Mirriad Advertising — On the cusp of potential widespread adoption

Mirriad Advertising (LN: MIRI)

Last close As at 24/04/2024

4.75

1.25 (26.32%)

Market capitalisation

GBP13m

More on this equity

Research: TMT

Mirriad Advertising — On the cusp of potential widespread adoption

Mirriad Advertising’s H120 numbers show strong top-line progress, up 109% on H119 and 26% ahead of H219. H120 revenues were up over 185% year-on-year in China and Singapore, with market confidence rebuilding. There are very promising new agreements in place with US media owners, with early moves in large adjacent markets, such as music video. There are advanced negotiations ongoing with Tier 1 entertainment platforms. These prospects significantly increase the attraction of Mirriad’s proposition to advertisers. Cash burn is now under £1m per month, with end-August cash of £13.3m (no debt). Market forecasts for FY20–22 are unchanged.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Mirriad Advertising

On the cusp of potential widespread adoption

Media

Spotlight research

11 September 2020

Price

22p

Market cap

£47m

Share price graph

Share details

Code

MIRI

Listing

AIM

Shares in issue

213.1m

Net cash (£m) at end August 2020

13.3

Business description

Mirriad Advertising creates new revenue streams for content producers and distributors by creating new advertising inventory in content. Its patented AI and computer vision technology dynamically inserts products and innovative signage formats after content is produced.

Bull

Significant, global addressable market.

First to market with protected and commercial offering.

Strong pipeline of clients and business.

Bear

Long sales cycles.

Markets nervous of COVID-19 impact.

Profitability not yet in current forecasts.

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

Mirriad Advertising is a research client of Edison Investment Research Limited

Mirriad Advertising’s H120 numbers show strong top-line progress, up 109% on H119 and 26% ahead of H219. H120 revenues were up over 185% year-on-year in China and Singapore, with market confidence rebuilding. There are very promising new agreements in place with US media owners, with early moves in large adjacent markets, such as music video. There are advanced negotiations ongoing with Tier 1 entertainment platforms. These prospects significantly increase the attraction of Mirriad’s proposition to advertisers. Cash burn is now under £1m per month, with end-August cash of £13.3m (no debt). Market forecasts for FY20–22 are unchanged.

Growing customer base

The Tencent partnership (see July Initiation) delivers minimum monthly revenues, giving Mirriad a base from which to develop further commercial interests. It also gives validation through successful execution; over 40 brands ran campaigns in June. The group signed agreements in the US with Condé Nast, Tastemade and Meredith in H120, and has since added Fuse Media. It can now offer brands and agencies substantial online audiences and has already run campaigns for P&G. Management is working to broaden the group’s operations, initiating partnerships with ZigZag Productions and with B-Unique Records. Music video is an interesting opportunity, given artists’ current inability to tour or generate much merchandising income. COVID-19 has stretched the conversion timeline of prospects to contracts. We expect more progress in H220, given the high level of engagement being achieved with global agency groups, brands, platforms and content partners.

Operating loss reducing

With a growing top line and the benefits of last year’s restructuring, as well as some COVID-19 related savings (£0.3m of the £1.8 reduction in administration expenses), the group operating loss reduced from £7.2m in H119 to £4.9m in H220. R&D (fully expensed) was 7% up on H119, at £1.2m. This investment will continue to be crucial to maintain the group’s technological advantage and ensure that the Mirriad content can be seamlessly integrated with client delivery platforms. The group’s cash burn is now less than £1m per month (as previously disclosed). With cash balances of £14.4m at end June and £13.3m by end August, there should be a sufficient runway until at least Q321 before further funding may be needed.

Consensus forecasts unchanged; FY21 acceleration

The FY20 revenue forecast of £2.2m implies £1.3m in H2. This should be possible, given the momentum in interest within the traditional advertising space and newer applications. With growing awareness and adoption, the upward trajectory could be steeper. The recent US OTC listing could generate greater interest in the equity story.

