Relative newcomer as a public company BBTV (BBTV Stock Quote, Chart, News, Analysts, Financials TSX:BBTV) has seen its share price cut in half since its debut last fall, but Scotia Capital analyst Jeff Fan is staying bullish on the company and stock after some better than expected results from its latest quarter. In an update to clients on Friday, Fan maintained his “Sector Outperform” rating and $19.00 share price, which at the time of publication represented a projected one-year return of 137.5 per cent.
Vancouver-based media tech company BBTV, which helps creators monetize their video content through an end-to-end management, distribution and monetization platform, delivered first quarter 2021 results on Thursday. The company generated $106.5 million in revenue, a 16-per-cent year-over-year increase, with BBTV saying the increased was driven by increases in Views (up 3.6 per cent) and revenue per one thousand video views (RPMs, up 12 per cent). Gross profit was up 17 per cent to $9.6 million, adjusted EBITDA was a loss of $2.5 million compared to a loss of $2.4 million a year earlier and EPS came in at negative $0.44 per share.
BBTV’s operational highlights over the quarter included the addition of almost 750 million monthly views to its platform through taking on new creators across multiple segments, new content distribution agreements with Roku and Amazon Fire, expansion of its services to India and Thailand and strategic growth and expanded solutions with both Instagram and TikTok. The company ended the quarter with cash and equivalents of $11.3 million.
“Our scale and proven ability to make money for creators around the world continues to attract some of the best partners around,” said Shahrzad Rafati, BBTV Chairperson and CEO, in a press release. “Our new service offerings with TikTok and Instagram creators will help them make more money with us. With investments being made into growing our Plus Solution revenue streams combined with global expansion, we anticipate accelerated growth and expanding margins over the coming quarters. We are just getting started.”
Fan said his take on BBTV’s Q1 results was ‘Neutral,’ with revenue and gross profit beating his estimates and EBITDA coming in-line with his forecast. Fan had $105 million for a topline compared to BBTV’s $106 million, while gross margin of $9.6 million was better than Fan’s $7.7-million estimate.
“Post our model review, our full-year F21 estimates remain intact with revenue of $500 million, gross profit of $40 million, and EBITDA of -$7 million,” Fan wrote.
“While BBTV saw higher-than-expected gross margin in the quarter at nine per cent, management highlighted the beat was driven by a favourable revenue mix of base revenue from certain content partners that are less predictable from quarter to quarter. Management reiterated that the structural margin improvement related to the increase of Plus Solutions expected in late F21 and F22 remains unchanged,” he said.
“BBTV’s valuation remains attractive, trading at 0.4x revenue and 4.8x gross profit,” Fan said.
Fan pointed out that BBTV is making operational changes to help drive margin expansion in 2022 and beyond; for instance, the company is retaining content creators during contract renewals while negotiating higher-margin contracts and simultaneously growing their creator base. At the same time, the company is pursuing alternate revenue streams including video game apps, content management and non-fungible tokens, having launched an NFT division earlier this month.
“Overall on a full-year basis we continue to expect gross margins to be stable to F20 levels at 7.9 per cent with expansion beginning in late 2021 and 2022 due to higher mix of revenue from Plus Solutions and the expiration/renewal of lower-margin contracts from prior years. Management stated on the earnings call the investments in F21 could drive positive EBITDA in F22, which would represent upside to our estimate of -$5 million. We continue to model EBITDA breakeven in F23 and beyond,” Fan said.
In total, Fan is calling for BBTV to generate 2021 revenue of $500 million and an EBITDA loss of $9.2 million and 2022 revenue of $569 million and and EBITDA loss of $6.1 million.
With a current market cap of $164 million, BBTV is currently down 45 per cent year-to-date and the stock is at $7.75 compared to its IPO price of $16.00 in October of last year.
On its new NFT division, BBTV said it plans to launch NFTs with leading content creators worldwide across entertainment, music, sports, esports and gaming verticals, with its first NFT to be with Grammy-winning and multi-platinum music producer Zaytoven.
“BBTV works with some of the world’s most prominent creators and is uniquely positioned to market NFTs through its vast creator network,” said Rafati in a May 6 press release. “The combination of creator economy, crypto movement, and proof of ownership has created a massive monetization ecosystem and we are excited to position BBTV at the centre of it all to take the creator fan engagements to the next level.”
Disclosure: BBTV is an annual sponsor of Cantech Letter and Nick Waddell owns share of the company.