Ebiquity plc (EBQ) Earnings Call Transcript & Summary

Thank you very much, Kayte. And now I will take you through more of the forward-looking strategy and the reasons why our client partner with us to start. We operate in a market that this year in 2025 surpassed the $1 trillion mark, $1 trillion in annual global ad spend that Ebiquity exists to help optimize. And this is desperately needed. Within the $1 trillion or just over that global expenditures, 75% is currently spent through digital media channels. This is something that back in 2017, when I started Digital Decisions, was the rationale for me starting a company like Ebiquity, really dedicated to digital media. Right now, it makes up 3/4 of the market, and this continues to grow. Digital media is rife with wastage and inefficient spend. It is complex, and it changes rapidly. So this is where clients, brand advertisers need most help. That's what Ebiquity is there to provide. We estimate that 42% or more than 42% of the $1 trillion is spent in a way that is not as effective as it should be. It's not driving the business growth that advertising is supposed to deliver for brand advertisers. We're talking about roughly the economic size of the entire GDP of Vietnam or 14x the entire global recorded music industry. This is a significant market that needs to be optimized. It needs to mature. When done right, advertising is a powerful growth driver. Ebiquity, in partnership with Thinkbox and several GroupM agencies, has proven that the short-term profit payback on advertising when done right is 1.87x. The total term profit payback, which includes the long-term effect of building brand equity and advertising continuously, is 4.11x, making advertising a significantly valuable investment. And Ebiquity exists to help maximize the incremental gains as a result of these investments and to create the business case for our client stakeholders to help them warrant the budgets they see in order to grow their brands within their organizations. To give you an example of a fantastic client relationship of Ebiquity, our long-standing client, Jaguar Land Rover, where we delivered over GBP 300 million of incremental value through the work we've done with them around transforming their media operations, governing their media investments and growing their incremental profit. We help brands deliver Effective and Responsible Advertising. We call it ERA. Effective really means driving the maximum amount of incremental business growth as a result of the investments in advertising, making sure that every dollar, pound or euro is spent in the best possible way, ensuring optimal brand health in both short and long-term competitiveness. This goes hand in hand with responsibility. These 2 are not mutually exclusive, rather the opposite. Responsibility refers to making sure that advertisement -- advertising investments are compliant with regulatory frameworks and with contracts between our clients, the brand advertisers and their agency and technology partners. We do a lot of this compliance work and are experts in the different regulations faced by brand advertisers. For example, the Fair Credit regulations in the U.S.A. that prohibit targeting people based on gender, ethnicity, age in the finance sector or regulations that are applicable to alcoholic beverages clients in many markets across the world. We help our brand advertisers navigate these regulatory frameworks and maximize the effectiveness. We make sure that investments in advertising are in line with company policies and that we minimize or completely prevent any excessive wastage as a result of their investments, including making sure that they don't have a negative impact on society, for example, by advertising and therefore economically empowering platforms that proliferate hate speech. We provide advice clients can trust, results that they can measure. We are an independent authority. We're not conflicted. We don't provide any media buying or selling services. We come at all the work that we do as an independent authority, and that drives incredible value. To highlight one statistic on here that I find particularly engaging and a clear testament to the value that we deliver to clients is that in the last 5 years, we have delivered over $900 million in cash returns to our clients from their agency partners as a result of the agencies not delivering in line with their contractual agreements. You can imagine that the ROI on working with us in that regard is massive. So what is it that we do? In historical reports and also the 2024 report, which is closing a chapter of previous leadership, we've referred to our business across 4 service lines: Marketing Effectiveness, Media Performance, Media Management and Contract Compliance. But really what Ebiquity does and what we will be reporting on moving forward is that we help our clients transform, govern and grow all their operations that are relevant to advertising and media. Henceforth, Transform will cover our Media Management service line. Govern covers our Media Performance and Contract Compliance service lines. And Grow is where we provide econometric modeling to help grow brands through incremental profit in our Marketing