Merging with AdTheorent, Ad AI Technology Leader Projecting 30% CAGR Going Public at 28% Discount to Peers



KEY POINTS
  • MCAP Acquisition Corp. is merging with AdTheorent, a programmatic digital advertising leader using advanced machine learning technology and privacy-forward solutions (“AdTheorent Predictive Advertising”) to deliver measurable value for advertisers and marketers. AdTheorent’s approach uses aggregated and statistical data sets for modeling and targeting, moving AdTheorent’s clients beyond cookie‑based or other ID/profile‑based targeting, which focuses more on individual identities and retargeting specific users.
  • AdTheorent’s ability to drive business performance for advertisers, measured by advertiser-provided business goals, makes it unique among its peer set. The company’s proprietary suite of tools, methodologies and vertical solutions maximizes campaign performance and ROI for advertisers, while operating in a privacy-first manner, which has quickly escalated as an essential element for brand marketers worldwide.
  • Operating at massive scale, AdTheorent optimizes ad targeting by evaluating and providing predictive scores for more than 87 billion impressions daily, bidding on less than 0.01% of impressions scored. Decisioning at this scale enables AdTheorent to make precise ad placement decisions for each of its world-class advertiser customers. The company also leverages advanced machine learning and data science to drive platform efficiencies by optimizing against ad impressions which represent a greater risk of IVT/fraud, poor viewability and brand safety, or impressions that may not be measurable by third-party measurement providers.
  • Revenue for 3Q21 was up 36% YoY and the company is projecting 28% growth in 2022 and 26% growth in 2023, with adjusted EBITDA margins of 28% and 31%. The CTV market is a major growth driver for AdTheorent with nearly 300% growth YoY in 3Q21, and 240% growth expected in 2022. With 10 years of operating history, AdTheorent has a proven technology and business model that many SPACs lack.
  • For a comp group, we have used a group of similar growth, similar margin ad software companies. These comparables have an average forward P/E of 66.5x, while ADTH is priced at 37.0x, a 44% discount. On an EV/EBITDA basis, the discount is 28% (24.1x vs 33.7x). The company’s 2022 EBITDA margin is projected to be between the comp group median and average (28.0% vs 24-30%), while AdTheorent’s 2022 revenue growth is expected to be higher than the comp group median and average (28% vs 25.5% & 26.5%).
OUR INSIGHTS

The Opportunities

AdTheorent has been able to grow in 2021, guiding for 33% YoY growth, and it expects to grow above 25% YoY in 2022 and again in 2023. Going public will give it more visibility with major advertisers. As the company grows, its machine-learning technology platform will have more data upon which to improve its predictive targeting for clients. While a technology leader in its space, it is priced at a 28% discount to its comps.

The Obstacles

COVID-19 continues to be a risk particularly for customers in the travel, retail, and automotive industries. AdTheorent has customer concentration risks, as it had 306 active customers as of September 30; however, 73% of its revenue came from 63 of its largest clients, 32% from 5 clients, and 10% from one client.

The Transaction

The business combination values AdTheorent at a $775 million enterprise value and at a pro forma market capitalization of approximately $1 billion. The transaction will provide a minimum of $100 million of net proceeds to the company, including an oversubscribed and upsized $121.5 million fully committed common stock PIPE anchored by top-tier institutional and strategic investors. The Special Meeting will be held at 10:00 a.m. Eastern Time, on December 21, 2021, via live webcast to vote on the Business Combination.

Read all our reports and view all our videos on AdTheorent on our website.

MCAP Acquisition Corp. is merging with AdTheorent, a programmatic digital advertising leader using advanced machine learning technology and privacy-forward solutions (“AdTheorent Predictive Advertising”) to deliver measurable value for advertisers and marketers. AdTheorent’s approach uses aggregated and statistical data sets for modeling and targeting, moving AdTheorent’s clients beyond cookie based or other ID/profile based targeting, which focuses more on individual identities and retargeting specific users.

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