Brave Bison Group (LSE:BBSN) — Interim Results

0:01 Good morning, and welcome to the BRAVE BISON GROUP PLC Interim Results Investor Presentation. Type your question, and press send. Company The may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted to them with published responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Oliver Green, executive chairman. Good morning.

0:29 Good morning, everyone, and thank you for dialing into our investor meet presentation. I'm Ollie Green, chairman of BRAVE BISON GROUP PLC, and I'm joined on the call today by Theo Green, our chief growth officer and Philip Norridge, our CFO.

0:46 Our presentation will last around thirty five minutes, and we'll have some time for questions at the end. We'll be covering everything from our financial results for the first half of the year through to our business model and our long term vision for the company.

1:03 Good morning, everyone. Thank you very much for joining us today. So here is a quick summary of our of our interim results for the six months ending June 2022. We're really pleased to show strong triple digit growth across our main KPIs. Revenue, gross profit, and EBITDA are all significantly up year on year, and it's also worth noting that these results are ahead of the trading update that we issued in July after the period end. You will also notice that our cash is much improved year on year. This is very important to us. It's something we focus on internally, particularly when it comes to cash conversion. And finally, you'll notice that profits are significantly up on a per share basis. Last year, we did complete an acquisition and fundraising, so we are pleased to see further growth on this KPI.

1:56 At the start of this year, we said we wanted to expand expand our board. And in July, we were pleased to welcome Gordon Brough as on as on executive director. Gordon has huge experience working in public companies and acquisitions. He was general counsel of FTSE one hundred Aberdeen asset management for ten years, and more recently, he was general counsel at CQS, the asset management firm with over $20,000,000,000 of assets under management.

2:25 We thought it might be helpful to remind shareholders and prospective investors of our hybrid business model. There are two parts to our business, our digital media network and our digital advertising and technology services. The digital advertising and technology services arm of BRAVE BISON is where we generate fee based income. We work with blue chip clients and large enterprises like Vodafone, New Balance, Panasonic, Mueller, and Pfizer.

2:56 We carry out our services from three business units, each led by a managing director. We call these business units BRAVE BISON Commerce, BRAVE BISON Performance, and BRAVE BISON Social Influencer. BRAVE BISON Commerce is our technology services arm. We design, build, and support ecommerce platforms for large retailers. Our work is typically sold in programs that can last for over twenty four months, and our work is mission critical. Put simply, the platforms that we build and then support allow our clients to facilitate a transaction online and ultimately generate online sales. BRAVE BISON Performance is our digital media buying arm. We buy media on behalf of our clients on platforms like Meta, which own Facebook and Instagram, and Google.

3:48 Our mandate is to drive quality traffic to our clients' websites and apps at the cheapest possible rates. All of our clients and all of our campaigns underpinned by data science and technology, and this is either licensed or it's proprietary. And this means that we're able to prove a return on ad spend and therefore our value to our clients' underlying businesses. BRAVE BISON Social Influencer is our social media arm. We help clients to manage their different social media accounts and support them as they launch on new platforms. We're particularly excited at the growth we're seeing around influencer marketing. This is where we use influencers or creators with large followings and engagement on platforms like TikTok and Instagram to drive brand awareness and sales on behalf of our clients.

4:43 We're going to take you through an influencer case study in a few slides time.

4:50 So as Oli mentioned, the second half of our business is our digital media network. This is where we own and operate a network of over 650 different channels across the major social and digital media platforms. We are in effect a broadcaster, but for the digital age. Instead of publishing our content on radio, TV, or in newspapers, we publish on YouTube, Snapchat, and TikTok. The content that we publish on these channels is typically video content, and it's watched by billions of people every month. Viewers will watch a short advertisement before the video starts, which will earn us and sometimes our partners revenue.

5:36 Most of our channels are focused on entertainment and lifestyle verticals. Some of our best channels are things like celebrity gossip, men's grooming, beauty things, and channels that cover satisfying content, particularly on Snap Discover. But we are also building a strong niche in sports. We now manage channels, particularly on YouTube, for two of the four grand slam tennis tournaments. That's The US Open and the Australian Open, as well as Roger Federer's Labour Cup, which we recently brought into the network, and we are now running their TikTok channel. We're also very strong in golf where we run channels for the PGA Tour, the PGA of America, the Ryder Cup, and the DP World Tour. So a good example of where our network is valuable to advertisers, if you're interested in reaching people that are very interested in golf, we're a fantastic partner for you.

