COMPANY ANALYSIS 23 July 2014
Important information: All information regarding limitation of liability and potential conflicts of interest can be found at the end of the report.
Redeye, Mäster Samuelsgatan 42, 10tr, Box 7141, 103 87 Stockholm. Tel +46 8-545 013 30. E-post: [email protected]
Key Financials
List: Small Cap Market Cap: 906 MSEK Industry: Information Technology CEO: Magnus Thell Chairman: Lawrence C. Fey
7.0 points 6.5 points 8.0 points 4.0 points 6.0 points
Share information
Share price (SEK) 60.8
Number of shares (m) 14.9
Market Cap (MSEK) 906
Net debt (MSEK) 225
Free float (%)
50 %
Daily turnover (’000) 18
Analysts:
Philip Skogby [email protected]
Solid Profitability Trend Cision Q2 report was in line with our forecasts and revenues
amounted to 211 MSEK with a 3MSEK currency effect and 2 %
organic growth. EBIT and EBITDA came in higher than expected at
25 MSEK and 37 MSEK respectively. During the quarter the
company had non-recurring costs of 20 MSEK, primarily related to
legal and advisory fees caused by the bid offering. Consequently the
reported earnings were low during the quarter.
Blue Canyon Holdings stake in Cision have now increased by 2.1 % to
74 percent since last quarter. Meltwater’s stake is unchanged since
last quarter. Blue Canyon Holdings bid is likely to fail due to
Meltwaters incentives to reject the offer. The intrinsic value of the
company as a standalone entity should serve as an indicator of the
price post-failure.
Our DCF indicate a value of Cision, as a stand-alone company of 50
SEK per share (11.2 % WACC) which has been revised since last
quarter due to changes in the rating parameters.
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22-Jul 20-Oct 18-Jan 18-Apr 17-Jul
OMXS 30 Cision
Management Ownership Growth prospect Profitability Financial strength
Summary
Cision (CSN.ST)
Redeye Rating (0 – 10 points)
2012 2013 2014E 2015E 2016E
Revenue, MSEK 956 856 848 886 940
Growth -1% -10% -1% 4% 6%
EBITDA 113 -194 117 152 213 EBITDA margin 12% -23% 14% 17% 23%
EBIT 58 -242 68 102 138 EBIT margin 6% -28% 8% 12% 15%
Pre-tax earnings 34 -263 44 86 118 Net earnings 48 -276 34 79 110 Net margin 5% -32% 4% 9% 12%
2012 2013 2014E 2015E 2016E
Dividend/Share 2.00 1.00 1.13 2.64 3.69 EPS adj. 3.22 -18.48 2.27 5.27 7.38
2012 2013 2014E 2015E 2016E
P/E adj. 17.4 -1.7 26.8 11.5 8.2 EV/S 1.2 0.8 1.3 1.2 1.1 EV/EBITDA 10.5 -3.7 9.7 7.2 5.1
Cision
Company analysis 2
Redeye Rating: Background and definitions
The aim of a Redeye Rating is to help investors identify high-quality companies with attractive valuation.
Company Qualities
The aim of Company Qualities is to provide a well-structured and clear profile of a company’s qualities (or
operating risk) – its chances of surviving and its potential for achieving long-term stable profit growth.
We categorize a company’s qualities on a ten-point scale based on five valuation keys; 1 – Management, 2 –
Ownership, 3 – Growth Outlook, 4 – Profitability and 5 – Financial Strength.
Each valuation key is assessed based a number of quantitative and qualitative key factors that are weighted
differently according to how important they are deemed to be. Each key factor is allocated a number of points
based on its rating. The assessment of each valuation key is based on the total number of points for these
individual factors. The rating scale ranges from 0 to +10 points.
The overall rating for each valuation key is indicated by the size of the bar shown in the chart. The relative size of
the bars therefore reflects the rating distribution between the different valuation keys.
Management
Our Management rating represents an assessment of the ability of the board of directors and management to
manage the company in the best interests of the shareholders. A good board and management can make a
mediocre business concept profitable, while a poor board and management can even lead a strong company into
crisis. The factors used to assess a company’s management are: 1 – Execution, 2 – Capital allocation, 3 –
Communication, 4 – Experience, 5 – Leadership and 6 – Integrity.
Ownership
Our Ownership rating represents an assessment of the ownership exercised for longer-term value creation. Owner
commitment and expertise are key to a company’s stability and the board’s ability to take action. Companies with
a dispersed ownership structure without a clear controlling shareholder have historically performed worse than
the market index over time. The factors used to assess Ownership are: 1 – Ownership structure, 2 – Owner
commitment, 3 – Institutional ownership, 4 – Abuse of power, 5 – Reputation, and 6 – Financial sustainability.
