Description

Ascential

Ascential (LSE: ASCL LN) is a £1.3B market cap events business with leading brands Money20/20 and Cannes Lions. The company recently divested its two other divisions and returned capital to shareholders. Ascential trades at a substantial discount relative to other publicly traded events businesses and recent transactions, despite operating market leading franchises that we believe should command a premium. With the majority of the capital return now complete and the HudsonMX strategic review underway, we believe Ascential’s shares are poised to re-rate or the company will become an acquisition target in an active M&A sector.

Ascential operates two leading event platforms:

Money 20/20 is the leading event platform serving the fintech community, including payments, banks, technology companies, VC-backed businesses, start-ups and regulators.  Money 20/20 hosts annual events in Europe (June) and the U.S. (October), and recently hosted Money 20/20 Asia in Bangkok for the first time. Over the last twelve months, Money20.20 hosted attendees across its shows: 8,500 in Europe, 11,500 in Las Vegas, and over 3,000 in Asia. Attendance includes 18 of the top 20 banks and 16 of the top 20 fintechs. The show benefits from a strong network effect, with deep brand and ecosystem relationships. Money20.20 in the US and Europe are the #1 and #2 largest fintech events in the western world, being 2-3x larger than others.

Cannes Lions serves the global marketing industry and is anchored by its flagship creative festival each June in Cannes, France at which the Cannes Lions Awards (effectively the Oscar awards for creatives) are presented.  The show, featuring >25K awards and >11K attendees, is the global #1, market leading brand with 70 years of brand history and serves as the benchmark for the entire advertising industry.  Marketing is a relationship business, and the festival enables strong in-person connections.  However, it’s worth noting that management was able to pivot to digital awards in 2021, during the pandemic, such that its benchmark awards (1/3 of revenue) is not reliant on holding a physical event. This segment also includes the WARC business, which provides data and benchmarks to 1400 companies in >100 countries to enable marketers to drive growth and ROI. 

Event Calendar:

• April - Money20/20 Asia
• June – Money20/20 Europe
• June – Cannes Lions
• October – Money20/20 USA

Investment Thesis

1. Market leading events are great businesses:

• Market leading shows have network effects whereby attendees, sponsors, speakers, and exhibitors want to attend shows where others are in attendance
• Customers prefer attending fewer, higher quality shows within specific niche driving consolidation and winner take most dynamics
• Both Money20/20 and Cannes Lions are “Marquee” world class brands
  • Industry leader Informa segments brands into Marquee ($30m+), Power Brands ($10-30M), Market Brands ($3-10M), and National Brands ($1-3M)
• Captive customers create adjacent monetization opportunities including digital and subscription offerings
  • Ascential has been successful in expanding Cannes Lions with adjacent subscription and advisory services and has recently launched digital services at Money20/20
• Attractive financial characteristics
  • High levels of reoccurring revenue
    • Repeatable event revenue and 33% of sales from non-event sources, including subscription, and benchmarks
  • Low capital intensity
    • Capex just 2-3% of revenue
  • Structurally negative working capital given upfront billings
    • Average NWC of 20-25% of sales and FCF conversion of 100%+
  • High fixed cost leverage drives high margins for winners and barriers to scale
    • Mid-30s EBITDA margins

2. Many organic and inorganic growth opportunities within existing franchises:

• Strong track record with double-digit annual growth achieved over the last decade
• Geographical expansion:
  • Launched Money20/20 Asia in 2024 with over 3,000 attendees, achieving internal aspirations
  • Previously expanded Money20/20 into Europe in 2016, an event that now generates £30M of sales in 2023
  • No further announced plans for expansion, but potential to expand brand to LATAM and the middle east
• Product Innovation
  • Ascential continuing to experiment with pricing and packaging of events in addition to LSD increase in base prices
  • Money20/20 launching digital marketing intelligence offering “twentyfold” which has become a successful category launch by Informa
  • Expansion within events – such as taking on additional space, hotel bookings, and category expansion
  • Sponsorship revenue has grown significantly over the last several years, increasing by 15% CAGR at Lions since 2016
• Bolt-on M&A has been successful
  • Digital subscription service, WARC, with 95% retention was acquired for 24m in 2018; generates 6m+ of profit with the business doubling since acquisition
  • Recent acquisition of Contagious, which is advisory services selling into Cannes Lions’ customer base

