Business Overview and History
Collective Audience, Inc. (OTCQB:CAUD) is a leading innovator in the rapidly evolving adtech and martech industries. The company has undergone a remarkable transformation in recent years, positioning itself as a disruptive force in the open web advertising landscape. By leveraging cutting-edge technologies, strategic acquisitions, and a talented team, Collective Audience is carving out a unique niche and driving meaningful growth.
Collective Audience was originally incorporated on March 18, 2021, as a Delaware corporation under the name Abri SPAC I, Inc. The company was initially formed as a special purpose acquisition company (SPAC) with the goal of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization, or similar business combination with one or more businesses.
On November 2, 2023, the company completed a transformative business combination with DLQ, Inc., a Nevada corporation. This merger marked a pivotal moment for Collective Audience, as it gained access to DLQ’s operations, technology, and expertise. Following the business combination, the company changed its name to Collective Audience, Inc.
DLQ, which now forms the core of Collective Audience’s operations, has its own rich history. It was originally incorporated in December 2019 as Origin 8, Inc. DLQ operates through two wholly-owned subsidiaries: Tamble, Inc., a Delaware corporation, and Push Interactive, LLC, a Minnesota limited liability company. In January 2020, DLQ completed the acquisition of substantially all the assets of Push Holdings, Inc., which were subsequently transferred to Push Interactive, LLC.
Further expanding its capabilities, DLQ completed the acquisitions of certain customer contractual agreements from Battle Bridge Labs, LLC and Section 2383 LLC, a Tulsa, Oklahoma-based digital brand marketing agency, on March 31, 2022. The purchase price for these acquisitions was $2.93 million, consisting of 2.91 million shares of restricted common stock of Logiq, Inc. valued at $2.68 million and cash consideration of $250,000, with Logiq, Inc. contributing $200,000 and DLQ contributing $50,000.
Following the merger, Collective Audience expanded its capabilities through two strategically significant acquisitions. On June 28, 2024, the company acquired DSL Digital, a global marketing platform with proprietary AI-powered technology. This acquisition enabled Collective Audience to launch its innovative AudienceServices™ Group, leveraging DSL’s Copycraft AI to generate high-performing ad creatives optimized for campaign performance.
On August 1, 2024, Collective Audience further bolstered its technology stack by acquiring BeOp, a French company specializing in conversational advertising technology for the open web. BeOp’s award-winning platform and expertise in next-generation advertising solutions have been seamlessly integrated into Collective Audience’s offerings, positioning the company as a cutting-edge provider of performance-driven advertising solutions.
Financial Performance and Liquidity
Collective Audience’s financial performance has demonstrated both challenges and progress in recent years. For the fiscal year ended December 31, 2023, the company reported revenue of $12.14 million, a decrease from the prior year’s $20.24 million. This decline was primarily attributable to the company’s focus on completing the initial business combination and subsequent restructuring efforts.
The company’s net loss for the fiscal year 2023 was $4.58 million, compared to a net loss of $5.57 million in the previous year. While the company continues to navigate the complexities of its transformation, it has made strides in managing its expenses, with a reduction in total operating expenses from $25.72 million in 2022 to $18.80 million in 2023.
For the most recent quarter ended June 30, 2024, Collective Audience reported no revenue, as the company was focused on completing the initial business combination. The company incurred $1.32 million in operating expenses during the quarter, primarily consisting of $808,500 in general and administrative costs and $377,720 in depreciation and amortization expenses. The net loss for the quarter was $1.32 million.
As of June 30, 2024, Collective Audience reported a working capital deficit of $2.53 million and cash and cash equivalents of $838,230. The company’s liquidity position has been a concern, as it continues to invest in its growth initiatives and integration of the recent acquisitions. The company’s debt-to-equity ratio stands at 1.40, while both its current ratio and quick ratio are 0.30, indicating potential liquidity challenges.
Collective Audience’s operating cash flow (OCF) and free cash flow (FCF) for the fiscal year 2023 were both negative $3.93 million. For the quarter ended June 30, 2024, OCF and FCF were negative $607,240. The company’s operating revenues are insufficient to fund its operations through the next twelve months, raising substantial doubt about its ability to continue as a going concern.
However, the company has secured a financing arrangement with its sponsor, which it expects will provide up to $30 million in additional capital to fund its operations and strategic initiatives.
Revenue Streams and Product Segments
Collective Audience generates revenue from three main streams: Lead Generation, Affiliate Management, and Reengagement.
