Transcription of Finance News Network Interview with Adslot Limited (ASX:ADJ) CEO, Ian Lowe Natalie MacDonald: Hello I’m Natalie MacDonald for the Finance News Network. Joining me now from Adslot Limited
(ASX:ADJ) to discuss the company’s first-half 2016 results is CEO, Ian Lowe. Ian welcome back to FNN.
Ian Lowe: Thanks for having me.
Natalie MacDonald: Ian before we get into your results, can you please firstly give us a brief overview of the business?
Ian Lowe: Adslot is a software company; we build and sell software to the media industry. And the way to think about what our software is doing is it automates, otherwise very manual interaction, between buyers and sellers of media. So we have workflow automation technology that we sell to media buyers. And we have training automation technology that we sell to both buyers and sellers of media. And the business at this stage of its journey is very focused on online advertising. And in particular what’s described as display advertising, which encompasses formats like video advertising, banner advertising and mobile advertising on mobile formats, as well.
Natalie MacDonald: Let’s take a look at your results for the half-year ended 31
st December 2015. What were some of the highlights?
Ian Lowe: Well overwhelmingly, the highlight was the growth in our trading technology revenue stream. So we report this as a discreet segment. Trading technology grew 39 per cent half-on-half, and 65 per cent year-on-year for us. We’ve really been projecting I think for a little while to the market, that that sort of quantum was our expectation. So that was a really pleasing result and overwhelmingly that’s the focus of the business. So I think it’s important that we can point to that sort of growth, with our training technology revenue specifically.
The second highlight was that we also saw strong growth in the volume, or value of demand, that we capture through our Symphony workflow platform. So this is demand that is executed, or media buying that’s executed by the agencies, that use our Symphony platform. And that reached on an annualised basis, nearly $3 billion by December 31. So the pool of demand that we are capturing through our technology and, therefore, our opportunity to grow market share continues to build. So again, that’s a continuation of an established trend.
Then the third highlight really is that in all of that revenue growth, the cost to provide the technology that actually underpins that growth,was flat. So this again points to the economic fundamentals of the Adslot business, where our technology is hosted in the Cloud. The variable cost of sale, if you like, to provide and service the use of that technology is a very modest percentage of revenue, and largely a fixed number. So this points to obviously a bright future, as the revenue for the group continues to build.
Natalie MacDonald: As you mentioned, the trading technology of revenue line was an important performer for the company in the first-half. What was behind the strong growth in this area of the business?
Ian Lowe: Trading technology comprises two different revenue streams for Adslot. The first is licence fees, where we charge a somewhat fixed licence fee to an organisation thatare using our platforms. And the second is trading fees, where we charge a percentage of the dollars that are traded through the technology. The really positive thing is that both the licence fee revenues and the trading fee revenues,grew significantly half-on-half year-on-year. So both of those revenue streams that roll up to create the trading technology segment, are growing.
Within that if we look at the licence fees, that growth was really driven by new deployments, new contracts, new customers. So new business, which demonstrates that the technology is seen as valuable, we are acquiring market share. In the case of trading fees, the growth really was underpinned by existing agency relationships, where we’re driving a greater level of awareness and ultimately, adoption of our trading automation technology. So this is the technology, where we derive a click of the ticket if you like, or a percentage of the spend that’s executed through our platform.
So the somewhat more predictable licence fee revenues are growing, and the somewhat more variable trading fee revenues are growing. And so that’s really healthy for our future, to see both of those sub-segments within trading technology, delivering against the overall growth of the business.
Natalie MacDonald: Can you comment more generally on the online advertising market, how fast is automation occurring, and how is Adslot seeking to differentiate itself from other companies?
Ian Lowe: Just by way of background, the first insight that’s worth sharing is that display advertising, as a component of the overall online advertising market, is now the single largest segment. So its value is somewhere around $66 billion a year and it’s now a larger market than search advertising. So that’s obviously very significant and the implications for the Adslot business are very positive.
The second is that consumers are increasingly looking to engage with online content, and consume that content through mobile devices. So this equally has significant implications for publishers that look to monetise their audiences, through advertising. And likewise the Adslot platform has supported mobile products, mobile ad products being transacted, for some period of time. So we think that that’s the right position for us to be in, as it relates to that consumer trend.
And then to answer your question more specifically, we are seeing a rapid evolution maturation and ultimately increased adoption of trading automation, just generally. So five or six years ago, this was very focused on a small segment in the market that was referred to as real time bidding. That’s now expanding through technology such as Adslot, to encompass all forms of online display advertising. And over the longer term, we expect to see this expand into media other than online media, so TV, press, print, radio etc. So that inevitable march to automation that the industry’s commenced, we see that continuing and accelerating in the coming quarters and years.
Natalie MacDonald: Last question then Ian. What is Adslot hoping to achieve in the second half of the financial Year?
Ian Lowe:Our expectation is for continued growth in trading technology revenues. And we expect to see that growth come from corresponding growth, in both licence fee revenues and trading fee revenues, in both of those areas. The second is that the demand that we capture through our Symphony platform, that will continue to build. That number will grow beyond $3 billion. And then I guess, the third thing is that the cost base associated with the provision and the maintenance of that technology, the variable cost of sale if you like, that will remain flat. So the outlook for the business I think, is really positive on all three accounts.
Natalie MacDonald: Ian Lowe, many thanks for the update.
Ian Lowe: Thank you.
Ends
