Mediavalet to reaccelerate in 2022, says Eight Capital

Christian Sgro of Eight Capital continues to be mindful of Mediavalet (Mediavalet Stock Quote, Chart, News, Analysts, Financials TSXV:MVP), maintaining a “Buy” rating and target price of $3.50/share for a projected return of 35 per cent in an update to clients on Tuesday.

Founded as VRX Worldwide in 2014 and headquartered in Vancouver, MediaValet is a SaaS provider of digital asset management (DAM) solutions to mid to large enterprises globally. The company offers its Enterprise DAM platform to help create, find, work with, manage and share digital assets; a CreativeSPACES collaboration tool, the core DAM, and other media creation software; and other modules for advanced various intelligence development tools.

Sgro’s updated outlook comes after MediaValet reported its third quarter financial results, headlined by revenue of $2.4 million in the quarter which came in slightly below the projections from Eight Capital and the consensus, both of which were set at $2.5 million. The Q3 revenue represented five per cent sequential growth and a 24 per cent year-over-year improvement, with approximately 94 per cent of the company’s revenue in the quarter coming from recurring SaaS revenue.

MediaValet’s adjusted EBITDA came in at a loss of $2.1 million, in between the Eight Capital projection of a $2 million loss and the consensus estimate of a $2.6 million loss. 

Meanwhile, the company’s gross margin represented a beat at 83.3 per cent compared to the 81.3 per cent projected by Eight Capital, producing a sequential improvement on the 80.5 per cent from the previous quarter, and the 82.2 per cent margin reported in the same quarter of 2020.

The company had a busy quarter from a news perspective, announcing partnerships with Monday.com, a work operating system that offers management tools with a user base around 127,000, and digital experience platform FFW, which houses approximately 500 clients.

MediaValet also secured a pair of new clients, including an unidentified university in South America at $87,000 in the first year of billing, and a $90,000 first-year bill with an American provider of smart home audio solutions, both of which Sgro noted to be toward the higher end of the company’s typical deal sizes.

In addition, MediaValet also became available in the Microsoft Azure marketplace, meaning organizations can completely cover their MediaValet subscription fees with their Azure consumption commitment benefit under their Microsoft Azure Consumption Commitment (MACC) or Commitment to Consume (CtC) agreement.

“Our approach to DAM is quite a bit different than other DAM providers – we focus on the assets themselves – throughout their entire lifecycle. Of course, how and where the final consumable assets are used is extremely important, but we feel the high value assets themselves – first and foremost – need to be protected, preserved, and highly accessible – at scale, at all times, from everywhere – by all approved individuals, teams, departments, suppliers, vendors, and systems, within the ecosystems that make up today’s organizations,” said David MacLaren, Founder and CEO of MediaValet in the company’s November 15 press release.

“Beyond these foundational elements of DAM, we believe the continuity, accessibility and discoverability of assets – in the very near future – has to happen entirely without any human interaction and very little direction. This is our vision, our future,” MacLaren wrote.

The updated quarter results have encouraged Sgro to revise his short-term and long-term financial projections, lowering his fourth quarter projections to $2.5 million in revenue (previously $2.7 million), adjusted EBITDA loss of $2.4 million (previously forecasted as a $1.9 million loss), and $2.1 million in gross profit for a margin of 81.9 per cent compared to the previous estimate of $2.2 million for a margin of 82.1 per cent. 

From an annual perspective, Sgro has lowered his revenue target for 2021 to $9.3 million, though it still yields potential year-over-year growth of 25 per cent, while he has lowered his 2022 projection to $13.1 million for a potential year-over-year increase of 41 per cent.

From a valuation standpoint, Sgro projects the company’s EV/Revenue multiple to drop from the reported 12.2x in 2020 to a projected 9.8x in 2021, followed by another projected drop to 6.9x in 2022.

Meanwhile, Sgro continues to project negative adjusted EBITDA for the company, lowering his 2021 projection to a loss of $8.1 million for a negative margin of 87 per cent, with 2022 now projected to produce a $7.6 million loss and a negative margin of 58 per cent.

Overall, Sgro believes MediaValet is being smart with its overall growth strategy.

“The company is tactically investing in R&D and expanding sales capacity with the view that customer spending will rebound in 2022 with the potential even for pent-up demand,” Sgro said. “We expect new partnerships to widen the top of the funnel, which management noted remains at record levels.”

MediaValet’s share price has dropped ten per cent over the course of 2021, having peaked at $3.20/share on February 16 and bottomed out at $1.82/share on August 17.