Part 1

• What does the company do and is it easily understandable?

Enero is a diversified global marketing agency that consists of five main businesses which are separated into two verticals, Brand Transformation & Creative Tech and Data.

BMF - Creative Agency - Brand Transformation

Hotwire Global - Creative Agency B2B Technology Companies

CPR - Public Relations

OBM - Web Traffic and customer acquisition

Orchard - Creative Agency - Digital Experience

• What is the problem the company is solving and how are they solving it? - Where? Why does it need solving? 

Enero describes itself as a “Creative Technology” company. It uses technology driven brand transformation and customer experience solutions for their clients. This is where CMO’s face their largest challenges in brand marketing.

From Gartner.com

• What is the company business model? What is the pathway from product/service/offering to payment? 

Creative Agencies

• B2B - Selling services to deliver specific scopes or projects

OBMedia

• Purchase traffic and sell the qualified traffic to search engines for advertisers.

• Is the product offering diverse and therefore income generation diverse?

The Enero group of companies operate across a range of areas within the marketing and advertising markets. These include PR, Creative Content, Digital Marketing, Digital Transformation and Analytics

• Is the company a price maker or price taker?

As a services company with many large global competitors Enero is a price taker, however by offering a premium service to marquee customers, they are able to maintain a small premium to competitors in some markets.

• Does the business generate recurring revenues? How reliable is this recurring revenue? 

Currently 47% of Revenue comes from fixed retainers (Excludes OBMedia)

• Who are the core customers of the business?

Enero have a diverse range of customers from some of the most recognisable brands globally.

• Is the customer base diverse? / • Does the company operate in multiple markets/countries?

Eneros revenue is split across multiple markets and countries globally which provides diversification across revenue streams.

OBMedia which is the largest growing business within the group has a more concentrated customer base as it transacts for web traffic from search engine providers.

• Is it easy to convince customers to buy the products/service?

Currently marketing spend makes up ~9-10% of company revenues, which mean that companies are always spending to drive sales of their own products and services. Enero group provide expertise that is not usually maintained in house, and have a proven track record with their existing customer base.

Current economic headwinds will pose some short term challenges as business’s look to implement cost controls, but marketing will remain an important area to maintain sales and business growth. A Gartner survey reveals that spending will likely continue in the development of new digital tools and customer experience marketing tools.

• Does the company operate in stable markets?

Enero operates in stable markets across the US, Asia, Australia, UK & Europe

• Is the company disruptive and innovative in its field?  

Across the operating business’s it is recognised that being at the forefront of digital marketing and analytics will continue to drive outcomes for their clients.  Enero has demonstrated this in the past with the integration of ROI into Hotwire which has expanded their offering to clients.

• Are the profit margins attractive (better than industry)?

Enero are feeling some impacts to margins, but are still inline with industry.

• What are the CAPEX requirements and are they ongoing?

Enero is predominantly a services business, so does not have significant ongoing capital costs. The largest operating expenses are on staff wages.

• What extent does the business experience operating leverage?

The creative agency parts of the business are limited in the amount of operating leverage that can be generated as can be seen by the consistent historical margins. This can be improved going forward through the integration of technology products in the service mix, but it will only be limited.

OBMedia can experience much more operating leverage than the other businesses as it does not require the same operating resources as the creative agencies. This can be seen by the much higher EBITDA margins in the U.S. Enero only owns 51% of OBMedia.

• How does interest rate increase and inflation affect the business?

Inflation mostly impacts the business through increased impacts of staff costs, some of these costs can be passed onto customers, but on a delayed cycle due to the retainer and project structure of business.