Team Internet annual report 2023: Revenue increased by 15%

Team Internet Group Plc (AIM: TIG) announced its audited annual report for the financial year 2023.

Financial summary:

• Revenue increased by 15% to USD 836.9m (FY2022: USD 728.2m)
• Organic revenue growth of 13%
• Net revenue (gross profit) increased by 8% to USD 191.1m (FY2022: USD 177.7m)
• Adjusted EBITDA increased by 12% to USD 96.4m (FY2022: USD 86.0m)
• Operating profit increased by 26% to USD 42.3m (FY2022: USD 33.6m)
• Profit before tax increased by 98% to USD 29.3m (FY2022: USD 14.8m)
• Profit after tax increased to USD 24.3m (FY2022: loss of USD 2.1m)
• Net debt increased by 31% to USD 74.1m as compared to USD 56.6m at 31 December 2022, following USD 39.7m of cash share repurchases, (including Employee Benefit Trust repurchases), USD 3.6m payment of dividends and USD 21.5m settlement of deferred contingent consideration during 2023
• Leverage increased to 0.96x adjusted EBITDA (31 December 2022: 0.84x), remaining under 1.0x
• Adjusted operating cash conversion of 96% (FY2022: 110%)
• Adjusted EPS for the year increased by 32% to 23.22 US cents (FY2022: 17.56 US cents)
• Proposed final dividend of 2.0p (FY2022: 1.0p), an increase of 100% as the group continues to pursue the progressive dividend policy launched in 2022

Operational and corporate highlights:

• On 4 September 2023, to support our next phase of continued growth, the Group announced its rebranding from CentralNic Group to Team Internet Group, and effective that same day, the Group’s shares commenced trading under the ticker “TIG”.
• The Financial Times listed Team Internet among the top 250 fastest-growing companies and among the top 50 fastest-growing technology companies in Europe
• Acquisition of Adrenalads, a business which has a rich history with Zeropark, on 31 August 2023 for an initial consideration of USD 2.1 million; the acquisition included deferred consideration of USD 0.2 million payable in February 2025
• The Group adjusted its global office footprint to post-pandemic working realities, notably reducing cash outflow, lease liabilities and emissions
• Appointment of Marie Holive as Non-Executive Director and Chair of the Audit & Risk Committee on 24 April 2023
• The Group successfully completed its first share buyback programme of GBP 4.0 million worth of ordinary shares in January 2023, and a second share buyback programme commenced in May 2023 and was increased to GBP 34.0 million worth of ordinary shares in July 2023. By 31 December 2023, the Group had repurchased a total of GBP 28.4 million (USD 35.6 million) worth of ordinary shares across the two programmes, with GBP 9.6 million (USD 12.2 million) remaining of the share buyback scheme at 31 December 2023.
• On 16 June 2023, the Group paid its inaugural final dividend of 1.0 pence per share totalling USD 3.6 million, reflecting a renewed capital allocation geared towards greater return to Shareholders

 

Team Internet Group plc (AIM: TIG) also announced it has entered into a definitive agreement to acquire the entire issued share capital of a leading online marketing business, Shinez I.O. Ltd and its subsidiaries (together “Shinez”) from its current shareholders (the “Acquisition”).

Business Profile

Shinez specialises in the production and promotion of highly engaging content across diverse channels such as social media, search engines, and native networks. Its currently forty popular portals include ourfashiontrends.com, falafelandcaviar.com and travelerdreams.com. Leveraging this expertise, Shinez monetises real-time visits through an expansive network of advertising exchanges, utilising cutting-edge technology and strategies. This approach maximises the revenue potential of each piece of content, and positions Shinez at the forefront of digital marketing innovation.

Acquisition Terms

Team Internet will acquire Shinez for an enterprise value of USD 41.8 million, on a net debt free basis and subject to customary adjustments for net working capital, payable in cash.

The initial consideration represents a multiple of 4.0x Shinez’s FY23 Adjusted EBITDA. Additional contingent consideration of up to USD 12.3 million will be due subject to Shinez achieving ambitious financial targets over the next two years, payable in cash.

Pro Forma Impact

Shinez reported USD 111 million in gross revenue USD 17.2 million in net revenue and USD 10.4 million in Adjusted EBITDA for the year ending 31 December 2023. Following the acquisition, the enlarged Group’s unaudited pro forma financials for 2023 indicate an estimated gross revenue, net revenue and Adjusted EBITDA of approximately USD 948 million, USD 208 million and USD 107 million, respectively. Moreover, this acquisition is expected to significantly enhance earnings per share (EPS), with a forecasted adjusted EPS growth in the high single-digit percentage range for the pro forma fiscal year 2023, not accounting for potential synergies.

Funding

The acquisition will be funded through a combination of cash reserves and the Revolving Credit Facility Agreement.

USD 4.6 million, i.e. 11% of the enterprise value, will be retained in escrow for four years to cover for customary warranties and indemnification. A graduated release schedule is planned for the escrow: up to 50% will be released on the second anniversary of the transaction’s completion, followed by releases of up to 25% each on the third and fourth anniversaries.

Strategic Benefits

·    Diversification: Shinez’s distinctive content creation and syndication prowess, complemented by a balanced mix of organic and paid content promotion strategies, extends our reach into lucrative, underserved verticals such as Lifestyle, Food, and Travel, among others. This strategic expansion not only diversifies our portfolio but also unlocks new advertiser budgets, significantly enlarging our Total Addressable Market (TAM).

·    Reduced Monetisation Network Concentration: The strategic acquisition of Shinez marks a significant shift in our monetisation network concentration. On a FY23 pro forma basis, this acquisition would more than double the Online Marketing segment’s revenue generated independently of our Tier 1 channel partner. Specifically, it elevates the segment’s independent revenue share from 15% to an impressive 27%. On a group level, the independent revenues increase from 33% to 41%.

·    Enhanced Capabilities: Merging Shinez’s expertise in media buying, content creation, and campaign optimisation with TIG’s existing expertise will significantly strengthen our business model.

·    Synergy Opportunities: We anticipate significant growth and revenue synergies, including reciprocal cross-selling to and from Shinez’s and TONIC’s publisher bases and deeper vertical integration with major networks, in particular Meta.

Completion Timeline

The Acquisition is expected to complete by late April/early May 2024, with all closing conditions anticipated to be satisfied, with the first full consolidation in Q3 2024.

CEO’s Perspective

Michael Riedl, CEO of Team Internet, commented:

“This acquisition marks a pivotal transformation for Team Internet Group, seamlessly aligning with our innovative OM² vision – Omni-Media, Omni-Monetisation. Our vision is to establish a versatile platform that expertly guides internet users across diverse media landscapes (Omni-Media) and steers them towards the most effective monetisation avenues (Omni-Monetisation). The addition of Shinez’s capabilities and market reach will not only diversify our revenue streams but also accelerate our growth trajectory. We are excited about the prospects this partnership brings. We welcome the Shinez team to the Team Internet Group.”