The Pureprofile turnaround: More evidence that domain expertise counts double

Welcome to a Friday morning edition of Unmade, kicked off on QF430 on the way to last night’s Publish Awards, and wrapped up in Sydney this morning with a slight hangover.

To our genuine surprise, considering the five other excellent publications on the shortlist, Unmade won launch of the year last night. I was also fortunate enough to be named columnist of the year. If all the people who told me last night they‘d been meaning to become a paying member, signed up today… we’d have three more members. You’re welcome to support us by beating them to it.

Pureprofile weathers the storm

So we’re done for another earning season. The last of the ASX-listed media and marketing stocks to report was panel research company Pureprofile.

For a company that seemed doomed three years ago, it’s been quite the turnaround for Pureprofile. On Tuesday, it informed the market that it had grown its revenues by 39% to $41.7m and EBITDA profits by 28% to $4m.

And while those who backed the company when it floated in July 2017 have pretty much lost their shirts, there is now two years of evidence that Pureprofile has come out the other side.

It’s a company that has (so far) been through four distinct eras.

First came the genius founder era, in the decade before the company floated. This was the period when founder Paul Chan began to build a company that put together online panels of consumers willing to share their opinions in exchange for rewards. In the background there was also a plan to use this knowledge to create one of Australia (and later the world’s) biggest pools of cookied consumers who could be directly targeted with online ads. That was an idea well ahead of its time.

Then came the ASX era. The 2015 float raised $12m in new funding. With programmatic advertising taking off, the company put that money towards buying performance marketing outfit Cohort. It did not work out.

The company quickly lost its way. Although performance media increased its overall revenues, it did nothing for profits. Chan got the tap on the shoulder at the end of 2017, initially given the face saving title of chief innovation officer and then leaving altogether.

Former Vevo executive Nic Jones was brought in as the new CEO. Notably, he’d never been in the research industry. He made some big promises, saying in the ASX announcement at the time: “I look forward to taking the company to truly global heights and establishing it as a globally dominant company with a range of elegant and innovative digital products.”

It was a short, and wild, ride. The company did not become globally dominant.

Chan was gone altogether within a couple of months. The Cohort acquisition proved to be a dud, with the company initially blaming the banking Royal Commission for drying up clients’ appetite for lead generating activity. Similarly the company’s investment in programmatic outfit Sparc went south.

In early 2019, Pureprofile sold off Cohort for just half a million dollars.

The chart of the company’s revenue and profits over the eight years it has been listed is telling.

As regular Unmade readers will know, we use these charts to show progress over time. The green bars, which correspond to the Y-axis on the left, show revenue. The red line, corresponding to the Y-axis on the right, shows EBITDA profits.

EBITDA (earnings before interest, taxation, depreciation and amortisation) is as good an indicator as any of how a company is doing, because it shows profits before tax issues and writedowns.

You’ll see how Pureprofile grew steadily in its first year listed, before revenues initially jumped thanks to the Cohort acquisition, and then fell again once it was sold.

It was a truly wild time. Shareholder Oceania Partners, the original owners of Cohort, tried and failed to oust chairman Paul Edwards. In turn, Pureprofile claimed it had been misled about the health of Cohort when it bought it.

It’s rare for an ASX listed company to report a negative EBITDA number. Usually when you see headlines about ASX companies reporting losses it’s because of paper writedowns of their valuations, not the sort of loss that sees you with less money in the bank at the end of the year than the start.

But that was what happened in FY19, with the company making a loss of $0.7m.

By the end of 2019, Pureprofile made a desperate deal to get more finance at a painful 20% interest rate and Nic Jones hit the exit. By then the company was $16m in debt. As I wrote in Mumbrella back in 2019: “When he took the helm in 2017, Pureprofile was already deeply troubled. Now it appears to be doomed as an ASX-listed concern.”

From the outside, things looked bleak. Pureprofile went several months without a CEO, with Edwards covering the role. The company’s total market capitalisation, which had been as high as $80m, was little more than $1m.

But Pureprofile’s turnaround era was actually beginning. In the early months of Covid, the company did a deal with its lender Lucerne to swap most of its debt for equity. It drastically diluted the original shareholders but at least the company survived.

And just as importantly, it found the right person to lead the company. This time it opted for domain expertise, appointing the unflashy (that’s intended as a compliment) Martin Filz.

Filz’s domain expertise comes from deep within the research sector. As the ASX announcement put it at the time: “Mr Filz is one of the most well-respected and influential individuals in the market research industry and has held senior executive roles as Managing Director of EMEA & APAC at Research Now (now a part of Dynata) and CEO of EMEA / APAC at Kantar-owned, Lightspeed GMI.”

It’s worth noting that Lightspeed, now owned by Bain, is the second biggest player in the space globally.

Going back to the chart above, the FY21 column was the first with Filz at the helm, for most of that period. And the FY22, which is what was reported this week, shows further progress.

It’s now a simpler company, focused on growing internationally as a panel based research organisation, rather than the smoke and mirrors of growth through programmatic shenanigans. One of its big wins over the last year or so was doing a deal to reward panel members with Coles-aligned Flybuys points. The compan y is also building out its self service product.

Filz mentioned in this week’s investor briefing that it is building a product with data on Australia’s 1000 top brands. What CMO wouldn’t subscribe to that at the right price?

On the operational side, as Filz pointed out in the briefing, the company has now had seven quarters in a row of positive cashflow.

Honestly, the update was all a bit boring. Again, that’s meant as a compliment. There were no big gambles. It looks like the wild ride is over.

Unmade Index: Red whine

Yesterday’s 2% slump across the ASX All Ords, was replicated on The Unmade Index of ASX-listed media and marketing companies, with none of them in positive territory.

Seven West Media experienced the biggest slump in price with the share price dropping 4.8%, taking the company’s market capitalisation back below $800m.

Meanwhile, from tomorrow The Unmade Index will expand its coverage to include The Market Herald (ASX:TMH), owner of Hot Copper, which this week agreed to buy Gumtree, Carsguide and Autotrader.

Time to let you get on with your day.

A reminder to trade marketers, Unmade will be accepting advertising from next month. If you’d like to see your brand featured in the publication that was officially launch of the year, do drop Damian a line at damian@unmade.media to get your hands on our media kit.

I’ll be back with Best of the Week tomorrow.

Have a great Friday.

Toodlepip…

Tim Burrowes

tim@unmade.media