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M&A interesting comment from the board for sure.. buyers must be circling with results out the way.
Good to finally see the board open to the idea of potential bids. Looking forward to the red dot flashing on LSE with a stonking bid from a suitor.
Myles done a great assessment on valuations - see below.
M&A in the podcasting space tends to be based on enterprise value/sales ratio (or price-to-sales ratio, which is the same except that it does not account for cash or debt on the balance sheet).
Transactions in the space over the past five years for which there is publicly available financial data include:
- iHeartMedia acquiring Triton Media for an enterprise value of $228m (an EV/Sales ratio of 5.0x)
- Amazon acquiring Wondery for an enterprise value of $300m (an EV/Sales ratio of 7.5x)
- Sirius XM acquiring Stitcher for an enterprise value of $325m (an EV/Sales ratio of 4.5x)
- Spotify acquiring Gimlet Media for an enterprise value of $230m (an EV/Sales ratio of 10.2x)
That's a mean EV/Sales ratio of 6.8x.
In the graph below, I have charted Audioboom's quarterly revenues over the past 5 years / 20 quarters from Q1 2019 to Q4 2023 (y-axis, left side) against the average weighted market capitalization for each quarter (y-axis, right side).
I have used a PSR over EV/Sales as BOOM did not have any significant debt in the period, nor did it ever have surplus cash (in fact, it relied on cash injections from equity raises until 2020). Accordingly, PSR in BOOM's case is an adequate proxy for EV/Sales, when comparing against the aforementioned M&A activity.
On average, across the 5-year period, BOOM has traded on a current year PSR of 1.85x (and a median PSR of 1.55x).
The combination of the share price collapse throughout last year (which bottomed in early November), coupled with the return to strong topline growth in Q4, means that the stock is now trading at a 62% discount to where it has traded over the past five years, on a PSR basis. Or to put it another way, just to be trading in line with where it has (relative to its revenues) over the pat five years, BOOM should currently be priced at 717p.
Now consider the known M&A valuations of the past five years. A mean EV/Sales ratio of 6.8x - versus BOOM's currently at 0.68x.
Based purely on previous M&A activity and using the peer group average, BOOM's "premium takeover" valuation would be 10x / 900% higher than it is: 2,500p.
The challenge is to understand why the share price collapsed over the past two years, and if the collapse was too extreme / unwarranted. My own view is that a temporary topline contraction in 2023 - caused by both the loss of a key podcast (Morbid) in 2022, and by a major downturn in the global advertising market between Q3 2022 and Q3 2023 - caused major uncertainty and yes, did drive an unwarranted sell off.
Continued on next post
You did not buy another 5k Zak, you bought back what you sold 😜haha
It is only fair to blame them for buying as well Zak haha
2024 is set to be a record year for Audioboom, and - as I highlight in our Q1 2024 Trading Update, released today - we are perfectly positioned to achieve these goals after positive trading in the first 3 months of 2024 in which we delivered revenue of US$17.1 million (up 11% on Q1 2023: US$15.4 million) and adjusted EBITDA profit of US$0.1 million. I expect the revenue growth rate to accelerate through upcoming quarters, and EBITDA profit to grow accordingly.
I am buoyed by the US$55 million of advertising that we currently have booked for the year. This compares with the US$50 million booked at the same stage last year but, in relative terms, we are even further ahead, as in 2023 approximately US$7 million of advertising campaigns were cancelled between April and September due to ad market deterioration.
In 2024 our main investment will be into our sales operation, specifically the growth of our brand awareness team tasked with bringing a new group of blue-chip customers to Audiobooom. We recently announced the hiring of 2 key executives - Shaun Wilson, formerly of Sony Entertainment and Spotify, in the role of Head of UK Sales and Molly Harvey, formerly of SiriusXM and CBS Radio in the role of Vice President of Brand Sales.
Operationally 2024 has started well. In January we hit a new record user number with 38.6 million unique listeners downloading content from Audioboom. Our creator network continues to grow with recently announced new signings including Pretty X Unfiltered, Soder, BDA with Katherine Schwarzenegger, Omnibus, Do We Know Them? and George Conway Explains It All To Sarah Longwell expected to add more than 4 million downloads to the network each month. Our pipeline of new business remains strong, and we expect to convert this opportunity to new podcaster partnerships throughout the year.
We continue to focus on the core operational improvements we initiated last year. Alongside the growth of our brand advertising unit and expansion of our creator network, the upward momentum of Showcase, the further exploitation of advertising inventory levels, and the continued growth of our Sonic brand platform, we are forecasting record revenue in 2024.
Record revenue, combined with the improved podcaster revenue shares and removal of more than US$5 million of minimum guarantee obligations through contract restructuring, is expected to take us back to a position of EBITDA profitability for the full year and as a Board, look to the future with confidence.
We are committed to delivering these financial goals despite still operating in a weakened advertising market. Any meaningful recovery in the ad market would bring further upside.
Lol he is only looking for clout from me.
If he does not see value at 310, it is best to ignore him.
If it gets to 235 I'll join you.
Still not sure about using a 'number of employees' metric to justify market cap though....
Am really glad I didn't take your advice to fill my boots at 310p. So many pathetic rampers on here. May consider buying at 235p this week.
It is the trajectory that is important.
Buyout sooner rather than later imo
They’ve already swallowed most of the losses, $7.5m to payout until July 2025 and then it’s plain sailing with the reduced minimum guaranteed
If you actually read the report you'll see that £7m is a provision for loss making contracts. So their future accounts will look good, as they have already taken the loss. Follow the cash, not the accountancy tricks
Now for a blue finish
Group hug :-)
Shorts increased this morning and now closing. Let’s see where we are by this afternoon - 3pm presentation
£19.4m statutory loss for such a small company is pretty shocking
Loss making, see you in low 200
Ffs
I think Warren Buffet's prophetic words may well be applicable here.
Takeover target is pretty much a given imho
Feels like they might be putting themselves in the shop window too towards the end of the year by some of the comments in that report
In each of the past two years, final yearly revenue has been approximately 25% more than the contracted revenue for the year so far quoted in the Q1 trading update.
Based on that, BOOM would be on target for revs this year of approximately $69M.
Obviously there are things that could happen to boost that further, but $85M+ looks a bit of a long shot at present, based on previous years patterns.
Moving in the right direction for sure, but beating 2022 figures would take a fair bit of accelerated growth over the next nine months.
Ignore the raise comment on Twitter, that's just lazy mans deramping. There hasn't been any need to consider that option for a long time now.
The question BOOM has is when to start paying a dividend, not if they should raise cash. Having stating an expectation to start in 2024 they rightfully shelved it as the market turned down. Keep the cash on the balance sheet and keep driving forward. Sound management.
There will be many envious eyes looking at BOOM over the coming months..
At this rate It’s not going to be hard to beat $75m , they’ll end the year $85-90m
The Company ended 2023 with cash of US$3.7 million. In addition, the Company had access to a US$1.9 million undrawn overdraft with HSBC. Therefore, the Company had access to circa US$5.6 million going into 2024, with the Company being fully funded for its current growth trajectory.
£5m available snd Someone on twitter suggesting a raise 😂😂😂
Contracted revs for year so far:
April 2022: $60.5M
April 2023: $52M
April 2024: $55M
Q1 revs:
2022: $19.5M
2023: $15.4M
2024: $17.1M
Still a way to go to reach 2022 figures but moving in the right direction.