Effectiveness division. Transform really means help clients design and deploy the operating models that will set them up for future success. This is consultancy work that Ebiquity provides. We create purpose-built operating models. We help clients design a model that is fit for their business and stakeholder objectives. We help them select partners, for example, media agencies but also technology partners. And we help them design the ideal technology infrastructure through a combination of in-house developments and partner licenses that they engage with. An example on the right is the case study for a large automotive client, where we help them design and deploy an operating model that sets them up for success all the way through to 2030, just to give you an idea of the longevity of the work that we do and how forward-looking the relationships with our clients really are. Through doing this work, we delivered an immediate 20% cost efficiency versus their existing baselines. So whilst delivering long-term strategic value, we also deliver short-term immediate value back to the company that can be reinvested in effective channels to drive further growth in their company. An example of our governance work where we provide ongoing continuous monitoring and validation of all the investments in media across the world, across all the different operating units, brands, product categories of our clients and across all the different partners they work with. This is often a roster that can get very complex and decentralized. We provide clarity. Ebiquity provides a source of truth that we refer to as a source of trust, which all partners but most primarily our clients can rely on to make investment decisions and to optimize their investments in advertising. We create transparency. We help identify opportunities for and then implement best practices. And we foster long-term trust with our clients and in their key relationships with their partners. An example on the right, Perfetti Van Melle is a client, an FMCG brand, where we delivered up to 53% of value opportunity in the first year of working with them. 53%, so more than half of our investment in media that was in scope for this review was either wasted or could be invested better. You can imagine the results of improving that, reallocating those investments. Another example is a large FMCG brand that we've had a long-standing relationship with, where we delivered 127 financial compliance audits across 48 markets over 5 years. We've delivered EUR 106 million in returns and findings for the work that we've done, which for this client amounted to an ROI on the Ebiquity fees of 53.1x, highly accretive and very much worthwhile. What we often see is that these returns, credits, whether it's credits or cash, can be used to invest in Transform and Grow solutions provided by Ebiquity as well as delivered as savings back to the business. And then we help our clients grow. As Kayte highlighted in our financial results for 2024, our largest growth driver in the company was our Marketing Effectiveness practice with 13.4% growth year-on-year. This is, I believe, the very first signal of what a renewed focus on our Marketing Effectiveness capabilities can bring us as a company. We deliver true incremental profit validated and trusted in the market through the media mix modeling, brand equity studies, price promotions, geo testing, all led by our team of expert econometricians, experts in advertising and media. Virgin Media O2, VMO2, on the right is a long-standing client, where we deliver Grow services for them. We help them design their investments in advertising and media. By doing so, we've managed to increase our brand effectiveness by 21% and their media ROI by 26%. This is a long-standing ongoing relationship where our modeling and our advice guides the longer-term strategic decision-making but also operational and tactical decisions when consumer markets change or, for example, we're faced with economic downturns that need to be addressed. More on that later as, of course, that is very relevant for the time that we live in today. Ebiquity is the global authority. Why I say that is because we work for more than 75 of the top 100 global brand advertisers based on their global ad spend. That is unprecedented. Our footprint, our experience, our deep integrated relationships with these clients give us access to best practices and investment data and client priorities at a scale that none of our competitors or contemporaries are able to provide. In total, we work for more than 500 clients across the world, in 123 countries. And we analyze over $100 billion or more than 10% of the market in media investment every year across all of the different service lines that we provide. We refer to our model, our global network model, as being most global, most local. We are currently live in 18 markets with local offices with local experts. This includes all of the major media markets. We have experts on the ground that provide local relevancy, local expertise because many of the challenges faced by advertisers are incredibly nuanced. Even within, for example, Continental Europe, the German and French markets are wildly different in