FLNT - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the Fluent, Inc.

Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Ryan McCarthy. ahead. go Please

Ryan McCarthy

welcome. our and for us joining Good quarter Thank XXXX discuss third earnings to afternoon, you results.

Joining me and Schulke; CEO, Fluent's on today's CFO, call Alex are Ryan Mandel.

the Alex with would event I to will please of the on live remind webcast, call following Ryan will and question-and-answer this like comments call that be website. being website call by a our available Investor begin Schulke Our To our on the and Relations is Mandel, you recorded. followed session. replay access from visit our webcast A page www.fluentco.com.

Litigation would of to the from Act by under could risks our will the provided forward-looking Any by I those as begin, associated this company we words during by identified of intends, information conference differ results forward-looking materially certain contain listeners safe discussed harbor Before call XXXX. during call Reform this The speak could, call. made like only stated Securities expects, statements date company's advise or such be obligation provisions words with no will, update implied due covered to as forward-looking other that believes, similar this plans, of Actual and These of may statements hereof. management Private estimates should, information anticipates, the undertakes meaning. projects, uncertainties business. statements may, the to and statements on the

with encourage and annual Form Fluent's For recent including a to reports we Form company's Commission, associated Securities the the on XX-K business, with the uncertainties of report the company's Exchange XX-Q. on and discussion and risks review you quarterly filings most

including the information Management margin, also media adjusted present the and adjusted performance on of our to EBITDA During relating business evaluates of adjusted indicators, variety margin, net a we certain non-GAAP media EBITDA will financial income. today. financial With net press to pleased are that, measure most earlier adjusted the release Ryan Fluent's comparable provided CEO, earnings in of reconciliations these and Schulke. to the introduce The metrics GAAP issued income. definition and directly financial call, I'm

Ryan Schulke

afternoon, everyone and good Thanks, today. thanks Ryan, joining us for to and

to continue base. couldn't environment, I more our we As challenging proud navigate entire of this colleague be

leadership The remote Fluent our culture. resilience of X team's is grateful environment. this work months now team, a into strength As our and we're for perseverance,

once recognized one Places to Such New As pride York's more great of so again, is were times. during source difficult we as a these Best even Work. acknowledgment of

regulators a We efforts. digital women-owned also and launch direct-to-consumer recently our announced their businesses we will business reflects as We EBITDA the of growth lapping pleased as third of well quarter. challenging clients growth XX% strong year's the the this it to for And program, support players marketing by some with we're shareholders. challenging and empowerment our XXX%. and environment of of last technology results officials elected challenging this and successful our the brand environment Fluent is macro benefit with significant the scrutiny regulatory heightened year-over-year to improving traverse as consumers which continue Today, and quarter minority diligent of that for a own innovation major enhancing industry, growth and well of our our third with remains of media revenue equity, standards margin in of adjusted performance in the during growth believe as as share XX%,

incremental additional upside product investment further and into new and some markets. growth, generate reinvest on returns our in I've we media flywheel. can tapping of and incremental analytics about To that technology. higher then context or Fluent's monetization media This, We opportunity, yield innovation, turn, capacity. spend levers through as the market extent thinking supply accessing notion spoken can for For the can about profits and potential such the of

now, And pillars. done were we through strategic advances past and analytics-driven several our our in X innovation priorities able product growth quarter, serving, this flywheel. results around contextualize ad in further forward-looking calls, I'll I've our and as to the effective During advance

refers First, rather to platform. on This clicks enable and the or advertiser our than advertising our clients performance consumers Fluent's outcomes and bid scale. marketplace. demand solutions impressions down-funnel predictable our to clients interactions or at on pricing our between

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broader base audience the us addition, from of a larger client In the monetize daily companies a diversified more Marketing Performance profitably than in basis, enables most on offers such breadth a business. to and

including services. from vertical, the During our demand gaming streaming third see strong and and to media quarter, entertainment apps continued we

financial We also from had which the seen pandemic in a earlier lift vertical our saw products services and softness.

