ScotiaBank stays bullish on BBTV

Scotiabank analyst Jeff Fan is staying bullish on BBTV Holdings (BBTV Holdings Stock Quote, Chart, News, Analysts, Financials TSX:BBTV) ahead of the company’s fourth quarter results. The analyst delivered an update to clients on Tuesday where he reiterated his “Sector Outperform” rating and $19.00 target price, which at press time represented a projected one-year return of 50.1 per cent.

Vancouver-based media tech company BBTV announced preliminary Q4 numbers on Tuesday, projecting revenue to represent a more-than-35-per-cent increase year-over-year, a record for the quarter, as well as a gross profit increase of more than ten per cent year-over-year and an adjusted EBITDA which will be breakeven to positive.

BBTV offers end-to-end management, distribution and monetization services to video content providers and has a multi-channel network on YouTube. As of August 2020, BBTV had the second-most unique monthly viewers among digital platforms with over 600 million viewers globally and over 50 billion minutes of video content.

Launched as a public company this past October, BBTV has been up and down since then. The stock opened at $16.00 on October 28 and is now trading in the $13.00 range.

In the preliminary Q4 corporate update, BBTV Chairperson and CEO Shahrzad Rafati said 2020 was a challenging year in the media tech industry but BBTV still materially grew its customers, views and overall financial results, calling the company’s Q4 results fantastic.

“We are expecting to close the year in an enviable position with a combination of impressive topline revenue growth, and positive steps forward on gross profit. We entered 2021 strong, in a place to successfully execute on our vision, and continue to scale,” said Ms Rafati. “We continue to benefit from our massive global ad inventory, and we’re successfully converting partners from BBTV’s Base Solutions to higher-margin Plus Solutions. We continue to outperform and we have a big year ahead.”

In his update, Fan called the BBTV update a positive, saying the preliminary quarterly results were ahead of his expectations. Revenue quoted at plus-35 per cent year-over-year would beat out his plus-25 per cent estimate and the consensus of plus-19 per cent, while gross profit of plus-ten per cent would yield about $11 million compared to Fan’s estimate of $10 million and the Street’s $9 million. The adjusted EBITDA call for flat to positive compares to Fan’s $0.1 million estimate and the consensus negative $1.5 million.

“Our expectations were previously raised mid-quarter when BBTV announced the stronger than expected October results and today’s announcement once again surpassed those higher expectations, reflecting the ongoing strategy of growing revenue and gross profit through Plus Solutions and seasonal strength,” Fan wrote.

“The pre-announced Q4 numbers imply that gross margin is expected to be stable sequentially in Q4 at approximately 7.3 per cent, which reverses the contraction trend seen in the prior four quarters as BBTV starts to lap the initiatives in 2019/2020,” Fan wrote.

“The company also announced it has extended the due date of its convertible notes by six months to July 1, 2022 from Dec 31, 2021 with no material concessions by BBTV. We believe this gives management additional runway to grow the business ahead of the refinancing,” he said.

For the company’s third quarter 2020, its first delivered as a public company, BBTV posted revenue of $120.7 million, up 31 per cent year-over-year, and an adjusted EBITDA loss of $722,000 compared to positive $39,000 for Q3 2019. The company had an 18-per-cent year-over-year increase in views over the third quarter to 121.2 billion across its various platforms, with the growth in views and improved ad sell through rates contributing to the overall revenue gains for the quarter.

Last week, BBTV reported on its music content business, saying it hit 162 billion views across its music content over the last twelve months ending in September 2020. The company said its September views, at 391 million unique viewers, puts it on par with top platforms like VEVO, which registered 455 million over September.

BBTV related that music streaming is expected to hit $23 billion in 2021 and get to $33 billion by 2025. In 2019, video made up 47 per cent of global music streaming, the majority of which (77 per cent) are going to YouTube.

Rafati said BBTV positions itself as a one-stop suite of solutions for music artists looking to increase views and revenues from their content.

“With the democratization of music distribution, there is more music being released than ever before in recorded music history. As a result, artists are looking for ways to stand out amidst the clutter, and BBTV’s solutions across both video and audio provide them with the tools they need to enhance viewership and revenue,” said Rafati in a January 19 press release.