FLNT - Earnings call transcript Q4 2020

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Operator

Good day and welcome to the Fluent Incorporated Fourth Quarter and Fiscal Year 2020 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would like now to turn the conference over to Ryan McCarthy of Fluent, Inc. ahead. go Please

Ryan McCarthy

welcome. our and results. for us joining Good quarter Thank and discuss fourth earnings full to afternoon you year XXXX

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

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

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

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

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

Ryan Schulke

Ryan. marketing today. implications XXXX. Fiscal XXXX of Thanks final services. our and and that extremely advertisers, And acceleration everyone we're consumers many for and solutions. marketing and report industry Thank in figures. innovative unlike saw providing for EBITDA. high entrusted pleased past I'm we preliminary ranges the came profound QX mid-January, and Today I'm to good our to has for performance we're proud plan. media year, you, strategic and in And pleased across of afternoon. against we year end us adoption execution margin, This was full their the year other, so at any our of provide a This a metrics joining to the significant shift team us released revenue, adjusted valuable Back and the in digital that

XXXX. Adjusted For represents we the XX%, revenue, XX.X%, of million XX.X% of revenue. full $XXX.X a EBITDA XX.X% adjusted margin of of of line million EBITDA, million in media top over growth $XX.X and delivered margin, of growth $XXX.X media which adjusted year and of EBITDA XXXX, represents margin of

of excited some XXXX see We're our us redefine spoken to experiences in Ultimately, And very our to notwithstanding thoughts of the our to I'll growth we outlook, shopping and on platform. both growth, show performance call fourth commitment few different the strategic a to motivated QX and that season. over EBITDA update would from Reflecting seasonal the our footprint. significant adjusted year we profile, QX, made deliver similar and 'XX. QX our fourth margin and to holiday a these optimism third as For the earnings came further million. has on strategic the I'll three I've $XX against pandemic, even speak our road both that the of quarter, which $XX.X the pillars, on our two for million. X.X% election, driving and which There, near-term to over higher-quality marketplace full the sequentially in on the these, growing our did On traffic share in our the sustainable quarter, and our Media pillar, was $XX implications you advances context though uncertainties in calls. was at revenue at arising end growth cautious media two over it progress million, revenue QX, to we our last have last moment. indicated October, pillars

performance pillar, side were by XXXX, or of client partnered motivated the in one XX new we largest in we our companies the by the that three including those, fact are fourth our Regarding the In highly world market five the the of in demand first cap. with marketplace business. quarter. Of year, the

with opportunity. appetite our platform, see enrollment the partner we that further like with the valuable this we large strong seeing incredible from live before, our marketing now and cycle. QX, market we demand bringing high-value In capabilities reflection quality innovative that of a In they as fully As a and saw demand solutions. confirms ourselves demonstrating very from enhanced to strategic a verticals senior brands the addressable performance health and an progress integrated, the for Medicare market we're sum, I've have through clients agent solution noted high-quality clients, open of we're

our second I've in spoken two where to we've is investments technology, The over significant CRM made analytics years. and pillar last platform the

the our in are innovative some significant for I consumers. began in meaningful us platform just unit Also QX, XXXX year. resonating continued and advertiser notable with and call, last comparing anticipate we during that new the effectiveness, XXXX. still the promotions in premium win. half I be we referenced, QX ad lift a doubled a the which On Through this on of through been with serving has demand new our effective we Those and to performing our were monetization a of well QX against delivered ad new when combination in initiatives second to promotions more referred sustainable effectively serving tier monetization improvement

As a valuable now is our platform to incrementally more result, for volume us.

strategic is footprint, our adjustments. now media on strategic an third some we're area pillar, focused making Our

we've evolving and business traffic all our position fortifying has to top-tier leadership these clients proposition more to industry, the while grown, our to our attracted to we landscape and clients, sophisticated further commenced larger frankly, As relation quality in XXXX. of our To platform. the regulatory in initiative value a increase of our clients

industry standards products, evolving. spoken in backdrop calls, against earnings And I've enhancing our including year, evolving model improving our media properties is industry and is our experiencing ways, many last our the rapid as about business that an on changes. and Over our regulatory our change

based offering enterprise on our our belief stakeholders. Fluent's will So doing of leading we'll to to In our clients, example. are media we too that foregoing value transition so, deliver on focus our term build higher side so the strategy. traffic is and we're quality this our for brand initiative, which fundamentally quality revenue by longer-term near a and enhanced in clients our with Through doing we're the some other an equity Fluent bringing