6:36 The last two and a half years have been a period of turnaround over the course of 2020, followed by sustained growth in '20 in 2021 and the first half of twenty twenty two. You can see this clearly in the chart here. In 2019, the group made a small loss, and this was exacerbated in the first half of twenty twenty by the impact of the pandemic. As a management team, we came in during the first half of twenty twenty and carried out a restructure of the business, which led to a shift from an adjusted EBITDA loss of 400,000 in the first half to an adjusted EBITDA profit of 500,000 in the second half. In 2021, we built on this through both organic growth and the acquisition of Greenlight to deliver gross profit growth of 95% and adjusted EBITDA of 1,800,000.

7:27 This trajectory has continued into 2022, which is demonstrated by our interim results, which came out this morning.

7:34 Our gross profit for the half year period has already exceeded twenty twenty one's full year gross profit, and our adjusted EBITDA was 1,600,000, which was an 189% increase on the first half of twenty twenty one.

7:50 There has also been a shift in the ratios between our top line revenue, our gross profit, and our adjusted EBITDA. This is principally driven by the change in our mix of revenues, which you can see on this slide. The acquisition of Greenlight has led to a more even balance between our media network revenues and our services revenue. Typically, the media network has a lower margin on top line revenue as a result of revenue shares with our partners across our network. However, it tends to have a higher margin when looking at adjusted EBITDA over gross profit as it tends to be more scalable for the services revenue stream, which is generally built on a rate card basis. The hybrid model serves to both differentiate us from our competitors and reduce our risk via diversification.

8:38 BRAVE BISON has also had strong cash flows over the course of the last eighteen months. Our gross cash increased by 3,200,000 in 2021, which is driven both by profits and an improved working capital position. In the first half of twenty twenty two, we have seen gross cash drop slightly from £5,900,000 to £5,400,000 However, during this period, we paid out over £1,000,000 in relation to acquisitions, consisting of a payment of $7.50 ks of deferred consideration in relating in relation to the Greenlight acquisition and the payment out in relation to the acquisition of Best Response Media in April 2022.

9:16 There was also a slight unwinding of temporary variations in working capital in the first half where we have received some large upfront payments from clients towards the end of twenty twenty one. However, there was still a small increase in net cash over the period. We anticipate continuing to be highly cash generative from operations, and it is worth noting that BRAVE BISON does have significant tax losses that can be set off against future profits. So there is no significant cash outlay for corporation tax expected in the next few years.

9:49 I've discussed the adjusted EBITDA numbers for 2022, but I also wanted to run through quickly how these reconcile back to the statutory profit before tax and the nature of the adjustments that have been made. The first step here is taking off naught 300,000 of interest, depreciation, and amortization. The majority of this amount is the depreciation of the right of use asset relating to our office lease and interest on the related lease liability, so it is primarily related to property costs. The adjustments between adjusted operating profit and the profit before tax are made up of three key components. Firstly, there were acquisition costs of around 40 k, which relates to the acquisition of BEST RESPONSE MEDIA. We also had restructuring costs of around 60 k, which primarily related to costs associated with setting up a new subsidiary in Bulgaria and transferring contractors over from a third party into that subsidiary.

10:43 And finally, we had amounts relating to share based payments, which are associated with employee share options and long term incentive plans. These items then bring us back to the profit before tax number of just over 1,000,000, which is an increase of almost 500% on same period last year.

11:03 As you can see from these numbers, we have gone into the second half of twenty twenty two with significant momentum. And as a board, we are very comfortable that we will meet or exceed expectations for the current financial year. Whilst we are very conscious of the current global macroeconomic headwinds, we nevertheless expect further growth in the next financial year as advertisers continue to migrate to our differentiated proposition.

11:38 So back in January, we set out for shareholders a six point business plan to grow BRAVE BISON, and we're really pleased to report good progress against these goals. Just as as a as a as a quick reminder, relaunching our trade brand. This is something that completed in June. It was a very important part of building up a strategy to cross sell and upsell between clients. It also served to integrate the number of acquisitions that we made over the last eighteen months. Secondly, growing our digital media network, one of our main points of difference as a diversified digital media company. Good progress here has been made, particularly on platforms Snap and YouTube. Thirdly, our distributed operating model. This is one of the real strategic advantages we have in our business, and Ollie's gonna tell you all about that later on.

