612 – The Weekend Podcast: 5 Reasons I Bought audioBoom Shares Recently

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612 – The Weekend Podcast: 5 Reasons I Bought audioBoom Shares Recently

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The content of this podcast (or content associated with it) is not intended as investment advice and people featured may hold positions in the companies they talk about. Please do you own research.

5 Reasons I Bought audioBoom Shares Recently
audioBoom 001
audioboom Group (BOOM) is a digital social media audio platform enabling the creation, broadcast and consumption of audio across multiple global media outlets.

audioBoom (BOOM)
Share Price: 2.25p
Market Cap: £14.4m
Shares in Issue: 638m

To listen to the last podcast I conducted with CEO Rob Proctor click here

The Previous 12 Months & The Next 12 Months
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This time last year I published a blog post about audioBOOM, entitled, “5 Reasons Why I believe audioBoom will Boom“. Even though, due to an averaging down strategy, I got out at a small profit, I mistimed my investment. In fact I’d go as far to say, I was a year too early.

This mistiming happened because audioBoom missed their revenue expectations for 2015.  They were expected to achieve around £500,000 but actually achieved £192,000, a big miss.

So I’ve been watching audioBoom results very carefully over the last 12 months and based on conservative estimates, I’m quietly confident they could achieve double their expected revenue in 2015, for 2016 i.e. £1m – that would be a 520% increase on last year’s revenue.

There’s Only One True KPI: Money 
Set Targets 01
There are all types of key performance indicators (KPI’s) that audioBoom have used, to show how much the company has developed over the last 2 years, from registered users, to listens, to channel partners but nothing reflects how well a business is doing, more than money.

I admit, in it’s infancy, due to the lack of revenue, audioBoom preferred to highlight other KPI’s but now they are prioritising revenue generation.

For a company with a market capitalisation of £15m I admit the revenue isn’t huge but its the rate of it’s growth that’s exciting.

Here’s the figures:
money-calculate

2015
1st 6 months (H1): £46,000
2nd 6 months (H2) : £146,000 (317% increase on the first half)
For the 12 months of 2015 (FY): £192,000

2016
1st 6 months (H1): £329,000

This is a 715% increase on H1 2015 and 171% increase on the previous 12 months.

Going Forward
going-forward
In a trading update for quarter 3 of 2016 they stated that, “Q3 revenues exceeded the total revenue generated in H1, reflecting the momentum Audioboom is now enjoying.”

This is where I have to make some assumptions on the figures, based on the information out there.

Revenue for the first 6 months of 2016 were £329,000 and the revenue they’ve generated for the 3 months to 31 August 2016 has exceeded that. If I assume a modest 5% increase, that would equal £345,450.

They also stated, in this update that, “Advance bookings for Q4 and into 2017 show this growth continuing to accelerate”.

So using a conservative estimate lets assume Q4 revenue for 2016 is 10% more than that of Q3, which equals £379,995.

Here are my estimated figures for 2016:

For the 1st 6 months of 2016 (H1): £329,000
For the 2nd 6 months of 2016 (H2) : £725,445
For the 12 months of 2016 (FY): £1,054,445?

They also stated in their Q3 update that, “The Board is, therefore, confident in meeting its revenue expectations for the full year ending on 30 November 2016. The Board is targeting a cash-flow positive position by Q1 2018”

cashflow

So how much revenue would they need to generate, at current cash burn, to be cashflow positive by Q1 2018?

In their interim statement for the six months to 31 May 2016, “Net cash used in operating activities decreased to £2.2m (H1 2015: £2.7m), with cash management remaining a key focus within the business.”

So here’s their net cash used in operating activities:

H1 2015: £2.7m (or £450,000 per month)
H2 2015: £3m (or £500,000 per month)
H1 2016: £2.2m (or £366,666 per month)

Even though they’ve say they’ve reduced their overheads by 28% and Rob stated in my recent podcast with him, that cash burn is down to £265,000 per month, I see this as overly optimistic.

