Zomd Technologies (ZOMD) is lurking on the Vancouver venture exchange.   Not the most prolific place for an internet tech-related company.  What attracted me to look further is the company’s recent high sales growth along with a transition to being cash flow positive.  I am using USD for the stock price and valuation since the company reports its financial numbers in USD.  

ZOMD has a market capitalization of $38 million.  For 2021 it recorded $52 million in sales, a 106% increase from 2020.   EBITDA in 2021 of $5.7 million versus a loss of $(2.6) million in 2020.   4^th qtr 2021 EBITDA of $2.7 million.   So, a current run rate of less than 4X EBITDA for a company growing sales 100%.   Also .6X sales.   Seems cheap.  While I don’t expect the company to grow 100% in 2022, company management expects very rapid growth to continue.   50% growth could lead this to be trading at .3X revenue and 2X EBITDA run rate by the end of 2022.  Similar companies operating at scale trade from 3x sales and much higher and mid-teen plus multiples of EBITDA and higher.   I thought about ending the write-up here on these highlights, but fear low marks and getting kicked out of VIC. 

ZOMD is an Israeli=based digital advertising and monetization company.  ZOMD leverages onsite search offered to publishers and to advertisers, with a mobile-first user acquisition platform that targets the most valuable users.  Utilizing proprietary and patented technology, ZOMD provides a unique one-stop-shop acquisition platform enabling advertisers to achieve superior results on wide effective digital campaigns.   ZOMD’s competitive advantage is its integration to hundreds (over 600) of media sources all under one dashboard, and its presence with publishers as an internal site search engine. 

ZOMD is differentiated from others in the following ways.  ZOMD does not monetize its own media inventory and rather acts as a layer on top of other media channels, making it highly resilient to ongoing privacy enhancement measures.  This is part of the reason, given IOS privacy changes, for ZOMD’s rapid growth.  Revenue per customer rose from $465,000 to $916,000 in 2021. 

ZOMD platform acts as a layer on the ecosystem of the digital media landscape, from social networks and device manufactures to ad networks, external data sources and direct publishers.  As a result, ongoing Google/Facebook changes do not affect the platform.  Advertisers leverage the unique concept of combining all the UA to one place, saving time and reducing the need for campaign management resources. 

ZOMD is soon to release a monthly subscription license: fully self-serve, fit for “in house advertising” departments that is gaining traction at companies instead of working with ad agencies.  It will also allow ZOMD to market to smaller companies and more verticals that do not need or have the resources to pay for white glove services.  This may also lead ZOMD to be recognized more over time as recurring revenue SaaS business versus as an more part of the agency ecosystem.

ZOMD is focusing its resources on high  growth industries including Fin Tech, Gaming, I Gaming and e-commerce.  Some of the leading clients include getir, Sony Pictures, Ladbrooks, Churchill Downs, cyrpto.com, TV Azteca, and SHEIN. 

Management

The company is led by Amit Bohensky (Chairman) and Ofer Eitan (CEO).  Management owns about 22% of the company with no insider buys or sells.  There are currently 8 million options outstanding with an average exercise price of .14 cents.  Amit Bohensky is an Israeli serial entrepreneur and angel investor who has successfully started, built and sold tech companies including Unicoders (sold to Matrix) for $2 million USD and Focalinfo (sold to Verint Systems) for $50 million USD.  Both were acquired less than five years from their founding.  He had some schooling in the U.S. having graduated from the Kellogg school at Northwestern University.  Ofer Eitan Co-founded and was CEO of Mobln, which was later merged with ZOMD.  and held a variety of positions at Microsoft.  Management in general has deep roots in data analytics. 

Competition

Digital marketing and advertising is a large, fragmented market.  The mobile segment is expected to continue to grow at a high rate.  Fragmentation of the market is both an opportunity and a risk.  It is highly competitive with low barriers to entry, although ZOMD has found a niche that currently is highly valued by its customers as shown by the rate of growth with both existing and new clients.  AdCore (ADCO.TO) and AcuityAd’s (ATY) two companies that are somewhat similar.  A larger company example would be Digital Turbine (APPS).

Valuation

I think ZOMD is a high-growth company in a growing industry trading at a value multiple.  I think being tucked away on the Vancouver Venture with all the rock projects has shielded it from a wide investor universe.  ZOMD plans to move up to the TSX this year.   From there they have ambitions of a U.S. listing.  I think these moves along with continued growth will raise the stock price closer to private market value.   Also, current results combined with favorable comp numbers in 2022 could make this an opportunity for 100% plus returns.  Assuming ending 2022 on a run rate of a $90 million sales range and $20 million of EBITDA, I could see a valuation of $100 million to $200 million USD or roughly $1.00 to $2.00 a share USD compared with a USD price today of .38 cents.