Lead Generation Revenue involves providing leads by purchasing ads to direct consumers to specific pages which are auctioned to the customer base. The company’s performance obligation is to deliver the leads to customers in accordance with the terms of the agreement, recognized at a point in time when value is transferred to the customer through delivery.
Affiliate Management Revenue is generated by placing ads on behalf of customers after identifying appropriate platforms, determining ad spend and pricing, and producing marketing materials. This obligation is also recognized at a point in time when value is transferred to the customer through delivery.
Reengagement Revenue is derived from providing links and advertisements via online, email, and In-App channels that generate views paid for by the customer. The performance obligation is to deliver clicks on advertisements, recognized at a point in time when value is transferred to the customer through delivery.
All revenue streams are recorded on a gross basis, as the company acts as the principal in these transactions, responsible for service delivery, pricing, billing, collections, and retaining credit risk.
Operational Highlights and Growth Drivers
Collective Audience’s recent acquisitions have been transformative, enabling the company to expand its technology capabilities and service offerings. The integration of DSL Digital’s AI-powered Copycraft technology has strengthened the company’s AudienceServices™ Group, allowing it to provide clients with highly personalized and optimized advertising campaigns.
Furthermore, the acquisition of BeOp has bolstered Collective Audience’s position in the conversational advertising space. BeOp’s award-winning platform and expertise in this emerging field have been seamlessly incorporated into the company’s product suite, positioning Collective Audience as a leader in this rapidly growing segment of the open web advertising market.
Collective Audience’s growth strategy is centered around leveraging its enhanced technological capabilities, expanding its client base, and exploring strategic partnerships. The company has secured a partnership with leading sports and news media provider Genesis Communications, which will integrate Collective Audience’s advertising solutions into its platforms, providing a significant opportunity for revenue growth.
Additionally, the company has established the Advisor Collective, a strategic advisory community comprised of industry veterans and thought leaders. This initiative is designed to leverage the collective expertise of these advisors to guide Collective Audience’s product development, go-to-market strategies, and industry positioning.
Risks and Challenges
While Collective Audience has made significant strides in transforming its business, the company faces several risks and challenges that investors should consider.
The company’s financial performance has been uneven, with declining revenues and ongoing losses. The successful integration and optimization of the recent acquisitions will be crucial in driving a return to profitability and sustainable growth.
Collective Audience has also faced regulatory and compliance hurdles, including notifications from Nasdaq regarding the company’s failure to meet certain continued listing requirements. The company is currently facing potential delisting from the Nasdaq Global Market due to failure to maintain minimum market value of listed securities and minimum market value of publicly held shares requirements. The company has appealed the delisting decision, and its ability to maintain its public listing or transition to the OTC markets will be a critical factor in its long-term success.
Furthermore, the adtech and martech industries are highly competitive, with established players and emerging disruptors vying for market share. Collective Audience’s ability to differentiate its offerings, stay ahead of technological trends, and effectively market its solutions will be essential in securing a strong position within the industry.
Outlook and Conclusion
Collective Audience’s transformation journey has been marked by both challenges and promising opportunities. The company’s strategic acquisitions and technological advancements have positioned it as a player to watch in the rapidly evolving open web advertising landscape.
As Collective Audience continues to integrate its recent acquisitions, optimize its operations, and explore strategic partnerships, the company’s ability to drive sustainable growth and profitability will be crucial. Investors should closely monitor the company’s progress in navigating the competitive landscape, maintaining its public listing, and executing on its ambitious growth plans.
Despite the risks and uncertainties, Collective Audience’s vision of building a revolutionary adtech platform for the open web is compelling. The company’s innovative approach, talented leadership, and growing portfolio of technology solutions position it as a potential disruptor in the industry. As Collective Audience continues to evolve, investors will be keeping a close eye on its ability to capitalize on the opportunities ahead and establish itself as a dominant force in the dynamic world of digital advertising.
The company’s focus on its three main revenue streams – Lead Generation, Affiliate Management, and Reengagement – provides a diversified approach to capturing market share in the digital advertising space. However, the lack of revenue in the most recent quarter highlights the challenges the company faces as it navigates its post-merger integration and growth strategy.
Collective Audience’s primary operations in the United States market provide a solid foundation, but future geographic expansion could offer additional growth opportunities. The company’s recent acquisitions of DSL Digital and BeOp demonstrate its commitment to enhancing its technological capabilities and expanding its service offerings.
As Collective Audience moves forward, addressing its liquidity concerns and returning to revenue generation will be critical. The company’s ability to leverage its new acquisitions, execute its growth strategy, and navigate the regulatory challenges will be key factors in determining its long-term success in the competitive adtech and martech industries.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.