Consensus estimates

Year
end

Revenue
(£m)

EBITDA*
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

12/18

0.4

(11.9)

(14.4)

(13.8)

0.0

N/A

12/19

1.1

(11.5)

(12.2)

(8.1)

0.0

N/A

12/20e

2.2

(11.2)

(11.6)

(5.4)

0.0

N/A

12/21e

6.0

(9.8)

(10.1)

(4.8)

0.0

N/A

Source: Mirriad Advertising accounts, Refinitiv. Note: *Normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Well managed: growing top line, reducing losses

The revenues from China and Singapore currently dominate the group, as shown below, accounting for 85% of total group revenue. Significantly increasing activity in the North American market has yet to translate into recognised revenues. We would expect these to step up in H2 as the newly won clients mentioned above start running their initial campaigns. Revenues from the UK and Europe are also yet to take off, but this again belies the amount of underlying activity.

Exhibit 1: Summary interim results

£'000s

H119

% change

H219

% change

FY19

H120

% change

UK

70

800%

70

117%

140

71

2%

US

27

103%

133

38%

160

62

125%

India

39

0%

(1)

-104%

39

-

-100%

China and Singapore

268

306%

508

252%

776

764

185%

Brazil

25

-25%

-100%

25

-

-100%

Total revenue

429

257%

710

140%

1,140

897

109%

EBITDA

(6,803)

(4,702)

(11,505)

(4,658)

Operating Loss

(7,179)

(4,995)

(12,174)

(4,891)

Source: Mirriad accounts

The group restructuring that took place in H119 significantly reduced the administrative expenses. The largest element of the £1.8m reduction was from staff costs, which reduced £874k against the comparative period. Advantageous exchange movements also gave a boost of £201k. Lower travel and expenses and rent, more COVID-19 related, saved a further £262k. R&D of £1.2m was slightly ahead of prior year (£1.1m) but represents an investment in the future growth potential of the business.

Mirriad had cash of £14.4m as at the end of June and the statement indicates that this had reduced to £13.3m by the end of August, implying a further slowdown in the rate of cash burn. On this trajectory, the group should have no need of additional external funding before Q321 at the earliest.

Clear strategy for growth

Management has articulated its growth strategy with some more granularity. There are three core elements:

1.

Expand partner footprint including Tier 1, drive adoption with advertisers, exploit new sources of content for scale.
The campaign to generate engagement with the relevant industry parties has been (and continues to be) wide-ranging and aims to be exhaustive. Management reports that it has established relationships with all five large agency holding companies, 55% of the 100 largest global advertisers, 80% of the leading global entertainment companies and numerous potential partners across the film and tv, and music businesses. Importantly, Mirriad has indicated that it is in negotiations with six of the seven largest US entertainment platforms, five of which are covered by non-disclosure agreements.

2.

Extend business model to include a direct-to-advertiser/agency marketplace approach.
To become a true part of the advertising ecosystem, Mirriad should offer a programmatic advertising solution, totally integrated. Mirriad is engaging with the key agency groups, with the aim of becoming a line-item within marketing budgets.

3.

Establish Mirriad as the leader in next generation brand and advertising experiences, powered by ground-breaking technology and innovation.
This would include being able to serve embedded advertising content in real time (or so close that the latency is imperceptible). Research commissioned by the group has demonstrated clear improved awareness and higher perceived brand value, particularly where the embedded content reinforces other advertising messages. It is also seen as considerably less intrusive by viewers, who no longer need to select to ‘skip ad’. The avoidance of brand safety/contextuality issues also adds to its attractions. Our July note contains more detail on Mirriad’s target markets and traction.

Mirriad’s technology currently stands at the cusp of more widespread adoption and is demanding attention. If it can move to the next phase and continue to prove its efficacy and scalability, the growth potential is substantial. The current market forecasts are shown below.

Exhibit 2: Market forecasts

FY19

FY20e

FY21e

FY22e

Revenue (£m)

1.1

2.2

6.0

11.0

Adjusted EBITDA (£m)

(11.5)

(11.2)

(9.8)

(6.8)

Adjusted PBT (£m)

(12.2)

(11.6)

(10.1)

(7.1)

Adjusted EPS (p)

(8.1)

(5.4)

(4.8)

(3.3)

Source: Refinitiv

CEO Stephan Beringer discusses the group’s brand and platform relationships, and its commercial prospects, in more detail in the video below.

