Virtus Commentary on the QuarterCommentary: MediaValet (TSXV:MVP) Reports Second Quarter Results, Share Consolidation and $3.5m Financing Yesterday morning, MediaValet (TSXV:MVP) reported financials for Q2 2019 as well as significant developments from the capital structure. For those not familiar, MediaValet offers a Digital Asset Management (DAM) platform that allows large enterprise to manage digital assets (pictures, video, creatives) under one platform solution.
The DAM market is expected to grow to over $4b by 2021, creating an opportunity for early entrants such as MediaValet. In our view, the company is now more primed than ever to capitalize on this opportunity and succeed in the capital markets. Historically, the company has been held back in the capital markets due to lack of funding and a complicated capital structure – this has now been resolved. But before digging into the impact of the share consolidation and financing, let’s take a look at the financials. Below we include a table from the company’s Q2 2019 press release highlighting the results:
- Q2’19 Revenue $1.1m compared to $0.7m in Q2’18, an increase of 61%
- Q2’19 ARR of $4.7m compared to $3.5m in Q2’18, an increase of 65%
- Q2’19 Gross margin increased to 86% compared to 76% in Q2’18
- Q2’19 Adjusted EBITDA loss of $0.7m compared to Adjusted EBITDA loss of $1.1m in Q2’18, a decrease of 35%
It is clear based on these results that the company has hit an inflection point in growth and performance. CFO & Chariman Rob Chase, formerly of Absolute Software, and CEO David MacLaren have done an excellent job in ramping up growth as large enterprise continue to engage MediaValet. The company is currently the only one to implement Microsoft Azure as the back-end for it Digital Asset Management platform. This offers a unique competitive advantage as MediaValet is able to customize the solution and quickly scale up
In our view, the company is trading at a deep discount given the several consecutive quarters of growth the company has shown.
At a $0.035 share price, of which the $3.5m financing is being offered at, the stock is trading at approximately 3x 2019 EV/Sales. Relative Canadian SaaS comps with similar revenue base and growth rate are trading in excess of 4x 2019 EV/Sales. Again, given the level of growth the company has now shown on a consistent basis, we believe there is significant upside at this value.
As we mentioned, the company’s share count of over 230m shares outstanding and lack of cash on the balance sheet has presented a challenge for investors to get behind the story. In conjunction with the company’s results, the company announced a financing of $3.5m led by Cormark Securities, of which a
majority of the funds have already been committed, in addition to a share consolidation at a rate of 15:1. This would take the company’s share count post consolidation and financing to ~15.3m shares outstanding.
As the intelligent investors knows – the consolidation is only superficial. However, optically this decision is an important one as the increase in share price and reduction in share count make the story more digestible for new investors. As well, there are many institutional investors who are unable to purchase shares below the $0.10 mark – this has now been rectified as a result of the consolidation. In our view, these restrictions should help improve the liquidity of the stock.
All of this in mind, MediaValet is now one of the most exciting technology companies available to investors on the Canadian markets. It will only be a matter of time before smart money recognizes this and accumulates a large position. We look forward to watching MediaValet continue to exceed expectations and continue to become one of Canada’s fastest growing technology companies.
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