Growth Outlook
Our Growth Outlook rating represents an assessment of a company’s potential to achieve long-term stable profit
growth. Over the long-term, the share price roughly mirrors the company’s earnings trend. A company that does
not grow may be a good short-term investment, but is usually unwise in the long term. The factors used to
assess Growth Outlook are: 1 – Strategies and business model, 2 – Sale potential, 3 – Market growth, 4 – Market
position, and 5 – Competitiveness.
Profitability
Our Profitability rating represents an assessment of how effective a company has historically utilised its capital to
generate profit. Companies cannot survive if they are not profitable. The assessment of how profitable a company
has been is based on a number of key ratios and criteria over a period of up to the past five years: 1 – Return on
total assets (ROA), 2 – Return on equity (ROE), 3 – Net profit margin, 4 – Free cash flow, and 5 – Operating
profit margin or EBIT.
Financial Strength
Our Financial Strength rating represents an assessment of a company’s ability to pay in the short and long term.
The core of a company’s financial strength is its balance sheet and cash flow. Even the greatest potential is of no
benefit unless the balance sheet can cope with funding growth. The assessment of a company’s financial strength
is based on a number of key ratios and criteria: 1 – Times-interest-coverage ratio, 2 – Debt-to-equity ratio, 3 –
Quick ratio, 4 – Current ratio, 5 – Sales turnover, 6 – Capital needs, 7 – Cyclicality, and 8 – Forthcoming binary
events.
Cision
Company analysis 3
Public Offer – Likely To Be Rejected
On February 14 th, 2014, Blue Canyon Holdings AB, a company indirectly controlled by GTCR Investment X AIV Ltd., announced a public offer to the shareholders of Cision to transfer all of their shares in the Company to Blue Canyon Holdings for a consideration of SEK 52.00 per share. The public offer has been increased twice to SEK 55.10 and on April 7 th, 2014 to SEK 61.00. Subsequent to the previous offer Blue Canyon Holdings AB announced that they controlled 71.9% of the shares and votes in Cision. On April 3 th, Meltwater Drive Sverige AB announced a competing offer of SEK 60.00 per share to the shareholders of Cision. The offer was conditional upon an acceptance rate of at least 70% of the shares. On April 16, 2014, Meltwater raised the offer to SEK 63.00 per share with a calculated acceptance period to May 27 th, 2014. The acceptance rate remained at 70% for this new offer. Meltwater later withdrew this offer on May 16. On June 23th GTCR offered another bid for 61 SEK per share which is the most recent. GTCR did not accept Meltwaters bid of 63 SEK per share and then GTCR subsequently reiterated their bid at 61 SEK per share. This indicates that GTCR can be reluctant to increase the bid from the current bid price. The current bid acceptance period runs out around the 5th of august according to the company, in which GTCR has the power to delay the acceptance period. Because the bid period is conditional, by state authority acceptance, it is possible according to the takeover-rules to delay the time for acceptance for up to 9 months after the announcement of the bid offerings terms and conditions. On May 21th, the board of directors of Cision has resolved to apply for a de-listing of the company’s share from NASDAQ OMX Stockholm. On June 21th the company decided to become listed on an alternative market place. On July 4th the company announced its intent and approval to list itself on the NGM Nordic MTF. This decision will most likely to lower liquidity in the shares, but more importantly it will make Cision comply with the regulatory framework for ownership spreads. Currently, Meltwater holds 15.3 % and Blue Canyon Holdings increased its position to 74 %. Since Meltwater holds more than 10 per cent of the company, Blue Canyon Holdings AB cannot exercise a compulsory redemption of the remaining shares in the market. Redeye asses that Blue Canyon Holdings AB will wait for the bidding rules to run out (12 month) and will then try to buy Meltwaters shares to force a compulsory redemption of the remaining outstanding shares. If GTCR plan is successful and as announced by GTCR the intent is to merge Cision and Vocus. Vocus have already been acquired by GTCR this quarter and the planning processes for the merger already seems to have begun. We asses that Cisions former president Peter Granat recent nomination as the CEO of Vocus, is likely a step in order to smooth the transition of the two entities together. The merger could then put significant pressure on Meltwaters current margins and business. A strong indicator that Meltwater will likely not accept the current bid. Because of the situation that Meltwater is in, it is likely that the offer has to be announced at a significant premium to be accepted. The other option for GTCR is to implement non-shareholder friendly measures as equity issuances and acquisitions which can be implemented to dilute Meltwater’s current stake. However, such actions should be seen in the light of GTCR
Possibility to delay the
acceptance period
Blue Canyon Holdings
increased its position
during the quarter
Cision
Company analysis 4
being a majority willing to risk current profitability and an effective transition with Vocus, which we deem is unlikely. On a stand-alone basis Cision seems to have significant potential to cut, their personel expenses with almost half of its costs relating to staff costs, similar to Vocus recent announcement of layoffs after the acquisition by GTCR. In Q2 we witnessed organizational changes contributing to a strong EBIT and similarly in Q1 we saw the layoff of production personnel. We expect the company to further increase the EBIT margin the coming quarters as we believe that Cision have room for further discharge of people. The DCF indicates a value for Cision around 50 SEK per share as a standalone entity. Thus, the outstanding bid of GTCR is fair. However, from our viewpoint, the acquisition is likely to fail due to Meltwater rejecting the bid offer, which can cause the share price to drop to the intrinsic value after the initial acceptance period and possibly after the extension of the bid period. Considering the ramifications on Meltwater’s current business in the case the acquisition succeeds, potential margin expansion and relative undervaluation makes the case clear that Meltwater is seeking a premium to the current share price. Thus, although the bid is likely to fail, we also estimate that the upside more probable than the downside. Considering that GTCR is still the majority owner and would not want to both set the entity in a financially worse position, as a majority owner, and possibly hinder an effective merger between Vocus and Cision. With large tax loss carryforwards, margin expansion through layoffs, relative undervaluation to its closest peer Vocus, we still believe that the stock can move further beyond the current bid price. We estimate that the upside can be around 75 SEK.