hit XX% compared last While lead with we into QX, currently QX anticipate topline XXXX on year. a taking in as

where model this brands, value the will our can year determination in be marketing will one the future their Fortune play that see that are more ahead, We We convinced pave the way as partner. for strategic XXX go-forward Fluent growth. believe

quality we From quarters our our So market. and volume achieve is for monetization our profile traffic somewhat conclude and been leaning our my clients for quality on pedal levels. of and prior year. where more, times at be of supply to highly a The high-value In while market sustainable the that higher this less substantial consumer will to we from Again vision, and mission today, We're and under rebuilding a last reestablish trend context, deliver the and that with represents demand on demand increasing I by our to believe we thoughts two traffic earnings is be commitment base clients were want a to of innovative, of profitable anticipate take transition will turn, QX reiterate growth initiative massive growth will has solution we prepared traffic valued that an robust metrics base encourages more higher week. opportunity. couple plan. metal will there, strong, a monetization. can quality fully days seven are client sustainable our provides clients a intact. To quality our our Fluent in see the and we nearly in revenue addresses

the for for shareholders. protocols, equity, consumers Alex of enhancing Fluent the that, on leading-edge solid rock is as principles, improving And remains best-in-class strategy, foundation business with financial Our turn as in and and time our sustainable brand with clients our our to operating things own I'll well code detailed our of standards conduct. results. operating diligent and rests benefit

Alexander Mandel

Thanks, and good Ryan, afternoon.

Ryan the line sequentially of up $XX the As QX X.X% in QX, patterns. QX we range we release our company results million year today, ends the revenue, of filing in for as and and released. confirm top historical and noted final with at previously XX-K from XXXX In year-over-year X.X% the earnings up full generated seasonal

in platform. logic call, favorable on consumer-facing QX we and our late those performance yielded coupled with continue noted engagement benefit last experienced trends October, in that For and saw context We monetization in in continue serving promotions ad new our QX, on we to enhanced QX. strong

year, up For digital year-over-year industry line XX.X% growth and advertising of the in revenue, generated million in full overall Fluent $XXX.X revenues. with

to notably in of to, began spoke the volume revenue a Ryan standpoint more from QX. shift versus As profile monetization,

in quality in business more focusing As the traffic, continued QX part the higher-quality has moves while on which volume quality first year. traffic lower of of quarter traffic reducing in our initiative, this aggressively of the

quality product further thereby flywheel yield consumers higher rates, conversion turning media million, this The factors. acquisition approach and quality higher representing loyalty media to We further increased reduced into road to that to offering which offset will sequential XX% which volume and to sufficient noted those trending year-over-year quality improvements During offset transition the our year-over-year revenue see will client monetization increases media satisfaction of improving by believe yield year-over-year. and of anticipate then growth. properties, $XX which QX XX% be in the monetization as We QX, down the model. a will volume the our sourcing on clients. valuable more margin our benefited is monetization revenue QX, development, we driving QX, supported of revenue and several while QX strategically engagement be higher Ryan two and not period similar times our reduced the of higher the outcomes fundamentally in this approximately and advertisers, from for traffic traffic of can reinvest on XX% sourcing to we customer should In

the revenue. in revenue of efficiency, revenue a outweighed benefited media our margin, cost media fulfillment further that as it level decreased second, media margin progress design although in First, the compared before, QX down captured increased XX.X% QX increased margin the cost of at the in earned as percent but year higher capture such the such cost, which Fulfillment GAAP X% on sales QX, programmatic lifetime incurred our consumers. data X% consumer on to does value the may program our of of talked incremental last year-over-year. offering is the QX. media our cost enabled QX QX programs. and fulfillment costs by sequential fulfilling not strategies increased consumer peak, a optimize we in cost with continuing economics of we various and margin We QX, these enhanced be monetization rewards Fulfillment The this that and for to this including year. we test in to learn noted rewards that the QX efforts progress rewards as notable and XX.X% likely us they strengthen to program to anticipate and reduction year's we is of in the relationships. our of reductions represent We revenue to much media to of enhancements benefit flow factors, noted expense offset in QX this targeting near-term expense of have CRM anticipate will was our our benefit and see in third,

product development marketing, quarter. $X.X Our operating Within grew of innovation mix, $XX.X we sales efficiencies and aggregate to or in a by expenses those that this GAAP product year-over-year for G&A in support evidence invest million. to continue and on basis like in and QX comprising million XX% development

