Location Sciences: Reassuring trading update
Location Sciences (LON:LSAI), the world leader in location verification for mobile advertising, recently released a trading update for the six months to 30 June. The company ended the period with cash reserves of £1.7mln, which the company believes provides sufficient funding through to Q2 2021. The loss at the EBITDA level reduced to £0.7mln reflecting cost-cutting measures.
Location Sciences reports that H1 revenues were approximately £0.65mln, a 43% increase year-on-year (yoy). This includes some £0.19mln of securitisation of revenues relating to the partnership with X-Mode that was announced in January. The company prefers to focus on the “core” revenue (wholly managed business), which came in at £0.46mln, up slightly yoy. We regard this as a good outcome against a very challenging mobile advertising market backdrop.
The core business - Verify
The main focus for Location Sciences is its Verify product for enabling accurate geographic targeting of advertising campaigns to mobile phones and devices. Companies often pay for ad campaigns based on how many views their ad receives around a tightly specified physical location. Without Verify they risk paying for inaccurate targeting.
Among the end user base for the Verify product are restaurants and retailers, with a portion of Verify revenues linked directly to their advertising volume. This has been severely impacted by COVID-19. Nonetheless, the company is now reporting that it expects some recovery in advertising revenues in H2.
Furthermore, there is evidence that the advertising industry is becoming more conscious of location data accuracy as a driver – the trading update highlights recent comments from Group M (the world’s leading advertising agency). We believe that the macro trend continues to move in favour of Location Sciences and the Verify product.
In addition, Location Sciences launched a new product during H1 called Verify Audience, which addresses the market for location-based audience segments. This targets consumers based on their previous visiting of a particular physical location, as opposed to proximity marketing (the first application of Verify), which depends on their location at the exact time the ad is viewed. We estimate that location-based audience segments represents a market about four times larger than proximity (which will continue to be important for Location Sciences).
Quick facts: Location Sciences Group PLC
Price: 0.435 GBX
Market Cap: £2.48 m
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