Cision’s intrinsic value
can be a good indicator of
the downside in the likely
scenario of bid failure
Cision
Company analysis 5
Positive Revenue Development and Cash Flow In The Limelight
Cision’s Q2 report was overall in line with expectations. Reported revenue amounted to SEK 211 million vs forecasted SEK 211 million. The FX effect on revenues were 3 MSEK as forecasted as USD and Euro were expected to be stronger this quarter than the year before. Organic growth amounted to 2 %, in line with our expectations, which we see as a strong indicator of Cision successful transition from print monitoring business to its core subscription services. EBIT amounted to SEK 25 million vs forecasted SEK 21 million before extraordinary items. The strong underlying EBIT is a consequence of successful cost reductions in the UK and cost benefits arising from changes within the board and organization. It can be noted that high non-recurring costs were reported for the quarter, primarily relating to non-recurring costs of advisory and legal fees amounting to 19.9 MSEK which affected all valuation measures.
EPS adjusted came in strong adjusted for the non-recurring items, supported by a gross margin expansion on adjusted basis since the last quarter one year before.
Cash Flow – Strong Working Capital Performance
Cision continued to deliver another strong cash flow quarter, driven by the strong and altered upfront invoicing seen in the first half of year when subscriptions are renewed. Cision’s operating cash flow amounted to 49 MSEK (50). The decreased free cash flow to 25 MSEK (42) primarily relates to payment of the legal and advisory fees. In the quarter Cision also signed a new credit facility to repay the old loan relating to a change in control of the company. The utilization of the new credit facility loan created a surplus of interest bearing in relation to previous quarter. As announced earlier, GTCR did not pay out any dividends for the year 2013, which makes it more probable that the company will now use the surplus to intensify either software development or paying off its debt gradually with the strong cash flow trend continuing.
Cision: Estimated vs reported
MSEK Q2'13 Q2'14E Reported Diff
0 0 0 0 0
Revenue* 203 211 211 0%
EBITDA ** 30 35 37 6%
EBIT ** 18 21 25 19%
EPS, SEK** 0,6 0,89 0,70 -21%
Revenue growth -19,8% 3,8% 3,8%
Gross margin 69,7% 68,0% 65,0%
EBIT margin 9,0% 10,0% 12,0%
EPS growth YoY -74,4% 39,1% 9,38%
*Q2'13 adjusted for extraordinary other-revenue items
**Excluding goodwil impairment and non-recurring items
Cision’s Q2 report was in
line with expectations
Cision
Company analysis 6
Revenue Growth in US and Europe Continues
The North American division delivered a strong quarter with 155 MSEK in revenues with 2 % organic growth which indicates traction in its subscription revenues. Currency effect of – 1 MSEK lead to a slightly lower revenue than expected. EBIT was 20 (21) for the second quarter which were caused by the decline in demand of the broadcast monitoring business. However, the company notes that the performance would have been better without the weak quarter for the Canadian business which is struggling with its declining demand for broadcast monitoring business.
The European division delivered a strong quarter, driven by strong growth in revenues from Germany, UK and the Nordics. Although, UK have potential to grow top-line revenue further, intense competition limits the potential. EBIT was 9 MSEK for the second quarter led by cost reductions in the UK business and a strong cost focus of the German business. Portugal showed weak growth this quarter and can be attributed to the economic condition in Portugal.
