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Mediagrif Focused on U.S. Markets

Longueuil, Quebec-based e-commerce solutions provider Mediagrif sees the potential to increase its revenues in the United States, based on the company’s current market share and strong presence in the Electronic Data Interchange (EDI) sector.

The title of the most recent investor presentation released by Mediagrif speaks for itself:  "Focus on U.S. revenue growth."

Mediagrif intends to reach growth targets by leveraging its successful suite of in-house technology solutions, including the electronic tendering service platforms that already count government agencies and large procurement organizations as customers. Mediagrif’s proprietary solution helps vendors and contractors identify and bid on government business opportunities in the United States and Canada.

"Once big players adopt our platforms, they quickly come to depend on them. It's a bit like using a Bloomberg terminal to invest; it's expensive, but [once you start using it], using a different tool becomes unthinkable," says Mediagrif CEO Claude Roy.

This same strategy is also what enables Mediagrif to generate recurring revenues.

"Recurring revenues allow us to focus on our long term vision, to invest and make acquisitions, because we know quite accurately how much money is coming into our coffers on a regular basis," says Roy.

Nearly 60% of Mediagrif’s annual income is generated by subscription revenue, and Roy is confident that this figure could grow to 75%. The company’s operating profit margin (EBITDA /revenues) is currently about 40%, and Roy believes he can grow it further by increasing recurring revenues.

The goal is to increase Mediagrif’s annual revenue from $65 million to $100 million within two years. Over the same time period Roy would like the company’s market capitalization, currently around $300 million, to grow to $500 million with share prices in the $30-to-$35 range.

Anything is possible

"To attain a market capitalization of $500 million will require us to have an operating profit (EBITDA) of $45 million. As our current operating profit is approaching $30 million, it’s a viable goal. It will take an additional 50% of $30 million. If we make some acquisitions and achieve the market penetration that we expect with our current solutions, we can get there," says Roy.

One criticism of Mediagrif that is frequently raised by analysts refers to weak organic growth on the part of Mediagrif’s "traditional" platforms (which include Carrus, Global Wine & Spirits, Market Velocity, Polygon, and other businesses).

"The operating margins that we realize with some of these platforms are around 70%, which is not something you come across every day. [These businesses] are jewels, and you do not sell your jewelry to go on vacation," says Roy.

Avoiding becoming another "Campeau"

Growth by acquisition is an important element of long-term strategy at Mediagrif. Roy says that he looks at a minimum of 5 acquisition targets each quarter.

"Some potential targets are eliminated quickly by our evaluation criteria. Buying is never a problem; if you’re willing to pay more, you'll get what you want. But it is [having] discipline that makes the difference," says Roy, who is determined to avoid making the wrong acquisitions.

"I always say, ‘I do not want to make a Campeau of myself’," says the CEO, referring to Robert Campeau, an entrepreneur who lost everything as a result of financial difficulties arising from his acquisition of the Bloomingdale's retail chain in the late 1980’s.

"Robert Campeau was a real estate genius, who made investments in areas he did not understand. I have four or five people around me at Mediagrif who can stop me if we were to consider doing something like that."

Roy speaks from experience: "I've already made a Campeau of myself in the past."

During Roy’s tenure at Logibec - a company that he founded, brought to the stock exchange and eventually sold - he oversaw about twenty acquisitions. "The only [acquisition] that did not turn out well was Visiontronique, and it was the only one that I managed by myself, essentially speaking to the mirror. I wasted $2 million and five years of my life on it."

The man who will not become a dragon

Roy says he was approached this fall to fill one of the vacancies left by the departure of François Lambert and Gaétan Frigon from the television program Dans l’oeil du dragon, the French-language equivalent of CBC’s Dragon’s Den. "But [TV], it’s not for me," says the 67-year-old Roy, before explaining that all of his energy is devoted to his family and to Mediagrif. "I want to keep working as long as my health will permit it."

Mediagrif: In Brief

Business activity: e-commerce platforms

Headquarters: Longueuil, Quebec

Number of employees: approximately 400

Annual revenue: $65 million

Net debt: $25 million

Shareholders

Claude Roy: 22%

Institutional Investors: 50%

Executives and employees: 6%

Public: 22%

Strengths

- Experienced management team

- Diversity of platforms

Weaknesses

- Uneven organic growth of traditional platforms

- High customer concentration in certain sectors

 

Originally published in La Presse.ca, December 10, 2014

Source article: http://affaires.lapresse.ca/economie/technologie/201412/10/01-4826817-mediagrif-vise-le-marche-americain.php

Translated from French by Marie-Claude Veillette, Content Specialist & Marketing Coordinator at Mediagrif
Edited and adapted by Nathan Munn, Web Content Specialist at Mediagrif

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