Digital marketer Engage BDR has slashed revenue guidance almost in half, because it couldn’t raise enough cash to pre-pay publishers for ad spots before Christmas.

The company (ASX:EN1) was expecting full year revenue of $21m-23m.

Now it thinks it’ll get $12m-13m.

EBIDTA (earnings before interest, depreciation, tax and amortisation) was supposed to be in positive territory around $1.2m-1.5m.

Instead, they’re likely to fall into the red with a loss of $4m-5m.

Blaming Ebenezer Scrooge

The cause was the capital crunch that afflicted small caps in the later half of 2018.

Engage BDR said it had lined up “a substantial amount” of cash from its investors in the third and fourth quarters, but delays by brokers and its falling share price meant it didn’t see the money in time.

“Engage BDR was in close dialogue with institutional lenders until very recently and expected an injection of $5m by early December… This endeavour has not been terminated, only delayed,” it said.

The US-based company has raised just over $12m from ASX investors since it listed in December 2017, including the IPO funds.

It’s been largely downhill for the company’s share price since then.

The stock opened flat at 1.8c on the first trading day of 2019, down from a peak of 23c exactly a year ago.

Engage BDR shares over the last 12 months.

The way Engage BDR works is by pre-paying an integration fee to a mobile publishers to gain access to their platform of about $25,000-100,000. Normally, they’d have made that back in the first few weeks of trading.

They also pre-purchase premium advertising inventory and they say $1 spent is worth $2 in revenue.

But because they couldn’t raise the money to pay those fees in what is traditionally the busiest time of the year for digital marketing.

Flowers and chocolates for ASX investors

In a letter to shareholders last week two days after Christmas, when the company released the news, chairman Ted Dhanik said it’s not all bad news and promised to pay more attention to their local shareholders.

The EBITDA loss is lower than a year ago when they reported a $7.1m loss, they’ve halved the number of staff and therefore the headcount cost, and a deal with Adacel could turn make up for the last lost quarter.

“Among its top priorities is finding innovative ways to secure long-term funding to help support prepays each quarter,” Mr Dhanik said.

“The executive team plans to spend much more time in Australia in 2019 to build closer relationships with its shareholders and stronger ties to the country.”

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