Audioboom, #BOOM

Record performance, 70% off the record high

This is just some thoughts, it isn't investment advice or incitement to buy in any way, just my views - please do your own thorough research. I’m not an analyst, I’m just a private investor looking after my own money. Nothing I do or say is meant as advice or should be taken as such. Here I publish my ideas and research that I have done and discuss the way I invest. Anything written here needs to be verified for its accuracy. Assume any stock I write about I likely own, so my views are biased. Inevitably I will get things wrong, everyone is responsible for their own decision making and what they buy and sell. Subscribing and reading this article means you accept the above and you take full responsibility for your own actions and decisions. Small Cap stocks can be illiquid and very hard to sell at times when demand is weak so caution is required.

Audioboom, BOOM. One-Bagger update.

I highlighted Audioboom in The Bumper Year End Rebel Review

Up over 50% since the start of the year and having doubled nearly my entire holding bought in December, they have already hit my OBIAY (One Bagger In A Year) status in just 3 months but I feel there is potentially lots more to come.

Audioboom are publishers of podcasts and advertising media. This is a fairly easy business to understand, think of it as like a commercial radio station for Gen Z, where the shows are more comedy and discussion rather than music, and on demand, when the listener chooses what rather than when the radio station provides the programmes.

https://audioboom.com/channels/2399216-no-such-thing-as-a-fish

This is also a recovery play and potentially a very exciting one based on the weakness after Covid and some minimum guarantee contracts Audioboom entered into and the fact that advertising and marketing spend is picking up. Here is the 10 year chart showing my favourite bowl formation which excites me even more:

I highlighted this back in December having kept an eye on the stock for a few years and being amazed by its rapid ascent from 2021-2022 where it 10 bagged n 15 months.

Stuart Last is CEO and been with the company for 10 years, Brad Clarke is CFO of 7 years.

In the last trading update, the company beat forecasts after 3 forecast raises in as many months. The company is taking market share and growing fast than the industry, where they are the largest independent play and 4^th largest publisher in the US as ranked by Triton Digital, and 2^nd in the UK.

The business is a tech platform that brings together creators of content. This is fired out to the world via Spotify, Youtube, Apple Podcasts etc, while major advertises buy ad-space, where BOOM make the bulk of their revenue. Revenue growth has been very strong and Audioboom have historically, and still are, growing faster than the industry. With the industry currently projected to grow at 20% p.a. compound, that’s a pretty mouth-water kind of growth potential when Audioboom are outpacing it, it would mean $215m sales by 2030.

Sales were up 13% this year and that was in spite of Apple Podcast player changes which reduced revenues by $15m and affected the whole industry.

The co is expected to do $3.4m adjusted EBITDA after several upgrades in 2024. Stockopedia are forecasting 29c eps for 2024 and 37c eps in 2025.

Over the past two years, Audioboom got into a number of minimum guaranteed revenue contracts with podcasters which they had to achieve and these became an albatross around their neck after Covid, forcing them to pay ‘true-ups”, ie making up the difference between the revenue promised and that achieved. these are now dropping out the system as they come to an end which will mean going forward the EBITDA margins should rise.

Audioboom partners:

So what really excites me about Audioboom? Well firstly, operational gearing – once you have these podcasts up and playing, it costs very little compared to ongoing costs to add an extra listener, often they Arrive by free will, so the larger the business gets the higher the margins should become.

Next is broker sales forecasts – here they are from Stocko:

Broker forecasts are showing expectations of just under 10% sales growth this year but the co itself says it expects to outgrow the market for sales going forward which stands at 22% compound – hence forecasts seem too low.

Next interesting point is that while the changes to Apple IOS 17 cost them $15m in revenues last year, they have said they plan to start distributing video and seem confident that this will start building that revenue number up pretty quickly. This is something most investors are not up to speed on imo and the company is likely to update the market with the year end results imo.

Lastly, this is a recovery play and you can see from recovery plays the past history. Looking at the chart you can see what these have done in the past and how excited investors have become from the potential, and what that did to the share price. This year will see record earnings and sales, yet the shares are trading at 30% of where they once were or 70% off their high to put it another way. To get back to that high they need to rally 300%. That leaves potential for a lot of pretty fast bouncebackability. Many investors that took profits much higher up will likely be more than happy to relive the rally again from lower down, when the company is performing even better imo.

US Market Position

Next on the excitement stakes is the fact these are growing so fast and they are independent. This must leave them as a prime bid target by one of the other top 10 which want to grow scale and margin.

Showcase is their proprietary ad-space software which is doing a lot of the heavy lifting as far as earnings growth goes. This allows advertising and marketing cos to pick and mix the right podcasts and times and use a menu to create their clients’ advertising spend without hardly any in-house work from Audioboom, it’s very much hands off for them and nearly all hands on by the ad and marketing buyers. Very automated it literally matches up supply and demand at scale and very directly to a specific demographic.

This is their highest gross margin sales area, with over 32% gross margins. The company’s other two advertising arms are Premium with a 20% gross Margin and Sonic with 15% where these sides of the business are much more ‘hands on’

Smaller podcasters with low volume audience can pay $130-260 a year to be on the platform.

Broker forecasts: Cavendish, currently have a £13 target price.

Earnings forecast trend:

2024 full year results should be out in mid April along with Q1 2025 results. From the chart above you can see the rapid rise that investor drove with the high demand. This is partly due to the tightly held nature of the shares. There are currently 16.4m shares in circulation compared to 2021 when there was 17m, when they hit heir £22 all time high.

The chairman, Michael Tobin has been a regular buyer of shares all the way up to £18 and back down again, expressing a lot of confidence.

One last bit of spice. Talking on investormeetcompany, the CEO suggested they would likely go for a US listing once revenues were over $100m p.a.. If revenues are $73m this year as forecasts and the beet the market growth rate of 22% in 2025, they would likely hit sales of $100m by 2026.

That’s my bull case for Audioboom. There are negatives like the illiquidity in shares. They could get into overextended minimum guarantees again but you would hope they have learned a lesson and seem to have done. Competition could get tougher but they have been up against some big co’s and outperformed.

Remember though this isn’t a tip, do your own research, you hit the buy and sell button, not me. Only you know your own risk v reward. These are just my musings about what I’ve been buying, what I like and why I’ve bought for interest purposes only.

Further research:

https://www.investormeetcompany.com/companies/audioboom-group-plc

Audioboom podcasts:

https://audioboom.com/podcasts

Rebel

Twitter: @rebelHQ