$TRMR - I recently opened a 5% position (my largest ever opening position)
Investment Thesis:
- Rapid Growth (Q4 2020 - 72%)
- Serverely undervalued to peers
- Rapidly expanding TAM
- Growing Industry (digital ads)
- Potential US Listing
- FCF positive
- Profitable
Thread👇
Investment Thesis:
- Rapid Growth (Q4 2020 - 72%)
- Serverely undervalued to peers
- Rapidly expanding TAM
- Growing Industry (digital ads)
- Potential US Listing
- FCF positive
- Profitable
Thread👇
Digital Ads Overview:
- Auctions occur where "ad space" is available
- When a company has vacant ad space (i.e. their web page), an SSP will help sell that space to advertisers.
Conversely, where a company is looking to buy that ad space, a DSP would help advertisers find it
- Auctions occur where "ad space" is available
- When a company has vacant ad space (i.e. their web page), an SSP will help sell that space to advertisers.
Conversely, where a company is looking to buy that ad space, a DSP would help advertisers find it
Example of how Industry operates:
- $BKNG, has regular viewers on its page.
- The space on the homepage can be sold to advertisers. $BKNG would use an SSP ( $MGNI) to sell this ad space
- Advertisers (such as Hotels) would then use a DSP to buy ad space via auction ( $TTD)
- $BKNG, has regular viewers on its page.
- The space on the homepage can be sold to advertisers. $BKNG would use an SSP ( $MGNI) to sell this ad space
- Advertisers (such as Hotels) would then use a DSP to buy ad space via auction ( $TTD)
Digital adertisers usually operate either a DSP or SSP
-DSP (Demand Side Platform)
Rep buyers of ad space
Ex's: $TTD, $AT.TO
-SSP (Supply Side Platform)
Rep sellers of ad space
Ex's: $MGNI, $PUBM
It is a perceived conflict of interest to operate both a DSP & SSP
-DSP (Demand Side Platform)
Rep buyers of ad space
Ex's: $TTD, $AT.TO
-SSP (Supply Side Platform)
Rep sellers of ad space
Ex's: $MGNI, $PUBM
It is a perceived conflict of interest to operate both a DSP & SSP
$TRMR is unusual in the digital ad space in that it operates both a DSP & SSP.
Telaria (now $MGNI ) tried this but eventually sold its DSP to $TRMR.
Why can $TRMR do it?
1. Not a closed ecosystem. Its SSP works with $TTD, $GOOG, etc
2. Results prove it is working.
Telaria (now $MGNI ) tried this but eventually sold its DSP to $TRMR.
Why can $TRMR do it?
1. Not a closed ecosystem. Its SSP works with $TTD, $GOOG, etc
2. Results prove it is working.
$TRMR has 3 business units:
- Tremor Video (DSP) - Acq from Telaria/Magnite (2017)
- Rhythym One (SSP) - Acq for $176m stock (2019)
- Unruly (SSP - self service) - Acq from NewsCorp (2020) - NewsCorp now owns >6% & $TRMR exclusive rights to CTV
$TRMR specialises in CTV ads
- Tremor Video (DSP) - Acq from Telaria/Magnite (2017)
- Rhythym One (SSP) - Acq for $176m stock (2019)
- Unruly (SSP - self service) - Acq from NewsCorp (2020) - NewsCorp now owns >6% & $TRMR exclusive rights to CTV
$TRMR specialises in CTV ads
$TRMR has an expanding list of A rated clients & is improving YoY.
The attached two slides compare list of clients from Apr 20 to Oct 20 - Notable additions include:
- CBS
- Viacom
- Rakuten
- Samsung
- Unilever
$TRMR also has 3 year exclusive deal with NewsCorp for CTV.
The attached two slides compare list of clients from Apr 20 to Oct 20 - Notable additions include:
- CBS
- Viacom
- Rakuten
- Samsung
- Unilever
$TRMR also has 3 year exclusive deal with NewsCorp for CTV.
Revenue Growth:
$TRMR has not reported 2020 results (however, released a trading update):
Q4 Results:
- Overall Rev Growth: 72%
- CTV growth: 127%
Total 2020 Revenue of $404 - $408m*
*Remember, advertising budgets serverely suffered from March 2020.
$TRMR has not reported 2020 results (however, released a trading update):
Q4 Results:
- Overall Rev Growth: 72%
- CTV growth: 127%
Total 2020 Revenue of $404 - $408m*
*Remember, advertising budgets serverely suffered from March 2020.
