Frontier Digital Ventures Turns Cash Flow Positive in Q1 Despite FX Headwinds

The ASX-listed portal operating company Frontier Digital Ventures (FDV) has released a report on its activities for the first quarter of the 2023 financial year. Relevant highlights from the company's operations for the three months ended March 31st include:

• First operating cashflow positive quarter.
• Revenue of A$18.2m down slightly on A$20m impacted by FX movements.
• Completion of A$13m institutional placement to fund LATAM acquisitions.
• 190% increase in portfolio EBITDA on pcp to A$2.0m in 1Q 2023, with 12 of 15 operating companies improving relative to 1Q 2022.

FDV has a portfolio of fifteen online classifieds businesses across emerging markets in Asia, Latin America and the MENA region. The company's largest asset is a 30% stake in leading Pakistani real estate vertical Zameen which contributed around 30% of company revenue in 2022.

Zameen saw a significant drop in revenue (-43%) and EBITDA (-46%) for the first quarter of 2023 which was chalked up to economic challenges in Pakistan and significant foreign exchange rate headwinds in FDV's reporting.

In terms of the year-on-year change in EBITDA, only three of fifteen of FDV's portfolio companies performed worse than the comparison period (Zameen, AutoDeal and PropertyPro). All three geographical operating regions were cashflow positive for the quarter.

EBITDA for the quarter was up in Latin America by A$836k and in the MENA region by A$783k while FDV's Asian assets saw their collective EBITDA for the period fall by A$326k largely attributable to Zameen.

FDV's report highlighted a company-wide uptick in EBITDA margin from 3% in the first quarter of 2022 to 11% in the most recent quarter thanks to cost optimisation initiatives undertaken in 2022. The company was also cash flow positive for the first time, recording A$609k on the balance sheet compared to a loss of A$2.4 million in the comparison period.

Commenting on FDV's performance, Founder and CEO, Shaun Di Gregorio said:

“We are proud to have delivered our maiden quarter of positive operating cash flow at a FDV Group level, representing a significant milestone for FDV and our shareholders. This result is the culmination of significant work completed across the portfolio, designed to ensure the operating companies can generate sustainable long-term growth while improving bottom-line performance."

"Notably, this result also includes FDV’s corporate level costs which demonstrates the Group’s capital self-sufficiency. While there may be fluctuations in operating cash flow between quarters as a result of varying market conditions, seasonality or other factors such as FX movements, our aim is to be operating cash flow positive at the group level over the medium-term.”

Like many online classifieds operators, FDV's stated strategy revolves around moving from being a shop window to becoming a transactional business.

The company noted that a milestone was achieved on that journey in Q1 with all operating companies now capable of facilitating transactions with the number facilitated across the portfolio rising 60% pcp year-on-year.