Today’s results are in line with January’s trading update in terms of revenue (reduced, as flagged, after the cessation of investment in the web apps platform) and adjusted EBITDA. The App Distribution segment has performed well and the group as a whole has demonstrated good cash conversion once again. Crossrider has also benefited from action taken to improve efficiency. In October 2016, Crossrider purchased DriverAgent for U$1 million – a product already successfully promoted on Crossrider’s app distribution platform – which is now fully-integrated. This has been followed by today’s acquisition of CyberGhost, a Cyber Security SaaS solution business on a multiple of 6x to 9x historical EBITDA depending on an earn out payment. This represents a continuation of Crossrider’s clearly-defined, well-articulated strategy. We make adjustments to our underlying revenue and margin estimates which, in combination with the CyberGhost deal leave revenue expectations little changed but add 14% and 20% to our respective EBITDA estimates for FY 2017E and FY 2018E.
2016 revenue of U$56.5 million and adjusted EBITDA of U$6.4 million were in line with the numbers given in January’s trading update. Crossrider ended the year with US$72.1 million of cash, and cash conversion improved to 123% of Adjusted EBITDA (US$7.9 million in FY 2016 compared to 69%, US$6.9 million in FY 2015).
The Media and App Distribution businesses produced solid segmental results. While the former was flat at US$3.5 million, stripping out two low-margin contracts that were signed in Q4 2015 and terminated in 2016 reveals an underlying increase. The App Distribution business improved margins and saw a 20% improvement in segment result at US$11.3 million. Segmental revenues are likely to reflect the Media business’ increasing supply of services to the App Distribution business.
The acquisition of CyberGhost represents a move into the personal privacy market for Crossrider. The solution aids users in keeping information secure while using public wifi, prevents general monitoring and can bypass local (geographic) restrictions on internet activity.
In our view, the acquisition of CyberGhost is a useful step forward adding slightly over 10% to EBITDA. It heralds Crossrider’s move into the burgeoning cyber security market where there is clear potential for growth.