For submission/discussion, loosely following Saul’s evaluation topics.
How I found it - usng a high growth screen I designed on Fidelity for high growth profitable firms.
What they do - Main product is a mobile app installation & advertising platform called DT Ignite. It’s been around in various forms since the late 00’s, with a spotty history and several acquisitions.
Writeups by trusted people - Fool 6/19
Lukas Wolfgram on SA (no idea if this guy is “trusted”, but it’s about the only public article on SA recently": allows developers to install their apps directly when the end-user activates a new phone. This gives apps immediate exposure with no friction of an install to the end-user. They’ve also developed software to install free apps from a single tap without going through an app store, folders that recommend apps based on what the user has already installed, and improved notifications to drive more engagement with apps after they’re installed.
Poster’s note: this software - DT Ignite - is also called “bloatware”. Carrier-labeled Android (and Kai) phones include it as part of the system software as part of the “price” for the discount you get when you buy the phone. It both pre-installs certain apps for which the developers have paid a fee, and pushes advertising to you as long as you leave it enabled, and if you need to do a factory reset. This is how the software exists on 230 million devices globally. So… this kind of marketing sw I have no particular passion for.
It’s not on iPhones.
Growth / improving metrics:
- Good - 30% revenue growth & beat Q4, 38% last year, 35% last 5 years CAGR
Revs outside US grew 4x YOY in 8/5/19 report
- Ugly: struggled in 16-17. Note 7 recall, content arm failed. CEO latest con call 8/5/19: “We also saw a real stabilization of our big four partners. As you and others are aware, those have been in decline for a while."
- Expecting 31-32m revenue (5% sequential, 30% YOY for quarter) next quarter
Significant operating leverage - incremental revenues in latest quarter resulted in an operating income increase of 51%.
- Trading at <5 P/S (forward 2020)
- Late to the party? Up 4x this year (<1.85 to $7.50)
- Samsung new partnership internationally - expecting 4x country exposure this coming quarter (50 vs 12). Telefonica new carrier relationship (Spain).
- 30m new devices onboarded to platform in last quarter (comparison 33m IPhones sold)
- minus: single-tap install is “outside of their social media partner” and US adoption is not great
- single-tap install is 30-200% greater than appstore type installs (because it’s easier for user)
- No app is >10% of revenues
- They have Pinterest, Twitter and Uber as customers
- Expanding into “deeplinking” apps (install restaurant app instead of pushing user to home page)
Seems to me it all depends on their carrier partners, phone mfrs relationship…
TAM = @$100B mobile ad spend… but what really is TAM in this case? Advertising spend? Mobile phone users?
Competition? There are over 100 mobile advertising platforms listed at https://www.businessofapps.com/ads/cpi/
Ongoing relationships with Samsung and Jio for phones, relationships with carriers like T-Mobile, US Cellular, AT&T, Deutsche Telecom, Vodaphone, SingTel, America Movi, Cloudphone, MTS.
*Average holding period of Android phones is only 2.66 years, yielding recurring revenues
- Samsung (international) partnership in 2018 may double (or more) the installed base.
Gross Margin: Gross profit up 78%; Non-GAAP margin 40% up from 31%
Opex down as % of rev from 30 to 26%
They had some convertible note get retired that cost them some net profit b/c stock went up
Profit Margin? Non-GAAP made .05 vs 01 loss
Generated $4m FCF for the Q, $15m cash increase for year, $0 debt.
$-based Net Retention Rate? Could not determine.
- Stock price crashed from $5+ to <$1 ‘15 to ‘17
- Back in 14 it was Mandalay Digital
- Bought a mobile user platform Appia in 16
- Samsung Note 7 recall hit them hard in 17. Advertisers & Publishers revenue dropped sequentially in ‘17.A&P revenue of $3.6 million declined 19% sequentially and 49% year-over-year stemming from the continuing shift in advertiser budget allocation toward programmatic and RTB systems away from legacy business development deals.
- Dropped its Content business in 2018. Now completely focused on OEMs & Operators, and App Advertising.
My action: I took a small (2%) position this week, but purely based on the recent results and projections for good (not outstanding) growth in the next year. This company is not the next Trade Desk, but if they have finally hit some kind of stride with Ignite and their relationships, because the stock is not wildly overvalued at 4+ P/S it has a decent possibility of still doubling from here. Congratulations to the couple of people on NPI that bought it early this year at <$2, now it’s $7.60.
Hope people find this post useful. I learned something doing it.