industries their them. work of point order represent right product discover engage that consumers we of needs affords categories While to our represent that variety consumer-first the out or service committed product preferences categories, I'll the to in and hundreds us into and grow retail. with ability and and for in platform such Fluent that Today, our that goal are as a with diversify recruitment, relationships of about of CPG them due industries insights services dozens operate marketplace. this to X aligned additional and verticals, to thesis of expanding health, to largest our the in those extract manner products helping and and We partners fundamental our we're verticals new practical against continues these orientation, advertising new

is day. properties by Fluent's media is our Second, This properties to consumers of portfolio of to pillar marketplace footprint. attract media digital growth our backed ability millions engaged and every fueling our those

marketplace. to for I able able consumers strong U.S. example to deeper in This yielded flywheel additional outcomes media of with new During supply our in and the quarter, these We an digital platforms well incremental several is, audiences, major to go leverage on monetization earlier. were were the promotions, the resonated the U.K. scale notion up which and noted in essence, both and we

markets efforts our in will in to planning. support these with our further Looking other outcomes expand and ahead, Canada already several geographically we anticipate testing

the the our into that platform pillars and our analytics I've product technology innovation capabilities first X and represents together. year Third, investments technology, spoken past the analytics infrastructure. about previously wire our over

During improved margins. matching our incremental which or logic ad the quarter, yielded monetization, serving in carries advances high

we drive addition, agility stack the upgrading launch our for technology desire in clients, performance support quickly we value the digital to platform AWS, our announced expansion by enable enhanced marketing of evolving powered In market a landscape. and

established map relationships paid additional In activation closing, Looking that third substantially out XXXX. of expanding results channels into we're building channels costs ahead, initiatives of we several we value are investing our with with and results. continue our that are our operational We're lifetime platform. pleased are There to reengage media the prioritize to consumers CRM these activation. we road initial strategic quarter that underpinning value consumer are than lower the on on for the

We lift opportunity. also clarity all performance with seasonal we provide. We Thanks and believe recognized fundamental XXXX. in our continues them to in due our support. market optimizes services did was predictability and we validate this clients' place to that budgets in marketing the clients it the the of providing value their And for your course, deliver third marketing reestablish on our quarter to important XXXX objectives competencies our of was ROI as alignment core on of needs to and our the confidence ability and achievable,

for afterwards. Q&A numbers will review further the return and detail, I'll Alex in Now

Alexander Mandel

Ryan, our for today. third good We're to Thanks, results report pleased the and quarter afternoon.

The level The increased the quarter, revenue year-over-year $XX.X spoke in generated monetization Ryan year-over-year, innovation million media as was As percent and Ryan a efficiency-driven consumer-facing reflecting revenue company or underpinning albeit that's revenue. on yielded promotions ad spoke profile quarter XX.X% platform. relatively exemplified coupled quarter media up X% at in favorable with about, higher growth of sequentially. End experienced year. in comparison earlier. relates a $XX.X the quarter, return was challenging enhanced spend to by marked our with to last the of also representing Revenue strong on growth. XX% and fact monetization which of the logic engagement, revenue that this growth million serving margin This with up margin XX%

of increased we cost is media but offset incurred costs Fulfillment As earned capture in to revenue revenue. the incremental margin, revenue last QX our fulfillment the QX. year's as efficiency in of by gross increased XX% rewards partial the a cost cost the decreased of a higher our consumers. percentage captured outweighed and media That margin as cost not in said, does compared GAAP fulfilling it with

a year-over-year [Technical those product expenses Our X.X% G&A, million. development comprising on quarter. efficiencies Within $X.X GAAP to we development and innovation that Difficulty] operating in in continue grew $XXX,XXX product advanced mix, support and the aggregate marketing, of like in and in invest or basis, by sales

we of year-over-year debt EBITDA In as the and year-over-year. share. G&A accrual reduced availability an of anniversary million Interest XXXX our $X.X year. prior We in contingency of costs $X.XX to related income, $X.X York noncash the XX-Q. per of per matter, XX.X% of our X revenue the includes acquisition, declined also million with And $XXX,XXX a a a Our million of tax Attorney income net by in to in of million adjusted established as this $X.X of be to of we of the New to compensation $X.X $X.X continued quarter expense in non-GAAP to us outstanding. G&A and Winopoly in quarter reported share. NOI. million fourth of No this disclosed increase $XXX,XXX the closed $XX.X the to quarter first million payer be anticipated line in due inclusive expense which QX, net amounts the cash QX incurred are XXX% acquisition. Adjusted which we measure represented or loss relating certain the of April noncash $X.XX respect includes federal connection or taxed General principal accrued a quarter litigation