12:28 Bolt on acquisitions. These are tactical acquisitions that will increase our footprint in specific markets or specific technologies. We'll talk a little bit more about that going forward, but we were delighted to acquire Best Response Media earlier this year. Fixed costs and a reduction program, something very important post acquisition. We do have significant office footprint, particularly in London, and we're working on an extensive subletting plan as we go forward. Finally, developing our board and our investor relations strategy. We're very pleased to appoint Gordon. We think he's he he he marks a good step forward on this, and we hope there'll be more to come in the future. The single BRAVE BISON brand. So since we joined in 2020, we've been pretty clear that making strategic and accretive acquisitions is part of our plan.

13:22 But rather than operate a WPP style holding company with a number of disparate entities that don't work together, we've been very careful and committed to integrate all of the teams, the processes, the p and l's, and now brands that we've acquired. In June, we launched a new value proposition and website for BRAVE BISON that combines all of our original capabilities with all of the new capabilities that we've acquired over the past twelve months. We're now going to market as a single company, a company built for the new era. And this is going to allow us to go after bigger clients and bigger briefs. And it also means that on an operational level, we will benefit from more cross selling and a single company culture, which is so important.

14:15 Our distributed operating model. One of the biggest things that has changed for us since the beginning of the pandemic is the way in which we work. So I used to be a huge advocate of in office working, but I was forced to change change my tune after the onset of con COVID. The last two years have seen us work incredibly productively from home. The days start a little bit earlier and sometimes finish a little bit later, but the flexibility allows our teams to spend less time commuting and more time with family. Hybrid and remote working hasn't just had a positive impact on productivity. It's had a huge impact on hiring because the talent pool has expanded dramatically. Two years ago, we were only looking for new talent that was based in London or Singapore.

15:05 Now we hire up and down the country as well as overseas. We're developing hubs or teams that work fully remotely or from a shared office space in a number of markets, including Egypt, South Africa, Bulgaria, and Amsterdam. Being able to hire new staff from across The UK and in our hubs means it's often quicker to hire. This means we can ramp up new client engagements more quickly and start billing earlier. Hiring can also be cheaper because the cost of living in our hubs is often much less than in London or Singapore, and so salaries are adjusted accordingly. Hybrid and remote working also means that our workforce is becoming much more diverse. This is good for our culture, and in the long run, it will mean we can work with a more global client base.

16:01 So as previously mentioned, bolt on acquisitions are a really good way for us to gain an immediate foothold in an interesting market. Earlier this year, we made an acquisition. We acquired Best Response Media. This was funded out of cash, and this acquisition was for our BRAVE BISON commerce pillar. And this gave us a strong set of case studies on an Adobe platform called Adobe Magento or Adobe Commerce Cloud. And this is a hugely popular ecommerce platform. Prior to this acquisition, our commerce capabilities were limited to three of the four large enterprise software solutions, SAP, Salesforce, and BigCommerce. We are now in a more competitive position because we are able to offer Adobe as well, And this broader range of technologies will come in handy to our customers both on an implementation level, but also on a consultancy level.

16:57 In addition to giving us credentials on Adobe Commerce, this acquisition gave us a highly capable and highly flexible team based in Mansoura, Egypt, who are very experienced working on Adobe, but have now been upskilled in big commerce technologies as well. We're also delighted to welcome NatWest to our register of clients as well as a number of other tier one clients.

17:23 Now as a modern business built for the next generation, we take our planet, our people, and our community credentials very seriously. BRAVE BISON is a fantastic place to work no matter where you are based. We focus heavily on diversity, inclusion, and belonging, and we provide regular sessions for our teams to learn more. We run apprenticeship programs to give our teams the ability to coach and pass on their skills to people from disadvantaged backgrounds, and we're very flexible with our working policies. Staff of BRAVE BISON can work from anywhere in the world for up to thirty days a year. In addition to our people, we take our environmental footprint very seriously. We try and do what we do best, online advertising, for all for organizations that we feel are making a difference.

18:10 We were delighted to recently sign up the WWF on a multiyear contract in our BRAVE BISON social and influencer division. In addition to this, we take our own carbon footprint very, very seriously, and we measure it rigorously. We also run a tree planting scheme that grows every time we win a new customer.

18:35 So as Oli mentioned before, influencer marketing is something that we're really excited about at the moment, and we see this as being one of the major growth areas over the next five years. Ultimately, influencer marketing works for brands, and it works for the agency. Essentially, the influencer is the creative agency, the marketing agency, the media agency, and the production agency all rolled into one. And we were delighted to sign a major contract this year with Rapid, a multibillion dollar global fintech business. Now Rapid is a payments infrastructure business that recently launched in The UK. Their ecommerce technology allows vendors to reduce the payment fees that they would typically have to pay for an online transaction.