Cision: Development North America
MSEK Q2'13 Q3'13 Q4'13 2013 Q1'14 Q2'14
0 0 0 0 0 0
Revenue 153 153 157 650 154 155
Organic growth YoY -7,0% -2,0% 0,0% -3,0% -1,0% 2%
FX effect on Revenue -9 -6 -5 -28 -2 -1
EBIT * 21 13 22 78 20 20
EBIT % * 14,0% 8,4% 14,0% 12,6% 13,0% 13,0%
FX effect on EBIT * -1 0 -1 -3 -1 0,00
EBITDA* 30 22 32 115 31 29
EBITDA %* 19,6% 14,4% 20,4% 18,5% 20,0% 19,0%
*Excluding goodwil impairment and extraordinary items
Cision: Europe
MSEK Q2'13 Q3'13 Q4'13 2013 Q1'14 Q2'14
0 0 0 0 0 0 Q2'14
Revenue 53 54 60 219 56 57
Organic growth YoY -4,0% 0% 1% 0% 4% 7%
FX effect on Revenue -2 0 0 -3 2 2
EBIT * 3 6 6 19 8 9
EBIT % * 5,3% 11,1% 9,7% 8,8% 13,0% 15,0%
FX effect on EBIT * 0 0 0 0 0 0
EBITDA 4 8 7 25 9 10
EBITDA % 8,1% 14,8% 11,9% 11,6% 16,0% 18,0%0
*Excluding goodwil impairment and extraordinary items
Strong organic growth
with a weak quarter for the
Canadian business
The European division
shows growth despite
challenging conditions in
Portugal
Cision
Company analysis 7
Cision Positioned To Fulfill Growth Projection
North America stands for approximately 75 % of Cisions revenues and thus
it becomes important to consider the markets current growth trends.
According to Forrester Research U.S. Marketers are planning to increase
their spending on interactive channels (display,search,email,mobile and
social media), from 16 % in 2011 of its total spending on advertisements to
26 % in 2016. This growth will drive the spending on IT advertising systems
like that of Cisions targeted ads systems. Moreover, advertising revenues
are expected to grow from 7B USD in 2013 to 13B USD in 2017 for the
mobile platform. Catching the mobile growth trend by providing advertising
service products that are friendly to mobile platforms and with an
optimized management system for the specific platforms will be
instrumental for the company to capture. Companies are becoming
increasingly aware of the transition and potential for the mobile platform.
The competition will therefore be intense in this sector.
With Cision cash-generating subscriptions based model, Cision can cut a
significant portion of the invested capital in order to boost dividend or M&A
activity. Thus, the company appends little maintenance CAPEX. However,
Cision has invested heavily during 2013, doubling their CAPEX since a year
before, which was caused by an increase in investments for mobile support
to social newsrooms to enhance the user experience. In 2014, this trend has
continued. This is coherent with the growth trend of the mobile platform, as
a new social media platform. To monitor traffic in these networks and equip
customers with marketing service tools will become more important for
Cision’s future revenue growth. Despite the growth rate the company must
show that these investments actually grows revenues significantly, which is
quite early to tell. Research indicate that, 60 % of the world’s internet users
are active in social networks and the number of users are expected to grow
by 30 % until 2017.
Furthermore, the company has enhanced their content marketing suite,
social influencer search and campaign analytics to support businesses
marketing strategy to distribute their content in a way that the customer
would want to be perceived and helping them monitor the response of their
messages.
Cision expected to
continue with large
software investments for
growth
Cision
Company analysis 8
Estimates
Redeye has made only minor changes to our estimates after the Q1 report.
Redeye has decided to revise the revenue estimates slightly downwards for
2015 and 2016 based on that top-line revenue growth must show in the
coming quarters in order to materialize the growth expected. The coming
two quarters are not revised for EBIT and EBITDA. The reason is the
uncertainty in the effect of the Canadian broadcast monitoring business.
Furthermore, there also exists some uncertainty whether more advisory and
legal fees will be applicable for the company in the coming quarters. These
are partially offset by increasing efficiency measures as the organizational
changes announced both in Q1 and Q2 of the current year.
Moreover, CAPEX investments have been adjusted slightly upwards due to
continuation in this quarter of higher CAPEX investments than its historical
rate.
