Doing The Math On Quartz’s Exit

Morning Report: A few numbers to keep in mind as Quartz finds a new home.

Quartz, the chart-heavy and generally good publication, has been acquired. Per Quartz itself, the company will be sold by its parent Atlantic Media to the Japanese media shop Uzabase for “between $75 million and $110 million,” with the final price determined by the performance of the asset in “the remainder of 2018.”

Our question is simple: Is that a good exit?

We only have a few data points to tinker with. Here’s what we can glean from historical and recent media reports (see if you can spot why Atlantic probably sold Quartz):

• Quartz 2013 revenue. $3.8 million (source)
• Quartz 2014 revenue. $10 million, +163 percent (source)
• Quartz 2015 revenue. $18.6 million +86 percent (source)
• Quartz 2016 revenue. $30 million, +60 percent (source)
• Quartz 2017 revenue. $28 million -7 percent (source)

And here’s that same story in a chart:

Two more facts and figures: Quartz was profitable in 2016 but was not in 2017. And the company is “on pace to increase revenue by as much as 35% in 2018,” per the Wall Street Journal. That would imply an estimated $38 million revenue result for Quartz this year.

With that number, Quartz will sell between 3.6x t0 5.3x its 2018 revenue, presuming the firm reaches the $38 million mark. If it doesn’t, the firm will likely not get the full dollar for its shares, implying a reduced revenue multiple. But we can only do so much with the few numbers we have.

So how does a revenue multiple of 3.6x to 5.3x stack up against other media exits? Per Poynter, here are two data points:

• “Digital media companies tend to sell for between 2.5 and 5 times (2.5–5x) revenues from the previous, or ‘trailing,’ 12 months.”
• “Looking ahead, prices paid tend fall between 3–7x the predicted forward revenues for the upcoming 12 months.”

Since we are using a full-year 2018 revenue figure at the half-year mark, we’re splitting the difference. We might expect, say, a revenue multiple of 4 to 4.5 given those two ranges.

And this is about where the company is going to fall, presuming that it doesn’t fully earn out. What we can say with reasonable confidence is that Quartz isn’t a fire sale or a trend-breaking exit. It’s somewhere in the realm of normal.

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