Programmatic ads set to boost financials for engage:BDR in 2019

Advertising company engage:BDR (ASX: EN1) has published better than expected financials in the first three months of 2019 with its revenues undergoing an “exponential increase”.

One of the standout results is a $3.9 million increase in net cash from operating activities – a 69% year-on-year rise. Equally important was the company’s cash outflow figures which decreased by $4.9 million or 57% from last year.

From a revenue perspective, engage:BDR reported that average daily revenue in April grew nearly 200% in the first quarter.

Ad companies typically experience their lightest revenues during the first and second quarters of the year for seasonal reasons, but engage:BDR says it was able to overcome the relatively slow trading period after deploying several publisher activations just before the end of March.

As part of its regular reporting to its national regulator, the ASX-listed programmatic ad company said that Q2 2019 is expected to yield “strong results” given that it deployed $1.1 million to publishers which it describes as “product manufacturing costs”.

Therefore, the company’s management expects yield revenue for the rest of 2019 to continue to exceed expectations and drive its expansion strategy further forward.

From 2018 to 2019

On a year-on-year basis, the ad company reported that it had lowered its quarterly expenditure from $5.6 million in Q1 2018 to $1.8 million in Q1 2019. Over the same period, cash outflows fell from $8.6 million to $3.7 million.

Looking forward, engage:BDR said it expects to record an improvement in total cash outflow by a margin of 57% in Q2 2019.

In another boost, engage:BDR confirmed that it spent a further $250,000 as payments to publishers before the end of the March, which brought its total spend to $1.35 million for Q1 2019.

Given its acute expansion targets, engage:BDR said that it had “significant cash outflows” in Q1 2019, with many expenses requiring prepayment including insurance premiums and publisher payments.

Additionally, engage:BDR said it paid significant costs for expenses from prior periods, including audit fees, taxes, legacy staff costs and the costs to move to a new facility.

When comparing its financial results in April to the March 2019 quarter, engage:BDR reported that receipts in April, alone, were $1.33 million – with the March quarter as a whole generating $1.96 million.

Furthermore, the ad company said it almost achieved a 200% growth in average daily revenue in April 2019 when compared to Q1 2019. “This growth is attributed to the deployment of $1.35 million to activate incremental publishers our programmatic advertising business and new client onboardings to our IconicReach platform,” the company said.

It also added that “management expects both revenue streams to continue to increase considerably throughout the year,” and declared that “additional publisher activations are due to be released imminently, which will yield further revenue contribution.”

Regarding profitability, engage:BDR said it expects to achieve monthly profitability “around the half-year mark, or before”. Currently, engage:BDR is about $2,000-3,000 per day short from achieving monthly profitability on an accrual basis – in other words, when excluding depreciation, amortisation, interest expenses, taxes and other non-cash items.

Based on the consistency of revenues and margins achieved over the past 45 days, engage:BDR’s management said it is now targeting positive net cash from operating activities for Q2 2019.

To give investors and the wider market further clarity, the ad company confirmed that it intends to publish a comprehensive trading update next month.