DGTL Revenue Soars, Stock Reaches Record High as Insider Buys

In the thick of earnings season, investors aren’t only cheering for blue chip tech companies like Square (NYSE: SQ), Qualcomm (NASDAQ: QCOM), Snap (NYSE: SNAP), The Trade Desk (NASDAQ:TTD), AcuityAds (TSX: AD) and MDF Commerce (TSX: MDF), and following earnings beats, they are bidding up smaller rapid growth stage companies too, where the upside can be considerably higher amid broader market trends. Of particular note is DGTL Holdings Inc. (TSX-V: DGTL), a venture capital investment company whose flagship asset is the AI/ML (Artificial Intelligence/Machine Learning) content-as-a-service (CaaS) platform called Hashoff.

The proprietary technology allows Hashoff customers to run effective localized brand marketing campaigns from top to bottom, including succinct engagement of specific influencers from a pool of more than 140 million freelance content creators and quantifiable marketing metrics.

The comprehensive platform has drawn the attention of household brands such as Amheuser-Busch InBev (NYSE: BUD), Ulta Beauty (NASDAQ: ULTA), Dunkin Brands (NASDAQ:DNKN), TJ Maxx (NYSE: TJX) and Syneos Health (NASDAQ: SYNH) to name just a few companies in Hashoff’s client portfolio. And five more major accounts were added to this list this past month.

A Banner “First” Quarter

During the quarter ended August 31, 2020, DGTL posted high double-digit revenue growth during what was arguably the worst economic climate in a decade, spurring the stock to a record high. Officially the first quarter of fiscal 2021 for DGTL, it was the first quarterly report since its acquisition of Hashoff earlier this year.

For the quarter, DGTL reported revenue of $1.16 million, representing an 83% improvement in revenue generated by Hashoff in the year prior quarter. Gross profit was $464,583 and net loss was $323,118, a negligible amount considering the company logged one-time costs associated with the Hashoff acquisition, listing on the TSXV, operational integration, and hiring a brand new business development and accounts management team.

A notable accomplishment for a growth stage company during a quarter in which they completed their qualifying transaction.

Excelling During a Pandemic

What is particularly impressive is that the growth came against the backdrop of the COVID-19 pandemic, which crippled many businesses and capped ad spending in a bid to preserve capital. For example, client Dunkin’ Brands, which is in negotiations to be acquired by Inspire Brands for $8.8 billion, shuttered 800 restaurants in 2020.

Safe to say, a company like Dunkin Brands wasn’t deploying the same amount of marketing money that it would during a typical year.

“Understandably, some of our clients decreased ad spend in response to COVID-19, but that didn’t stop of from executing on our model to accelerate growth through other channels,” said Mike Racic, CEO of DGTL Holdings, during a phone conversation with Baystreet.ca. “While there was some temporary drag from covid, much of that was offset for us by heightened demand for enterprise level CaaS platforms like Hashoff that allow global brands to efficiently run remote marketing campaigns.”

To lend some color as to what COVID-19 did to competitors, note that AcuityAds Holdings Inc. (TSX: AT) (OTCQX: ACUIF) saw revenue decline 24% in the second quarter (ended June 30, 2020) to $19.6 million. Net loss for the quarter was $1.6 million for AcuityAds.

AcuityAds has a market capitalization of approximately C$360 million. DGTL has a market cap of about C$9 million.

Another Revenue Double In The Cards

It doesn’t take skilled tea-leaf reading ability to see what is possible in revenue growth for DGTL in the current quarter.

On October 15th, DGTL secured a new client service agreement with an anonymous global leader in the e-marketing services sector interested in using Hashoff’s “IAM” and “Create Marketplace” products in the burgeoning e-sports market.

The 12-month contract is valued at US $1.0 million.

Only days after that deal, Hashoff inked a 24-month contract with a Nasdaq-listed “global leader in online fantasy sports gambling.” While companies frequently must keep new clients anonymous, DGTL went on to further say that the fantasy sports company has a market cap in excess of $16 billion and services fantasy lineup bets on essentially all major professional sports. Terms of the contract weren’t disclosed.

That wasn’t it for October, as Hashoff secured another 12-month contract, this time with a “one of the largest consumer apparel e-commerce companies in the world.” Again keeping the company unnamed, it was reported that according to a Brandz™ market research report, this newest client was ranked number 15 on a “Top 50 Global Brand Builders” list, with 2019 FYE sales revenue estimated at over $30 billion.

This licensing agreement has a minimum value in excess of US $500,000.

All told, Hashoff announced five major new customers in as many weeks, including the aforementioned as well as a leading quick-service restaurant delivery mobile application (i.e. Ubereats, Doordash, Foodora, etc.) and an online education company (a sign of the times).

Add it up and another doubling (or near doubling) of revenue again during Q2 fiscal 2021 is certainly not out of the question as these new revenue streams start being realized this quarter.

Apropos, the acquisition of Dunkin Brands by Inspire is worth a bit of speculation. Of course, nothing is a certainty, but the fact that Hashoff has a relationship with Dunkin begs the question if the door could be opened in the future to rest of the Inspire family, which includes Arby's, Buffalo Wild Wings, Sonic Drive-In, Jimmy John's, and Rusty Taco restaurant chains.

Remember, DGTL is a Portfolio Company

Perhaps what is most overlooked with DGTL is that it is a self-proclaimed “portfolio” company. DGTL’s mission is to acquire, fund, accelerate and optimize a diversified portfolio of innovative and disruptive Adtech companies powered by AI. At this moment, Hashoff is the only company in the portfolio. That likely will change in the not-too-distant future.

“With a quarter in the books for Hashoff and a spate of new major corporate clients, we have proven our ability to execute on our business model to accelerate growth,” commented Racic. “We remain active in negotiations for new portfolio additions that represent similar high-growth opportunities as part of our overall strategy of blending organic and inorganic growth to quickly build corporate value.”

As the company heads for a U.S. listing on the OTCQB in the coming weeks, it is clear that leadership sees considerable upside, as measured by the fact the founder and director John-David A. Belfontaine is aggressively buying shares in the open market.

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