terms of how the trading mechanics work and what the priorities are for clients as a result of that. But we provide global consistency, scale deliveries, and we feed our findings and validated results all the way up to the top, to the CMO and the CFO in the relationships that we have. But we're able to service our clients regardless of how complex or decentralized their operating models are at global levels -- at the global level and in local markets. We have technology, which is allowing us to operate at greater speed, accuracy, transparency and with way more richness and depth than any of our competitors are able to provide to brands. We get transaction data, transaction -- transacted media data directly from source across a large number of the different media channels we cover, especially in the government service line. In our Media Data Vault, which is our rich data infrastructure, it's proprietary, we hold $73 billion in transacted media spend. This amounts to trillions of ad impressions, where we cover over 123 countries. Across all of the work we do, we find -- we seek and find opportunities to enhance our delivery, to delve into data that would otherwise be more difficult to obtain or analyze to find richer insights, all with the ambition or the mission objective to drive ERA, Effective and Responsible Advertising. Our global footprint is interesting. Ebiquity is listed in the U.K., as all of you on this call today know. And this is very much where the origin -- sort of the primary origins of the company are. 42% of our revenue in 2024 came from the U.K. and Ireland. But this market constitutes only 5% of global ad spend. In Europe, we derived 28% of our revenues in 2024. And this market constitutes 14% of the global ad spend. As you can see, our extraction rates -- our extraction ratios are very different still in the Americas and Asia Pacific, which are 2 primary geographic opportunities and therefore priorities that we're focused on to expand our footprint and deliver our forward-looking services into these markets that provide a huge commercial opportunity. In the Americas, we went through significant growth in 2021, '22 and '23. '24 was more challenging. We're working on recovering and making sure that the market is set up to deliver its sustainable next phase of growth. We are innovating for the future. Ebiquity is 28 or 29 years old, but we are forward-looking, and we are putting our money where our mouths are. In the last years, we've made several critical acquisitions, starting with Digital Decisions, my business in Q1 of 2020, then an expansion into Canada with Ford & Semple, who were a partner before, providing similar services to Ebiquity. And then in Q2 of 2022, we purchased MMi and MediaPath, giving us not only additional scale, primarily in the U.S. region, but also new access to new technologies that enable us to deliver our work better, faster and with richer insights and results that drive returns for our clients. Obviously, acquiring businesses takes -- creates friction during the integration and transformational period that follows that. At the same time as acquiring the last 2 businesses, we have gone through a magnificent transformation at Ebiquity that was very intense. Put a lot of pressure on our internal teams and, in my opinion, caused, over the last few years, Ebiquity to be more inward focused than externally focused. I am very happy with the fact that we are out of that transformation. And we believe we have a strong platform to start to recapitalize on the opportunity and to materialize the value delivered by that transformative effort delivered by so many people over the past years. In our sector, we are leading when it comes to AI solutions. We have established an AI Center of Excellence last year. We've launched an internal agentic AI chatbot, which is based on large language models that are leading in the market but all hosted and accessed by our global workforce in a private secure environment, trained on Ebiquity data, client deliverables, data, obviously, all in a secure way, managing sensitivities correctly but allowing us to enable our entire workforce to do better work faster, improve their workflows, the way they're able to partner with clients and also the types of insights. They're able to explore and find and deliver to clients as a result of this technology enablement. We call this ERA bot, and this is a fascinating and super exciting thing for the company that has already delivered major improvement in our ability to work faster and better. As a result of our fast progress and our incredibly promising results to date, I have made a capital commitment of up to GBP 750,000 in 2025 to accelerate our R&D efforts in this area. We're funding this from our cash positions, from our headroom. And the reason that we say up to is that we're carefully balancing our investments with working on reducing our net debt position. AI is becoming more agentic. AI is also ubiquitous. I sometimes joke that AI is Ebiquity. AI is becoming more agentic, which means that AI is becoming better at fulfilling complicated multi-step tasks and processes with less and less human oversight. This is an incredible opportunity, and