3. Events businesses solidified their value proposition with attendees during the pandemic with industry participants continuing to point towards growth:

• The pandemic underscored the importance of in person events to convert digital interactions into relationships
• Reports of Robust events business across major exhibition companies – Informa, Emerald, and Reed Exhibitions
  • Informa indicated “Momentum is strong across all major geographic regions, including North America, Asia and IMEA (India, Middle East & Africa)”
  • Emerald described its core trade show business as strong with year-over-year growth in revenue driven by increases in exhibitors, attendees and pricing
• Tailwinds for continued recovery post pandemic and ongoing growth
  • Industry supplier GES – which operates 3600 events globally each year – forecasts strong like for like growth at events
    • GES reported same event square footage vs 2019 of 81% in Q1 2023 vs 90% in Q1 2024 vs 2019 and expects continued recovery of show sizes to 2019 levels
  • Markets ex-Asia recovered in 2022 and 2023 with Asian markets continuing recovery into 2024
    • Business travel routes and spending continue to recover and exceed pre-pandemic levels with airlines continuing to add seat supply
  • Significant expansion in trade show capacity over the last decade with venue space increasing from 34.7M sqm in 2016 to 40.6M in 2022

4. Rumored strategic interest from well-funded parties with a long list of potential buyers which we believe will resurface after the HudsonMX process is completed:

• Several reports of interest in Ascential’s event business during the company’s strategic review process in 2023
• Notable report from Mark Kleinman, who originally scooped that Ascential was undergoing a strategic review, that a consortium of buyers backed by private equity were interested
  • Parties included Hyve, which was acquired by Providence Equity in 2023.  Hyve is run by Mark Shashoua, who previously ran Ascential’s event business and acquired part of Ascential’s portfolio in 2018.
• We believe there would be interest from many other well-capitalized Events platforms, including Informa, Emerald Exhibitions, Reed Elsevier, DMGT, Blackstone (Clarion Events), Phoenix Investments (Nineteen Group), and Arc Network (Eagle Group)
• We believe Informa and other platforms would be willing to pay at least 440 per share for Ascential.
  • Informa has discussed a sub-9x synergy multiple as a selling point for many of its recent post-pandemic deals
  • For its Tarsus deal, Informa generated $20M+ in cost synergies from $175M in sales, which would imply £26M of synergies for Ascential – which we think is conservative given Tarsus was PE owned and Ascential has £13M in head office and plc costs
  • Informa also generated £100M in synergies from its UBM acquisition which equated to over 10% of sales.
• While not significant to the value of the group, we believe the sale of HudsonMX, a media management platform, will drive more M&A interest in Ascential
  • HudsonMX lacks strategic fit for potential acquirers and, as a startup, is loss making, which creates further disinterest
  • We believe there is interest for standalone HudsonMX:
    • Alongside the sale of Digital Commerce to Omnicom, it was noted that Omnicom was interested in HudsonMX
    • MediaOcean is also a likely interested party, who has been speculated to have previously bid for HudsonMX

Financials

We believe growth will accelerate in 2025 as events normalize after the strong post-covid event and fintech environment in 2022 / 2023, Money20/20 Asia grows, and other growth initiatives take shape. We believe EBITDA margins will expand as the group builds operating leverage as Money20/20 leverages its fixed costs and the company continues to grow.

Valuation

We believe Ascential is worth at least low-teens EBITDA with publicly traded peers, acquisition comps, and post synergy targets from Informa pointing towards these levels. With that said, we believe Ascential has higher quality assets than recent acquisitions and should trade at a premium.

Catalyst

Sale of HudsonMX (H1 2024) – we believe a successful sale of HudsonMX could be worth an incremental 25-50p per share, but view a sale as removing an overhang for the public markets and a poison pill for acquirers

Money20/20 Europe (June 4-6) – Ascential announcing attendance figures from the event occurring

Cannes Lions (June 17-21) – company announcing award entries and other figures from the event

Money20/20 US (October 27-30) – Ascential announcing attendance figures from the event occurring