Frontier Digital Ventures Ltd (ASX: FDV) has released its December quarter 2020 (Q4FY20) update filled with some positive news.
Despite the recent drop in the Frontier Digital Ventures share price, this update provides encouraging signs of growing business fundamentals.
Frontier Digital Ventures invests in and operates property, automotive and general online classified websites in emerging markets across countries and regions like Pakistan, Morocco and Central America.
What did Frontier Digital report?
Maiden full-year profit for FDV portfolio
Frontier Digital Ventures has a portfolio of 15 online classified businesses and it reported a maiden full-year profit of $0.6 million for FY20 on an FDV ownership basis. The company also recorded a second consecutive quarterly profit in Q4FY20.
It is also encouraging to see Frontier Digital Ventures record its first full-year positive EBITDA (EBITDA explained) margin of 3% across its portfolio (FDV basis).
On a portfolio basis, the company completed a turnaround on its quarterly revenue for the year. Q2FY20 revenue dropped from $6.5 million to $3.2 million due to COVID-19 and gradually worked its way back up to $6.5 million again for this quarter, excluding the revenue contribution from recent acquisitions.
Key operating metrics
Frontier Digital Ventures managed to generate a higher level of revenue in FY20 ($23.7 million) relative to FY19 ($22.3 million) despite the adverse impact of COVID-19 last year. These figures also exclude the additional revenue from the acquisitions completed between 1 January to 4 November 2020.
The key metric to monitor the competitive position of an online classified business is the level of web traffic. Frontier Digital Ventures noted direct and organic traffic across the portfolio had rebounded strongly in the second half of FY20, finishing significantly above pre-pandemic levels.
Founder & CEO commentary
Frontier Digital Ventures’ Founder and CEO, Shaun Di Gregorio said, “2020 has been a milestone year for FDV. We are particularly pleased with our strong revenue growth trajectory, despite a once-in-a-century health pandemic. We also finished 2020 with our first full year profit at a portfolio level, in line with ASX disclosures dating back to our FY17 results conference call. Growth remains the key focus given the current operating environment, consistent with FDV’s long-term value creation strategy.”
My takeaway
The results of this quarter illustrate the resilience of Frontier Digital Ventures’ business and the benefit of a diversified portfolio. As highlighted in my previous article, Frontier Digital Ventures (ASX: FDV) share price sinks, but is it down and out?, Shaun Di Gregorio has the experience and an eye for spotting opportunities for long-term disruption.
Let’s not forget that these emerging markets have a long runway for digital adoption of online marketplaces. Globally, only just over half of households have an internet connection, according to UNESCO, which makes me think of the long-term potential of online marketplaces in emerging markets.
The recovery in web traffic to pre-COVID-19 levels is promising and Frontier Digital Ventures is in a good position to capitalise on long-term structural tailwinds should it execute well.
Redbubble Ltd (ASX: RBL) is another interesting online marketplace business building its presence across the globe and further details can be found in the article, 2 ASX tech shares I’d buy with $1,000.
