engage:BDR matches 2019 performance despite COVID-19

engage:BDR (ASX:EN1;EN1O) has provided a trading update and commentary regarding the group’s performance in April and May as well as making comparisons with previous corresponding periods.

Consistent with EN1’s results, the advertising industry traditionally generates 65% to70% of its revenues in the second half of the year (July – December), as experienced by EN1 in 2019 (34% / 66%).

Management expects 2020 to produce similar revenue seasonality, as experienced in 2019 and all prior years.

Discussing the impact of COVID-19 on working arrangements, management said that EN1 employees are still operating remotely as stay in place orders remain.

Today’s analysis highlights that remote productivity has been significantly stronger than working from EN1 offices.

Management will conduct cost benefit analysis for the future, when considering costs associated with office leases.

Approximately 95% of the US population is in lockdown (stay in place orders), and many brands (not specific to EN1) have temporarily reduced their marketing budgets, as consumers cannot transact with them currently.

Momentum building in May

As expected, April was the start to a new quarter and typically, demand is lighter in the first three weeks of the first month.

April revenue of $1.25 million was 3% higher than April 2019.

Management sees improvement across all granular metrics – advertiser bid rates, bid prices, number of active and new campaigns, auction win rates, clearing prices and daily revenue growth, which are all key indicators of what to expect in the coming weeks.

May performance has been significantly stronger than April’s, which is indicative of where the month should finish, and management also said that May is currently expected to yield better results compared with April.

The preliminary analysis of April revenue impact (COVID-19) when compared to March, was approximately 38%.

Management expects this figure to be narrower for May, considering many businesses in the US are to re-open this month.

Importantly, EN1 generated revenues of $305,000 between 1 May 1 and 9 May, were up substantially on the same period in April when revenues were $255,000

As of yesterday, daily revenue had peaked to 75% of March’s daily averages.

Management looking to take advantage of low interest rates

While management was working with an Australian bank in the application process it did not progress to submission as the pre-application process recently determined that EN1’s assets and principle business activities are mostly in the US which places it outside of their lending guidelines.

However, EN1 qualifies and has applied for US EIDL funding under the CARES Act and should have updates in this area shortly.

Management has received conventional debt term sheets from the company’s advisory firm Virathus for $8 million and is in the evaluation process.

EN1 is also in talks with US banks about applications for term loans, as interest rates are the lowest in recent years.

Management is focused on refinancing current note balances and securing equity-free alternatives.