Consensus community valuation
Nice little business these guys have built here. They've now gotten rid of all the dead wood and we are left with just the Data & Insights business. Modest debt, easily serviceable given the asset light cash generative nature of the core business, plenty of cash, and growing rapidly. For an advertising exposed business to have grown its topline 22% and PBT ~30% in the last year is very impressive, imo. A $35m market cap with their operating business generating ~$10m in PBT and growing rapidly.
I'm just getting my head around Pureprofile's update today, the headline being the shutting down of Pure.amplify Media in Australia. This follows the shut down of that business in the UK in the previous quarter. Pure.amplify Media is (soon to be was) a digital advertising business, fairly generic and typical of the breed. In the past it has contributed around 10% of the Company's revenue and a similar proportion of EBITDA. It's being wound down because it is currently contributing around 6% of revenue and negative EBITDA.
The half glass full version of that move is it removes a lower quality, fairly generic, non-core part of the overall business and allows management to focus on Data and Insights and the SaaS business. Certainly that's the way they spin it. The glass half empty version is that they're reacting instead of being proactive and making the right move at the wrong time. On balance I don't fault the logic, I just wish they'd made that move at a time Pure.amplify was actually worth something to another party. Now they will not only not receive anything for the business but incur the costs of winding it up. However, if the best time to divest the business was before, the second best time is now. I do give them credit for making the difficult decision and not trying to remediate it or hang on until conditions improve.
Goodwill, customer lists etc. had all been previously written down to zero so apart from the actual costs involved in winding up the business there shouldn't be major impairments in the FY result.
What is left is a higher quality business that is more likely to earn more predictable revenue at potentially higher margins. It also leaves three business units that are all still growing double digits and blended continuing revenue is up 22% vs Q3 FY22. I think visually so here's a picture:
It all looks great (from a continuing business perspective) but what they don't say is both D&I and Platform revenues are both down on the immediately previous quarter. Q3 has tended to be softer in previous years, with Q4 much stronger so hopefully this is the case here.
In light of the travails of Pure.amplify guidance was narrowed to the bottom of their previous disclosures. Revenue is expected to come in at $48m (previously $48-52m) and EBITDA margin at 9% (previously 9-10%). They are a bit of a serial share-based remuneration payer (below EBITDA) and they're not super capital light either so that should all get factored in. Overall I think the thesis still holds but it's getting very close to put up or shut up time. FY24 is shaping as an important year for them.
[Held]
There is a focus on staff engagement, evident in Martins SM’s talk, the latest results and webinar. (Recording is available on PPL website) I have no doubt that staff retention is crucial, hidden costs to business’s are high if staff turnover is also high.
It is difficult to judge culture from the outside but here are a couple of points that may back up managements “talk” about caring for employees.
Recent results slide on employee benefits. I haven’t been in the corporate world for a while, but these look generous to me. There are a couple I would have been happy to have back in my working life. Any comments?
Glassdoor reviews also point to a positive work environment, rating of 4.6 stars with 100% recommendation of CEO and 88% would recommend the company as a good place to work. There were 41 reviews, and the bulk were positive, reviews in the last year rated highly. The one that stood out was a person who felt the environment was too laid back, “come and go as you please”. PPL’s response was that it valued autonomy in its workplace. This is interesting as the biggest complaint I see with most companies on Glassdoor is micromanagement. My takeaway is, not every culture suits everyone. The Glassdoor reviews gave an overall impression that backs managements claim of high employee engagement.
I then moved onto researching the product panellists, ie. reviewers, technically not employees. What stood out to me was the paid surveys by PPL were considered good value in Aust, that is, it is worth completing the surveys for the compensation received.
I thought I’d sign up and see how easy the platform was to use etc. After reading the privacy disclosure I decided against it. It appears you can opt out of cross tracking from other sites, but I was unable to determine how easy that was. The privacy statement was the easiest I have read in simple language, although I reckon most people probably don’t read it.
Interestingly the overseas reviews from panellists were at odds with the Australian experience. Most reviewers said there was not enough surveys/rewards to warrant the time spent and rated the other big companies as better compensation. My take on this is PPL has a historical Australian focus. So does this make it harder to recruit panellists overseas and how does this impact the quality of the data for international customers. Alternatively, once they increase the survey options for overseas, perhaps they attract more participants. There seems to be a large contingent of people tracking these sites and talking about them on social media platforms. It was common to see a company considered the best in one country and insignificant in another.
Lastly the question that emerges to me is how do you reach all demographics? It seems to me the people completing the surveys do so because they need the economic benefit, I’m thinking similar to CSL’s blood collection in the US. Although this is probably an issue for all the companies in the space, not unique to PPL.
On the results call, I don’t think anything new emerged that we hadn’t heard in the SM meeting. Results were ok, Revenue and Ebitda increased, loss after tax (2.2)m
Relatively solid steady growth from Pureprofile.
- Revenue up 31% to $10.6m vs pcp (up 44% to $20.8m half vs 1H 21)
- all divisions had revenue up at least double digit
- EBITDA up 82% to $1.4m vs pcp (up 53% to $2.5m half vs 1H 21)
- Operating cash up 386% to $0.9m vs pcp (up 829% half vs 1H 21)
Two new partnerships were announced in the quarter with theAsianParent being a really crucial future growth driver, in my opinion, being able to tap into a market of highly motivated panelists.
This was the most interesting graphic for me showing a full year of consistent operating cash generation (with low capex requirements) - presumably no more 4Cs though.
They have plenty of volume to churn through at 0.064 and above but when you have a profitable and growing business short-term share price movements (which this experiences a lot of) don't keep you up at night.
The new management have set a very clear aspiration to align their financial metrics to their peers by FY24, which would mean without any revenue growth at all in the second half annual EBITDA would be $16m, which is about 4.3x current market cap. However, if they were to make revenue of $40m this year (they will do better than that) and revenue growth were to slow to 15% over the next two years (they'll probably do better than that), they would be be only 3x current MC. Mr Market is definitely angry at this company for past indiscretions but even he can't hold a grudge forever.
[Held IRL only]