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How a 20-year tech veteran’s restructure could see its value double

November 2, 2020

How a 20-year tech veteran’s restructure could see its value double

Four-fifths of all business revenue growth is expected to come from digital offerings and operations over the next three years, making data absolutely critical to businesses worldwide. Already valued at US$190 billion2 in 2019, the data analytics industry is forecast to grow to a staggering USD274 billion by 2022 alone as marketers, advertisers, researchers and more scramble to better understand their customers’ needs, desires, and behaviours. It’s the continuation of a long-standing trend driven by a global shift towards digital space.

Four-fifths of all business revenue growth is expected to come from digital offerings and operations over the next three years, making data absolutely critical to businesses worldwide. Already valued at US$190 billion2 in 2019, the data analytics industry is forecast to grow to a staggering USD274 billion by 2022 alone as marketers, advertisers, researchers and more scramble to better understand their customers’ needs, desires, and behaviours. It’s the continuation of a long-standing trend driven by a global shift towards digital space.

Since launching in 2000, Australian data analytics company Pureprofile has been witness to much of those changes.

The company’s proprietary technology platform – which enables marketers, researchers and advertisers to better understand their customers – offers a reliable and transparent method for its 600 plus clients to capture and interpret data.

But as the business grew it looked to expand its reach into performance marketing and programmatic advertising shortly after its IPO in 2015, and made a number of acquisitions which left the company with a sizable debt burden, holding its stock price down – closing at 2.3 cents only today, 4 November 2020. Pureprofile has since restructured, returned to profit, and is now recapitalising – with independent research house Research as a Service (RaaS) expecting a valuation of 4.6 cents following the latest entitlements offer.

Join Pureprofile CEO Martin Filz in a live online investor briefing where he’ll discuss the industry tailwinds and the company’s strategic turnaround. Click here to book your spot.

As consumers become increasingly wary of how companies collect and use their data; and major platform providers like Google and Facebook crack down on third-party cookies (with a full ban enforced from 2022), businesses are looking for new ways to collect data without losing their customers’ trust. Pureprofile’s proprietary platform collects declared data – first-party information willingly volunteered by its panels of consumers – with a greater statistical weighting key 25-34, 35-44, and 45-54 year age groups than the actual population.

These consumers are compensated with cash and gift cards for providing the data, all of which is owned and aggregated by Pureprofile and used to provide deeper and more accurate insights to clients. Partnerships with other online providers globally, give the business access to hundreds of millions of consumer profiles across 25 countries, in addition to the more than 2 million it already has in Australia, New Zealand, the United Kingdom and the United States.

 

The more clients using Pureprofile’s self-serve platform, the more data Pureprofile collects and is able to aggregate, allowing for more comprehensive insights. This makes Pureprofile’s offering more attractive to prospective new clients, which in turn creates more data – effectively operating like a flywheel.

In their report, RaaS said Pureprofile’s capacity to provide pre-qualified panels of consumers to clients – with privacy requirements matched for both parties – is a core strength, and the proprietary technology underpinning this “is a highly profitable and growing part” of the company’s revenue stack.

 

“The company ensures the quality of its panel by deploying a rigorous process of identity validation; IP address matching; name, password and profile matching; unique machine/device ID validation; fraud and poor behaviour detection and geo IP detection and de-duping filters,” the report said.

 

The report further added “this enables Pureprofile to comply with evolving global data regulation laws as well as honouring industry codes of practice and meeting global standards. As a result, Pureprofile has attracted a high-quality list of brands, advertising agencies and government agencies and universities as clients.”

 

Repositioning for growth

The value that key decision makers get from this is evidenced by the volume of repeat business Pureprofile enjoys – accounting for roughly 85 per cent of the company’s revenue, RaaS said. This performance has been offset over the past four to five years by earlier acquisitions of media trading company Sparc and performance marketing business Cohort within the first two years following Pureprofile’s ASX debut, the report further added.

Pureprofile became overleveraged as a result of the purchases (resulting in negative equity for investors) and hurting the company’s market performance. Over the past two years the company has refocused on its data analytics and insights platform – divesting from its failed media acquisitions and repaying a debtor financing facility it took on during the 2017-18 fiscal year, replacing it with a new facility from Lucerne Partners’ Lucerne Composite Fund.

A new management team was brought in to oversee the company’s transformation, with Martin Filz taking the reins as CEO in July 2020. Mr Filz has previously served in executive positions with data analytics firms Research Now and Lightspeed, owned by industry leaders Dynata and Kantar respectively.

In the first quarter of the 2020-21 fiscal year, Pureprofile delivered EBITDA of $878,000 – a staggering 61 per cent jump from the previous quarter and a 17 per cent increase on the prior corresponding period. The business’ revenue also grew 19 per cent quarter-on-quarter, while expenses increased only 6 per cent following cost saving initiatives implemented over the past 2 years as part of the company’s restructure.

The final step in the business’ metamorphosis is a recapitalisation plan, to be achieved through a fully underwritten, 8-for-1 entitlements offer priced at 2 cents per share – roughly a 23 per cent discount to its closing price on 4 November.

Pureprofile aims to raise $18.8 million with the Lucerne Composite Fund – Pureprofile’s largest debtor – underwriting $15.3 million of the issue via a debt to equity swap. The fund has also agreed to take up its rights and will be issued with 483.15 million shares at 2 cents per share, and will forgive roughly $7.3 million in debt – as well as provide an ongoing debt facility of $3 million for a three-year term, at an annual interest rate of 8.5%, to be paid quarterly.

With these changes, RaaS base case scenario is for Pureprofile’s price to reach 4.6 cents per share at the conclusion of the capital raise. This was based off a discounted cash flow valuation method – which estimates a company’s value based on projections of its cash flow.

RaaS also looked at the upside and downside cases using the same methodology. The downside case is for Pureprofile’s share price to hit 2.5 cents following the capital raise, while the upside case sees it hit 8.1 cents.

 

“Our upside case assumes a 10-year CAGR in Revenue of 12.2% which, with growing revenues from the higher gross margin self-service platform, translates in a 10 year CAGR in EBITDA of 23.9%,” the report said.

 

“Our downside case derives a 6.8% CAGR in revenues, and 19.4% CAGR in EBITDA, with our forecasts tempered at a lower rate of growth but still in the expectation that management will focus on developing the self-service platform as well as the core data and insights business.” Further quoted from the report.

To read the full report click here, or, to join a special live investor briefing with Pureprofile CEO Martin Filz, click here.

 

 

Reach Markets have been engaged by PPL to help manage their investor communications.As the advisers assisting with the management of their current Rights Issue, Reach Markets may receive fees depending on its uptake.

 

Sources:


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