If the COVID-19 pandemic has been a shot in the arm for anything — home food delivery and social paranoia aside — it is the already booming digital marketing industry, as media engagement and ecommerce transactions have skyrocketed.
The hordes of shoppers that once peered through storefront windows on New York’s Fifth Avenue and London’s Bond Street have been diverted to similarly crowded high streets on social media: Instagram, Facebook and Pinterest. Consequently, since advertising follows the people, marketing budgets have been similarly redirected.
At the core of this rise is the Google-Facebook duopoly, which — according to industry researcher eMarketer — together account for more than 60% of global ad spend.
However, recent years have seen the arrival of a flood of new and innovative technologies in the space, which are causing quite a disruption. In the new “gig economy” we are seeing global brands developing and distributing creative content on local and regional levels through enterprise level software solutions, powered by AI.
DGTL Holdings Inc. (TSXV:DGTL, Forum) launches at an opportune time as the digital media sector booms alongside the new COVID-19 gig-economy and the adoption of AI technology. Unlike the established methods of Facebook and Google, which launched the media revolution, #Hashoff takes things a step further by combining artificial intelligence with the power of social media to provide a turn-key platform for brand content. With flagship services like IAM and Create Marketplace, #Hashoff engages top-ranked content producers to activate hyper localized product marketing campaigns.
We have seen some recent success among publicly traded peers, with more mature growth companies AcuityAds Holdings (TSX:AT) and Mediagrif International Technologies (TSX:MDF). For the quarter ending June 30, 2020, the two companies generated C$19.6 million and C$20.5 million in revenue, respectively, but remain in negative cashflow. These long-standing players in the advertising technology sector, whereas DGTL is beginning its journey of growth through M&A and asset incubation and plans to maintain sustainable margins and drive cashflow positive operations.
DGTL completed its Qualifying Transaction to trade on the TSXV as DGTL with the successful acquisition of its first AI driven SaaS technology company; Hashoff LLC. The prevailing ethos is innovation through the adoption of Artificial Intelligence and Machine Learning technology in the space.
HASHOFF’s customer portfolio includes global brand giants such as ABInBev (NYSE: BUD), Pizza Hut(NYSE: YUM), Dunkin’ Brands (NYSE: DNKN), TJ Maxx (NYSE: TJX), Comcast Universal (NASDAQ: CMC SA), CBS, Lending Tree (NASDAQ: TREE), FanDuel, and The Container Store (NYSE: TCS) among several others.
A startup company with bluechip customer partners bodes well for a C$5.4 million market capitalization, particularly when considering that AcuityAds and IZEA Worldwide (NASDAQ: IZEA) have valuations of C$121 million and $51.0 million, respectively, while operating at a loss. Those two companies have experienced huge market capital growth in the past 60 days, with the new COVID economy inspiring major growth of digital media consumption and ecommerce shopping.
According to an independent Valuation Report, Hashoff’s AI-SaaS technology platform has been valued at between $6.6 million to $7.1 million. Hashoff’s 2019 financials showed approximately $2.5 million in revenue for the previous 9 months of 2019 with about a 60% gross profit margin (all prior to entering the DGTL incubator program).
Terms to acquire 100% Hashoff included $3.9 million in preferred shares at $.47 a share, and $2.6 million in cash payments to be paid over a 36-month period. The first $650,000 was paid on the completion of the deal. These milestones require a significant revenue growth curve and the next milestone is scheduled for June 30, 2021.
|June 30, 2021||December 30, 2021||June 30, 2022||December 30, 2022||June 30, 2023|
|Revenue||$4.16 Mil||$5.2 Mil||$6.24 Mil||$8.32 Mil||$10.4 Mil|
DGTL reported their last quarterly financials in April 2020 with just over $1 million in cash. They closed a private placement for an additional $1.32 million (at $.35 cents a common share) shortly thereafter. DGTL Holdings currently has 25.8 million common shares outstanding (approximately 60% are subject to a three-year escrow release schedule) giving DGTL Holding an enterprise value floating around just $5 million.
The brainchild of an experienced management team, DGTL’s portfolio vision is a strategy of acquiring a basket of commercialized innovators that covers all three of the industry’s growth verticals: content, distribution, and measurement / analytics.
By incubating and capitalising on fully commercialised and high margin software-as-a-service (SaaS) companies, like #Hashoff, DGTL casts a wide net that maximises near-term profitability and sets the stage for long-term growth. The strategy is underscored by a strong balance sheet, which comes off the back their successful financings, a revenue generating assets, and a recently secured C$2.64 million credit facility with Pacific Western Bank. The terms of their credit facility are just 0.83% based on the strength of Hashoff’s current customer base and three-year revenue growth projections.
DGTL announced on August 18th that it had built out its sales and account management departments with the addition of several key figures. Most notably, Joel Wright was appointed as Interim-CEO of #Hashoff and Strategic Advisor to DGTL. With 15 years of experience, Joel previously managed the North American Digital Media Sales department at Travelocity and a former Senior Digital Media Sales Executive at Yahoo!
Charlie Thomas was also appointed as Chief Strategy Officer of #Hashoff — another former executive at Yahoo! having previously acted as Vice President of Regional Sales. In addition to a strong leadership team, DGTL’s acquisition of #Hashoff nets the company access to a broad client base of global brands, including; AB-Inbev, Dunkin Brands, Pizza Hut, Nestlé, TJ Maxx, Dunkin’ Brands, Syneos Health and Danone.
Joel and Charlie join proven senior executive team led by CEO Mike Racic. Racic leads with +20 years in digital media and adtech management, with notable appointments as the former SVP, Director of Partnerships and Category Strategy at RocketFuel and EVP of head of global planning and strategy roles with UMand J3, etc.
DGTL Holdings Inc. began trading on the TSXV on August 4th 2020, as “DGTL”. Right out the gate, with their first small acquisition, they have a strong financial position, expert management a solid capital structure. DGTL’s has a bedrock foundation for significant growth potential through M&A and revenue commercialized SaaS companies recent boom in the digital media and marketing sector.
It’s a strong start for the company, which is continuing to grow in a sector that will only benefit from the adoption of AI. Take into account the disruptive effects of the COVID-19 pandemic — a rapid growth stage in the digital media and Adtech/Martech sector— and DGTL Holdings is perfectly positioned and well structured to capitalize on the future.
Note: Currencies converted from USD to CDN at a 1.3 forex rate