Adslot Limited (ASX:ADJ) CEO Ian Lowe discusses FY17 results, growth in trading and licensing revenues, and long-term contract with the world’s largest media buyer, GroupM.
Jessica Amir: Hi. I’m Jessica Amir for the Finance News Network. Joining me from Adslot
(ASX:ADJ) is CEO Ian Lowe. Ian, welcome back.
Ian Lowe: Thanks for having me, Jessica.
Jessica Amir: First up, for those that don’t know, Adslot builds technology that facilitates the buying and selling of online advertising. Can you tell us more?
Ian Lowe: We have two basic propositions that we take to market. One is a workflow automation technology, which we sell to media agencies, or large media buyers, and we sell that under a licence fee model. And then we also have a trading technology that we sell to both buyers and sellers of online advertising. And we monetise that through the publishers, or the sellers under a trading fee model, so it’s essentially a clip of the ticket. So we’ve got the two propositions and they operate under slightly different revenue models.
Jessica Amir: The company recently released its FY17 results, which showed strong growth in trading technology revenue. Can you tell us more about what drove that?
Ian Lowe: Trading technology revenues grew 27% in FY17, and that’s the fourth consecutive year of growth in our trading technology revenue stream. Underpinning that was particularly strong growth in licence fees, which grew 45% year on year. And in turn that growth was driven by our large contract with GroupM, which we announced last year. If we took a full-year treatment of the growths extracted from that particular client, then the year on year growth in licence fees would have been closer to 63%. So it certainly was a pleasing result, and our expectation is that we can maintain a similar level of growth.
Jessica Amir: The company’s recently received commitments from agencies about its Automated Guaranteed technology. Can you tell us more about that?
Ian Lowe: First of all, the Automated Guaranteed technology you refer to is the trading fees side of the business, the trading technology I described earlier. So we’ve had a couple of large agency clients that are already using our workflow technology, Symphony, make commitments -- meaningful, ongoing commitments -- to transitioning their trading activity to our Automated Guaranteed technology. And so this is an important milestone for the business, and I think really strong validation of our product vision. And the expectation is that this will start to drive some more meaningful growth in trading fees as we move forward.
And so, further to that, the commitments that we’re talking about, one of those agencies is based in Europe and the other is based here in Australia. And both of these agencies are really committed to an ongoing process of transitioning their current activity, from current state to new state, being the trading technology I’m referring to. And we expect that that’s going to be a really successful program and allow us to develop the blueprint that we can then take into other Symphony agency customers to achieve a similar outcome.
Jessica Amir: So, Ian, you mentioned earlier you’ve got an agreement with GroupM. Can you just tell people at home who GroupM actually are and how that agreement is progressing?
Ian Lowe: Certainly. In a nutshell, GroupM are the world’s largest buyer of advertising. So, it’s a multinational group that’s part of the WPP Group, and they’re represented in almost every country on the planet and have a number of media agencies that plan and buy media on behalf of large advertisers.
In terms of our progress rolling Symphony out for GroupM, since we announced that contract in August of last year, we’ve successfully deployed in three new markets for them, being Austria, Taiwan and Turkey. And there’s an ongoing program of deployments planned across APAC and Europe. And we’re in really good shape, as it relates to the execution of those deployments for GroupM. So, it’s a part of the business that we’re particularly happy about.
Further to the deployments that we’ve already done, there’s another three markets that are in various stages of activation. And there’s a pipeline of additional markets that are being discussed with GroupM beyond that.
Jessica Amir: Last year you raised $18 million for further investment into product development and sales. Can you tell us how that program’s going?
Ian Lowe: The primary objective of the capital raising was really to improve the velocity of our product development. And so, essentially, we set about a program of expanding the product and development team.
The productivity that we’re seeing come out of that additional investment is probably even beyond what we anticipated. So, with a twofold increase in the investment in that team, we’re seeing a three to fourfold improvement in the output of the team. It means we’re in a better position than we’ve ever been before.
We also have invested more modestly in sales and marketing activity, principally bolstering our sales presence in the US, which is obviously a particularly large market, and supporting that activity and also our sales efforts in all markets.
It just means that we’re in the best position in terms of the output on the product side, and the sales and marketing effort to take advantage of the market opportunity, which is very significant.
Jessica Amir: Last question now, Ian. Can you tell us about the outlook for FY18?
Ian Lowe: So, we anticipate continued revenue growth in trading technologies for FY18. That’ll be contributed to by both licence fees, where we have good line of sight into forward revenues... They’re predictable recurring revenues and we have contracted growth, in that revenue stream. But we also anticipate trading fees emerging to make a much more significant contribution to trading technology revenues over the coming quarters. We’re very excited about that and I think importantly that revenue growth, the substance of that will be realised in profit performance now that costs are very stable.
Jessica Amir: Well, Ian Lowe, thank you so much for the update.
Ian Lowe: Thanks for having me.
Ends
