Assume people have seen the Criteo results, link below
Revenue, Adj EBITDA and cash flow down but still managing a $80m buy back.
Interesting to see what R1 come up with soon...
Instadeth, I’m not surprised they didn’t include cash in the TU just before month end. I suspect many invoices are raised at the end of each month with payment due at roughly 30, 60 or 90 days so always at or around a month end so the final week will be very volatile in terms of cash in. We’d normally have a TU around now which would have stated the cash position at the end of the half, ahead of the formal H1 results. I’m not expecting a big jump in their cash pile despite c20m adj ebitda. Cash at 30m would be a good outcome for H1. I would expect a big jump in H2 though with the seasonal working capital unwind which will dampen the H1 number. All things being equal around 50-60m at end of FY19 is still the forecast.
Wouldn’t be the first time I’ve bought a share that I thought couldn’t possibly go down much further then a few months later see myself buying more at a lower price. R1 a case in point and still holding over 3 years later.
Assuming the next TU shows them on track with their plan the share price should move up materially. Not sure they will kick off the buy back, feels like the BoDs PR on that was misplaced and that hasn’t helped the share price trend.
I would expect it to. Probably very wide spread at start then quickly narrow to c234 230 spread depending on interest. But then my trading skills are limited and timing usually poor hence why I tend to buy a stake and hold in companies where I feel they are undervalued rather than dip in and out. Plenty more upside in this one I think.
He’ll be waiting for the first share price fall to tell us it’s all doom and gloom, heading back to 180.
It would be good though to break 240 which was the ceiling after the last push up. A retrace from here is still quite possible.
No doubt the chartists can inform what it could mean if we break above 240.
Well I've had a quick look at the model I was running vs the TU. I had Adj EBITDA at 21.7m so a little above the TU for H1 taking mid-point of 20m.
But if I replace the revenue number to 175m instead of my 205m the Adj EBITDA would drop below 10m. Given there are limited changes possible on Adj EBITDA (eg exceptionals are neutralised) then to get back to their stated range they must have made more progress on the margin number and reduced operating expenses.
As an idea of possible outcomes if you assume a gross margin of 46% instead of 44% and Op Ex of 76m instead of 83m you are back to 20m. Both could be possible. Due to the YUME acquisition I've always said the Op Ex number i had could be quite a way out. Equally margin could be up to 47% and Op Ex at 77.5m.
Either route would give an operating profit of c5m from which exceptionals would then come off. 'Normal' exceptionals I would expect c4-5m but you never know what they may throw in!
Turning to cash I amended the working capital requirement to 10m as 1GW was quite right, last October they split out the working capital element to 7m (on 114m revenue so i scaled it up for this year's revenue). Still got 5m cap ex and 3m cash exceptionals (i expect any other exceptionals they throw in to be non-cash). All of this would mean cash ending maybe 2m above the year end level at 29m.
It's then very difficult to run through to FY19 but if you simply run through the H1 assumptions in to H2 I would get the following headlines:
Revenue 385m (downtuned revenue based on H1 being short)
Operating profit 22m (deduct your own choice of exceptionals to get PBT)
Adj EBITDA 54m
Cash 74m (before acquisitions or buy back!!)
Notes out from Whitman Howard and N1 Singer. WH very positive and reaffirm prcie targets etc. N1 reviewing forecasts and TP as H1 revenue short of their 204m and Adj EBITDA short of their 23.5m. They expect FY19 concensus to drop by c10% but still be in high 40m's and so still very cheap on current valuation.
Adj EBITDA at c20m is good to see. I had them around 22m with a PBT of c1-1.5m so at 20m adj EBITDA I think they might post a small loss at PBT unless there are other write offs that will be booked that will distort the picture further.
Revenue is light though. I had expected much nearer to or above 200m. So either volumes are down or pricing has slipped in Q2. I think we need to see the greater detail on metrics that we normally get with the trading updates. We could do with evidence of organic revenue growth as I can't see it at present.
Beyond on track for H1 no real answers today.
Thanks for the posts 1GW.
A reasonable take I think. As a long on R1 I'm still a bit nervous about the H1 FY19 TU/results.
At an industry level the growth is clearly there, no matter what others may say about GDPR etc, digital advertising, programmatic and mobile/video growing strongly. The problem is R1 can't evidence traction on organic revenue growth.
The big numbers aren't clean that would make forecasting your own view of likely outcome easier. With the YUME acquisition key areas of Ops expenses, restructuring costs and cost saving realisation are open to different views and working capital movement difficult to predict if you're not on the inside.
I do think they have largely hit their profit forecast (at Adj EBITDA) over the last couple of years and been very clear in both FY18 results and 1Q TU they are in line this year on profit. I don't see that anything has changed negatively to impact this.
As such I'm expecting a positive update mid October, even if cash reeduces a bit due to seasonal working capital movement. If they can evidence organic growth and cost savings in line with plan then we'll be set for a very good run through to Christmas. Who knows, Stt may even buy some with his TLY profits.
This is worth a read:
I like this bit from the article: ...By next year, half of all digital ad spending could be programmatic, Magna Global notes in a recent report. Brand safety concerns and anxiety over recent data scandals are not having any discernible impact on digital advertising growth, the report says. Programmatic ad spend is forecast to grow to over 57% of digital display ad transactions by 2020, from just over 40% currently.
Wow 1GW, good luck with your 12.36 post. I think you forget Stt won't like a company forecast for 400% growth in FY19 and with free cash flow of 40-50m whether it has either 75m or 27min the bank. He's looking for another company with say 11m of cash, marginal profitability, at an earlier stage in its transformation than R1 and preferably in a heavily political public arena, one which would have to do a placing of shares as no bank in their right mind would lend to it. That would be far safer than R1.