Going for Ebiquity: Why independent marketing outfit's share price looks attractive

Ebiquity (LON:EBQ) is a leading, tech-enabled, independent marketing and media consultancy that works with 80 of the world’s top 100 advertisers and some of the world’s biggest brands. They serve as a “left brain advisory” by using data and analytics to improve clients’ return on investment in their marketing efforts.

The company operates in four practice areas in order to cover the broad spectrum of marketing and visibility challenges: Media (greater transparency of client media spend and performance), Analytics (evidence-based marketing program), Tech (proper technology ecosystem selection), and Intel (deep competitive and consumer insights to drive advertising campaign strategy). 

Thanks to its significant and persistent investments in each of these practice areas, Ebiquity has attained a strong market leadership position across the industry.

This strong positioning produced continued strong growth in the first half of 2018: Media revenues grew by ~5% year-over-year and Analytics & Tech were up ~16% year-over-year. However, Intel declined ~13% year-over-year, leaving total revenue growth at just ~2% year-over-year. 

Despite the negative growth in Intel, it is not a long-term concern for shareholders since the company is planning on selling the business to Nielsen next month. Excluding the Intel business from the first half results, revenues actually increased 7%. 

Meanwhile, the company continued to invest heavily in scaling the Media, Analytics, and Tech practices, setting itself up for strong future growth. 

They accomplished this by rolling out new data validation tools, launching a near-shore delivery center, piloting expanded and standardised digital benchmarking service lines, hiring staff to continue scaling contract compliance practices in local markets, continuing investment in acquiring advanced analytics talent, began expanding the UK Tech advisory practice to Germany, expanding client events and sales materials to increase the company’s profile, and appointed a small number of client partners to better service their biggest revenue opportunities.

Additionally, the core Media advisory services business is well-placed to give Equibity the ability to meet clients’ primary need for help in achieving marketing transparency.

Looking ahead, Equibity is focused on closing out the Intel business sale, continuing to strengthen the Media and Analytics and Tech practices, and evolving the business to become a more client-centric organisation. The company is also looking to continue deleveraging the balance sheet. In the first half, they reduced debt by £3.2m, well over 10% of total outstanding debt.

The main risks confronting the firm are competition (like that which ate away at their Intel revenues in the first half) and the successful closing of their Intel business sale. 

However, Equibity appears to be well positioned to compete in its core businesses which experienced strong growth and achieved 100% retention of its top 50 clients year-over-year. Furthermore, the company has a strong position and name recognition given that it works with 80 of the world’s top 100 advertisers and enjoys over 70% recurring revenues in its core media practice.

Conclusion: Despite a rebound from their deep summer plunge, shares remain attractively priced given that the core business should continue experiencing solid growth.