NetworkNewsWire
Editorial Coverage: Eight years ago, Hubspot’s Platform
Ecosystem VP Scott Brinker introduced Martech’s Law, a now-famous
thesis that technology changes at an exponential pace, while
organizations change at a logarithmic rate (https://nnw.fm/ALrg5). By definition, the gap between
technological advances and business implementation gets wider all
the time, creating a conundrum for management that requires quick
decision making to keep up with tech. For its part, the coronavirus
pandemic tightened the gap by forcing the hands of businesses to
rapidly adopt new digital solutions to reach consumers, a
cataclysmic event that resulted in explosive growth for
DGTL Holdings Inc. (TSX.V: DGTL) (OTCQB: DGTHF) (Profile), as major international brands came
in search of DGTL’s artificial intelligence-driven marketing
platform. What COVID-19 did to accelerate everyday use of adtech
and martech will not be undone, which benefits an array of
companies in the space, including Digital
Turbine Inc. (NASDAQ: APPS), Viant
Technology Inc. (NASDAQ: DSP), IZEA
Worldwide Inc. (NASDAQ: IZEA) and PubMatic
Inc. (NASDAQ: PUBM).
- An estimated 62% of Americans shop more online post the
backdrop of COVID-19.
- DGTL more than doubling revenues with its Hashoff to
approximately $5 million or more in the first year since
acquisition.
- Company lands Suntory, the third-largest producer of premium
distilled product brands worldwide, as new client.
- DGTL trading at three to four times price-to-earnings ratio,
while sector peers are trading up to 50 times.
Click here to view
the custom infographic of the DGTL Holdings Inc.
editorial.
The New Advertising Paradigm
COVID lockdowns, while unfortunate to say the least, may have
been a blessing in disguise for some companies that were forced
into purposeful choices on spending. This was especially true for
advertising and marketing budgets, as they are the lifeblood to
sales that keep a brand in business. With stimulus money going to
people globally, advertising spend needed to be more targeted than
ever to get into the wallets of consumers, most of which were
sheltering, working and shopping at home.
Brands must transition to digital outreach or face the reality
of business stagnating and dying. In a Bazaarvoice
survey of more than 5,000 consumers across different countries,
49% said that they shop more online now than pre-COVID, including
62% of Americans, 59% in Canada and 70% in Mexico. To that point, a
Criteo study
showed that 70% of businesses surveyed agreed that their company’s
marketing function became more important during the pandemic for
reasons spanning the full customer journey spectrum.
Quick to respond to the burgeoning opportunity, DGTL
Holdings Inc. (TSX.V: DGTL) (OTCQB: DGTHF) is building
a portfolio of B2B enterprise Software-as-a-Service (SaaS) in the
digital media, martech, ecommere and adtech sectors. The company’s
first acquisition, Hashoff, put the company squarely in the
forefront of influencer marketing, a practice where people with
large social media followings or “experts” in certain niches are
hired to endorse products to their audience. As noted in an
Influencer
Marketing Hub presentation, 75% of companies are dedicated a
budget to influencer marketing in 2021.
Hashoff uses proprietary technology to give clients unparalleled
access to content creators in the emerging influencer markets that
still only comprised about $9.7 billion of
the overall $572 billion spent on advertising in 2020. The
Hashoff platform is turnkey, using machine learning ("ML") and
artificial intelligence ("AI") to allow client companies to
comprehensively search and identify freelance content creators that
best align to reach the target demographic, albeit at global scale
or a highly refined group, a service dubbed CaaS
(content-as-a-service). In addition to its self-serve SaaS
platform, DGTL also offers managed services for its customers.
Revenue Growth, Breakeven in Sight
The Hashoff acquisition speaks volumes about the management team
at DGTL and its ability to execute acquisitions and accelerate
growth by nailing KPIs (key performance indicators).
Pre-acquisition by DGTL, Hashoff was generating approximately
$500,000 in quarterly revenue. In the quarter ended August 31, 2020
– the first quarter with Hashoff under the DGTL umbrella – revenue
increased 83% from the year prior quarter to $1.16 million. During
the subsequent quarter, revenue rose to $1.25 million. DGTL’s Q3
financial numbers show a similar growth
curve, with quarterly revenue growth reaching 68% and FYTD
revenue growth reaching 71%.
Even with a conservative estimate of no quarter-over-quarter
growth, revenue at Hashoff would extrapolate to approximately $5
million in the first 12 months being owned by DGTL, a massive
improvement from the acquisition date.
Furthermore, DGTL is funding an aggressive revenue growth plan
in which Hashoff must reach a
milestone of $8 million in ARR in order to receive 100% of the
value of cash and shares on transaction and is now streamlining
operations to reach cash flow breakeven within the calendar year,
meaning their first acquisition would be self-sustaining without
any fundraising necessary for operations.
Name Brands Like a Blue Chip
Doubling revenue and achieving cash-flow neutrality in only 12
months is an impressive accomplishment for any upstart. Although,
with DGTL management coming from senior executive roles at
companies including Hearst, Yahoo, AOL-Time Warner, RocketFuel,
Facebook, Google, Microsoft, RBC and IPG, meeting KPIs is more of a
mandate than an option in its portfolio model. The performance has
underscored shares of DGTL rising more than 200% since going public
in August 2020, as early investors took notice of the first
enterprise software acquisition.