Cision: Detailed estimates
MSEK Q1'14 Q2'14E Q3'14E Q4'14E 2014E 2015E 2016E0 0 0 0 0 0 0 0
Revenue 206 211 214 218 848 886 940
EBITDA* 33 37 35 35 141 152 167
EBIT* 20 25 23 23 88 102 138
PTP 13 -2 16 16 44 86 120
EPS, SEK 0,7 -0,4 1,0 1,0 2,3 5,3 7,3
Revenue growth 0% -10% 5% 2% -1% 4% 6%
Gross margin 67% 68% 68% 70% 84% 69% 69%
EBIT% 8% 2% 11% 10% 10% 12% 15%
EPS growth (YoY) 161% -119% -105% n.a. -112% 132% 39%
*Excluding goodwill impairment and non-recurring costs
Slightly revised estimates
caused by uncertainty of
the Canadian business and
related bid fees
Cision
Company analysis 9
Valuation
The discounted cash flow model accompanied with a relative peer valuation is used to perform a valuation of the company.
DCF valuation
We have used a discount rate of 11.2 per cent, which is a decline of 1.8 % in
the discount rate, since the last quarter due to the revision in the rating
parameters. For 2014 we have assumed zero sales growth but lower costs,
which increases margins. The increase in value caused by the lower
discount rate is however compensated, partially, by the revision of sales
growth, EBIT margin, tax rate and CAPEX. Between the years 2014 - 2022
we have assumed a lower sales growth ranging between 5 to 10 per cent
with an average sales growth of 7 %. We have also downward adjusted the
period between 2018-2022 for both the EBIT margin and sales growth due
to the historical growth trend, competitive landscape and the uncertainty of
the company capitalizing on its mobile investments. The EBIT margin is
between 9 and 15 per cent during the period 2014 - 2022. CAPEX is
estimated to be higher than previously forecasted, which mostly relates to
intangibles as software development. We are positive to increased CAPEX
and might have to revise the estimates depending on the outcome of these.
We have used a tax rate of 8 per cent due to tax-loss carry forwards
amounting to 649 MSEK, and 225 MSEK in the US subsidiary alone, until
2021, where the tax benefits is expected to decrease, which in turn increases
the tax rate to 15 per cent. Our DCF valuation becomes upwards adjusted on
an absolute basis and the intrinsic value is estimated to be 50 SEK per share
(as a standalone entity).
Peer valuation
Due to none of its direct peers (Vocus) being listed anymore it is not easy to come up with an accurate peer analysis. Arriving at a valuation of Cision on P/E basis can be a little misleading because the company can take advantage of its tax-loss carry forwards to reduce its tax bill the upcoming five years. Our non-tax adjusted forecasts puts the P/E multiple for 2014e at 17,3 x and 14 x for 2015e, which is arguably a bit expensive for a company with single digit growth. Vocus was acquired by GTCR for 483 million dollars and had an unprofitable track-record, mostly caused by high personnel expenses, which makes Cision an interesting alternative which still have room for margin improvement in the same area. Although, the revenues are double of Cisions the company has a significantly stronger growth track record, which primarily relates to acquisitions.
Revised rating parameters,
but increased uncertainty
in growth projections
along with larger CAPEX
investments compensates
partially for the
adjustment of the DCF
value of 50 SEK
Cision
Company analysis 10
Despite this with purchase price of Vocus, on an EV/EBITDA basis, Cision would be cheap. If one assumes a 15 percent EBITDA margin, based on Cision’s rate, Vocus would be trading for 16,3 x EV/EBITDA for 2014. That would make Cision cheap at 8,6 EV/EBITDA for 2014 and the possibility of 10-30 % bid premium is not unlikely, which still provides an upside for the Cision, considering the layoff potential recently executed by Vocus to restore profitability in its organization. A 10 % decrease of personnel costs would decrease its EV/EBITDA valuation to 6. We are neither concerned that the company needs to add additional capital to maintain its growth, which consequently leads us to using the EBITDA measure with confidence. However, it shall be mentioned that the two entities are traded in two different markets which might cause the discrepancy.
Peer valuation*
Company 2013 2014 2015 2013 2014 2015
VOCUS INC - 43,0 35,0 - 16,3 15,2
CISION AB 9,0 7,1 6,5 6,9 8,6 7,4
Mean 9 25 21 7 12 11
Median 9 25 21 7 12 11
*Assume d 15 % a nd 5 % EBITDA & Ne t ma rgin, re spe c tive ly, for Voc us.
*Re de ye Re se a rc h / Bloombe rg
P/E EV/EBITDA
Cision looks cheap in
comparison to Vocus on a
EV/EBITDA basis
Cision
Company analysis 11
Fundamental View Cision
Investment Case
The pending acquisition is key to understand the potential the magnitude of upside
or downside. The current bid offer does not enable shareholders to extract any
significant value unless the acquirer (GTCR) are willing to release another larger
offer to the shareholders. Meltwater whom are minority shareholders have a strong
incentive to block the acquisition by declining the current bid; they are one
Cision’s key competitors in the US market. Meltwater is also aware that the
acquisition might cause significant issue for its US business, as Vision and Cision’s
will likely do a merger. Consequently, this will cause pressure on Meltwater’s
revenues and margins. Thus, GTCR are well aware that Meltwater will be difficult
to convince and thus it is likely that GTCR will either utilize methods to dilute
Meltwater’s current stake or increase the bid within the next 12 months. The risk of
the current acquisition failing is high considering Meltwater’s large incentive to
cease it, and the upside the next 12 months is relatively limited considering the
time-frame of the acquisition.
