- Shares in engage:BDR (EN1) are slumping today after the company revealed a cost-heavy September quarter
- While an August capital raise helped boost the advertising company's cash position to $2.6 million by the end of September, the company was still cashflow-negative over the quarter
- Steeper admin and corporate costs offset a marginal increase in customer receipts, which were just under $3.2 million for the quarter
- This may have been particularly disheartening to investors given engage:BDR's confidence at the end of July
- Shares in the company are down over 14 per cent this afternoon and currently worth 0.6 cents each
Shares in engage:BDR (EN1) are slumping today after the company revealed a cost-heavy September quarter.
The advertising company bolstered its cash position to just over $2.6 million on hand at the end of September with the help of an August capital raise. However, engage:BDR was still cashflow-negative by around $741,000 for the September quarter.
Over the June quarter, EN1 managed to go cashflow-positive by a slim $4,000.
While engage:BDR posted a marginal increase in customer receipts to $3.2 million over the September quarter, it seems steeper ad inventory expenses and admin and corporate costs offset the increase.
The company blamed the higher admin and corporate costs on the kickback from March payment deferrals. In light of the coronavirus, engage:BDR deferred several large vendor payments to preserve cash.
This meant, however, that EN1 had to kick off an accelerated repayment plan in July to start paying back outstanding balances.
Thus, quarterly costs deepened despite a 45 per cent reduction in staff costs to around $432,000. Since the onset of COVID-19, EN1 has managed to reduce staff costs by a whopping 61 per cent.
Investors may be particularly disheartened by the soft quarterly numbers given EN1's confidence at the end of July. At the time, engage:BDR said the advertising industry typically books most of its revenue during the second half of the year.
Still, with over $38 million available through a major financing arrangement with Alto Opportunity Master, EN1 had almost $41 million in total funds available at the end of September. Even at its increased level of spending, this translates to 55 quarters worth of available funds.
This trend was evident in 2019, when EN1 made 66 per cent of total revenue between the months of July and December.
As such, the moderate increase in quarterly customer receipts likely fell below market expectations.
Shares in engage:BDR are down 14.29 per cent at 2:50 pm AEDT, currently worth 0.6 cents each in a $10.34 million market cap.