REMINDER: Our user survey closes on Friday, please submit your responses here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Stt Surely not another bucket of cold water on RTHM. You really are a nasty piece of work. I thought that you said it like it is, yet in all you thousands of posts, you have failed to find one positive thing to comment on. You are a disgusting creep.
rthm have a history of missing expectations... With new management, there's is likely to be new focus/vision...As the majority of management come from Yume, the focus/vision is likely to be the same as Yume...
The ad tech industry is fast moving and I think it's too early to suggest that they may have turned the corner...
It's clear from the results that pre-Yume revenues were largely flat and even Yume revenues were lower than they were previously..
From the results:
$58m of the $175m revenue is from Yume..
For H1 2017, Yume published revenues of $79m
Without Yume, the rthm H1 results, revenues were largely flat..
Looking at Yume's previous results.. It looks like Yume's revenue has been declining as well
Yume H1 2017 results, just before the rthm/Yume deal was announced..
Revenues of $79m...
https://www.marketwatch.com/press-release/yume-reports-second-quarter-2017-financial-results-2017-08-08
This from couple of years ago..just months before rthm's deal to buy them.
Margins were quoted as 50%
fy2016 revenues of $160m (2015 $173m)
They also had a buy back program back then. Coincidentally $10m as well.
https://www.businesswire.com/news/home/20170216006240/en/YuMe-Reports-Fourth-Quarter-Full-Year-2016
Some good posts today, thanks to 1GW and Brass for putting some numbers up. I am not too good at doing numerical analysis, never was much of an accountant.
On the cash bridge, given the revenue-related uncertainty over profit, I think a reasonable methodology is to go with the cashflow statement format:
+$ xm Profit for the period ($xm = $10m-$30m say, depending on revenue)
+$17m Operating adjustments (same as 1H except for forex which could go either way, so zero)
+$ 6m WC adjustments (assume unwind of $6m of the $10m 1H build)
-$ 0m Income taxes paid
-$ 3m Investment adjustments (same as 1H)
-$ 2m Financing adjustments (same as 1H)
To give you $(x+18) m increase in cash in 2H before acquisitions / buyback. So if x=10, cash goes up by $28m to $50m, while if x=30, cash goes up by $48m to $70m.
So estimate $50m-$70m cash at 31st March 2019, depending largely on revenue, and before buyback or acquisitions. If $10m buyback in 2H, then $40m-$60m cash at year end (or $30m-$50m net cash assuming the loan is left as is).
On WC, I have assumed $6m of the $10m 1H build unwinds, as Mark Bonney commented that some of the build was due to the longer payment terms YuMe has with agency clients compared to the base R1 business - so I presume some of this will stick in 2H, assuming YuMe has a better 4Q than it appears to have done last year. $4m sticking is probably conservative, but it makes for nice round numbers in the end-year cash estimates.
I don't know how to model income tax cash payments. R1 has lots of tax losses, but did pay a small amount of tax in 1H, so presumably there are areas where as it makes profits it can't offset them completely with losses. So if profits are significantly larger in 2H, I suppose it is possible there will be a more significant cash tax cost.
thanks again stt1 for reposting them post here aswell has i missing them on the other MB's<br /><br />or did you for get that you had posted them on other MB's
According to Reuters website, rthm recommendations have been downgraded from:
1 outperform and 1 buy
to
0 buys and 2 outperform
I noticed this a few days ago but the recommendations changed back to the former on Fri..
It is currently (Sun 2pm) showing as a Downgrade:
0 buys
2 outperform
"ANALYST RECOMMENDATIONS AND REVISIONS
1-5 Linear Scale Current 1 Month Ago 2 Month Ago 3 Month Ago
(1) BUY 0 1 1 1
(2) OUTPERFORM 2 1 1 2"
https://www.reuters.com/finance/stocks/analyst/RTHM.L
Pensioner,
"They are almost certainly well informed."
Tosca were buying years ago at much higher prices, around double current sp..
Tosca increased slightly recently after the new broker, Whitman Howard, was appointed.
https://investor.rhythmone.com/newsroom/2018/12/04/nominated-adviser-and-broker-changes
Cash bridges start from $37.3m which was the year-end cash balance. $27m was the net cash.
Given their apparent focus on adj ebitda rather than revenue, you can also start from an adj ebitda number (although I don't know what "consensus" is on that) and work down to profit.
$31m D&A should (double the 1H number)
$ 3m Finance expense and share-based payments (double 1H number)
$ 6m Exceptionals ($3.6m 1H, $2.4m 2H maybe - i.e. a bit less)
To give $40m to come off adjusted EBITDA before tax and forex gain/loss.
So if you started from $50m adj EBITDA that would give you $10m less tax/forex adjustments as profit, as hopefully a "low" end of the range, pending seeing some Whitman Howard estimates which might help tighten up the range.