They are expanding aggressively and this needs investment, so I’m going use £400,000 per month, which is still less than the average over the last 18 months.

To be cash positive in Q1 2018 their revenue would have to exceed £1,200,000 (£400,000 x 3) in that quarter. This would mean they’d have to increase revenue by 21%, quarter on quarter, from from the 2016 H1 revenue of £329,000. Quite a tall order but achievable going by previous growth.

In their interim results for 6 months ended 31st May 2016, audioBoom stated:

“The momentum from H1 has continued into H2, which has started well, with the Group securing significant advance bookings for advertising revenue. Fill rates and CPMs (cost per thousand listens that advertisers pay) are expected to improve further in all our major territories and content verticals over the next few months and beyond.

We also have multiple technological upgrades to the Audioboom platform scheduled for H2 2016, which we believe will create increasingly large volumes of monetizable ad impressions.

This progress gives the Board confidence that the Group is on track to meet market expectations for FY 2016, improve revenues and move towards its target of a breakeven position by the end of 2017.”

audioBoom have been criticised previously, for missing estimates and I now hear they are trying to under promise and over deliver, as opposed to the other way round.

So would they make this break even claim, if they didn’t believe this revenue were achievable?

If they managed 21% growth Q on Q for 2018, their full year revenue for that year would be £6.8m.

5 Reasons I Bought audioBoom Shares Recently

profit-loss

On 5th August audioBoom raised £2.55 million by issuing  102,200,000 shares at 2.5p to fund working capital and acceleration of the growth in the business.

If there net cash used averages £400,000 per month, this cash, assuming current levels of revenue, will last them just over 6 months to the start of February.

BUT their revenue is growing, so the more revenue they earn, the less cash they’ll burn. If they achieve the above stated revenue growth, they will not burn through this cash. It will reduce to around £380,000 by the end of 2017 but will grow to around £2.3m at year end, 2018.

They also announced they’re, “currently in discussions with a Chinese fund for a strategic investment of up to US$8 million to be made at not less than 2.5 pence per share.” At the time of writing this, this is above the current share price.

1. The Share Price
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(click to enlarge)

Their current share price (2.25p) is now below the last placing price (2.5p) and below that at which the Chinese investor, is reportedly prepared to invest at (2.5p).

This gives them a market capitalisation of less than £15m. Ok this maybe not cheap on traditional metrics but audioBoom are not a traditional company, in a traditional sector. The technology they are monetising didn’t exist 20 years ago.

2. Revenue
REVENUE GROWTH 001
Revenue is not only based on the amount of listens they get but how effectively they can monetise these listens. Advertising fill rates and CPMs (cost per thousand listens that advertisers pay) are expected to improve as they shift from ‘host read’ or ‘in-read’ advertising sales.

Revenue growth seems to be accelerating, to a point where the board are confident that they will break even by the end of 2017 and be cash flow positive in Q1 2018.

3. Cash Burn
cash-burn-003
audioBoom’s overheads have been an issue but they now seem to be as focussed on reducing these, as they are at growing revenue.

Of the £2.55m they recently raised, £1.2m is intended to be used to build their own audio ad-servers. Using their own ad servers, rather than 3rd party ad servers, could reduce overheads by over £2m per year.

Should they achieve the above revenue forecasts, they will not need to raise anymore money.

4. Global Footprint
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(click to enlarge)

audioBoom describes itself as, “the leading spoken word audio on-demand platform”.

At the moment they work with more than 2,500 active broadcasters, content creators and podcasters around the world ‐ including Cumulus, the BBC, the Telegraph, the Premier League, Associated Press, The Sun, NBC Sports Radio, Undisclosed, Global and Bauer ‐ hosting over 8,500 content channels.

Here are some of the markets they’re involved in:

U.S.
usa-flag
US based users accounted for 70% of listens in the H1 2016 and given its importance, they appointed Thomas Mancusi (formerly of CBS Radio) as US commercial director in April 2016.