CTV ads - Bull Theory:
- Major secular trend "Cord Cutting"
- CTV Ad spend expected to increase from $8.1bn in 2020 to $18.3bn in 2024
- Ad spend cut during 2020 (2021 comps)
Investments I hold:
- $TTD
- $FUBO
- $TRMR
- $CURI
- $ROKU
There will be multiple winners in CTV
- Major secular trend "Cord Cutting"
- CTV Ad spend expected to increase from $8.1bn in 2020 to $18.3bn in 2024
- Ad spend cut during 2020 (2021 comps)
Investments I hold:
- $TTD
- $FUBO
- $TRMR
- $CURI
- $ROKU
There will be multiple winners in CTV
Peer Comparison - Valuations (2020 Revenues):
DSP:
- $TTD - P/S: 50 & P/GP: 64
- $ACUIF - P/S: 14 & P/GP: 29
SSP:
- $MGNI - P/S: 18 & P/GP: 29
- $PUBM - P/S: 16 & P/GP: 23
Combined:
$TRMR - P/S: 2.80 & P/GP: 6.23
$TRMR is serverely undervalued compared with peers
DSP:
- $TTD - P/S: 50 & P/GP: 64
- $ACUIF - P/S: 14 & P/GP: 29
SSP:
- $MGNI - P/S: 18 & P/GP: 29
- $PUBM - P/S: 16 & P/GP: 23
Combined:
$TRMR - P/S: 2.80 & P/GP: 6.23
$TRMR is serverely undervalued compared with peers
Profitability:
- $TTD is clearly in league of its own (although Q4 results have shown FCF potential at scale).
- $TRMR is the only other company that is FCF positive & operating income positive
I believe $TRMR is proving that it is possible to operate a DSP & SSP successfully.
- $TTD is clearly in league of its own (although Q4 results have shown FCF potential at scale).
- $TRMR is the only other company that is FCF positive & operating income positive
I believe $TRMR is proving that it is possible to operate a DSP & SSP successfully.
Estimates for 2021:
An important point to note here is that, this industry was decimated in mid March 2020. Q2 results were terrible for every company.
This will result in easy YoY growth comps for FY21.
- 50% growth rate should be minimum here.
An important point to note here is that, this industry was decimated in mid March 2020. Q2 results were terrible for every company.
This will result in easy YoY growth comps for FY21.
- 50% growth rate should be minimum here.
Balance Sheet:
- $TRMR has a solid balance sheet w/$97m in cash and no debt.
- It has FCF margins of 20% +
- $TRMR buying back shares due to undervaluation
Comparison:
- $MGNI - burning cash & large debt due to SpotX acq
- $MGNI 5X bigger mkt cap ($1.1bn Vs $6.5bn)
- $TRMR has a solid balance sheet w/$97m in cash and no debt.
- It has FCF margins of 20% +
- $TRMR buying back shares due to undervaluation
Comparison:
- $MGNI - burning cash & large debt due to SpotX acq
- $MGNI 5X bigger mkt cap ($1.1bn Vs $6.5bn)
Company Culture - Glassdoor:
- $TRMR ratings are quite poor - not unusual for the amount of M&A ( $MGNI is similar)
- $TRMR PR is really poor & has to improve. Presentation slides are rehashed from period to period
Recent hire of PR firm (Stifel) should improve this
- $TRMR ratings are quite poor - not unusual for the amount of M&A ( $MGNI is similar)
- $TRMR PR is really poor & has to improve. Presentation slides are rehashed from period to period
Recent hire of PR firm (Stifel) should improve this
US Listing Potential:
- US Listing "premium" - CEOs are aware of this.
- Mgmt team: Isreali living in the US
- 5 US offices
- Approx 80% of Rev from US
I aim to find great int'l companies with a view to dual listing in the US. $TRMR is a great candidate for this
- US Listing "premium" - CEOs are aware of this.
- Mgmt team: Isreali living in the US
- 5 US offices
- Approx 80% of Rev from US
I aim to find great int'l companies with a view to dual listing in the US. $TRMR is a great candidate for this
@Melendhar @FinanceFunky interested to hear thoughts
Credit to @Yield_Fanatic for giving me this company and helping me with research!
Credit to @Yield_Fanatic for giving me this company and helping me with research!
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