Cision is a profitable company with a strong recognized brand and a high degree of
recurring revenues by 65 %. The strong brand accompanied with efficient
monitoring solutions enables the company to reach its aim of higher degree of
subscriptions based revenues and thus more predictable revenues which could be
more appreciated by the market than one-off transactions. Although, the market is
relatively mature and growth is not expected to increase significantly as the PR
market in the North America is relatively mature with Cisions current position in
the market. Cision has the potential to streamline its operations, when considering
the restructuring program for Vocus which most likely would lead to higher
profitability.
Albeit, its investments in mobile applications, one of the risks with Cision is that it
loses traction in the evolving mobile industry. Shareholders should also be aware of
relatively high indebtedness and potential legal indictments of copyright material
which recently caused Cision to denounce its planned dividend (2012). Although,
goodwill is a significant part of Cision’s balance sheet is more attractive now than
before, considering the recent impairment of the traditional and broadcast
monitoring businesses.
Company Description
The company is listed on the Nasdaq OMX Small Cap. 20 The company reported
975 MSEK of revenues with an operating profit of 81 MSEK. Cision is a software
as a service company divided in to three categories software,professional and
transactional services. The majority of the 16000 customers contribute as a
recurring revenue stream. The majority of revenue is attributable to North America
(75%) with Europe (25%).
The company has an established brand and is often a preferred provider for
companies requesting news services. Moreover, add-on services such as
monitoring and ad support adds a layer of a complete internet package for
companies marketing.
Cision
Company analysis 12
Product Overview
Cisionpoint is a popular tool for planning, following and evaluate distributable
content. Through monitoring what news distribution works in terms of total traffic,
the websites that frequently or are expected to attract traffic, Cisionpoint becomes
an essential tool for marketers to deliver their content efficiently. The database
consists of 1.5 million media contacts and over 200 countries for social media.
Recently in 2013, Cision launched the content marketing suite which helps
companies to enhance creation and analysis of their brand content. An advantage of
Cisions product offering is its global reach of its products and the complete
offering from the planning stage of its content to the deliver and analysis of the
content.
Industry outlook
According to Forrester Research U.S. Marketers are planning to increase their
spending on interactive channels (display,search,email,mobile and social media),
from 16 % in 2011 of its total spending on advertisements to 26 % in 2016. This
growth will drive the spending on IT advertising systems like that of Cisions
subscription services, monitoring business and targeted ad systems. Moreover,
advertising revenues will grow from 7B USD in 2013 to 13B USD in 2017 for the
mobile platform. Catching the mobile growth trend by providing advertising
service products that are friendly to mobile platforms and with an optimized
management system for the specific platforms will be instrumental for the company
to capture as companies become increasingly aware of the transition and potential
for mobile advertising revenue.
Increased competition from Meltwater, PR newswire, business wire could pose a
threat to the US segment which could decrease its margins, despite its position, in
the market. A threat coming from clients themselves are that in-house expertise
already exists and several social media sites simplify news distribution. 60 % of the
world’s internet users are active in social networks and the number of users are
expected to grow by 30 % until 2017. The high growth rate and margins for social
networks will increase the number of social networks substantially. Combined with
increased functionality to satisfy users Cision could be challenged in the arena of
content branding by the social network themselves. However, as long as Cision can
offer its professional complete and global package competitively it appears that
they can keep their market position.
Cision
Company analysis 13
Summary Redeye Rating
The rating consists of five valuation keys, each constituting an overall
assessment of several factors that are rated on a scale of 0 to 2 points. The
maximum score for a valuation key is 10 points.
Rating changes in the report
The ownership parameter of the rating has been upwards adjusted due to
significant change in the ownership situation. Management 7.0p
The Company's management and board have been replaced in the recent past. The reason for this is because of the underlying merger proposal between Cision and Vocus. The new CEO Magnus Thell has extensive experience from Cision. CFO and other parts of management are also replaced and GTCR might plan more layoffs as with Vocus to support profitability.
Ownership 6.5p
GTCR is a strong owner whom are dedicated to acquire Cision, with their expertise represented on the board and executive team of Cision. If the bidding process fails, which is a likely scenario, we can still expect that GTCR will implement layoffs in order to successfully and eventually transition Vocus to Cision.
