Entertainment AI plc (EAI: AIM) has announced that 1Q20 trading delivered in-line adjusted loss before tax of $630,000 despite revenue being 8% lower at $2.1m (1Q19: $2.3m).
Interesting for investors, the COVID-19 pandemic helped boost the views on the Company’s Multi-Channel Networks audience views by 35% to 4.4 billion (Q1 2019: 3.3 billion).
However, due to the worldwide decrease in advertising spend, it did not directly translate into digital video advertising revenue due to global CPM rates falling 33% to $1.57 (1Q19 $2.33).
Reassuringly, prior to the COVID-19 outbreak, the Group's revenues were tracking ahead of the same period last year.
The Company maintained a strong balance sheet through 1Q20 with cash of $7.9m as at 30th April 2020. Importantly this balance sheet strength provides sufficient resources to commercialise the Company’s entire multi-year product development roadmap starting with and continuing with contextual e-commerce in 3Q20.
Outlook
The Company remains on track to launch its new AI-driven products not only designed to address digital advertising revenue yield from the Group's MCN, but also open multiple additional revenue streams including licensing to other brands and MCNs affected by the same market downturn in YouTube digital ad spend.
In Mid-May, the Company plans to launch the Group's first product offering, CreatorSuite™, to assist video creators to gain higher yield from their content, studio and marketing activities and videos to be quickly followed in mid-June with the launch of BrandSuite™ to drive B2B licensing opportunities emerging beyond application to the Group's own MCN:
CreatorSuite™
EAI expects CreatorSuite™ to positively impact the economics of MCN in two ways:
Firstly, content that is enriched via CreatorSuite™ is expected to drive incremental views on YouTube where they will be monetized via YouTube's normal advertising mechanisms.
This increase in views will be further enhanced by better analytics from our proprietary processes for "micro-momentising" video driving CPM higher as advertising is more targeted.
Secondly, CreatorSuite™ allows our network of affiliated creators to generate significant new revenue streams such as offsite contextual e-commerce and lead generation from videos on other websites, including the Group's own proprietary GTChannel website.
In both these cases, the Group will share in the revenues generated from CreatorSuite™.
Furthermore, the Company will also directly offer CreatorSuite™ to both creators and other MCNs, who depend on digital video advertising for their own revenue generation, on a high margin, SaaS based recurring revenue model.
Brandsuite™
The Group is on track to introduce BrandSuite™ during the current quarter to help brands better monetise viewers interest in key moments in the path to purchase online.
As mobile has become an indispensable part of daily lives, a fundamental change has taken place in the way audiences consume video. Predictable, daily sessions online have been replaced by many fragmented interactions that now occur instantaneously.
BrandSuite™ arms our brand partners with useful metrics, insights, predictions about their audience, which will drive significantly better return on marketing investment from video.
EAI will bundle and sell access both to insights and to solutions based on the Group's proprietary technology that will allow brands to respond to the constantly connected purchase journeys reshaped and personalized by consumers.
The Company is considering various branding strategies to reinforce the value of its product launches and the enthusiasm it expects from the marketplace. The Company plans to communicate its strategy in the coming weeks coincident with the release of its 2019 accounts.
Dr. Patrick DeSouza, Chairman of Entertainment AI, stated, "We believe that our technology products are being launched at the right time to take advantage of opportunities brought on by Covid-19 crisis and market drop in digital ad sales. We have the capital and institutional backing to deliver our solutions on-time and we look forward to this challenge."
Shares in EAI have traded largely flat from 26.5p at the beginning of April to open today 6% higher at 27p following the 1Q20 trading update.
Todd Carter, CEO of Entertainment AI, stated, "In speaking with publishing and brand leaders during 1Q, we believe that demand for our technology products will be acute given the pullback in digital ad spend and increased reliance on online sales for brands to meet their sales goals.
We will leverage our AI-powered data analytics and data-grounded decision making to drive broad commercialization. Technology at EAI spans many video segments of the market and drives opportunities from content creation across our network, to personalization for consumers and partnership with brands.
We are on target to deliver these innovative products and are excited by the impact we expect them to make on our business."