Why this will BOOM!!! - Dowgate holding not trading like Q114 Sep 2025 09:28
Audioboom plc (BOOM LN) - Date of First Investment November 2024 - >1000% IRR as at 30 June 2025
Audioboom first entered the nursery in 2024 at 250-300p and went on to deliver a series of profit upgrades that transformed the profitability and future cash generation potential of the company - the shares subsequently rallied strongly to around 600p in Q125 where we took profits as trade war uncertainty grew. Following the market volatility this year, we have now been able to reinvest in Audioboom, but this time as a core holding as;
1) the value on offer was even greater (the profits this year are higher than last year for the same price),
2) the business is now exiting the last of its onerous contracts, unlocking cash generation at the business for the first time in years,
3) M&A activity in the podcast sector has ticked up noticeably, with serial acquirers such as Lemonada paying valuations which are at a large premium to Audioboom's
4) most importantly, our understanding of the real value of Audioboom's business model has grown substantially.
Audioboom's business model is to help podcasters produce their shows and distribute them for monetisation and in this we observe a number of attractive qualities versus a valuation of 0.7x Sales at the point of investment. Most significantly, the end markets are in structural growth with both the volume of listeners growing each year, and also the amount of advertising budget committed to this growing listener count growing at an even faster rate, creating a structural tailwind for revenues for Audioboom. Within these sales, the company has an emboldening competitive advantage to advertisers; it can provide them with the same, if not more, high-quality eyeballs and earlobes for their campaigns and products at a much lower cost than, say, a TV production house or broadcaster and still make a much better margin.
This is because the cost to produce a podcast for an hour is single digit percentages of the cost of making an hour of TV. To exaggerate for effect, it is 3 people in a room with some basic recording equipment versus a series of production sets, high paid actors, camera crews and equipment etc in TV. This is why Audioboom's margins are starting to expand and their unit economics are likely to increase further. They can charge advertisers much less than their competition and deliver the same result, whilst making a higher profit margin.
The fact Audioboom is the 4th largest publisher in the US and the 2nd in the UK and one of the very few that are independently listed makes them stand out as a potential strategic asset for a larger media organisation seeking a 'land grab' in this attractive market. We look forward to the typically busy H2 advertising period around the start of the NFL season and Christmas with interest. Any earnings growth from such busy periods ought to drive upgrades and surplus cash from here given the platform nature of the business.
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