therefore, all of our clients are experimenting with this and are deploying both homegrown solutions. But also all of their partners across agencies and technologies are introducing AI layers to the work they deliver or the platforms they provide. The more agentic and autonomous these AI applications become, the more difficult it becomes to have proper human oversight. So AI needs clear guardrails and instructions in order to deliver results, the right results, and mitigate risks. One of our largest clients refers to this to me as they want to innovate fast but need to make sure they do so responsibly. This is where Ebiquity comes in. We've released the ERA Curriculum. ERA, just as a reminder, stands for Effective and Responsible Advertising. The way you should see this is it is essentially a training manual that can be used when our clients internally or partners are utilizing any AI application, it doesn't matter from which provider, to train that model and give it clear instructions on what it should and what it shouldn't do. For example, the different regulations that are in place for the scope on which it is creating a media plan or the company rules, guardrails, best practices, taxonomies and naming conventions relevant to the client that the AI application needs to adhere to when it generates its output. We help clients design and deploy their ERA Curriculum that they can use across all the different applications that relate to advertising and media, as I said before, whether they are doing so internally or externally. This is an intense 2- to 6-month consulting project, which is delivered with a start and an end. But then there is an option for clients to take a subscription with Ebiquity, where we maintain and host the ERA Curriculum. So it's 2 new commercial opportunities incremental to what has been shared earlier today and what you've known about Ebiquity before. We're very excited about the traction in this area. In the second half of this year, we plan to release an agentic AI pre-flight check. The way Ebiquity primarily worked historically is that we review data of campaigns that have been delivered, and we check whether the delivery was in line with best practices. And we find areas for improvement that can then be deployed in future campaigns. We operated mostly downstream. This is an opportunity for us to move upstream to provide a scalable automated tool that helps during the media planning process to prevent any noncompliance or issues seeping into the campaigns that will be run. So it's more proactive, forward looking, highly incremental and complementary to the work that we do. We know that there is demand for this because historically, Ebiquity has provided some pre-flight check capabilities in a less automated way. What we found is that delivery was difficult because the time lines of the media plan process are so short and also tactical that the turnaround time for our team to do a pre-flight check just weren't in line with the requirements and expectations of clients and their agencies. This changes that completely and allows us to become a part of the planning stage and, as I said, operate more upstream. Our growth strategy is combining several things that the company has been focused on with our new strategic priorities. We are focused on continuing to grow our priority regions, the Americas and APAC. And of course, Continental Europe and U.K. and Ireland also continue to provide an opportunity for growth. But we highlight these regions because of our relative under-extraction in these markets, as showcased earlier in this presentation. We're focused on driving operational efficiency. And we have never lived in a more exciting time to do so than now with all of the capabilities that are coming online and all the capabilities we are delivering to our teams globally through the internal secure AI applications we're pushing into the organization. We're leveraging the extensive client base we have through focused cross and upsell opportunities, and we're focused on increasing the revenues of digital solutions. As I showed earlier, digital now makes up 3/4 of the entire global ad market. New strategic priorities that we have deployed and are working towards is to stay and remain a leader in AI, both in terms of how we enable and empower our staff to engage with these applications and enhance their workflows and the solutions we're able to provide to clients. We have fully shifted focus from revenue to operating profit. We share a firm belief that there is such a thing as the wrong kind of revenue. Historically, all of Ebiquity's forecast, budgets, incentives were built around revenue, which, in my opinion, has led to us having some lower-quality revenue in certain areas. We're putting accountability and responsibility to drive high-margin growth into the organization. And we've deployed that across all of the different budget processes and incentive schemes that we have live for our staff globally, and we're empowering the regional leadership to focus and optimize towards operating profit. We're integrating Marketing Effectiveness and Media Performance, which is something that we're unique in terms of our capability to do so. We have