1GW, have been through my forecast and for second half have left the margin same as H1 (though they may eek out a small improvement) on a second half revenue forecast of $200m. Ops expenses pre exceptionals I've reduced by $4m on H1 to $72m. This on the basis that there will be annualisation of H1 savings and I expect them to make more savings as H2 progresses.
Allowing $3m exceptionals in H2 and the same finance/tax impact of $1.3m that would give a real Profit for the year of $12m. Full year Adj EBITDA would be c$55m.
Given most of the areas will be fixed then for every $10m extra revenue $4.5m would drop to the bottom line.
Cash bridge is more difficult as they keep changing the bridge info. latest one didn't start from year end closing cash of $27m so shooting in the dark a bit. Assuming working capital $10m unwinds and the above profit then I'd be about $60m before buy back or acquisition.
Overall H1 was better than I forecast running in to H2. Assuming revenues come in above $375m for the year it should give plenty of room for further buy backs or small bolt on acquisitions. I really do hope they don't do any larger acquisitions this year.
I am surprised the share price hasn't moved further. With the $31m current cash comment in the webcast it must be getting more difficult to find the negatives in this story.
I can see why the institutional investors were increasing their holdings.
Just to add, the FT, quoting Thomson reuters, is today quoting the $408m mean (high $436m, low $380m) version. If only R1 would quote actual numbers as guidance.
https://markets.ft.com/data/equities/tearsheet/forecasts?s=RTHM:LSE
For anyone wondering where the $408m consensus came from in my post below, it was from reuters, which yesterday was showing this (mean $408m of 2 estimates: high $436m, low $380m). It was showing this with zero revisions in the last week, so I assumed this was the consensus Bonney would have been talking about.
However, I see that today reuters is showing $402m mean consensus (high $425m, low $380m), still with no revisions in the last week, and seems to have reverted to the same set of numbers it was showing in early October.
So have to see whether yesterday's reuters numbers were an anticipation of something to come or just an error.
stt1 please could you explain why Tosca increased its shareholding recently? They are almost certainly well informed.
Gerihatrick,
"which has top rating on the seller trust index."
They announced they were top of Pixalate in 2017 and then again in 2018...
It didn't stop forecasts being reduced.
https://uk.advfn.com/stock-market/london/rhythmone-RTHM/share-news/RhythmOne-PLC-Maintains-1-US-ranking-on-Pixalates/75873901
2018:
https://uk.advfn.com/stock-market/london/rhythmone-RTHM/share-news/RhythmOne-PLC-1-Ranking-Global-Seller-Trust-Inde/77205587
It didn't stop forecasts being reduced...
https://www.reuters.com/finance/stocks/analyst/RTHM.L
Gerihatrick,
We haven't had a full half period with the new management. I think it's too early to assess whether they have turned the business around.
rthm have a history of closing operations. Whether they were following the 2014 blog or previously classified as non-core or more recent non-platform etc. The full consequences of closing those operations on revenue, cash etc won't be known for months, at least a year after they have been closed down. Given new management, majority from Yume's previous business, it's seems more likely rthm's operations are more likely get the chop (rthm's old snr management have left) .
"The gross margin is up; the EBIDTA is greatly improved and they are getting closer to profitablity."
You're comparing a period H1 2017, pre-Yume, against H1, which includes Yume.
Looking at gross margins for instance, Yume, CTV, commanded higher gross margins...
Fy 2016 Yume GM of 50%
rthm H1 2018 GM 38%
Current H1 2019 GM 45%
so GM compared to Yume's 2016 fy results is down.
Yume's fy 2016:
https://www.businesswire.com/news/home/20170216006240/en/YuMe-Reports-Fourth-Quarter-Full-Year-2016
Pre-Yume:
https://investor.rhythmone.com/assets/pdf/RHYTHMONE_PLC_H12019_RESULTS_FINAL_TABLES.pdf
If they were to do $30m or so PBT that would suggest well north of $60m adj EBITDA (given the $16m D&A in 1H, plus $4m exceptionals).
So need to see the WH numbers for a sense check.
Some very encouraging numbers and guidance out of the results and call, in my opinion. Has anyone else plugged them in to a spreadsheet yet? I'm looking forward to seeing what Whitman Howard come up with when they produce a note. As far as I can see, we have guidance for the full year of something like:
$408m revenue ("continues to trade in line with consensus forecast revenue")
45% gross margin (probably settle around where they are, maybe even a bit better)
$185m+ gross profit as effective guidance
Opex - realised about 50-60% of overall cost reduction through 1H P&L, in 2H should get to 85% to 90%. Here, you've got to decide what the baseline is. I think Bonney is thinking of the adjusted opex metric he used in the bridge. So that's at $58.9m in 1H, but difficult to work out what the baseline is. However, playing around with the numbers I would have thought it reasonable to assume maybe a further $5m or $6m of opex cost saving to come through in 2H.
