Virtus Advisory Q3 Commentary (IR Firm)Commentary: AcuityAds (TSXV:AT) Announces Q3 2017 Financial Results / Reported 64% Revenue Growth YoY Yesterday afternoon, AcuityAds (TSXV:AT) announced their much anticipated Q3 2017 financial results. Despite having to revise revenue downward earlier this year, the investment community was very pleased to see that the company beat the Street’s revenue expectations. Response thus far has been very positive from the investment community as many are pleased to see that the worst is behind us and the company is poised to grow from here, both organically and through further acquisitions. Before we dig in to the results, we provide some highlights below:
·
Q3’17 revenues of $14.5 million compared to $8.9 million in Q3’16, an increase of 64%. Total revenue for the first nine months of 2017 of $43.3 million compared to $21.1 million in the same period in 2016, an increase of 106%.
·
Self Serve revenue of $4.5 million in Q3’17 compared to $3.5 million in Q3’16. Self-Serve revenue for the nine months ended September 30, 2017 totalled $16.7 million compared to $9.4 million in the same period in 2016.
· Additionally, the company added 22 new self serve partners in Q3’17
·
Q3’17 Adjusted EBITDA of $2.08 million compared to $0.56 million in Q3’16, an increase of 271%. Adjusted EBITDA for the nine months ended September 30, 2017 of $2.9 million compared to $0.67 million the year prior, an increase of 324%.
We adamantly believe that these numbers are further indicative of the fact that Acuity has been oversold following the news of the removal of 17 partners and downward guidance of revenue for 2017. Clearly, the company continues to operate with a concise focus on attracting new revenue and bringing on larger clients that have the potential to spend dramatically on the platform.
Let’s take a look at how some competitors are trading (As at November 7
th, 2017):
| Company Name | Price/Sales (ttm) | P/E (forward) | EV/EBITDA | EV/Sales |
| AcuityAds (TSXV:AT) | 1.04 | N/A | 36.69 | 1.23 |
| The Trade Desk (NASDAQ:AT) | 2.5[1] | 37.91 | 39.63 | 2.45[2] |
| Criteo (NASDAQ:CRTO) | 1.21 | 12.90 | 12.11 | 1.11 |
| Facebook (NASDAQ:FB) | 15.74 | 27.48 | 26.61 | 14.5 |
As you can see from above, Acuity is trading at a relatively cheap multiple compared to some other Adtech/advertising companies. We view the Trade Desk as the most comparable company as they would be considered a direct competitor particularly on the self-service segment of the business. Given Acuity’s roughly ~50% year over year growth in revenue (analysts project ~$60 million in FY’17 revenue) compared to TTD guidance of 50% revenue growth for FY’17 ($303 million) we believe Acuity is trading at an extremely cheap multiple of sales.
Furthermore, as was stated on today’s conference call by CEO Tal Hayek, the company has yet to fully recognize a number of synergies that exist between Visible Measures and Acuity’s Managed Service segment. Upon further integration, we believe the upside that exists between these two organizations will reward shareholders tremendously. As well, the company reiterated that its M&A strategy remains on course with the expectation of completing 1-2 acquisitions annually.
We remind readers that the average one-year price target for AcuityAds (TSXV:AT) is $4.25.
[1] TTD reports revenue on a net basis – P/S and EV/S converted to if they reported on a gross basis as AcuityAds does
[2] TTD reports revenue on a net basis – P/S and EV/S converted to if they reported on a gross basis as AcuityAds does
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