Growth prospect 8.0p
Cision has a high proportion of recurring revenues and the company has a good chance to succeed in developing their strong brand within new markets. Gross margin is also very high (65-70%) and in combination with further efficiency measures there is good potential for margin expansion. The company also has a very good market position in both North America and the Nordic countries, which are the core markets. margin is also very high (65-70%) and thus there is good potential for margin expansion.
Profitability 4.0p
The company has had a declining profitability in recent years. Furthermore, Cision has sold off much of the old business. Profitability has declined as the company has transformed the business and we expect no quick recovery. Rather a slow recovery that may also mean additional decline in profitability in the short term.
Financial strength 6.0p
Cision has a reasonably good financial situation with good development in its financial standing the last year. To a large extent the company uses a prepaid income model, long-term contracts and recurring revenue, making cash flow stable. Goodwill in relation to equity is not ultimate, but the last impairment write-down has improved the situation as the traditional print and monitoring business is impaired.
Cision
Company analysis 14
Income statement 2012 2013 2014E 2015E 2016E
Net sales 956 856 848 886 940
Total operating costs -843 -1,050 -731 -734 -727 EBITDA 113 -194 117 152 213
Depreciation -55 -47 -49 -50 -74
Amortization 0 0 0 0 0
Impairment charges 0 0 0 0 0 EBIT 58 -242 68 102 138
Share in profits 0 0 0 0 0
Net financial items -24 -22 -24 -16 -20
Exchange rate dif. 0 0 0 0 0 Pre-tax profit 34 -263 44 86 118
Tax 14 -12 -10 -8 -8
Net earnings 48 -276 34 79 110
Balance 2012 2013 2014E 2015E 2016E
Assets
Current assets
Cash in banks 56 66 85 77 78 Receivables 220 151 140 146 155
Inventories 0 0 0 0 0
Other current assets 0 0 0 0 0
Current assets 276 217 225 223 233
Fixed assets Tangible assets 27 23 25 35 28
Associated comp. 0 0 0 0 0
Investments 38 38 42 42 42
Goodwill 1,335 995 995 995 995
Cap. exp. for dev. 0 0 0 0 0 O intangible rights 76 94 93 97 103
O non-current assets 3 1 1 1 1
Total fixed assets 1,478 1,151 1,156 1,171 1,169
Deferred tax assets 5 3 3 3 3
Total (assets) 1,759 1,370 1,384 1,396 1,405
Liabilities
Current liabilities
Short-term debt 405 0 0 0 0 Accounts payable 266 292 280 266 235
O current liabilities 0 0 0 5 0
Current liabilities 671 292 280 271 235
Long-term debt 0 300 310 270 250
O long-term liabilities 2 4 4 4 4 Convertibles 0 0 0 0 0
Total Liabilities 672 596 594 545 489
Deferred tax liab 139 146 146 146 140
Provisions 0 0 0 0 0
Shareholders' equity 947 628 644 705 776 Minority interest (BS) 0 0 0 0 0
Minority & equity 947 628 644 705 776
Total liab & SE 1,759 1,370 1,384 1,396 1,405
Free cash flow 2012 2013 2014E 2015E 2016E
Net sales 956 856 848 886 940 Total operating costs -843 -1,050 -731 -734 -727
Depreciations total -55 -47 -49 -50 -74
EBIT 58 -242 68 102 138
Taxes on EBIT -9 -11 -15 -9 -10
NOPLAT 49 -253 53 93 129
Depreciation 55 47 49 50 74
Gross cash flow 104 -205 102 143 203
Change in WC 35 95 -1 -15 -45
Gross CAPEX 49 280 -55 -64 -73
Free cash flow 188 170 46 64 85
Capital structure 2012 2013 2014E 2015E 2016E
Equity ratio 54% 46% 47% 51% 55%
Debt/equity ratio 43% 48% 48% 38% 32% Net debt 349 234 225 193 172
Capital employed 1,296 862 869 899 948
Capital turnover rate 0.5 0.6 0.6 0.6 0.7
Growth 2012 2013 2014E 2015E 2016E Sales growth -1% -10% -1% 4% 6%
EPS growth (adj) -44% -674% -112% 132% 40%
Profitability 2012 2013 2014E 2015E 2016E
ROE 5% -35% 5% 12% 15% ROCE 4% -21% 7% 11% 14%
ROIC 3% -20% 6% 11% 14%
EBITDA margin 12% -23% 14% 17% 23%
EBIT margin 6% -28% 8% 12% 15% Net margin 5% -32% 4% 9% 12%
