Engage:BDR (ASX: EN1) has laid out a multifaceted strategic plan focusing on efficiency and a prospective return to profitability later this year.
The advertising company has published a specific list of notable milestones for this coming year with winning new client relationships, up-scaling its product development and new deployments top its list of priorities.
So far this year, engage:BDR has introduced five new programmatic integrations and has integrated more than 175 third-party providers.
One of the core aims targeted by the company has been to increase revenue which is expected to grow in parallel to the company adding further integrations and third-party partners onto its proprietary ad platform.
By the end of this year, the pre-set goal is to surpass 190.
According to the ad company, integrations represent fundamental drivers of its business model, and ultimately, its programmatic revenue. The more programmatic partnerships the company integrates, the higher the supply and demand sell-through.
The additional ad inventory and advertiser demand are expected to create a multiplier effect whereby demand on all inventory increases competition for each impression, bid-prices, sell-through – and ultimately – boost profit margins, net income and EBITDA.
At the current time, the ratio of gross-net profit is expected to be around 40-50%. “In simple terms, gross profit in a given month above approximately $350,000 would mean that the company would achieve a profit because engage:BDR has a fixed-cost structure with software generating 100% of revenue,” the company said.
Risk and reward
In the first six years of operation, engage:BDR has managed to maintain profitability, but has never raised any external equity or debt financing – something the company has now done in the first month of this year.
The move is a direct step towards becoming a more cost-efficient and more productive programmatic ad company.
According to engage:BDR, its operations were “fully-bootstrapped and organically grown until its IPO in 2017,” but with capital now secured, its executive team feels confident the company is “well-positioned to return to profitability”.
Core goals for 2019
Engage:BDR said it aims to achieve a rate of six-to-eight new programmatic integrations signed per quarter for the entirety of 2019.
It also wants to scale existing relationships and improve efficiency, partly by creating faster engineering cycles to connect new buyers and publishers through more automated engineering processes.
In addition to new integrations the ad company said it wants to develop and deploy several new technologies via recently-signed partnerships with IconicReach and AdCel, which could add significant reach to incremental customers.
Over the course of 2018, engage:BDR says it successfully reduced staff costs by 42%, manufacturing and operating costs by 69%, advertising and marketing costs by 96%, and research and development costs by 93%.
However, by the end of this year, the company plans to further reduce overall operational expenditure by a further 25%.
In terms of expenses, engage:BDR says it intends to pursue “constant reduction in operational expenditure” by renegotiating all operating expense items and contracts in terms of tech infrastructure and outside professional services.
These plans are expected to yield an additional 25% reduction in cost by the end of 2019, and further supplemented by a proposed reduction to its office lease by 70% by end of the first quarter of this year.
Potentially a significant addition to its service suite will be the introduction of a programmatic exchange.
Engage:BDR said that as part of its set of strategic initiatives for 2019, the company plans to launch a server-side header bidding business and add more than 200 new direct publishers.
The bidding business is expected to be deployed in Q2 with early expectations of adding 50 new publishers in Q2, 75 in Q3, and 75 in Q4, the company said.
Furthermore, engage:BDR said it wants to develop and launch a white label of its ad exchange, to then licence them to international competitors and ad networks.
This is expected to be live by the end of Q3 this year and is expected to enable incremental revenue from an already existing product, through a “completely different customer base”.
Last but not least, engage:BDR may also become involved with advertising cannabis and CBD.
According to engage:BDR, it has been approached by “countless CBD and cannabis brands” from North America to provide digital advertising access.
Currently, its two recently-added partners IconicReach and AdCel are exploring the possibilities of developing and going to market with self-serve marketplaces exclusively focused on advertising for CBD and cannabis brands in North America, specifically in influencer and mobile advertising.