Collective Audience, Inc. (NASDAQ:CAUD) is a leading innovator in the digital advertising and media space, revolutionizing the way brands and publishers engage with audiences on the open web. Founded in 2021, the company has rapidly emerged as a disruptive force, leveraging its proprietary technology and strategic acquisitions to carve out a unique position in the rapidly evolving AdTech landscape.
Business Overview
Company Formation and Early Acquisitions Collective Audience was originally incorporated in March 2021 as Abri SPAC I, Inc., a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses. On September 9, 2022, Abri SPAC I, Inc. entered into a Merger Agreement with Logiq, Inc., DLQ Inc., and Abri Merger Sub, Inc. The business combination was completed on November 2, 2023, at which time Abri SPAC I, Inc. changed its name to Collective Audience, Inc. and its operations became primarily based on those of its wholly-owned subsidiary, DLQ Inc.
In March 2022, DLQ Inc. and its then parent completed the acquisitions of certain customer contractual agreements of Battle Bridge Labs, LLC and Section 2383 LLC, a Tulsa, Oklahoma based digital brand marketing agency. The purchase price was $2.93 million and consisted of the issuance of 2.91 million shares of restricted common stock of Logiq, Inc. with a fair value of $2.68 million and cash consideration of $250,000.
Core Business and Technology The company's core business revolves around audience-based performance advertising and media solutions for the open web. Through its proprietary AudienceCloud platform and strategic acquisitions, Collective Audience has assembled a robust suite of technology and services designed to empower brands, publishers, and agencies to maximize the effectiveness and profitability of their digital marketing initiatives.
Collective Audience operates through two main product segments: Lead Generation and Affiliate Management. In the Lead Generation segment, the company provides leads by purchasing ads to direct consumers to specific pages which are then auctioned to the customer base. The performance obligation is to deliver the leads to customers in accordance with the agreement terms, recognized at a point in time when value is transferred to the customer through delivery.
The Affiliate Management segment involves placing ads on behalf of customers after identifying appropriate platforms, determining optimal ad spend and pricing, and producing marketing materials. This is also recognized as a single performance obligation at the point of delivery.
Additionally, the company offers Reengagement services, providing links and advertisements via online, email, and In-App channels that generate views paid for by customers. All revenue streams are recorded on a gross basis, with the company responsible for service delivery, pricing, billing, collections, and credit risk management.
Strategic Acquisitions In June 2024, Collective Audience made a transformative acquisition, purchasing a 51% stake in DSL Digital, a global marketing platform with proprietary AI-powered technology. This transaction added a marquee customer base of Fortune 500 companies, as well as a highly skilled 20-member global services team. Importantly, it also brought DSL Digital's Copycraft AI technology, which enables the automated generation of high-performing ad creative optimized for campaign performance. The company also secured an exclusive option to acquire the remaining 49% over the next 18 months.
The company further bolstered its capabilities in August 2024 with the acquisition of BeOp, a France-based innovator of next-generation advertising technology for the open web. BeOp's award-winning, SaaS-based platform and global customer base, including leading brands such as Range Rover, Tommy Hilfiger, and Coca-Cola, have been seamlessly integrated into Collective Audience's ecosystem.
Financial Performance
Collective Audience's financial performance has been impacted by the company's strategic shift and transformative acquisitions. For the fiscal year ended December 31, 2023, the company reported total revenue of $12.14 million, down from $20.24 million in the prior year. This decline was largely attributable to the company's focus on integrating its newly acquired businesses and restructuring its operations. The company reported a net loss of $4.58 million for the year, with operating cash flow and free cash flow both at -$3.93 million.
For the second quarter of 2024, the company reported no revenue and a net loss of $1.32 million. This decrease in revenue and increase in net loss was primarily due to the company's focus on completing the Initial Business Combination during this period. For the first six months of 2024, the company incurred operating expenses of $2.53 million, primarily consisting of professional fees, depreciation and amortization, and general and administrative costs.
However, the company's outlook for the future is quite promising. In its most recent guidance, Collective Audience projected record pro forma revenue of approximately $1.8 million for the third quarter of 2024, representing a 65% increase from the previous quarter. This growth is being driven primarily by the contributions of the DSL Digital and BeOp acquisitions, as well as strong momentum in their client campaign bookings.
Financials and Liquidity
As of June 30, 2024, Collective Audience reported cash and cash equivalents of $838,230, with a working capital deficit of $2.53 million. The company's current ratio and quick ratio both stand at 0.30, indicating potential short-term liquidity challenges. The debt-to-equity ratio is 1.40, suggesting a significant reliance on debt financing.
To address these liquidity needs, the company has secured a financing commitment of up to $30 million from its sponsor, which is expected to provide the necessary capital to fund ongoing operations and support the company's growth initiatives. However, the company's operating revenues are currently insufficient to fund its operations through the next twelve months, raising substantial doubt about its ability to continue as a going concern. The company is exploring strategic options, including seeking additional financing, to address its liquidity needs.
Collective Audience primarily operates in the United States market. The company does not have any disclosed available credit lines or credit facilities.
Risks and Challenges
Collective Audience, like many companies in the rapidly evolving AdTech industry, faces a number of risks and challenges. The company's recent delisting from the Nasdaq Global Market, due to its inability to regain compliance with certain listing requirements, is a significant hurdle. While the company is pursuing an appeal and exploring a potential transfer to the Nasdaq Capital Market, the ultimate outcome remains uncertain.
Integration Risks Additionally, the company's heavy reliance on its recent acquisitions, DSL Digital and BeOp, exposes it to integration risks and the potential for slower-than-expected synergies. The successful execution of the company's growth strategy, which hinges on the seamless integration and optimization of these acquired assets, will be crucial to its long-term success.
Competitive Landscape Furthermore, the highly competitive nature of the digital advertising and media industry, marked by the dominance of tech giants like Google and Facebook, poses a constant challenge for Collective Audience. The company must continually innovate and differentiate its offerings to maintain a competitive edge and attract both brand and publisher partners.
Conclusion
Collective Audience is a company in the midst of a transformative journey, leveraging its proprietary technology and strategic acquisitions to carve out a unique position in the rapidly evolving AdTech landscape. While the company has faced some near-term challenges, including its recent Nasdaq delisting and lack of revenue in the most recent quarter, the long-term outlook appears promising.
The successful integration of DSL Digital and BeOp, combined with the company's AI-powered technology and growing customer base, positions Collective Audience as a potential disruptor in the audience-based advertising and media space. As the company continues to execute on its growth strategy, investors will be closely watching for signs of improved financial performance and the realization of the synergies promised by these recent transactions.
The digital advertising industry is experiencing rapid growth, with the global market expected to more than double in size by 2030, exceeding $250 billion according to Grandview Research. This favorable industry trend provides a significant opportunity for Collective Audience to capitalize on its innovative technologies and strategic positioning.
Overall, Collective Audience's story is one of innovation, adaptation, and a relentless pursuit of delivering value to brands, publishers, and ultimately, the end-consumers on the open web. With a seasoned management team and a clear vision for the future, the company appears well-positioned to navigate the challenges of the AdTech industry and emerge as a leading player in the years to come. However, addressing its current liquidity challenges and successfully integrating its recent acquisitions will be critical to realizing this potential.