XX-Q Our in our filings. non-GAAP and release and metrics XX-K today's are reconciled earnings

minus and We with the defined million reflected of the discount $XX.X to restricted capital the current of the at million million. $XX.X debt cash. the Turning Total including as quarter unamortized sheet quarter ended $XX.X balance assets closing Working on balance ended cash balance quarter while as million. with current the $XX.X sheet. liabilities at ended

Our $XX.X compared a million year with balance debt declined has as by ago.

time. season the we operate associated will any than election a potential before. shopping and media Our performance-based who anticipating upcoming and everyone the on that outcomes your have takes Difficulty] this even their wish that spend. believe families market proper long-term digital different and of from We accelerate the time, likely take We with marketers you questions perceive this factors opportunity. effect to continuation the unfortunate Fluent's to uncertainties shift glad these team accountability brands At precautions continues and the to cadence hope safe. We're fully and solutions to and plays the The supply. squarely to holiday greater ad ongoing for arc well see and same measurable in a stay at [Technical pandemic seamlessly

Operator

Instructions]. [Operator

Our from with first come Barrington question Goss today Jim Research. will

James Goss

questions. Several

the steadily course or opportunity for that more more number I the First, it us? and the seems over Does navigate that with space provide year of this streaming services, you you year. increasing if and more given entrants into could competition? wondered before more of

Ryan Schulke

Yes. more a that fact Jim, us thing. players that it options and which gives marketplace a company, our performance And to it's into the more coming marketing we've services as offer out more It effect good you. not good helps us. flesh hear really positive space thing are is that to and is consumers from products for about. to and a more this ultimately, an spoken And choices, agency,

very So thing a for us. it's positive

James Goss

also does sort and on-betting it - Is what gaming, it referring type you you gaming apps. to is more to that But of referring mentioned were And it gaming? are thing well? Okay. as Or include specifically? you of

Ryan Schulke

of gaming may different there, variety with skill They're light. more apps we're a type And social the be are There we predominantly, some working that game in apps right of now. have these games. but of

category. and I skill more you think That's are mode growth the in that of acquisition So be something guys game may referencing mode. customer type those

of but a in variety some of our of gaming that see we apps. wide base, client terms So also

James Goss

that anything of other lot base. to as your wonder apply are subscription-based a And would that enter or transactional this broaden you there if could applications like would is sounds it categories So well. I

Ryan Schulke

expand of we we we ability calls, contact in, We channels to absolutely things - we're that ad spoke drive There the of - the are operating believe that. of products the like many our And as can we center our consumer to is that. we're you that delivered, kind capability, inbound some able really categories something against. match focused applications and product of model that's types marketing and different at a we're base on in operate really expanding amount performance that that of this apply with. the product And service our point

James Goss

that's what you're U.K. in, I Canada? in think, the might mainly business they States? same and target Are sort United to Okay. the to international, do already the you going want of involved that your Then X% areas of in

Ryan Schulke

have type driven the to absolutely. all and of it's successful be that something believe in to seen respond demonstrate Yes, the in be success we've cultural been the that order that And anticipate to U.K., the for But same to have speak. to we countries, are ultimately will the U.S. that's there model can differences something here scale be growth the In we'll hunt, success may we've In we we on. dog domestically. able and there - at so here it's here other we

James Goss

years year. sequential targeted the the was just should - of Okay. and if last improvement And seeking them looking over And several be seasonal you're at of revenue really consistent one over those The for of - is pattern a wondering one of now. wasn't I'm the I there over course patterns, what one the the course pattern to that last generate? years.

Ryan Schulke

business. We're comment some time Alex and QX to back from have lift saw Yes. over some occasionally QX be We tend and abnormal you the will I us. see quarter, a but for growth details but can the XXXX, in was the to strong XXXX financials company, noted Generally, growth a half QX. time the with specifically a of challenging QX in to and last

of of have business, the ultimately, to macro if be some have But to the growth more growth. we certain look that on you comment But a tend can frame may terms business see the any a a in specifics. tend is across time longer were patterns, available. we what can to have and than I you little periods outsized do Alex bit publicly So

James Goss

wants we if go cover ahead Yes, Alex to it in or Okay. discussion. subsequent can a

Alexander Mandel

that on going release and observed, has just QX was to noted [Technical than that been this a the different time, We in earnings years. At same shared the which which Difficulty] are Ryan cautiously this than QX. I a simply make historically, uncertainties other some year Sure. is at year's sequentially of type this present stronger what the point. environment, of simply you we're upfront, optimistic

