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engage:BDR sets sights on scaling revenue and profitability for 2020

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Despite the economic and financial impacts of COVID-19, the company experienced the strongest first half in its history of more than 44% up from 2019.

The Progressive - Engage:BDR sets sights on scaling revenue and profitability for 2020

Quick facts: engage:BDR Ltd

Price: 0.007 AUD

ASX:EN1
Market: ASX
Market Cap: $8.85 m
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Engage:BDR Ltd (ASX:EN1) is reaping the benefits from several new revenue streams introduced in the first quarter of 2020 and has subsequentially updated its strategic plan for the year.

In a letter to shareholders, co-founder and executive chairman Ted Dhanik said: “The company extends material revenue growth to the first half of 2020 with the strongest first half in EN1 history at about 44% over first half 2019 - regardless of the COVID-19 disruption.

“As the second half begins (peak season), management expects revenue to continue to increase throughout the balance of the year.”

The company’s strategic goal for the remainder of the year is to continue to scale revenues and profitability.

Integrations to drive revenue

To date, the company has onboarded more than 230 integrations in the first half of 2020 and is confident the additional ad inventory and advertiser demand will create a network effect where demand on all inventory increases competition for each impression, bid-prices, sell-through and margins all increase; yielding a direct impact on gross profit, net income and EBITDA.

Dhanik said: “engage:BDR is the core business and largest revenue driver.

“[It’s] like a stock exchange for digital ad space, which connects thousands of publishers to buyers and all of their transactions are automated, almost exactly like online stock trading platforms.”

The company cites eMarketer’s forecast that the global directly addressable market size for programmatic advertising in 2021 is expected to reach US$147 billion as the reasoning behind its push in the second half of the year to include new integrations on the platform each quarter.

engage:BDR intends to exceed its target of 238 programmatic integrations by the end of 2020 and is well on-track for this.

The company's strategic milestones for the second half of the year

New ad inventory quality initiatives

Two new ad inventory quality initiatives (app ads.txt & sellers.json) are now live and generating $5,000 incremental daily revenue on average.

In quarter one, the company successfully listed greater than 50% app ads.txt inventory quality coverage – essentially allowing app publishers list their authorised sellers within a file accessible by anyone, (but typically only buyers), at the time they submit their bid.

The progressive ad inventory quality sellers.json was also launched during the quarter and enables buyers to understand how direct the ad inventory they are buying truly is.

engage:BDR anticipates positive revenue impact in 2020, and in the future, a material difference in sustainability and reduction of competition and growth of margins, as the middlemen would be eventually eradicated by the design of sellers.json.

NetZero targets met

All NetZero targets for the first half have been met with the addition of two new, large publishers per quarter.

NetZero is a post-paid publisher payments solution which significantly improves the cashflow of publishers by providing cost-free, immediate payment of invoices the day EN1 is invoiced.

 In contrast, many publishers pay 25% interest on average, per year, for similar access to capital (factoring).

EN1 executes campaigns, sells the ad inventory and invoices the buyers before paying the publishers and is insured for all A/R credit with Euler Hermes credit insurance.

AdCel top performer

AdCel remains a top performer for the company, with a new revenue stream deployed in quarter two.

Native advertising support, within the AdCel DSP, is time-based guaranteed attention product for advertisers, which takes optimisation several steps further by guaranteeing specific time metrics around the viewability of the ad to each user, down to the impression.

Dhanik said “AdCel’s technology is specifically focused around helping mobile app publishers generate revenue with their traffic, by providing premium advertisers and campaigns.”

During quarter two, AdCel also deployed another new ad format for publishers and AdCel DSP customers in chatbot ads.

The company's three business streams.

IconicReach influencer marketplace

A new potential new revenue stream for the company is IconicReach, which Dhanik said aimed to be the ‘Google AdWords’ for influencer marketing.

He said: “Currently, there is a large gap in the industry and large-scale opportunity for IconicReach to lead as the technology solution.

“Within a single campaign EN1 can leverage social influencers on Instagram, syndicate the content they create for EN1 clients’ campaigns across other influencers on Instagram, YouTube, etc, then also publish advertising to the same influencers’ audiences but across display, native, video and audio ads on desktop, mobile and connected TV (CTV) on websites and apps (all screens).

“There are very few companies in the digital ad space, anywhere, who have achieved this.”

The global directly addressable market size in 2021 for influencer marketing is estimated to be US$12 billion.

While the company targeted 2-4 new brands to be signed per quarter in 2020, these resources have been temporarily furloughed to shift expenses to other revenue-generating areas of EN1’s business due to Covid-19 expense optimisation.

In the second half of the year, IconicReach will deploy an entirely new website with new marketing content and case studies.

New revenue targets

Despite COVID-19 revenue impact, the company closed its largest H1 in EN1 history on June 30, 2020, 44% revenue growth, year-over-year.

Management successfully reduced tech infrastructure costs by greater than 10% in the first half - an ongoing cost reduction exercise which will continue for the foreseeable future.

In 2019, EN1 generated $1.15 million per person; and the company is now targeting a considerably higher figure individual revenue target by the end of 2020 as revenue run-rate is currently stronger than 2019, with 12 full-time employees.

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