12-month target C$19.00
Highlights
Digital ad spend strength drives 2Q beat. BBTV reported 2Q revenue of C$118.1m, up
~24% yoy and ahead of our estimate of C$110.3m (Street C$110.8m). Base solutions
revenue, which is the core driver of the company’s platform, grew ~21% yoy to C
$108.0m vs our C$101.8m (Street C$103.3m). Plus was exceptionally strong, growing
~65% yoy to C$10.1m vs our C$8.5m (Street at C$7.7m). As BBTV scales up its direct
ads efforts and adds more gaming and content management contracts, we expect Plus
to steadily become a larger part of the story. Adjusted gross profit of C$9.2m beat
our C$8.7m for a margin of 7.8%, down from 9.0% in 1Q. Recall that in 1Q, a better
mix of higher-margin content creators drove margin strength. As gross margin can be
lumpy from quarter to quarter, we focus more on trends over time and expect margin
expansion as Plus mix increases and as lower-margin penetration pricing contracts
expire. Importantly, the leverage in BBTV’s model was on display as the gross profit beat
led to a lower-than-expected EBITDA loss of C$3.4m (we were at -C$4.1m).
Expecting momentum to continue into 2H. Our forecasts are largely unchanged and
call for sequential top-line gains throughout 2021, led by a combination of new viewers
and differentiated content, the introduction of platforms beyond YouTube (Tik Tok,
Instagram), entry into new geographies (recently launched in India and Thailand),
emerging initiatives (non-fungible tokens) and as direct ads sales ramp higher. We
continue to model acceleration in gross profit growth at ~13.7% yoy in 2021, ahead
of gains of 35% and 41% in 2022 and 2023, respectively, helped by Plus upside.
Management maintains its view of being EBITDA profitable in 2022 (we model just over
breakeven).