accrued matter. Our The which G&A the the includes stands as acquisition, $X.X the related respect of a therefore increase outcome. incremental York General year-over-year New million and of line XXX,XXX Winopoly non-cash million was includes believe year-over-year and also on contingency X certain of Attorney we total costs this $X an of April in litigation which a to be quarter, and loss G&A includes on matter the costs. million expense G&A we accrual to incremental in completed $X $X.XX accrual relating at fully million, compensation will ultimate basis on

are Adjusted in XX.X% represented As fourth we've million and to EBITDA amounts prior incurred in year came acquisition. $XX.X anticipated to noted with full no connection revenue quarter million in cash the the the for the XX% anniversary of $XX.X us, of of or revenue. be of at

the million declined items as we EBITDA Interest revenue. X% of reduced adjusted range debt NOLs. GAAP QX net income in quarter of $XX.X to $X.XX share. outlook a $X.X to year-over-year. noted, continue and measure or million to million XXX,XXX availability we XXX,XXX non-GAAP of anticipate we income adjusted outstanding $X.X QX, Given X% net noncash in currently we've of the of expense due the our the by federal reported tax-payer We to principal by and In per year-over-year be

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

up the this and current at while the cash. sheet, we capital quarter balance of $X.X ended and ended minus asset, with closing current Total million debt million. million cash Working restricted liabilities the as $X.X million, Turning $XX reflected balance $XX.X million $XX.X quarter ended including at quarter to the yields defined the sequentially. million, discount unamortized balance sheet, on $XX of year-over-year

cash this year balance a ago compared has debt balance our excess payment a recently we balance. by with in declined made sheet million and $XX.X further million flow debt reducing $X.X Our

revenue Over litigation development primarily principal costs. is acquisition controls product million in included today million been internal costs XX-K relating to $X.X the capitalized and related servicing like key now which the remediated has I'd weakness debt filings areas noted and that XX-K and have XXXX. to past $X.X reduction mentioned. and deployment X.X addressing the to in for matters debt, such on our XXXX year, million XXXX. capital nearly noted note and and the for $X I also the our to $XX relating for as material process of technology filing recognition million It

field We build your continue our our to we demand client clients opportunity strategically solutions gives to your enhance ahead. our for everyone confidence As acquisition us the robust glad The and stay our safe. of support. families for this you value on time. innovative value the hope We and of customer wish well and substantial for in at stakeholders. journey solutions that to and appreciate precautions takes strengthening questions proper We're base

Operator

session. Canaccord. will begin Please from now question ahead. Instructions] will go first the with come Our We question-and-answer Maria Ripps [Operator

Maria Ripps

us is of initiatives wanted that practices Great, with it launched. already to current with the media and on about. thank partners my that I or share assuming you sources media you steps this taking just acquisition talked working for on take of that more was sort specific follow-up your that Any sort Are you questions. on new you you can front. with it different color

are QX. almost of are from kind have a follow-up. in And in seeing What We the then you of this. end quick advertisers feedback I

Ryan Schulke

Maria, overall. hear great Hi, you. good question we to had And from great,

new decent protocols a implied we're into didn't increasing forth policies. away into perspective. We direction the is our what new and our that doing times for monetization believe in we in, traffic are base channels initiative lot two and going feedback attention starting investing fall is impact of amount business of from A have walked quality we're our set from in which energy. So channels lot traffic, that by of these under is a the spent with of being believe of see certain to positive advances where quality do advertiser of terms really terms a and that time in that we consumer we from the a

in top-tier the moving are Thus to did very responsive economics of I direction, your unit lot answer a far question? initiative. Our are this right clients our

Maria Ripps

Yes, yes.

how think I QX follow-up, us your you numbers media you that, you I margin In with the of if revenue relative that of, for about think as sort just progression sort through the go to should could so. year. and shared

Ryan Schulke

spreads revenue. comfortable I managing stated comfortable will we're the we're on that, media We previously dropping of percentage to on to with. that that levels I've continue spread look a of that terms in we margin, believe calls certain as at the

more being XX bar that really low us recently mid-XX the So range. XX, historically for in

the be opportunities on So now. on test different we're seeing fully the a end, expect we as when on we're back media change quality we'll very materially our that don't pursuing sizable specific the we're to leaning that XX margin But in XX channel to that that invested high-end, of more I types into thresholds. advertisers in. right be tend low in

So in should we margin channels over consistent, keep media on onset. at those testing, focused new quality quantity levels times really and this, on what relative to we're like the remain spread fairly but

margin to and we We will some that get test, it levels in the learnings had lower door the need. get

Maria Ripps

thank Got you for color. the it,

Ryan Schulke

Thanks, Maria.