In February 2015, they announced that they’ve been selected as one of 11 podcast/spoken word content partners for the new look Google Play application in the US. Audioboom is the only non-US based content partner to be selected by Google Play and its content is available within the updated Google Play app.

In addition to working with Cumulus Media and Westwood One, the US’s second largest radio group, they have recently signed an agreement with the US’s largest digital radio company.

India
indian-flag
In addition to the relationship with Eros International, a leading global company in the Indian film and entertainment industry, announced in January and currently in a process of integration, the Group has signed a distribution agreement with SAAVN, India’s largest music streaming company, and RedFM, India’s largest radio group, are already live on the Audioboom platform.

Central and South America
central-america
A number of influential podcasters and are developing important relationships with the key regional radio stations as they look to move into the digital space. They are also now selling Spanish language adverts through audio.ad in the region. They have also recently signed an advertising and content agreement with Univision, North America’s largest Hispanic broadcaster.

Africa
nigerian-flag
They’ve signed an agreement with mobile content aggregator Cloud Africa. Under this deal the first mobile network operator to roll-out branded audio services using Audioboom will be MTN Group, starting with an initial launch in Nigeria before making the service more widely available across Africa. Revenues from this arrangement will be generated via a mixture of shared earnings from data packages purchased by mobile subscribers to use the service and various advertising and branding opportunities.

U.K.
uk-flag
They have signed Bet on Brazil, an online betting company, and deepened their relationship with News International. They have also recently been granted a full PPL license which will allow Audioboom to work with the UK’s largest commercial TV broadcasters, bringing their most popular shows (such as Coronation Street and Downton Abbey) to podcasting.

Malaysia
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They’ve just signed a deal with Astro, Malaysia’s biggest radio group.

Australia
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Grant Broadcasters, one of Australia’s fastest growing media companies, has recently signed up with Audioboom.

China
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The proposed Chinese investor, mentioned above, is also a broadcast and media company, which will open up the Chinese market for audioBoom.

 

5. The Podcast
podcast-listening
Podcasting is still in it’s infancy.

The podcasting market, in the US alone, is estimated, “to be a $100 million to $150 million industry right now, radio is a $17 billion market.”

According to a report from Edison Research released, 21 percent of Americans (age 12+) will have listened to a podcast in the last month. To put that into perspective, that’s the same number of Americans who use Twitter, while only 13 percent of Americans use Spotify on a monthly basis.

Due to this personalised nature of a podcast, adverts are more effective, “75 percent of podcast listeners take action on a sponsored message.” That’s a huge number.

According to PodcastOne the demographic categories are:

  • Adults 25-44 make up 61% of listeners.
  • 35% of listeners make more than $75k annually, above the U.S. average.
  • 62% have finished at least 4 years of college (higher educated)

As podcast and on demand listening grows, audioBoom are not only building a significant presence in some of the biggest markets in the world, they are also starting to monetize this influence. How many other companies can you name, with this type footprint, in who are valued at under £15m?

Maybe more pertinent a question is: how much would a bigger media company, be prepared to pay, to own the right to the title, “the leader spoken word”?

Post Script:

On 5th August 2016:

In a Tip TV interview Rob, CEO says their H2 revenue was already more than double H1 revenue (H1 revenue was £329,000) and that was at the start of August. Their full year doesn’t end until November 30th, so that means 4 months of revenue.

Their Brokers Liberum have £1.1m estimate for the FY and they’d already done £1.05m according to Rob in the interview.

On 6th October 2016:

This interview, recently recorded with Rob Proctor, at the Vox Markets Momentous events on 6th October 2016, is worth looking at.

