Brand building has gained an increasing amount of importance as more and more industries are recovering from the aftermath of the Covid-19 pandemic and increasing their marketing budgets. There is a need for carrying out strong brand building campaigns among corporations in order to recapture the market share lost over the course of the pandemic, which is bound to fuel the advertising and the marketing consultancy sector. Troika Media Group Inc. (TRKA, Financial) is a recently listed company within this domain that had a weak listing but is now trading at a reasonable valuation. The company is a holistic provider of brand building and analytics solutions for many Fortune 500 companies and could be a compelling pick at current levels.
Company overview
Troika Media Group is focused on brand building and communications. The company provides integrated branding and advertising solutions for global brands, primarily those in the fields of entertainment and sports. Its core services include research and insight services, media content for events and hospitality customers, brand assessment, positioning and communication. Applying emerging technology, data science and integrated branding, the company helps brands deepen engagement with audiences and fans throughout the consumer journey.
The company offers solutions to its clients through its operating units, which include Troika Services, Troika Design Group and Mission-Media Holdings. The company's management team is led by Chairman and CEO Robert B. Machinist, and its corporate headquarters are located in Los Angeles, with offices in New York, New Jersey and London.
Strong set of offerings
The company operates in three main functional groups of expertise through three different segments: Troika, Mission and Troika Digital.
The Troika segment gives the clients in-house design, content inventory, research and branding services allowing it to bring a suite of engagement services to the clients.
Mission is the company's brand experience and communications agency that specializes in brand strategy, communications and experiential marketing. It provides services such as brand fundamentals development, brand voice and personality development, marketing strategy, public relations, crisis management, physical and digital experiential, which focuses on driving near-term sales for the clients.The company's advertising approach is centered around experiences and events and is amplified through influencers and social media making it different from traditional advertising.
Its third segment, Troika Digital, is a data intelligence and performance measurement platform through which every campaign carried out by the other segments is analyzed and optimized with the help of advanced artificial intelligence technologies. By integrating a native marketing strategy, the company enables brands to optimize engagement with potential and existing customers and fans.
Robust client base
Troika is laser-focused on its clientele and this centricity is evident by the extensive longevity in the relationship that the company has with these clients. The list includes giants like Tiffany & Co., Amazon.com Inc. (AMZN, Financial), Netflix Inc. (NFLX, Financial), CNN, Verizon Communications Inc. (VZ, Financial), Walt Disney Co. (DIS, Financial), ViacomCBS Inc. (VIAC, Financial), Sony Group Corp. (SONY, Financial), Fox Corp. (FOX, Financial), Electronic Arts Inc. (EA, Financial), Apple Inc. (AAPL, Financial), AT&T Inc. (T, Financial), Comcast Corp. (CMCSA), Spotify Technology SA (SPOT, Financial) and many more. A large number of these client relationships have lasted for over a decade, as per the company presentation, which means that Troika appears to have strong relationships with each of these companies that have withstood the test of time.
It is worth highlighting some of the brand experiences that display the unique and innovative approach adopted by Troika in its campaigns and communications. The company rebranded the Ultimate Fighting Championship, an outlier sports league for mainstream audiences and fans, helping transform it into a global powerhouse and leading to a $4 billion sale to Endeavor. Another interesting case study is the company's brand strategy to help CNN's repositioning efforts in order to align the company with the new era of news consumption by moving the organization from on-air breaking news to mobile breaking news and on-air feature stories.
Moreover, Troika was in charge of bringing Hulu back to its roots as the leading TV disruptor. The company reignited the Hulu brand and reversed negative social chatter with a positive brand story, irreverent TV humor and a fresh look in an omnichannel campaign to reclaim Hulu as the ultimate TV destination.
All these client stories are indicative of the fact that the company has go-to marketing solutions for some of the top global brands in the world and is a major green flag.
Final thoughts
The proceeds from Troika's recent public offering are for the purpose of retiring the debt on its balance sheet, carrying out acquisitions and funding its cash losses until the company hits break even. The offering was priced at $4.5 per share, but after the post-listing selloff, the stock is now available at close to the $3 mark.
The company witnessed its fair share of Covid-19-related headwinds in 2020 because of lockdowns, which is why its top-line dropped from $40 million in 2019 to around $24 million last year. I am expecting a sharp recovery in the revenue number this year with increased digital marketing expenditures from large corporations, including those falling within the company's portfolio of clients.
This should result in a strong financial performance in 2021 and will lead to the stock price appreciating above the $4.5 mark even if the company is able to maintain its existing valuation multiples. Overall, I believe Troika could be an interesting pick for small-cap investors looking for opportunities within the marketing industry.
Disclosure: No positions.
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