Operator

Instructions] come [Operator next with Our Jim Barrington go question Please will ahead. Research. from Goss

James Goss

us wondering, Hi, on. was Thanks. mentioned mean definition is focusing you the times. you several Ryan, Could by you I understand, are help what quality, what quality you

Ryan Schulke

and with publishers, the the that website sourcing that driving and against is activity. looking consumers really owners, our platforms traffic when direct they interacting that app Ad large our our are owners, We're buys rendering upstream the how Creative we're at that brand on media websites reach websites with in partners,

proposition that is looking for the So looking to offering end of they on instance, how value privacy policies, the partners, we're really at aligning created our equation. with we're And data that our at the consumer. render

at an with were they our when advertisers they our our us of landed quality wherever when with one is proposition on a of traffic about activity interacting one consumer we're offers they that reached Internet there out was when they've the is going most initiative reach value on. really They ad the properties consumer more looking clicked that all understood of our is when They and if a that focused understood So yield on properties. properties. really one in the that's tells generating something and

Give in traffic consumer results great on great a and So revenue, buy much lower for rates. quality Those spectrum. albeit, not short it's the you term. experience the could out but Internet may of really advertisers at side some the go really lower it's profit and across end our in quality you the other not

we've our made digital on much So this running and a an my higher that, XXXX to it towards move businesses decision belief more just yield will results. longer-term better direction in really in and this really since based quality space, aggressively knowledge operating

James Goss

the those least because will you the initially clients, world verticals that, So companies it. largest five in. margins now your the then the mentioned dramatically and some would you at of And going secure either be is They eat what the are in going into, or good. from other in of There related you of compressed of are in a half, describing are is of them dealing recent are fairly factors roster wondered you couple changing sort have first new. the fit of with verticals I and into other media types

Alexander Mandel

bear the the to relationship years of of them the onset overall our of that, us, the That's difference terms a their progress how of these like two longer-term what and some the in to with progressed types growth level year, what we of made business. on working It's our able is in with that sacrifices have standards, XX some able our that's being the resource that. the that's in four to terms deliver to them traffic for world we're about Fluent and There on-boarding this us that's a years is meaningful all of ensuring at is profile over referenced number the can now initiatives. five spoke very terms data was and meant with on positive. and and initiative they to invest that too, Upfront We past cost Jim. ones internally companies largest we have alongside clients really and question, believe to and up quality five in in I great Fluent's our

three, us So valuable longer with of over we're of had the term. time long could on, be very periods those business the but understanding two been that extremely standing that focused not for out this our the just for

However, things the leg of call are term, in overall new they of to relative large monetization do there of ways on opportunity a love media consumer trust that represent our many you as the those it's know, see and work to these these types they to the brand In consumer the of run Consumers certain the are them, of brands. finding have they properties. to the bit get experience types introduce that are increase implications them on-boarding companies behalf to these on the they brands short a more on certain resonating long processes, very well. we're going. offers

first revenue exactly year be in the massive profile. overall to the tends of So terms not

long of to other And and the just business couple belief. a term things. a over long However, for of that's material wins these our things time, turning the

tend expect get do for the much a better of companies, they be better First, they to size do larger scale. pay with and those experience willing their deal more because to to or

Alexander Mandel

every consumers day. reflection of and of collect in experience. The our table about on lot unique unique a it. former, on ago to Fluent the able for some they again single Fluent's probably, terms consumer tend maybe the that insights the quarters to and stronger talked discrete around to only be But of not this pay tools distinctions the able many thousands business still my it, serving more, of to hundreds brings We're we in of

for these look market share instance. of they Some at brands, larger

service to consumer ascribe competitor's, So over, competitor's and if value identify right. a we're help convert higher to that, using they able go that's a a or them currently product out them and

rationalize certain time, simply premium out return Fluent's go the moment traffic, share able market they segments economics and the than important this can these across through go conquest for on and because premium of them for to against clients some will But all be of do in more that, take our on, be they consistent profit short-term that. of I competitor door. the will the unit out larger platform, point at against Those is ad and a So I'm clients. willing for pay may view spend if Fluent will to

utilizing are a been types with of the that can table pay No of our there really those So premium assets client that segments we're business. we've brought Fluent. advantage what has identify of and key matter for type traffic to they working a really