competitors across both Marketing Effectiveness and Media Performance. But those competitive landscapes look very different. We're the only ones that can bring the 2 together and have skilled operations and expertise and track records across both. And bringing them together, I believe, is a huge strategic advantage and something that the market is really yearning for. We're focused on One Ebiquity. We operate as One Ebiquity. Everyone that represents Ebiquity in the market needs to represent the entirety of Ebiquity, not just a single service line or a single market. This is already moving forward very well, I believe. And we're making it much easier to buy from Ebiquity, and we're making it much easier to sell Ebiquity as well. Navigating Ebiquity has never been more straightforward than it is today. And we're very excited about the opportunities that will bring us. We continue to focus on cross and upselling across the very vast client roster that we are privileged to work with. We have refreshed the Ebiquity narrative and positioning. Those of you that have attended previous presentations will probably have seen a very different Ebiquity today. We have released updated assets, including websites and all the client-facing collaterals, and we're continuing to double down on our clearer narrative and positioning, already behind ERA, Effective and Responsible Advertising. And we have a focus, and we're investing in that on emerging channels, fast-growing channels with a lot of complications and issues for clients to get expert independent advice on such as streaming TV or connective TV and retail media. Now I wanted to highlight today specifically that we are very likely heading into some kind of recession. Exactly how intense and how globally widespread it will be remains to be determined and has been -- has proven to be highly unpredictable, largely driven by the tariff interventions across the world, mostly stemming from the North America region. We believe that consumer markets will change. The global trade and manufacturing landscape will change. And therefore, many of our clients will be impacted by the results of these trade inventions and potentially the economic downturn. The good thing, and this is why I'm confident, is that Ebiquity is a proven partner for brands that have to navigate challenging economic cycles. I don't want to say we're anti-cyclical because I think we're both cyclical and anti-cyclical. We've done really well through COVID, where most brand advertisers had to radically cut or even entirely -- completely suspend all their investments in marketing and advertising as their sectors dried up, for example, in travel and hospitality. We help clients cut the right things, make sure they preserve as much brand equity and value as possible so that they can come out of the economic downturn period with completed edge and turn it into a leadership advantage. Similarly, we work for all the large automotives, except for Tesla, who don't advertise. And through the automotive chip shortage crisis, we helped our brand advertisers manage the fact that their supply dried up and they had to steer away from focusing on promotional sales-oriented campaigns and focus more on brand building and maintenance in their advertising activities for when supply came back online. We're releasing a study in the coming weeks called the ROI of resilience, advertising through economic uncertainty, to firmly establish ourselves as -- or reestablish ourselves as the partner for brand advertisers to navigate economic downturns and specifically the likely impending recession we're heading into. Now as a last slide, I just wanted to highlight why I think this is a very good time to join me as an Ebiquity shareholder. As I said at the start of this presentation, I am the largest individual shareholder, and I hold 7% in the company. And that is because I'm committed and I believe in the opportunity ahead. We have gone through a significant transformation, and we're now ready to capitalize on the new structure. We have a new leadership team set up to deliver profitable growth and innovation. We have strong momentum for effective and responsible advertising. We have a significant lead in AI, both in terms of internal utilization and deployment and external solutions. This is not just some buzzwords included in this presentation. This is real value that is online now. And of course, I believe, and the market agrees with me, that we have a currently materially undervalued share price. So I personally believe this is a very good time to join us if you believe in the opportunity that we presented to you today and in our ability to turn around the company and enter its next phase of growth. Now I want to thank everyone for dialing in today. And I think we're going to go through some Q&A now.

That's right. Ruben and Kayte, thanks very much for your presentation. [Operator Instructions] I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboards. As you can see, we have received a number of questions, both pre-submitted and throughout today's live presentation. And Ruben, if I can hand over to you to chair the Q&A, that would be great, and then I'll pick up from you at the end.

