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Engage:BDR year-on-year revenues tracking well

Published 27-APR-2020 12:02 P.M.


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engage:BDR (ASX:EN1; EN1O) has provided an unaudited trading update in relation to its interim April 2020 financial performance with a comparative analysis relative to the previous corresponding period in 2019.

EN1 has just received the US government Paycheck Protection Program (PPP) funding of $690,000 (US$435,000).

This funding is entirely forgivable and creates no liability for EN1 within 60 days if used entirely on US employees’ payroll.

PPP funding qualification criteria did not require EN1 to prove financial hardship, and the program was strictly for US small businesses with US resident employees.

The program paid for 2.5 months of payroll, with some restrictions (caps on executive pay, etc) and required the funds to be used exclusively on payroll of these employees, entirely forgiven within 60 days.

The net impact to EN1’s balance sheet adds $690,000 to working capital and assets, without any incremental liabilities.

Management expects additional PPP funding in the near future, as the US government has approved and extended the program, currently doubling the initial budget.

As US quarantines continue, management expects the US government to continue deploying funding to small businesses.

EN1’s cash balance is $2.4 million, which is significantly higher than the average cash balance of $1.4 million in 2019 and the 2019 ending cash balance of $1.8 million.

The following table shows the group’s significant outperformance compared with the previous corresponding period, including an improvement in gross profit margins from 38% to 41%.

01b - EN1

Revenue building after quarantine leads to subdued start

April 2020 revenue started lighter than expected due to brand budget pauses throughout the US because of the quarantine orders across 85% of the country.

This coupled with the start of a new quarter has resulted in lighter revenues temporarily.

Revenue is expected to continue to increase throughout the balance of the month and greater through subsequent months of the second quarter.

Daily revenue analysis shows an increase of more than 25% over the past 7 days, and management expects revenue to continue to normalise over the balance of the month and into May.

01 - EN1.jpg

Based on EN1’s average gross profit margins, PPP funding is similar to incremental revenues of $1.65 million.

Management took measures in early March to defer and significantly reduce all operating expense categories to limit cash outflow.

All vendors, partners, and companies EN1 works with have been very malleable, and management expects business to continue as usual.

There have been across-the-board reductions in operating expenditure, including board and director compensation.

Alto, the company’s primary lender, has proactively and voluntarily deferred recent amortisation payments.

During the quarter there were payments of $250,666 associated with executive and non-executive fees paid to director's fees for the March 2020 quarter.

Management anticipates EN1’s industry diversification will work in its favour in terms of weathering the COVID-19 storm.

As the US economy reopens, management expects advertising activity to ramp up.

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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