engage:BDR Ltd (ASX:EN1) expects revenue during the current quarter will continue to normalise after daily revenue has improved 25% over the past four days.
Monthly revenue until April 21 is A$835,000 and the company's current cash balance of A$2.4 million is significantly greater than the average and ending balance of 2019.
In a mid-month trading update and March quarterly commentary, engage:BDR said it had acted quickly in response to the COVID-19 pandemic and as a result, the impact had not been as great as it may have been.
Executive chairman and chief executive officer Ted Dhanik said: “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 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 Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (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.
"After conversations with maybe 50 companies in our space, the typical impact is 50-70%, closer to the 70% mark.
“We diversified our streams well, so we haven’t seen an impact like them, we are sitting much stronger than the crowd, currently, with much lighter operating expenses.”
Along with deferring and reducing all operating expense categories to limit cash outflow, the company’s primary lender Alto has proactively and voluntarily deferred recent amortisation payments.
US Paycheck Protection Program
EN1 has received the US Government Paycheck Protection Program funding in the amount of US$435,000 (A$690,000) which paid for 2.5 months of payroll (with caps on executive pay).
The funds will be entirely forgiven within 60 days, with the net impact to EN1’s balance sheet adding $690,000 to working capital and assets, without any incremental liabilities.
This funding is free of liability, and similar to an incremental $1.65 million revenue at EN1’s 42% (average) gross profit and will sit at the other income line at the half-year review mark.
EN1 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, the US government is expected to continue deploying funding to US small businesses with US resident employees.
The current cash balance is A$2.4 million, compared to the average cash balance of A$1.4 million in 2019.
During the quarter there were payments of A$250,666 associated with executive and non-executive fees paid to directors fees for the March 2020 quarter.
Net cash used in operating activities ($1.1 million) includes $804,000 in prepaid assets (refundable pre-paid ad inventory) and $637,000 in onetime legal settlements.
Cash receipts increased to A$5.5 million, the highest ever since ASX listing.
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 revenue temporarily.
Revenue for April (up to the 21st) is A$835,000 (compared to $724,000 in April 2019) and daily revenue has improved 25% over the past four days.
Daily revenue analysis shows a 25% increase over the past seven days and EN1 expects revenue to continue to normalise over the balance of the month and into May.
The company expects 2020 to produce similar revenue seasonality, as experienced in 2019 and all prior years.
Dhanik said: “We are seeing the key states in the US open up soon (California, Texas, Florida, New York, Georgia, etc) with plans to reopen publicly announced.
“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 EN1.”