Rob points out severals developments happening at audioBoom. Some that stand out to me are:

Revenues: they have a figure of £5.4m for 2017.
Accounts: They will charge small podcasters to open accounts. I assume this is to prevent lots of hobby style podcasters setting up accounts, which take server space and not using them or achieving figures that aren’t monetizable.
Revenue Streams: At their new office in the US, they will also have the ability to record video and so they’ll be able to monetize these on YouTube too.
Target: Even though their ambition is to be a stand alone company, they are working closely with Sony and Vivendi, who like what they do and so could become a takeover target.
The content of this podcast (or content associated with it) is not intended as investment advice and people featured may hold positions in the companies they talk about. Please do you own research.

PLUS

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All companies that appear on these lists are approached by Vox Markets to appear on the podcast.

The Top 10 Most Followed Companies on Vox Markets:

1. Cloudtag (CTAG)
2. 88 Energy (88E)
3. Andalas Energy & Power (ADL)
4. Asiamet Resources (ARS)
5. Tlou Energy (TLOU)
6. Ascent Resources (AST)
7. EVR Holdings (EVRH)
8. African Potash (AFPO)
9. Prospex Oil & Gas (PXOG)
10. Kefi Minerals (KEFI)

To add any of these companies to your Vox Markets watchlist, click on their name and hit the, “Follow” button.

If you have the app, you will then be sent RNS’s to the from screen of your phone whenever a company releases one. To get the app for free see below.

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Please click here to fill in a form and I could be featuring it on tomorrow’s podcast.

 

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How to get company RNS releases sent straight to the front screen of your smartphone, as soon as they release them, for free!

1. Download the Vox Markets app by clicking here (for either iPhone or Android).
2. Search for a company you want to receive the RNS’s from.
3. Click, “Follow” on that company’s page.

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If you find this podcast useful please could you give it a 5 star rating and review on iTunes by clicking here and I’ll return the favour by giving you a mention on the podcast!

LIVE PRICES ARE NOW AVAILABLE ON VOX MARKETS

It cost £9.99 per month, £4.10 goes to the London Stock Exchange, £5.89 goes to charity. Vox Markets receive NO money from this. Click here for more information

If you find this podcast useful please could you give it a 5 star rating and review on iTunes by clicking here and I’ll return the favour by giving you a mention on the podcast!

The content of this podcast (or content associated with it) is not intended as investment advice and people featured may hold positions in the companies they talk about. Please do you own research.
PLUS
Top5_smll

All companies that appear on these lists are approached by Vox Markets to appear on the podcast.

The Top 10 Most Followed Companies on Vox Markets:

1. Cloudtag (CTAG)
2. 88 Energy (88E)
3. Andalas Energy & Power (ADL)
4. Asiamet Resources (ARS)
5. Tlou Energy (TLOU)
6. Ascent Resources (AST)
7. EVR Holdings (EVRH)
8. African Potash (AFPO)
9. Prospex Oil & Gas (PXOG)
10. Kefi Minerals (KEFI)

To add any of these companies to your Vox Markets watchlist, click on their name and hit the, “Follow” button.

If you have the app, you will then be sent an RNS, to the from screen of your phone, whenever a company releases one. To get the app, for free, see below.

Watchlist_smll
Please click here to fill in a form and I could be featuring it on tomorrow’s podcast.

 

Vox App Image
How to get company RNS releases sent straight to the front screen of your smartphone, as soon as they release them, for free!

1. Download the Vox Markets app by clicking here (for either iPhone or Android).
2. Search for a company you want to receive the RNS’s from.
3. Click, “Follow” on that company’s page.

VOX BANNER LOGO 001

If you find this podcast useful please could you give it a 5 star rating and review on iTunes by clicking here and I’ll return the favour by giving you a mention on the podcast!

LIVE PRICES ARE NOW AVAILABLE ON VOX MARKETS

It cost £9.99 per month, £4.10 goes to the London Stock Exchange, £5.89 goes to charity. Vox Markets receive NO money from this. Click here for more information

If you find this podcast useful please could you give it a 5 star rating and review on iTunes by clicking here and I’ll return the favour by giving you a mention on the podcast!

The content of this podcast (or content associated with it) is not intended as investment advice and people featured may hold positions in the companies they talk about. Please do you own research.