Operator

Ripps And come with Genuity. our next Maria Canaccord will question from

Maria Ripps

follow to your media I and vertical. entertainment up Great. just on wanted

helped any most from vertical how expect sources? significant So mobile sort of are this streaming gaming. it I of seems like you by to growth and services the diverse driver remain forward, going concentration revenue there your sort issues? guess, is revenue your And

Ryan Schulke

north array really to we're our the discovering lot services of that enjoying testament on it's platform. hear XX% And knowledge. of vast where of been seeing benefits no growth. don't no, question And Maria, particular any to have client, to your concentration products great we from the issues, we directly, And answer of a my been really, consumers a a X specific have to and you. are that's

particular at this no issues time. concentration So

Maria Ripps

us upside. change you update profitability? revenue here. on quarter structural And flow margins it. maybe over next how Can about from this for question just the this an great Does really the potential give You another your year had two? you or to upside through EBITDA think Got

Ryan Schulke

Alex, I mute. think on you're

Alexander Mandel

well. Thanks the it's to for hear Maria, question. from as you Alex. Great

same I years, we don't opportunities our next think promotions changes the continuing this areas new we tested the see were And into necessarily about We As to experience from. and generally invest we're quarter margin that that effective. about think the say, to time, we that X year some let's over spoke potential profile that at outlook.

think at this change outlook no point. to our I material So that

Operator

with from come Dezellem Bill next Our will Tieton Capital. question

Bill Dezellem

debt the here like plans would your What you have higher relative to to sheet? about cost the you that share on balance

Ryan Schulke

Bill, one I'm going directly. that to let Alex field

Alexander Mandel

for Thanks the question. Yes.

and review at You our them currently if opportunities and suffice noted that that to X, market publicly that. priced are update regularly, we'll credit changes and continue plus any focus we facility say available the it is to in there to LIBOR on

Bill Dezellem

I Ryan, expand expand remarks you kind further But Great. give discussion. did, flywheel? to you opening on want opportunity really example later know made And I about comment please? that, would, if on an please in you the your the to give would you And then, the of, you in the

Ryan Schulke

absolutely. Yes,

of to the better partner of go lack many with spends money. make major We Fluent term, our owners' For out, money to platforms traffic and go media out properties.

which scalable clients extremely Our other for end makes the digital are their on a pay-per-performance properties basis, us. on our campaigns of media

has what really simply with since do the ROI. pent-up that that of they our more flywheel demand. the delivering, want So can clients The we're to see fact

we and need channels appropriately and essentially grow in which digital media clients our all those do go is and predictably really more out to them. to traffic offerings find what So position within to properties

that speak, have ways on enables and flywheel. of any So we're That that of those and products our to so really cat, there's or leapfrog is supply, go media us products traffic a call essence, our that on, websites clients and to in access variety apps is, Facebook out our audiences side house. turn, acquire major going many and focused services deliver to and go for skin essence. out competitors that in we other and ensuring more in demand and the And where out Google to from, services platform of it, we like outbid or partnerships a and vast

Bill Dezellem

$XXX,XXX. Great. restructuring please was severance that? lastly, And you and the Would that cost I think, then referenced, detail

Ryan Schulke

on you mute? Alex, are

Alexander Mandel

No.

Ryan Schulke

you. you. Yes, we hear Got can Okay.

Bill Dezellem

hear you can We now, Alex.

Alexander Mandel

the Great. to? the in Could please $XXX,XXX relation though, repeat you question,

Bill Dezellem

so quarter, that a great a and/or severance and question a unusual bad But quarter. congratulations. really spirit companies Usually, restructuring it? have save for the severance in time. asking great the a The you to What And restructuring little had during costs. I'm that was it's

Alexander Mandel

of have so company and for ordinary we course. In reiterating se or the Sure, nothing but we thank the discuss major one. circumstances, agreements company different on depart course, to you that joined that forth, the people and of question. further terms have in that and But the in different per material severance

Operator

may this day. our time, ladies question-and-answer today's today's also at your to and lines, will a conclude gentlemen, you presentation. And have disconnect attending thank session great and you like And this for concluding We'd and call. now

Fluent (FLNT) 31 Oct 202020 Q3 Earnings call transcript