System1 Share Discussion Threads

[gsbmba99] 09/11/2018 07:06

W1 - I think I misread your comment. At the AGM Kearon and Hunt said the business line of rating ads before they are televised was going well. I think this is called "Communications". Not to be confused with AdRatings which at the time of AGM was in friends and family mode but has since soft launched.

[gsbmba99] 08/11/2018 20:10

W1 - that's true. But the AGM was on 25 July. Since then, the AdRating service has undergone a soft launch.

[woozle1] 08/11/2018 17:48

gsbmba99,
Maynard Paton said in his blog of the AGM that Adrating was experiencing teething probs and that is was just been trialled by "friends and family".
w1

[gsbmba99] 08/11/2018 13:15

The results presentation has a couple of snippets( ). P. 15 says AdRatings covers "8 core industries" lending more to a broad interpretation of "category". It also says that it covers all UK/US ads over 12 months but AdRatings website says "since May 2017". AdRatings database count is now up to 27k which, I imagine, skews very heavily to the US. What continues to intrigue me is the cost reduction breakthrough they appear to have achieved for the AdRating process itself. From "around £20-30k (more for multi-country studies) over a 3-4 week period" to "£1k per ad when part of a larger study" at the AGM. This usually leads to demand stimulation. Hunt and Kearon both said at the AGM that the ad rating product was doing very well. I thought it might show in the results. Could it be that the radically lower price point is (temporarily) masking underlying "volume" performance?

[tmfmayn] 08/11/2018 12:03

H gsbmba, yes I was surprised at the number of categories, too. I had thought like you that the categories were much broader. I suspect discount s may be available for multiple categories. You wrote that you attended agm. I was there too, and should be there next year.

[gsbmba99] 07/11/2018 22:07

Maynard Paton has written a blog post on the 1H results which is worth reading: There's also a website up for AdRatings. There's rather a lot more "categories" than I had anticipated. I had understood it was £10k/year/region/category. But there are "categories" like "Consumer current account" and "Consumer savings account". Are Santander and Halifax meant to pay £20k for UK access because they are in two "categories"? Or do they pay £10k for the category "Financial"? Not sure.

[modform] 07/11/2018 14:53

Looks like a good recovery stock with the possibility of some future recurring revenue and better revenue visibility

[gsbmba99] 06/11/2018 12:53

Yes and the 30k at 190 this morning might have been the last of Pie Funds Management, NZ whose most recent announcement accidentally revealed they had 30k remaining. It's unclear what Mr. Barden's role with the company is. The announcement says he's a PDMR (person discharging managerial responsibility) but is no more specific. His public persona would suggest he's a portfolio NED but he's not on the board. His most recent position was CEO of Wiggle. It looks like he and Kearon may have intersected at Unilever many years ago or he may have been a previous client at Heinz.

[longshanks] 06/11/2018 11:38

Stefan Barden seems to be clearing up any overhang.Good to see such solid support.

[gsbmba99] 02/11/2018 18:56

Most of this info comes from attending AGM, careful reading of company blogposts and watching some of the videos from company personnel. Some snippets from (house broker) Cannacord ( ): 1) "This is a differentiated subscription product designed to improve advertising efficiency (and save money) for agencies and advertisers. If successful, it could generate material incremental high margin/high visibility profits for SYS1," said Canaccord. 2)"The Canadian broker left its forecasts unchanged for the most part- flat revenues of £27m, and pre-tax profits of £3.4m, but did upgrade its EPS estimates from 17.9p to 19.4p to reflect lower tax rates. It also now assumes a flat dividend for FY19, given projected year-end net cash of £4.3m."

[longshanks] 02/11/2018 12:43

You are so very well informed - I am in awe!Thank you for sharing your research

[gsbmba99] 02/11/2018 10:47

My £2m/yr guess may be on the high side. The running costs of AdRatings will depend on the number of Ads reviewed which depends on annual releases of ads in UK and US. About 23k ads in database but unclear what proportion outside of company's 18/19 fiscal year. The company typically charges £1k for ad testing in advance of an ad launch (when purchased as part of a larger package). So, the actual review of the ads is a very significant investment ("retail" value £23m). They are also importing third party data from Ebiquity (amongst others) that will have an ongoing cost. I imagine we'll get a clue as to how well AdRatings is doing if we see them expand the number of categories or expand the geographic coverage (continental Europe, Asia Pac, LatAm and Africa not covered). I could have sworn I've already seen a reference somewhere in company literature of expansion to 21 categories.

