Engage:BDR more than doubles revenue growth, seeks to tap US stimulus program

Engage:BDR (ASX: EN1) kicked off the second quarter of this year with a trading update relating to its performance in March 2020 – a pivotal month considering the brutal impact of the COVID-19 pandemic on all aspects of commerce and society in general.

Despite the challenging economic conditions facing absolutely all businesses around the world, engage:BDR said it generated just over $2 million in revenue in March with a gross profit figure of $808,000.

Compared to February, the programmatic ad company’s revenues grew 18% although it was the year-on-year comparison that was most notable. Compared to March 2019, engage:BDR improved revenues by 211%, its best improvement since listing on the ASX in 2017.

The company also reported strong quarterly figures with first-quarter revenues totalling $5.3 million – a 247% improvement compared to Q1 last year. On a year-on-year basis, revenues improved by 147%.

Much of the improvement has previously been attributed to a gradual expansion of the company’s operations, including growing the number of large-scale programmatic partnerships and gaining “greater access to key incremental clients, publishers and strategic partners”.

Looking forward, despite the impact of COVID-19, engage:BDR said it expects traditional advertising industry seasonality to persist with around 65-70% of the industry’s revenues to be generated between July and December.

“Management expects 2020 to produce similar revenue seasonality, as experienced in 2019 and all prior years,” the company said.

As an admission that COVID-19 is weighing on ad spend across the board in all sectors, industries and nations, engage:BDR reported that many brands have temporarily reduced their marketing budgets, with consumers now unable to conduct transactions as they would normally.

“As a result, the ad exchange did not see demand ramp-up as usual in the last days of the quarter,” according to engage:BDR.

Future expectations

As an indication of its near-term expectations in Q2 2020, engage:BDR stated that demand is typically lighter in the first three weeks of April and warned that it doesn’t have access to statistically relevant data on what to expect in Q2, but will update shareholders “consistently”.

Additionally, the company’s AdCel business unit is expected to increase its revenues by 25% in April as a result of NetZero publishers going live and maintaining consistent, uninterrupted international demand.

Stimulus tap

As a key development relating to the ongoing COVID-19 response by the US government, engage:BDR confirmed that it had applied for “several new financing opportunities” in light of significant interest rate reductions, introduced as part of the US$2.2 trillion (A$3.7 trillion) stimulus program currently being deployed in the US.

Engage:BDR declared that it is currently working with a tier-1 Australian bank to navigate the application process and quoted an annual percentage rate (APR) rate of 3-4% but reassured current investors that it would not cede any equity as part of the financing package application.

Furthermore, today’s trading update also confirmed that the programmatic ad company could potentially apply for SBA loans in the US under the CARES Act via UMB Bank, with a quoted APR rate of 2-3%.