Programmatic ad specialist engage:BDR (ASX: EN1) published updated financial results covering the all-important COVID-19 impacted months of April and May.
In April, engage:BDR recorded $1.25 million in revenue with a corresponding $513,000 in gross profit. While in May, revenues remained constant at $1.25 million while gross margin eased to $500,000 for the month.
Important for both ad companies and the industry is the concept of seasonality. The advertising industry traditionally expects around two-thirds of total revenues to be recorded in the second half of the year between July and December.
Taking this into consideration, engage:BDR said it expects to achieve “similar revenue seasonality” this year and should thereby go on to record greater receipts after July.
A further source of positivity for engage:BDR is more macro in nature.
According to market commentators and major news sources, a growing number of US states are easing quarantine and lockdown measures following reductions in infections and deaths over the past few weeks.
The gradual re-opening of major high street stores bodes well for online sales and – crucially for engage:BDR – is expected to boost ad spending across the board in all market sectors.
“Management expects media buyers to increase spending in June and July. Per shareholder requests, management will update the market on trading when there is material change, in contrast to the typical mid-month updates,” the company said.
New revenue stream
Since 2017, engage:BDR’s revenues have been derived entirely from mobile app and connected TV advertising. However, as of May this year, the company’s mobile and desktop websites have now been re-deployed.
As a means of improving its market performance further, engage:BDR reported it had deployed a “purely incremental revenue stream” by re-focusing on its web efforts, in addition to the mobile-centric development the company is already doing.
The move is aimed at re-activating thousands of web publishers engage:BDR has worked with over the past seven years as well as many buyers now eligible for programmatic integration.
“The company’s business development and engineering teams have been working diligently (remotely) to architect and deploy an entirely new programmatic web advertising business with its associated technologies; these efforts have now yielded the first dollars generated, as of 29 May 2020,” the company said.
In addition to incremental improvements in company performance, engage:BDR has also secured a public funding boost in the form of an economic injury disaster loan from the US Small Business Administration (SBA).
The programmatic ad company applied for funding as soon as the program was made available to applicants in April and has now secured US$150,000 (A$230,000) to be paid back over a 30-year payment term at an interest rate of 3.75%.
Engage:BDR confirmed it expects US authorities to pass additional legislation “in the coming months”, and as a result, to tap the bailout scheme for additional funds in the foreseeable future.
To ensure its Australian operations are not affected by access to US funding, engage:BDR declared it had secured bailout funds via its US holding company and would, therefore, avoid having to return funds to the US SBA.
“There have been a small number of listed, multi-billion-dollar market cap companies in the US who have voluntarily returned their funding; engage:BDR is not a multibillion-dollar market cap company – yet,” the company said.