Airtasker Limited

ASX:ART

Airtasker Limited

ASX:ART
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$0.340 (+3%)
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#126
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5
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19
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Reports (5) My Report Forum Investors
Forum Topics ART ART Quarterly

Pinned straw:
Goldfish
Added 4 months ago

This is actually surprisingly good

I had pretty much written off this business. Last time I took a look, it was growing too slowly, unprofitable, and not really getting traction overseas (UK and USA)

Things have improved.

Now they are cash flow positive. Basically generating cash from the more mature Australian business and investing it in the UK and USA.

Overall, group revenue up over 20% for the quarter (vs PCP). It's even better for the core Airtasker marketplace business (the Oneflare acquisition is not performing as well). Australia is growing quite strongly and generating cash. UK is growing rapidly (from a small base) and USA is growing even more rapidly (but from a tiny base, still very early days).

Current EV is only $125 million (even after a big jump today), which is around 2.5 time revenue. They have cash on hand and basically no debt.

This is a multibagger IF they can maintain the trend of the last few quarters. It's a big IF, but the signs are there

Definitely worth a look IMO
Goldfish
Added 4 months ago

I took a bit more of a look overnight, and added a modest amount this morning.

The 2021 IPO is interesting to me. Somehow it was priced at 65c per share. EV was $227 million. EV/revenue (forecast) was 9.3. The business was unprofitable and had revenue of less than $20 million in the financial year prior to IPO. But apparently the "market" regarded this as cheap and the share price more than doubled immediately post-IPO. Incredible

Then the inevitable happened. It turned out that "the market" was a bit too enthusiastic (who would have thought) and the share price was eviscerated, all the way down to below 20c in 2023.

At IPO, revenue (most recent FY) was 19.7 million. The business was unprofitable, negative cashflow and pretty much embryonic outside of Australia

Now, revenue is $52.7 million. The core Airtasker marketplaces business is growing at over 20% annually (Oneflare is disappointing, bringing overall growth down to 13%). The Australian business is profitable, throwing off cash even after paying all head office costs. The cash is being reinvested in overseas businesses (mainly UK and USA). The UK in particular is starting to get traction, with revenue (TTM) up 123% to $2.9 million(AU).

At IPO, the business was valued at $227 million (EV). Post IPO it went as high as $400 million. Today it is valued at $147 million

The point is, this is not a bad business. It just got overhyped. Presumably people thought it was going to be the next Amazon or something. That didn't work out

But, perhaps because of the history, the market seems to be overlooking the steady progress that is being made

Nothing particularly spectacular needs to happen for this to be worth much more than the current SP. Just continuation of recent trends. Modest growth in the Australian business, spinning out cash that can be used to fund the overseas businesses. They have no debt, plenty of cash on hand and a clear path forward


17
UlladullaDave
Added 4 months ago

Now, revenue is $52.7 million. The core Airtasker marketplaces business is growing at over 20% annually (Oneflare is disappointing, bringing overall growth down to 13%). The Australian business is profitable, throwing off cash even after paying all head office costs. The cash is being reinvested in overseas businesses (mainly UK and USA). The UK in particular is starting to get traction, with revenue (TTM) up 123% to $2.9 million(AU).

The AU business has $11m in advertising (over 2 years) that has been swapped for a convertible note. That doesn't show up in the OCF/FCF because it's in the financing part of the cf statement. The overseas business has $40m in advertising swapped on with straight equity (IIRC). I am not sure the Australian business is cf+ when that adjustment is factored in. You need to keep in mind at the very least the dilutive effect of all that advertising on the equity and that basically they are financing their marketing budget by issuing equity.

Perhaps as Seven was the seller into the IPO, ART struggles without having a major media company supporting it with advertising which is why the partnerships are key to the business.

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Goldfish
Added 4 months ago

Yes you are correct @UlladullaDave. Definitely need to understand the media partnerships. I have done some digging.

