This is an excerpt from the Polish version of DM BOÅš SA’s research report prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 4.0.
2023 was prosperous for Brand24 in all respects; despite the adverse impact of weakening US$ the Company’s revenues/ adj EBITDA/ OCF grew 25%/31%/39% yoy, new products (Insights 24 and Brand Monitoring – an application from the Semrush platform) generated revenues at PLN 1.5 million in total while the CLTC/ CAC ratio1 materially improved which was reflected in Brand24’s very good market share price performance last year and in 1Q24. The Company’s financial results were inter alia supported by the product development and key processes improvement initiatives such as the introduction of other than English and Polish language versions, marketing automation of new notifications, more interesting webinars, more data sources etc.
The crucial role in these changes belong to the AI-related implementations (for example, AI is employed to improve the customer service offering immediate summaries of talks with users, helps create the new blog content that constitutes the main channel of Brand24’s customer acquisition, improves the meeting effectiveness via tools creating automatic transcripts and summaries) which however brings about mostly product changes; in 2023 Brand24 launched AI Wnioski (a functionality which implements AI to analyze data and provide the user with ready-made basic conclusions), AI anomaly detection function, AI topic analysis and more.
The crucial project the Company has been working on is the AI Brand Assistant – a virtual consultant which can be questioned about anything connected to the brand (with an access to all the metrics and data, able to make graphs and slides for the presentation); a Beta version has been already tested by Brand24’s select clients.
Apart from the product issues (and the related pricing policy2 ), currently the Company is faced with crucial decisions regarding the way of (i) using the accumulated net cash (over PLN 6 million at 2023 2 Brand24 believes that a room for the price upgrades is still huge (and targets the ARPU growth for next 2 years at a dozen or so percent with the ambition to at least double the ARPU in a 5-year perspective). eop, excluding leasing; would it be the distribution to shareholders, acquisitions or something else?) and (ii) strategic option review ending (started at mid-March last year, for the purpose of an analysis of possibilities to find a business partner that would help accelerate the Company’s development abroad (especially in the US) and thus increase the effectiveness of Brand24’s client acquisition which would allow for a quantum leap of a scale of operations3 ) – according to the Company’s management last announcements, the talks are still under way.
Our 12M EFV for Brand24 constituting a 90%/ 10% mix of the outcomes of DCF and peer-relative valuation approaches (no change in weights) stands at PLN 56.2 per share (previously PLN 48.8 per share). Our 12M EFV falls under the positive impact of the valuation horizon forward shift in time, basing of the peer relative approach on 2024 multiples (instead of 2023) and a decision to lower (following footsteps of A. Damodaran’s estimates) the ERP assumption for Poland to 5.9% (from 6.3% previously).
