EVR Holdings recovers from multi-year lows, but can the momentum continue?
Since listing in London in 2016, EVR Holdings has been widely covered due to its unique, engaging business model and its ability to court the interests of numerous key players in its industry.
To recap, the firm owns and runs an application called MelodyVR that simulates the experience of being at a live concert using a headset, allowing fans to buy digital tickets to sold-out real-world events. The firm has secured licencing deals for the back catalogues of pedigree music labels such as Sony/ATV and Warner/Chappell Music, as well as content deals with entertainment firms like O2 London and the NEC Group.
Rising from lows
When we covered EVR in May, we suggested that it might have bottomed at around 2.58p. After more than a year of constant decline in the wake of a £20m placing last April, the company had had its legs kicked out further by the release of its 2018 results.
The results period saw MelodyVR launch in the UK and US, roll out across another eight territories and expand it’s content and distribution opportunities through licence agreements with numerous labels, publishers and venues. However, in spite of these encouraging steps forward, EVR generated revenues of just £1.2m for the period and an operating loss of £11.3m, compared to a loss of £6.2m in 2017. The company put down to increased investment in people and operating capabilities.
Whatever you think of the firm, it is hard to ignore the progress its shares have made since hitting those lows. Indeed, it currently sits at 6.85p with a £100.9m market cap. Those who invested following May’s results and before shares started to rise at the beginning of June would be sitting on a large paper profit.
This progress has been driven by a combination of momentum and strong newsflow. For example, on 19 June, EVR announced that it had launched a closed beta version of MelodyVR for both Android and iOS devices alongside a ‘viewer’ to enable smartphone users to enjoy a full VR experience.
The launch, which was extended to the wider public at the beginning of July, complements the app’s presence on the Oculus Go and Samsung Gear VR headsets. EVR said it will also significantly widen the reach of its service beyond that of dedicated VR devices: ‘We seek to scale both our userbase and revenues by entering the wider mobile market which is significantly larger than the current install base of VR devices.’
Alongside its smartphone launch, EVR has also introduced MelodyVR to Canada, Spain, Italy, and Portugal, entered a content licencing agreement with Facebook Technologies, and a partnership with Wireless Festival. Perhaps its most notable corporate development, however, came on 7 June when it announced a strategic partnership with the John Gore Organisation.
John Gore’s family of Broadway-related companies includes Broadway Across America, Broadway.com, The Broadway Channel, BroadwayBox.com, and Group Sales Box Office. The businesses develop, produce, and distribute live theatre content such as The Lion King in 45 cities across North America, London’s West End, Japan and China.
The two firms have set up a joint venture to facilitate the VR capture, production and distribution of Broadway theatre content globally. However, as part of the agreement, Tony-winning producer and owner John Gore also invested £5m personally into EVR at 4.5p per share, a 25pc premium to its mid-market closing price on 6 June.
Alongside the purchase, which equals an c.8.5pc stake in EVR, Gore has also received an option to subscribe for the equivalent of $10 million of EVR shares at a price to be determined at the time of exercise that would value EVR’s’s issued equity share capital at c.£220m. The exercise period for this option will expire on 31 December 2019 at which time it will automatically lapse if not exercised.
As well as giving it exposure to the huge global Broadway industry – 14.9m people went to Broadway shows in the year to May – the vote of confidence from Gore and his firm helped EVR’s shares to rise by 42.6pc in a day.
Make or break
Although they remain miles ahead of historic lows, EVR’s shares have come off slightly in the weeks since the beginning of July, when they hit a high of 8.7p. So, where will they head next?
First-of-all, it is worth noting mentioning that the losses reported in May’s results are hardly surprising. After all, how many early-stage technology companies out there are reporting huge profits during a pivotal period of growth? Few- you need to spend money to make money, as someone probably said once.
It is, however, may be worth keeping an eye on the company’s cash position. Its administrative expenses for the year ended 31 December 2018 came in at £11,260,086 – or roughly £940,000 a month. EVR has not raised since, and, although it received a £5m boost from Gore, this figure suggests that it is likely that the company’s c.£19.3m cash balance at the end-2018 end will now be significantly lower. Is there then a risk that EVR will take advantage of its recent rise to carry out a placing?
Cash concerns aside, however, EVR’s progress this year means it is continuing to inch closer to the strong revenue and profit generation that will ultimately be required for it to make a success of its interesting model.
Likewise, there remains huge potential in the VR market – which many still believe to hold the key to the future. Research from Lucintel suggests that the global virtual reality (VR) headset market will reach an estimated $38.7bn by 2024, with a CAGR of 41pc from 2019 to 2024. Meanwhile, CCS Insight reports that 14 million AR and VR devices are expected to be sold in 2019, adding that demand for standalone VR devices will grow over 16 times between 2018 and 2022.
These sorts of statistics are ten a penny, but if such growth is realised, then EVR and MelodyVR will be exceptionally well-positioned with strong industry ties and sector-leading technology. But that’s the million-dollar question – will the sector actually take off? It’s hard to say definitively at this stage. Bearing that in mind, when approaching EVR as a potential investment, it may be worth bearing in mind its cash position and looking at it from a long-term perspective.
EVR has only just started to be able to show off its potential in action – moving from a good idea to a working piece of saleable technology. It will require a global VR take-off to show what it can really do. Whether or not you invest depends on if you think the world will give EVR the chance to reach its potential and start to generate some serious profit or become a take-out target.
Virtual Reality. Liam Payne’s first-ever headline show is playing on MelodyVR.
The author was remunerated but does not hold shares in the company