Thank you. Appreciate it. And yes, of course, I see that there are 2 questions submitted live today on the call quite early on. The first question is, you are described to be uniquely positioned to help clients during disruptive times. How are you leveraging this position now, particularly in volatile sectors like retail and tech? I hope -- considering when this question was posted, I hope my second to last slide answered this. If not, please ask a follow-up question, and I will gladly provide more detail. Another question. You mentioned that you have already made some key hires. Can you provide more detail on these appointments? What specific gaps or needs within the team were these roles intended to address that may not have been covered previously? Again, I think the question was asked relatively early on. The key hires referred to are a combination of Kayte being an external hire, internal appointments and promotions and several external appointments really focused on senior high-caliber go-to-market or revenue-focused personnel that have been put in place. Also, we have made specific appointments for leadership on emerging media channels, deep expertise for CTV or connected TV and retail media. I hope that answers your question. Then there are some pre-submitted questions. The first one. How does Ebiquity plan to monetize its new AI offerings such as the ERA Curriculum and the forthcoming pre-flight check agent? And what impact are these expected to have on revenue growth and margins in the near to medium term? The ERA Curriculum, I walked through already. It will be a combination of a high-ticket consultancy project followed by a subscription fee for maintenance and hosting. We are not yet fully set on the commercial model for our pre-flight check agent. Whether it will be some kind of usage-based model or a tier-based subscription to be able to utilize the pre-flight check agent on an always-on, ongoing basis, that is TBD. We're now fully focused on development before we can start to engage in product market fit and commercialization strategies. With the development of proprietary technologies like the AI RF protocol aimed at enhancing AI efficiency and reducing costs, how does Ebiquity intend to leverage these innovations to gain a competitive advantage in the media analytics market? Great question. Thank you. .AIRF is particularly exciting. And I don't think I've mentioned it today. We have a protocol, a compression protocol that allows us to create input for AI systems in a way that is condensed as much as possible to maximize the purity, so we remove any conflicting statements or information or guidance, but also to minimize the compute needed to process and consume the input. So by lowering compute, we lower costs in terms of being able to use our AI -- ERA Curriculum, for example, and we're significantly lowering the carbon footprint as a result of process and the information. I think this is completely in line with our focus on -- our continued focus on responsibility and within that sustainability and making sure that we don't create excessive unnecessary costs for our clients and internally when we use AI applications. We're thinking about it ahead of the curve. And the .AIRF protocol, which is essentially a compression file type, is a key initiative that I think sets us ahead of the market quite significantly. Then how far along is the GMP365 rollout? And is it delivering the anticipated efficiency benefit and cost savings? Is much extra needing to be done to achieve the expected benefits? Great question. We are well integrated and set up to utilize the GMP365 platform. And in certain areas, across certain services in our business, it is helping us to deliver projects more efficiently and at higher value. I think the initially anticipated efficiency back in 2022 that was communicated to the market has not materialized. Back then, the expectation was that it would deliver GBP 5 million in annualized cost savings by 2025. That has not materialized. So the expected benefits have not been achieved, and I also think that, that statement back then was made in a very different situation in the industry than we are in right now. We continue to benefit from the platform and have a strong relationship setup, enabled to do so where we have exclusive access to the platform and use it with the clients that we work for. And then in the current turbulent economic situation, do you anticipate a downturn in advertising budgets? And if so, will this negatively impact on your revenue targets? We absolutely expect a downturn in ad spend. We already see clients suspend or defer investments in marketing and advertising. However, as I explained in the second to last slide, we have proven historically, and I think we'll do that again now, to be quite resilient because clients that need to cut their investments in advertising need to do so in the best possible way. You can't just randomly cut however many percentage points you're forced to cut by your finance leadership. So whilst it all depends on the severity and the widespread nature of any economic downturn or recession that may come our way, for now, I don't see that we are fully aligned with or correlated with downturns in ad spend, as we've also seen during and shortly after the COVID pandemic. But I will say that this remains trying to read a crystal ball. It will depend on what happens, and we need to stay vigilant. We're monitoring the situation. And as you have seen today, we are prepositioning ourselves to make sure that we adapt to whatever economic situation we enter, and we capitalize on it. We continue to support our clients, continue to deliver high value as they are faced with the same challenges that everyone else has faced and need a trusted external expert partner to help them do it. I think those are the questions. So I would like to again thank everyone for joining today. All of you that are shareholders, thank you for your continued support. And those that may become new shareholders following today, thank you for your interest. I'm there beside you, and I take it very seriously. I think we have a huge opportunity ahead. I'm incredibly happy that now the team is fully completed with Kayte by my side as a strong, high-caliber CFO and financial partner to work with as we turn around this company and enter what I believe is an incredibly exciting opportune phase in its 30-year history. Thanks again, and I wish everyone a fantastic rest of your day.

Ruben and Kayte, thank you very much for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? On behalf of the management team of Ebiquity plc, we'd like to thank you for attending today's presentation, and good morning to you all.