The Hashoff platform has attracted the biggest names across a
multitude of markets, including its key categories of consumer
packaged goods ("CPG"), health care and retail, which should be
particularly hot as the pandemic fades and economies fully re-open.
DGTL’s news feed speaks loudly to the quality of customers using
Hashoff technology, with more coming aboard constantly. The roster
of large cap clients includes DraftKings, Door Dash, Veritone,
Anheuser Busch-InBev, PepsiCo, Nestle, Post Holdings, Danone and
Keurig-Dr. Pepper, Dunkin Brands, The Container Store, Ulta Beauty,
Pizza Hut, Live Nation, The CW, Scribd, Syneos Health, and
Novartis, to name a few.
More to Come, Yet Just 4x P/S Ratio
On April 26, Japan-based Beam Suntory Holdings ("BSI") added its
name to the list of tier-one Hashoff clients. BSI is the
third-largest producer of premium distilled product brands
worldwide, trailing only Diageo and Pernod Ricard. This new major
account is the owner of iconic global brands, such as Jim Beam, the
number-one selling bourbon brand in the world, as well as Maker's
Mark, Knob Creek and Laphoraig, the top-selling single malt scotch
brand. BSI is seen as the global leader in the top-selling Japanese
whiskey brands, worldwide.
The Suntory service agreement is focused on video-based content,
a new market segment that Hashoff is championing through its access
to more than 150 million influencers.
DGTL anticipates growth within the Suntory Holdings family of
brands and is also currently managing requests for proposals, as
demand continues to increase. That doesn’t appear to be reflected
in the valuation of the young company yet. As management succinctly
details in its
presentation, industry comparables are trading at much higher
multiples, particularly as a measure of enterprise value to revenue
and price-to-sales ratio. Others in the asset class are trading 10
to 15 times and even as high as 50 times on price-to-sales, while
DGTL is currently trading at a significant discount to these peers,
at approximately four times sales.
Vying for Market Share in a New Ad World
The organization change trajectory of Martech’s Law is
undergoing a hockey stick-type of growth as companies effectively
absorbed years’ worth of change in a matter of months at the hands
of COVID-19. Moving to digital technologies was inevitable in the
ever-digitization of the world; the coronavirus simply gave the
trend a shot of adrenaline, and in the new normal of a global
gig-economy, there is no looking back.
Digital Turbine
Inc. (NASDAQ: APPS) simplifies content discovery and delivers
relevant content directly to consumer devices. Digital
Turbine’s on-demand media platform powers frictionless app and
content discovery, user acquisition and engagement, operational
efficiency and monetization opportunities. Adopted by over 40
mobile operators and original equipment manufacturers around the
world, the platform has delivered more than 3 billion app preloads
for ad campaigns. The stock was a real beast in the last year,
rising from a low of $3.48 to as high as $102.56.
Viant Technology
Inc. (NASDAQ: DSP) completed a
successful initial public offering in February, pricing at $25
and jumping ahead to open at $44 per share, as the latest public
entrant to the hot ad tech market. The company, which gets its
ticker from the acronym from “demand-side advertising platform,”
markets its DSP branded Adelphic, which automates managing, buying
and measurement of advertising across multiple channels. The
company call hundreds of Fortune 500 advertisers as customers using
its data and analytics to maximize return by trying to pinpoint and
reach target demographics.
IZEA Worldwide
Inc. (NASDAQ: IZEA) is recognized as a pioneer in influencer
marketing technology, having its roots in the social media adtech
space for more than a decade now. Most recently, IZEA was awarded a new
contract from an unnamed Fortune 10 customer. IZEA couldn’t
name the company due to disclosure rules, but it did say it is a
repeat customer that tripled its budget in the first four months of
2021 compared to the spend for all of 2020. After setting a record
for its best quarter for managed services in Q4, IZEA expects to
top that when it reports Q1 2021.
PubMatic Inc.
(NASDAQ: PUBM) is another new public player in the adtech
space, completing its IPO in December and popping almost
50% on its first day of trading. The 14-year-old sell-side
advertising platform operator priced its IPO at $20, opened at
$25.12 and continued upward to reach $76.96 at the start of March.
Another company that can speak to demand from big brands, PubMatic
calls Verizon and News Corp. clients.
No one could have foreseen COVID-19 or the incredible effect it
would have on the planet. It has touched every part of life. One
other thing that no one, not even the savviest of analysts, saw
coming was the way the virus leveled the playing field in
advertising, with small tech firms emerging as leaders with
enviable client lists and next-generation technology. These
companies are now true growth stocks instead of speculative plays.
It will almost certainly lead to another market activity that
investors like to see — consolidation, as companies look to deepen
their roots through acquisitions.
For more information about DGTL Holdings Inc. (TSX.V: DGTL)
(OTCQB: DGTHF), please visit DGTL Holdings
Inc.
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