Data per share 2012 2013 2014E 2015E 2016E
EPS 3.22 -18.48 2.27 5.27 7.38
EPS adj 3.22 -18.48 2.27 5.27 7.38
Dividend 2.00 1.00 1.13 2.64 3.69 Net debt 23.41 15.69 15.12 12.96 11.55
Total shares 14.91 14.91 14.91 14.91 14.91
Valuation 2012 2013 2014E 2015E 2016E
EV 1,184.1 711.1 1,131.2 1,099.0 1,078.0
P/E 17.4 -1.7 26.8 11.5 8.2 P/E diluted 17.4 -1.7 26.8 11.5 8.2
P/Sales 0.9 0.6 1.1 1.0 1.0
EV/Sales 1.2 0.8 1.3 1.2 1.1
EV/EBITDA 10.5 -3.7 9.7 7.2 5.1 EV/EBIT 20.5 -2.9 16.6 10.7 7.8
P/BV 0.9 0.8 1.4 1.3 1.2
Share information
Reuters code CSN.ST
List Small Cap
Share price 60.8 Total shares, million 14.9
Market Cap, MSEK 905.8
Management & board CEO Magnus Thell
CFO Charlotte Hansson
IR Angela Elliot
Chairman Lawrence C. Fey
Financial information
Q3 report
October 23, 2014
October 28, 2014
February 4, 2015
Analysts Redeye AB Philip Skogby Mäster Samuelsgatan 42, 10tr
[email protected] 111 57 Stockholm
DCF valuation Cash flow, MSEK Risk premium (%) 5.3 % NPV FCF (2013-2015) 156
Beta 1.5 NPV FCF (2016-2022) 345
Risk-free rate (%) 3.0 % NPV FCF (2023-) 487
Interest premium 9.0 % Non-operating assets 51 WACC (%) 11.2 % Interest-bearing debt -300
Fair value estimate MSEK 739
Assumptions 2015-2021 (%)
Average sales growth 7.2 % Fair value e. per share, SEK 49.6 EBIT margin 9.9 % Share price, SEK 60.8
Share performance Growth/year 12/14e
1 month 10.0 % Net sales -5.80 %
3 month 1.3 % Operating profit adj 8.5 %
12 month 51.9 % EPS, just -16.1 % Since start of the year 77.1 % Equity -17.6 %
Shareholder structure % Capital Votes
GTCR Investment X AIV Ltd 74.0 % 74.0 %
Meltwater Drive Sverige AB 15.3 % 15.3 %
Others 8.0 % 8.0 % Skandia 2.0 % 2.0 %
Repurchased own shares 0.3 % 0.3 %
Hatteras Funds 0.2 % 0.2 %
Blomdahl,Håkan 0.1 % 0.1 % SEB Funds 0.1 % 0.1 %
Cision
Company analysis 15
Revenue & Growth (%) EBIT (adjusted) & Margin (%)
Earnings per share Equity & debt-equity ratio (%)
Sales division Geographical areas
Conflict of interests Company description
Philip Skogby owns shares in the company: No
Redeye performs/have performed services for the Company and
receives/have received compensation from the Company in connection
with this.
Over the past hundred years, Cision has helped more than 20,000 customers worldwide get their stories out. From freelancers to the
Fortune 500, the world’s best communicators all turn to Cision to make
sure their message succeeds. And we provide them with the PR and
media software, services and tools to help navigate the changing media landscape and cover every angle – from beginning to end, all
around the globe. Headquartered in Stockholm, Sweden, Cision is
present in Europe, North America and Asia, and has partners in many
countries. Cision AB is quoted on the Nordic Exchange.
-20,0%
-15,0%
-10,0%
-5,0%
0,0%
5,0%
10,0%
780
800
820
840
860
880
900
920
940
960
980
2011 2012 2013 2014E 2015E 2016E
Net sales Net sales growth
-35,0%
-30,0%
-25,0%
-20,0%
-15,0%
-10,0%
-5,0%
0,0%
5,0%
10,0%
15,0%
20,0%
-300
-250
-200
-150
-100
-50
0
50
100
150
200
2011 2012 2013 2014E 2015E 2016E
EBIT adj EBIT margin
-20
-15
-10
-5
0
5
10
-20
-15
-10
-5
0
5
10
2011 2012 2013 2014E 2015E 2016E
EPS, unadjusted EPS, adjusted
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
0
0,1
0,2
0,3
0,4
0,5
0,6
2011 2012 2013 2014E 2015E 2016E
Equity ratio Debt-equity ratio
Subscription Transactional
Professional Services Other
period
North America Europé period
Cision
Company analysis 16
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Redeye Rating (2014-06-10)
Rating Management Ownership Growth
Prospect
Profitability Financial
Strength
7,5p - 10,0p 22 28 11 4 16
3,5p - 7,0p 43 32 54 30 26 0,0p - 3,0p 1 6 1 32 24
Company N 66 66 66 66 66
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