[longshanks] 02/11/2018 10:12

Thanks for that update. Not sure that the costs of running Ad Ratings will be as high as £2m pa - certainly in terms of overhead.All costs to date have been on development of the tool so running costs could/should be much lower.They talk in this statement of it being a scalable service. In this respect I would expect this could become a very profitable SAAS tool should uptake meet expectations.

[gsbmba99] 02/11/2018 08:20

AdRatings has a soft launch on 5 November ( hxxps://pages.system1research.com/s1r-ad-ratings-pilot ). The launch categories appear to be Automotive, Financial, FMCG, Health & Beauty, Tech and Charity (about 10:20 of this interesting video - ). The price for a subscription was said to be £10k/region/category/year. If we assume ongoing running costs of about £2m per year (could be less, depends on the investment into the "historic" ads portion of database), they need each of their 200 clients to buy one region or half of their clients to buy both regions (UK and US) to break even. Let's hope for news of a positive launch.

[woozle1] 02/11/2018 08:10

Sensible to cut the dividend and conserve cash or buy back shares at cheap levels.
w1

[longshanks] 02/11/2018 07:51

Admirably frank and open interim statement.Whilst revenues are clearly under pressure there are lots of positives buried in the detail.They disclose that the final dividend could be cut which would be disappointing although they position this as being that capital could be spent instead on share buybacks.The new Ad Ratings innovation is due to be launched imminently and it seems that much rides on the success or not of this new service.Much to be interested in but I can't see any major rerate in the share price in the short term.

[gsbmba99] 15/10/2018 11:41

On the surface, £1.9m of 1H "underlying" PBT excluding the AdRatings investment would appear to be reasonable in the context of a full year forecast, as near as I can tell, of £3.5m. I suppose the quibble would be that "underlying" PBT increased because expenses declined year on year by more than the decline in gross proft.

[topvest] 22/9/2018 12:46

Yes, good to see. Still watching at the moment though myself.

[markie7] 22/9/2018 09:23

hows that moat coming along?

[woozle1] 22/9/2018 09:11

That is interesting! It's the signal I've been waiting for.
w1

[longshanks] 22/9/2018 08:39

Thanks for your insights. Good to see a chunky PDMR share purchase this week. Looks like some insiders see good prospects ahead.

[gsbmba99] 21/9/2018 17:12

I found a few useful presentations on the web ( ). You can get a good feel for the types of work the company does. The company is presenting to the TMRE conference is Arizona next month with a major financial services brand ( ). I'm guessing they might be presenting together with whoever asked them to do this presentation ( ).

[gsbmba99] 21/9/2018 17:05

I bought a small number of shares here. More in hope than expectation. It looks cheap on a cash-adjusted EPS basis but that assumes they don't burn through the cash and that EPS forecasts are right. EPS expectation doesn't appear to have changed in 9 months so maybe stability but not recovery. Maynard Paton did a good review of AGM and recent trading update in comments to his post ( ). I've found the company blog ( ) to be insightful. I do find the AdRatings concept intriguing. A successful AdRatings business could have significant rerating potential not to mention ancillary business benefits.

[longshanks] 10/7/2018 14:20

I think this may still be a little early for a recovery, but I bought £1k for the Longshanks 2018 portfolio today. I will probably look to buy a few more each month.

[woozle1] 01/6/2018 10:14

I have to admit that it was one of the most interesting and stimulating statements that I have read. Very similar to Tom Kirby, outgoing CEO of Games Workshop, who always entertained with candour and interesting insights into the table top miniature world.

My concern has always been the competitive moat and thought Kiernan's propitiatory methodologies - using techniques from social anthropology (that I read at college) and behavioural psychology - claim overblown and the quote from the CFO confirms that:

" Furthermore, competitors are increasingly adopting the behavioural science approaches that the Company has been advocating over many years."

Moreover, the CFO acknowledges that the name change has hurt them:

"The effect of these market shifts was compounded by the change in the Company's name from BrainJuicer to System1"

It's interesting that the CFO and not the CEO is pointing out these issues.

All that said, that's in the past and this is about the future.

If the company can make 22p EPS (peak earnings)and subtract 40p of cash (from the m/c) to give you an EV of 220p, the cash adjusted p/e of 10 starts to look interesting.

w1