19:25 Rapid asked us to target medium and small sized businesses in The UK as well as the developer community that would typically be involved in the implementation of this kind of payments tool. Now our strategy used influencers, particularly Stephen Butler of Dragon's Den, who you may recognize, to target these customers. We ran this campaign on TikTok as well as Instagram and YouTube with fantastic success. So why was it so successful? So, principally, because Steve is a very well followed, hugely popular commentator on business and entrepreneurship. His endorsement for this product meant a lot to these potential customers, and the reach of his channels allowed us to get our message to enough of them.

20:13 Another program we ran for Rapid involves raising awareness to hack the galaxy, a developer competition where the winner will be sent up into space as part of one of the modern programs. Now this campaign was slightly different. Instead of using a large headline influencer, it used a number of smaller and medium sized names across multiple platforms to generate a similar result. On this slide, you can see our long term vision for BRAVE BISON. On the left hand side, you have a combination of digital advertising and technology services that have a business model that is anchored in fee based income.

20:58 Some of these services we have currently, and some we're looking to build organically or acquire. When we look at acquisitions in this space, we analyze things like who are their clients, what territories do they operate in, what's their management team like, and what is their underlying capability. We're really keen to build out our suite of digital services, and we're excited to consistently evolve our proposition to our clients. On the right hand side, you have a roster of media assets across various social and digital media platforms. Some of these meet media assets we we have now and some we're looking to acquire in the future. The business model for the right hand side of this diagram is currently all programmatic ad revenue. But in the future, we're keen to explore other revenue streams such as subscription and ecommerce.

21:53 What we love about our hybrid business model is that we're creating a flywheel for growth. The two sides of the equation feed each other. Clients buying digital advertising and or technology services from us love the fact that we have our own media network and our own channels. It gives us a point of difference. And often, particularly when we're talking to those clients that are interested in buying social media services from us, they love the fact that we we benefit from our own experiences, And we and they love the fact that we actually manage our own online audiences, and we understand how to grow and and and increase the reach amongst them. I think we're now gonna move on to some questions.

22:45 Fantastic. Thank you very much indeed for your presentation. Just while the team take a few moments to review those questions that have been sent through already, I'd just like to remind you that a recording of the presentation along with a copy of the slides and the published Q and A can be accessed via investor dashboard in the Investor Me company platform. Just before we delve into those live Q and A, we did have one pre submitted question. If I could just read that out, please. You're operating a fast moving industry. How far forward can you plan? Do you have a vision of what the company will look like in ten years' time? So I think ten years is a is a very long time, especially in the the world of digital and the world of of social. I think that we want to remain a modern com company that exists within the the worlds of media marketing technology.

23:35 I think there will always be a a services part to our business, and I think there will always be a a media part to our business. I think the the backbones will be similar, but I'm sure will be a lot bigger. We'll be we'll be working across multiple markets with lots more clients that are spending a a lots more money. So there's a question here about expanding into The States. I think it's certainly something that we've we've we've had to think about in the past, and it's certainly something that a number of our competitors have looked at doing. I think we feel that that that would be quite a large next step. And at the moment, we're very focused on our existing markets, which is principally EMEA, but also we have a presence in APAC. I think taking on the states would be a large step that we would do once we had found the right kind of partner to do that alongside.

24:27 It's not something that we see us jumping on in the in the short term unless an opportunity comes up. There's a question here around the popularity and usage of social media channels and how the channels are in constant flux. Flux. The question is, how do you keep abreast of the market and what challenges and opportunities does this present? I think what's really interesting is that we are seeing an emergence of more and more platforms. If we rewind the clock back maybe four or five years ago, the dominant platforms were, let's say, Facebook, Instagram, maybe a little bit of Twitter, but you've seen the emergence of of TikTok over the last couple of years. Last summer, everyone was talking about a platform called Clubhouse, which was very sort of audio based, and now everyone's talking about a platform called Be Real, which TikTok have actually just launched a sort of similar product around. And so what what's becoming more and more apparent is that every few months, the platforms themselves launch new products, and those and those products are used by audiences in different ways, in different markets, and there are constantly more and more platforms emerging.

