Around two weeks since announcing its intent to obtain stimulus funding from the US Government, programmatic ad company engage:BDR (ASX: EN1) has received US$435,000 (A$690,000) from the US paycheck protection program.
In the eyes of its executive chairman Ted Dhanik, receipt of additional funding and slashing operating expenses wherever possible, has left the company “sitting much stronger than the crowd”.
“We are in an unimaginable time, people are losing their lives, loved ones, livelihoods and everything they’ve built over their lifetimes. No one could have predicted this, and this has blindsided all of us,” said Mr Dhanik.
The terms of the US program stipulate that support funding is entirely forgivable and will, therefore, bear no liability for the ad company within the next 60 days if spent entirely on supporting payrolls for US employees.
According to engage:BDR, it wasn’t required to meet any qualification criteria including proving financial difficulties – the program was created strictly for US small businesses in an attempt to help domestic workers, which in engage:BDR’s case, ensures its US staff will have their salaries secured for the next 90 days while executive pay remains capped.
All in all, the net impact to the company’s balance sheet is the addition of A$690,000 to working capital and assets, “without any incremental liabilities” the company said.
Moreover, engage:BDR confirmed it expects to receive additional funding “in the near future” as the US Government has approved and extended the program, currently doubling the initial budget on the proviso that the lockdowns will be extended into the US summer months.
In a statement to the market this morning, engage:BDR published a financial performance alongside an unaudited comparative analysis.
The company said its cash balance now stands at $2.4 million, boosted by over $5.5 million in customer receipts in Q1 2020, making its ultimate cash position 71% higher compared to this time in 2019.
In terms of interim results, engage:BDR stated that its April revenue figures totalled $849,000 with a gross profit of $348,000 – which compares favourably to last year’s result of $742,000 in revenue and $281,000 in profit.
According to engage:BDR, April’s revenue “started lighter than expected” due to “brand budget pauses” throughout the US as a result of quarantine orders across 85% of the country. Coupled with the start of a new quarter this has resulted in lighter revenue “temporarily”.
Looking forward, the company expects revenue to increase for the rest of April and to be “greater through subsequent months” of Q2 2020. In addition, engage:BDR said its daily revenue analysis showed a “25%-plus increase” over the past seven days.
Reeling in the slack
In terms of operating expenses, engage:BDR said its management team, led by Mr Dhanik, took “proactive measures” in early March to defer and significantly reduce all operating expense categories to limit cash outflow and added that all its vendors, partners and companies had been “very malleable” to the cutbacks.
More specifically, engage:BDR deferred office rent, all board and director compensation, technology and infrastructure vendors, consultant fees and equipment leases.
Further curtailment of expenses came in the form of the company’s primary lender, Alto, which has proactively and voluntarily deferred recent amortisation payments.
In terms of executive and non-executive fees paid to directors, engage:BDR held back over $250,000 in Q1 2020.
“For the company, we were crushing along, at nearly 300% year-to-date of last year by the middle of March and came off of a fantastic turn-around year. Timing wasn’t the greatest, but since we’ve weathered many storms over the [past] 12 years, we knew what we had to do when we caught the hints of another storm.”
“We responded with the urgency needed to take advantage of opportunities once they were presented; we applied for the PPP and EIDL within 24 hours of their introduction, we deferred everything possible the day quarantines began, and we ramped up the business development effort weeks before.”
“I feel we have seen the worse of this era, and large brands will be able to transact with their customers again soon, which will require ad dollars to be spent online with engage:BDR,” Mr Dhanik said.