449 |
97,368 |
|
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(11,803) |
10,645 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(9,297) |
9,449 |
97,368 |
127,862 |
Source: RNTS Media accounts (historical numbers), Edison Investment Research (forecasts)
|
|
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