Entertainment AI plc

(“EAI”, “Group” or the “Company”)

Q1 Trading Update

Entertainment AI plc (EAI: AIM), a leading technology and media platform company focused on transforming video content and e-commerce through micro-moments, announces its trading update for year-to-date through the end of the first quarter.

The Company is pleased to report that adjusted profits before tax were in line with expectations. Whilst the Group’s Multi-Channel Network showed strong growth in audience views and watch minutes, because of the impact of Covid-19 and the market-wide reduction in digital video advertising spend, the Company does not expect this growth to translate into a similar increase in revenue. However, the Company has maintained a strong balance sheet with cash of $7.9m as at 30th April and remains on track to launch its new AI-driven products on schedule in May and June.

Highlights

●    GTChannel views up 35% at 4.4 billion (Q1 2019: 3.3 billion)

●   Revenue per view down 33% at $1.57 CPM (2019 CPM: $2.33), reflecting wider market conditions

●    Revenue down 8% at $2.1 million (Q1 2019: $2.3 million)

●    Adjusted loss before tax of $630,000 in line with expectations

●   Strong balance sheet with $7.9 million of net cash as at 30 April 2020, which enables the Company to meet all its growth objectives as outlined at IPO in September 2019

●  Q2 proprietary technology product launches geared to address market-wide decline in digital ad revenue; products not only address digital ad revenue yield from the Group’s MCN but also open multiple revenue channels including licensing to other brands and MCNs affected by the same market downturn in YouTube digital ad spend

o  Mid-May launch of the Group’s first product offering, CreatorSuite^TM, to assist video creators to gain higher yield from their content, studio and marketing activities and videos

o   Mid-June launch of BrandSuite^TM to drive B-to-B licensing opportunities emerging beyond application to the Group’s own MCN

Trading Update and COVID-19 effects

The Company’s previously announced product roadmap post IPO has been to use VCT investment to launch proprietary products and tools that add revenue and yield to its MCN in good times and bad. The Covid-19 crisis and market dynamics only reinforce the demand for the Company’s products and licensing opportunities. The Group has sufficient cash to commercialize its entire multi-year product roadmap starting with CreatorSuite^TM and BrandSuite^TM in Q2 and continuing with contextual e-commerce in Q3. Management continues to monitor and manage its budget carefully in light of Covid-19.

During the three months to 31 March 2020, the Group’s video views across its entire MCN increased 35%, in line with analyst expectations. During January and February, the Group’s revenues were tracking ahead of the same period in 2019. However, in March as a result of COVID-19, advertising revenues per view fell, in line with the wider marketplace. CPMs decreased from $2.33 in Q1 2019 to $1.57 in Q1 2020.

EAI expects the roll-out of CreatorSuite^TM to impact the economics of MCN businesses (both ours and and third parties) in two ways. First, content that is enriched via CreatorSuite^TM 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-momentizing” video driving CPM higher as advertising is more targeted. Second, CreatorSuite^TM 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^TM. CreatorSuite^TM will also be offered as a SaaS product both directly to creators and, at a larger scale, other MCNs who depend on digital video advertising for their revenues, providing the Group with a higher margin, recurring revenue stream.

The Group is also on track to introduce BrandSuite^TM during the quarter to help brands to 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^TM 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.”

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.”

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014