Exhibit 3: Edison TV exclusive interview with CEO Stephan Beringer

Source: Edison Investment Research

Exhibit 4: Financial summary

£'000s

2017

2018

2019

Year end 31 December

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

874

416

1,140

Cost of Sales

(181)

(144)

(178)

Gross Profit

694

272

961

EBITDA

 

 

(10,359)

(11,931)

(11,505)

Normalised operating profit

 

 

(11,272)

(14,429)

(12,174)

Amortisation of acquired intangibles

0

0

0

Exceptionals

0

0

0

Share-based payments

(1,675)

(176)

(360)

Reported operating profit

(12,947)

(14,605)

(12,534)

Net Interest

1

58

23

Joint ventures & associates (post tax)

0

0

0

Exceptionals

0

0

0

Profit Before Tax (norm)

 

 

(11,271)

(14,371)

(12,151)

Profit Before Tax (reported)

 

 

(12,947)

(14,547)

(12,511)

Reported tax

209

42

56

Profit After Tax (norm)

(11,089)

(14,329)

(12,095)

Profit After Tax (reported)

(12,738)

(14,505)

(12,455)

Minority interests

0

0

0

Discontinued operations

0

0

0

Net income (normalised)

(11,089)

(14,329)

(12,095)

Net income (reported)

(12,738)

(14,505)

(12,455)

Basic average number of shares outstanding (m)

58.0

104.1

150.2

EPS - basic normalised (p)

 

 

(19.11)

(13.76)

(8.05)

EPS - diluted normalised (p)

 

 

(19.11)

(13.76)

(8.05)

EPS - basic reported (p)

 

 

(21.95)

(13.93)

(8.29)

Dividend (p)

0.00

0.00

0.00

Revenue growth (%)

-

(52.4)

174.0

Gross Margin (%)

79.3

65.5

84.4

EBITDA Margin (%)

N/A

N/A

N/A

Normalised Operating Margin

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

2,280

770

1,125

Intangible Assets

1,641

170

0

Tangible Assets

426

414

913

Trade & other receivables

213

186

212

Current Assets

 

 

27,667

16,466

20,193

Stocks

0

0

0

Debtors

1,074

974

1,025

Cash & cash equivalents

26,384

15,204

19,092

Other

209

288

77

Current Liabilities

 

 

(2,055)

(1,659)

(1,322)

Creditors

(2,055)

(1,622)

(1,298)

Tax and social security

0

(37)

(25)

Short term borrowings

0

0

0

Other

0

0

0

Long Term Liabilities

 

 

0

0

0

Long term borrowings

0

0

0

Other long term liabilities

0

0

0

Net Assets

 

 

27,892

15,577

19,996

Minority interests

0

0

0

Shareholders' equity

 

 

27,892

15,577

19,996

CASH FLOW

Op Cash Flow before WC and tax

(10,359)

(11,931)

(11,505)

Working capital

980

(332)

(237)

Exceptional & other

0

0

0

Tax

184

(7)

248

Net operating cash flow

 

 

(9,195)

(12,269)

(11,494)

Capex

(1,309)

(1,016)

(62)

Acquisitions/disposals

3

0

0

Net interest

1

58

23

Equity financing

25,069

1,926

15,290

Dividends

0

0

0

Other

(202)

(169)

(389)

Net Cash Flow

14,367

(11,470)

3,367

Opening net debt/(cash)

 

 

(12,017)

(26,384)

(15,204)

FX

0

0

0

Other non-cash movements

0

290

520

Closing net debt/(cash)

 

 

(26,384)

(15,204)

(19,092)

Source: Company data

General disclaimer and copyright

This report has been commissioned by Mirriad Advertising and prepared and issued by Edison, in consideration of a fee payable by Mirriad Advertising. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Mirriad Advertising

View All

Latest from the TMT sector

View All TMT content

Research: Consumer

Games Workshop Group — Exceptional start to FY21

Games Workshop’s (GAW) Q121 trading update was well ahead of expectations, indicating that the previously flagged strong post-lockdown demand has continued, helped by a major product re-release in the period. We upgrade our FY21e PBT forecast by 37% to £115.9m, reflecting higher revenue growth, c 12% versus 2% previously, and a higher operating margin pre-royalties of c 35% versus 27% previously. On our new forecasts the P/E for FY21 is 35.2x. The EV/sales multiple of 10.6x is a premium to GAW’s previous highest multiple.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free