Isentia finds market traction after commencing new three-year strategy

Isentia ASX ISD financial year revenue profit strategy
Isentia has reported FY19 revenue of $122.5m and underlying EBITDA of $23.1m

Media intelligence company Isentia Group (ASX: ISD) has raked in $122.5 million in revenue accompanied by an underlying net profit after tax of $9.2 million for the 2019 financial year.

The news comes hot on the heels of a new strategy, first initiated in February this year which “provided a roadmap for transforming the business over the next three years”.

Both as confirmation of its intent and validation of its strategy, Isentia has now implemented a range of measures as part of the plan, including the development of new workflows for press production and daily briefings, implementing new product management processes and establishing product and technology teams in Asia.

To add further sheen to its performance over the past year, the company said its strong financial results were achieved “despite a challenging competitive environment,” according to chief executive officer and managing director Ed Harrison.

Isentia reported the number of product and feature releases has “more than tripled” to 66 during the past financial year including major product launches such as live alerts, a large suite of on-platform analytics tools and a new mobile app which is currently being beta tested by clients.

From a product development perspective, Isentia attributed its financial prowess to establishing regional product and tech teams, as well as new multi-market sales capabilities in Asia. A further boost was achieved by enhancing its competitive position in April courtesy of the Australian Copyright Tribunal after the agency issued orders for an interim licence which came into force as of 1 December 2018.

“The decision is important because it goes some way towards achieving equity in copyright pricing and it introduces a variable component into what had been a fixed cost. The action in the Copyright Tribunal is ongoing and a final hearing date has been set down for late 2020,” said Mr Harrison.

Strong market traction

In a statement to the market, Isentia said its revenue for the 2019 financial year was $122.5 million while its underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) was $23.1 million – both, of which, are in line with the earnings guidance provided in August 2018.

Further positive news came in the form of debt reduction. Isentia said its strong operating cash conversion from underlying EBITDA resulted in a “significant debt reduction” with net debt falling to its lowest level since 2015.

At the end of the 2019 financial year, Isentia’s net debt stands at $28.3 million – $14.8 million lower than at the end of Q2 2018 and $23.4 million lower the same time in 2017.

“In the 2019 financial year, we pointed the company in a different direction with the appointment of a new leadership team and the launch of a new strategy,” said Mr Harrison.

“We realised significant operational efficiencies across the organisation through increased automation and the use of our Asia Pacific network to optimise resource allocation. This ongoing shift from investment in operations to investment in technology continues to improve productivity, reduce costs and, most importantly, deliver higher quality services to our clients,” he said.

Looking forward

Going forward, Isentia said it expects to continue executing its new strategy with its board and management “focused on the successful execution of the next phase of Isentia’s three-year strategic plan”.

In terms of financial metrics, this translates into an EBITDA estimate of $20-23 million for the current financial year, although the company did hint at a potential risk in the form of the “AASB16 lease accounting standard”, the impact of which was excluded from its future estimate.

In addition, the media intelligence company declared that it expects the rate of revenue decline to slow in the current financial year and that it will be “making significant operating and capital investments in building new product and technology”.

This morning’s financial announcement and parallel investor conference call boosted Isentia’s shares to $0.38, up 22.5% on the day.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.