Short version:

I am comfortable with how ART has structured these. Partly it is based on a partnership that ART had with SevenWest media in Australia going back to 2016 (pre-IPO). This was reportedly very successful for both parties. ART are repeating the same successful formula in the UK and the USA. Makes sense

Longer version:

Rather than funding the investment in advertising with debt, ART are funding it with a combition of selling equity (in the overseas businesses only) and convertible notes (mainly). The plan seems to be to buy back the equity and repay the convertible notes, so hopefully limited dilution, although ART has an option in all cases to convert to equity. It seems like a smart way to fund advertising, ensuring alignment of the media partners and minimising dilution.

Here is a summary of all the media partnerships:

  • Channel 4 (UK, June 23)
  • $6.5 million for a 20% start in ART UK.
  • ART to repurchase stake at ART UK revenue x ART revenue multiple at end of 2028 (scrip or cash)
  • oOh!media (AU, June 24)
  • $6 million convertible note
  • 2 years, 5.8% coupon
  • repay in cash or convert to equity at 10% discount
  • ARN (AU, July 24)
  • $5 million convertible note
  • same terms as oOh!media
  • 2 years, 5.8% couple
  • repay in cash or convert to equity at 10% discount
  • iHeart (USA, Sept 24)
  • $7.4 million convertible note
  • 4 years, 5% coupon
  • repay in cash or convert to equity at 20% discount
  • TelevisaUnivision (USA, Sept 24)
  • $7 million for a 17.1% equity stake in ART USA
  • ART to repurchase the shares between 2029 and 2031 at a price based on ART USA's last 12 months revenue x ART revenue multiple
  • Channel 4 follow-on (UK, Nov 24)
  • $7.8 million convertible note
  • 3 years, 5% couple
  • repay in cash or convert to equity at 20% discount
  • Mercurius (USA, Nov 24)
  • $9.2 million convertible note
  • 4 years, 5% coupon
  • repay in cash or convert to equity at 20% discount
  • Sinclair (USA, Nov 24)
  • $9.2 million convertible note
  • same conditions as Mercurius
  • 4 years, 5% couple
  • repay in cash or convert to equity at 20% discount


I believe the idea of all of these partnerships is basically to turbo-charge growth of the businesses to scale and then ease back on advertising.

Seems to be working so far. Importantly, much of the money has still not been spent. So we can reasonably expect the effects to continue over the next year or more.

There is significant insider ownership, including the CEO. These guys are repeating a formula that has worked previously and are heavily incentivised to make it work

13
WINGMAN
Added 4 months ago

Like it @Goldfish

I sold out in the last big uptick and waited until recently to start building a position again - unfortunately only ended up buying about 20% of the position I wanted to IRL due to the liquidity , and not wanting to keep upping my buy bids which has cost me today. I am sure this a common issue to most straw people!

I have viewed it a little differently and always thought it was ticking along OK , I guess giving it more time to play out. Getting comfort along the way that the AUS operations totally covering the expansion plans into US and UK.

It’s easy to get excited seeing the growth numbers today but as you say, from a tiny base.

instead of doing my usual thing and selling for the win today I have actually topped up, liking what I see and that it’s still below my prior sell price around 0.39 which was back in December / Jan this year.

I need to hit buy on Strawman, seem to not keep up pace on strawman with what happens IRL ( again, I might not be the only one) but I aim to mirror the 2.

thanks for the post, hope you have a deeper look. Ince I get home tonight , I want to take a deep look again. When they went next level with the media partnerships I backed away a bit, so need to fully understand the implications for balance sheet etc into the future. The issue for Airtasker will always be the amount of continued spend to acquire users that are not going to stick around for too long. Also, like you say, can the US and UK take hold and speed up.

It’s an interesting one but understand the media partnerships if you’re looking for a longer term position. Without yet taking my closer look at results, I can see this hitting 0.50 cents in the near term as it continues to execute, based of where the price has been over the last 12 months. Usually the price doesn’t move when the release QTR results , so it’s interesting.

11
WINGMAN
Added 4 months ago

Actually was purchased both in SM and IRL - glad I did that ????

3