Within 1 year the team has successfully built and scaled a +$100m run rate business
Companies: Rhythmone
RhythmOne (formerly Blinkx) has delivered an encouraging set of results this morning in a sign that Ad Tech could be experiencing a bit of a renaissance. It has refocussed the business around its "Core" products and scaled back operations in its non-core product lines.
Revenue from its core Programmatic Products rose a sizeable 45% over the half year and now accounts for 83% of group revenue. Overall revenues fell 12% year-on-year as a result of the strategic refocus which on first look appears negative. However, adjusted losses halved over the same period going from a loss of $13m in H1 2015 down to a loss of $6.5m for H1 2016.
Most encouraging is the swing to positive adjusted EBITDA for the final 2 months of the period.
What has driven this EBITDA boost?
As highlighted by Management, the strategic refocus of the business towards its core products is starting to reap rewards. The major success is the RhythmMax product which has gone from a standing start to a serious revenue generator in 12 months:
"Continued to build and scale an industry leading programmatic platform, RhythmMax, which now drives a majority of the Company's revenues and represents a c. $100M per year run rate business that was entirely built within one year"
Total programmatic transaction volume grew by over 85% year-on-year.
What do RhythmOne do?
Its core product is its "Ad Tech" that relates to the programmatic trading used to buy digital advertising. According to the company over 73% of total digital ad spend today, is through programmatic channels spanning, desktop, mobile and video. It is expected to grow to 82% by 2020.
Singers put out a bullish note this morning following the results and following its thorough initiation report published yesterday.
"The business has been trading profitably for the last 2 months in line with our turnaround expectations boding well for our expectation of full year profitability."
"Given this picture we expect FY17 consensus revenues to rise to US$170m ... and EBITDA profit to US$1m..."
Market appears to need more tangible progress
Shares are marginally down (1.3%) this morning as the market is undoubtedly looking for further tangible signs that the outlook is improving, especially given the heavy losses incurred in 2014.
Consensus revenue forecasts for the FY 2017 are $168m according to the FT so the half year delivery of $81m appears in line with expectations.
Looking at valuation, the Group is still forecast to make a loss in 2017, but is trading at about 1.15x forecast sales.