25:41 And we think this is a really big opportunity because if you think about the sort of typical marketing team, it's really quite difficult to put together strategies across Twitter, YouTube, Facebook, Instagram, TikTok, b real, clubhouse, Discord. There are so many platforms. They all have different audiences, and they're all used in different ways. And so, actually, a company like ours is very well placed to help brands launch on new platforms and consult around the nuances of the different platforms. So I think that, actually, the the the the fragmentation is a good thing because it means that clients are much more likely to be able to or much more likely to need outsourced support dealing with one or two of the platforms.

26:33 So there's a question here about recessionary periods or sort of weakness in revenues and the cyclicality of of of of marketing spend. I think we we try not to spend too long thinking about this. It's not that we ignore the macro environment. Of course, we we can't get away from it. But the reality is we're doing £30,000,000 of revenue on a sort of pro form a run rate basis. We're still a smallish player in a global market, which means irrespective of whatever the macro says this year, I think there's there's still a good chance of us moving the business business forward. We're at a size where if we successfully pitch and win for a, you know, 750,000 to a million pound a year client, that makes a difference to both our top line and our bottom line. And those clients are gonna be out there irrespective of these of these macro conditions.

27:27 At the moment, we're not we're not hearing from our major clients, UK or global, that spend is coming back. New Balance will spend more money this year than they did last year. Currys will spend more money this year than they did last year, there's still a number of pitch opportunities that we're quite excited about. So it's not something that we are immediately aware of, although we are, of course, watching very closely. But in in in the meantime, when we win clients, we hire new staff. We don't tend to hire new staff ahead of winning new clients unless we think that's a particular particular area of interest. There's a question here which is asking around what opportunities we have to increase operating margin and what our medium term target is. As I mentioned previously, there are I think the opportunities are slightly different over the different half half of the business.

28:17 So on the media network, the key way we have of increasing our operating margin is by growing our audiences. It doesn't take any more staff or any more costs to create a show that is seen by a million people versus 200,000 people. So for instance, this year, we've launched a number of new Snapchat shows. As those gain traction and grow an audience, that operating margin will naturally increase. On the services side, because it is done on the rate curve basis, that does tend to be a you know, that tends to kind of top out at around about 20% margins. Those tend to be the maximum that we would normally see achieved. But, obviously, there are efficiencies that we can find in areas such as overheads. And when looking at things like overheads, I think one of the key opportunities coming up is that we do have a lease event in our London office in November 2023.

29:08 So we will be looking to make savings in the area of property cost at that point. I think there's also an opportunity to increase margin by cross selling because, there is a a a cost of sale when you you win win and onboard a new a new client. And I think that with with one brand and a and a very integrated offering, there are opportunities to increase margin by selling more than one or two or even three services to any one client that comes into our ecosystem. There's a question here about bolt on acquisitions in the near future. Do we do we foresee any? The answer is absolutely yes. We're we're we're quite excited about that. BRAVE BISON has has a has a very strong cash position.

29:56 We have almost no leverage in the business. There are definitely smaller businesses out there that would benefit from being part of an organization that has over a 100 clients who really do struggle to pitch because they don't have enough resource or it's it's a massive undertaking already servicing existing customers. So we do think there's opportunity for bolt ons, and we do think we're well funded. In terms of what areas, I think it's very important to to look at some of the some of the new capabilities coming up. So one of the things we talk about a lot internally is this idea of the app economy. There's a huge number of new digitally focused digitally only focused businesses who deliver 100% of their revenue through an app, and that'll be an Android app on the Google Play Store or an iOS app on the Apple App Store.

30:50 Think sort of lifestyle apps, fitness apps, recipe apps, gaming apps, dating apps, anything that delivers a service and charges through the through the in app function. How you drive downloads for an app is a is a totally different marketing sort of theory. It works very differently to traditional marketing, and it's growing very, very quickly, again, despite all of the all of the headwinds out there because a lot of these businesses over the last three or four years have been immensely successful, particularly if you think about the and some of the other sort of very successful app based businesses out there. I think you've covered off pretty much every question that we've had come through. And, course, if there any further questions that do come through, the team will be able to review those, and we'll publish responses where appropriate to do so on the investor me company platform.

31:40 Oliver, perhaps just before redirecting investors to give you a feedback, which I know is particularly important to you and the team, if could just ask you for a few closing comments, please. Thank you. I'd like to say thank you very very much for everyone's attendance, and we look forward to updating you all soon with progress. Fantastic. Thank you, Oliver, Theo, Philip, and thank you indeed for updating investors. Can please ask investors not to close the session? It should be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete, and that's greatly valued by the team and the company. On behalf of the management team of BRAVE BISON GROUP PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you.