Q2 Ahead Of Estimates; Good Plus Solutions Growth; Continue At Outperformer
And $15.50 Price Target
Our Conclusion:
We reiterate our Outperformer rating on BBTV and keep our price target of
$15.50 unchanged. Q2/21 headline results were again ahead of
expectations, with a solid uptick in Plus Solutions performance. We continue
to believe that Plus Solutions offers material opportunity for growth in
profitability, as the segment continues to scale.
In our view, the stock remains attractive relative to its material opportunity to
drive profitable growth over the next few years, as the pools of people
producing and consuming the video content continued to grow. We continue
to expect the shares to appreciate materially as the company executes on its
Plus Solutions strategy over the next 12-18 months.
Key Points:
Headline Financials Ahead Of Our Estimates, With Acceleration In Key
Plus Segment: Consolidated Revenues of $118.1MM reflected 24% Y/Y
growth, and was ~6% ahead of the Street at ~$111MM (we were at
~$112MM). The revenue results included highly anticipated evidence of Plus
Solutions growth at +65% Y/Y, and a resurgence of RPM (Revenue Per One
Thousand Views) at +41% Y/Y, partially offset by ~12% lower views. EBITDA
of -$3.4MM also compares favourably to consensus and our expectations at
-$4.0MM.
Targeting Positive EBITDA In FY22: Management is increasingly focused
on profitability, and expects to become EBITDA positive in FY22, by driving
both revenue growth and operational efficiency. While the key element of our
thesis remains the success in Plus Solutions, the business with materially
better economics, Base Solutions still represents the main engine for
company’s profitability and a talent feeder for Plus Solutions. We expect the
company to continue its focus on key creators, who drive the majority of
Base Revenue and also unlock the Plus opportunities, while the contract
renewal process should drive gross profit in H2/21 and into FY22.
Management also anticipates an improvement in operation leverage into
FY22 driven by scalability characteristics of the tech platform and overall
efficiency.
No Changes To Our Price Target Of $15.50: We have updated our model
to capture the Q2/21 beat and improved Plus Solutions trajectory into FY22,
with a slight offset in Base Revenue. The changes have not materially altered
our NAV model.