$148m opex excl exceptionals (i.e. $76.6m 1H + $71.6m 2H assuming $5m further savings as above)
$ 6m exceptionals (assume a bit less in 2H than in 1H)
$31m profit before tax and finance income & expense
And so perhaps about $30m PBT.
Which would be quite the turnaround. Of all those assumptions, I think the one that is most difficult to accept, given the track record, is perhaps the revenue guidance. Can they really get over $400m? But given they must have pretty good visibility over the key 3Q revenue number, and they know 4Q was a bit of a shocker last year, I wouldn't have thought they would give the guidance they have unless they were confident.
Any other views? Any obvious errors in the above?
I was at the AGM in London on July 13th and had the opportunity to listen to Mark Bonney on his assessment in inheriting RTHM with its recent acquisitions and his conclusions. I have just listened to the podcast of the interims and am encouraged by the summary. He is doing exactly what he said he would do. He has consolidated the businesses into one; he has reduced the head count considerably; he has promoted the talent from within; he has closed non viable countries and non profitable functions; he has worked hard on the integration of the acquisitions into one entity, and this process is all consolidated on the platform -which has top rating on the seller trust index. He is about half way on his cost reduction process and hopes to achieve near 80% by year end. The gross margin is up; the EBIDTA is greatly improved and they are getting closer to profitablity. Cash will improve as costs are stable and receivables paid. As the SP rises he may well be looking for further acquisitions as part of the process of consolidation in the market place. Looks promising to me so I hold.
Max he is another person who thinks he is influencing the market, probably Stt’s bag carrier.
Is it a fact???.....aducated guess.....or just a wishful thinking???......
Your wishes never come true, do they?
Trades dried up wait for the sell off.
will put the sh+ts up the Algo boys
No matter how you spin it they're buying 4.29 mln of shares on current FX Cable 1.2586 and share price 185.1p. That's on top of the 7mln plus Tosca recently bought.
I think the buy back had been planned for over a year and just before the Yume deal was announced. I think it was probably part of the Yume deal to have it in place...
The cancellation of the Share Premium account was announced in June 2017, just as they were negotiating the deal with Yume...
So they created $186m distributable reserves..
July 2017:
"The amount standing to the credit of the Company's share premium account has been cancelled and the Reduction of Capital has created distributable reserves of approximately GBP142,825,734 (equivalent to approximately $186,359,256 at the prevailing spot foreign exchange rate as at approximately 4.00 p.m. (BST) on 26 July 2017).
The Reduction of Capital is a legal and accounting adjustment and is not expected to have any direct impact on the market value of the ordinary shares of the Company, or the number of ordinary shares in issue.
The creation of this distributable reserve as result of the Reduction of Capital will afford the Company more flexibility to make distributions to its shareholders, if thought fit by the Directors."
https://investor.rhythmone.com/newsroom/2017/07/27/confirmation-of-reduction-of-capital
fy 2018:
"On 26 July 2017 RhythmOne completed a UK High Court approved capital reduction. A copy of the order confirming the capital reduction has been registered by the Registrar of Companies and as such the capital reduction has become effective. All share premium and merger reserve attaching to the Company's ordinary shares has consequently been cancelled. The purpose of capital reduction was to create distributable reserves to provide the Company some flexibility should it wish to undertake the payment of dividends or undertake a share buy-back program in the future."
https://investor.rhythmone.com/assets/pdf/RhythmOne_FY2018_Results_140618.pdf
Reduction of share premium account
Share premium account
Reduced (or cancelled) by means of a reduction of capital. In accordance with article 3 of the Companies (Reduction of Share Capital) Order (SI 2008/1915), the reserve created on such reduction can be treated as a realised profit and, therefore, it may be distributed to shareholders or used to buy back shares.
Share premium account | Practical Law
https://uk.practicallaw.thomsonreuters.com/1-107-7253
Than you to 1GW_ for this one. Just been reading back over earlier posts as haven't had chance yet to listen to the call. This is worth a re-post if any missed it: RE: Working Capital The replay is now available. What Bonney actually said on cash was as follows, as I now hear it: "Significantly impacting our cash in the half was approximately $15m of cash paid out for one-time liabilities incurred as part of the acquisition of YuMe as well as the cash cost of integrating and restructuring in the half. Additionally, approximately $10m was used for working capital requirements as the first half of our fiscal year always requires more investment in working capital and the addition of YuMe extended our accounts receivable as terms with their agency customers tend to be longer than the terms of our base business. Cash typically builds in the second half of our fiscal year and as of our latest full week cash report our cash balance was approximately $31m. We are now beginning to build cash in the business as the receivables for our seasonally strongest period of revenue, September through December, are beginning to be collected and our supply costs for this period have largely been paid."