James Goss

are that strategy. has the Lastly, in of verticals quarter last because verticals ones of that at or change shifted this now terms leading the we're your same in the ones

Alexander Mandel

towards verticals we're line for that very more web-based much it's have No, previously business, are the purchase things about conversion. engagement decision still simpler you decisions. geared the think an we've It's consumer with decision a make or if that our you whether in overall presented a a from -- to

by instance, So gaming. media video we and and apps entertainment category, for as mobile is well streaming have our which as dominated music

higher one frequency on and well falls about retail, where we're remained CPG So consumer, boat side easy if upfront lower in of touch those and doing to cost buckets consideration, areas for the area the it's lower house. the really through of kind frequency that in convert -- consistent higher same digital. us think that's cost you points, into where to

you're on within financial about getting that capability capability. home due side, be at legal getting with ultimately our looking decision our and where, to live like and complex more continues us have a to things The base good that the phone talking option increasingly services, them and other strong services, to strong agent being is live a advertiser it more able a to consumer agent that

some So continue momentum in pick it's anticipate that we XXXX. certainly and up more in starting the quarter fourth to to

James Goss

much. very you Thank

Ryan McCarthy

Jim. Thanks a lot,

Operator

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

Bill Dezellem

normal of not you. year. is higher quarter there revenues Thank Group factors pattern fourth this with have had all whether we first Christmas election of questions, really or without the and a the shopping been

Ryan Schulke

did Hi, were I was believe bit in it Bill. the for some more of us, pushing we of for a investment Good in somewhere areas October especially we to understand into to do Was the from a to you. us on be up go areas in terms acquire which good factor the that election it back do hear have election. of door specifically boxed leading out the cycle traffic, quality traffic.

much, everything disruptive on was shipping delayed data terms and points that sort So, overall something was a election have to and went of that areas else. chaos maybe in certainly the holiday all that regular on and few the but I that of of like that. things this think year, the more of some that would say, season. the don't pointing influenced results don't half I that as QX, us specifically I disrupted

Bill Dezellem

Thanks, your would quality initiative, with fits the Ryan. please traffic somewhere are that opportunity, along I in big you then if those you think it that you your about link way. have been answer. anyway that a the may range My it And mobile in is believe in talk and would opportunity apps sense

Ryan Schulke

Absolutely.

app one to Really Fluent reputation suppliers the broken very and mobile were mobile talk is space, mobile the our dating we few and So are predominantly We apps web community apps when as we've back. in of top mobile for ecosystem much the now. we ecosystem apps the we've we've years mobile known or out the about four trades, the this mobile of players user play go mobile talked as community. space. media enter back an were become trying mobile in to to properties five This of that into excellent web mobile sought acquisition one and really gaming Web and specifically app lot, and into player developed

house, of established our we really advertiser on a reputation. So the strong side

expansion We we've we've healthy accolades its great and What believe and recent go spoken out believe were gotten Fluent ecosystem about in is growth in footprint our way can mobile another format more advertising have that partners. deliver for that app more on and immediate is expand ecosystem. player known calls many this way I incrementality around for the outcomes we

We forward-looking at anything are this having talking point. about

we develop that in looking question. I this advertisers at go more in do have this been and and we for belief great the However just things no, you we own that the way I of had some ecosystem our apps, believe actively content can and have that specific space area, apologize, do in play of a

Bill Dezellem

in just way. was Yes, the yes. that did. I they And quality do any traffic relate initiative and

Ryan Schulke

do. they do, they If

in which So of in terms from consumer the and the is web It's together terms a that. work very they technologies predominantly operating ecosystem. things and of really of different like how terms mobile app the this with area website, interaction in

how and know In optimize to essentially where How develop. [indiscernible] iterate terms acquired you you lot going is a to place come a dollars revenue it's get be consumers things where of traffic you can if you flywheel have and than out of you've at. going to you get to more

had learnings a than we they initially would be. slower those little of some assume been So perhaps have

still We However the to opportunity for Fluent and this do looking right we're data mission. at. large still is believe that on points steadfast we're a get really

Bill Dezellem

What Winopoly, I'd is Hawaii expectations. on and you last, the to Great, exceeding success? And to like in the that thank you. the talk was release it mentioned their in touch you really

Alexander Mandel

in we knew. there Bin behalf parties, interacting advantage that demand taking consumers on really, we have end with our is area this this with of historically -- We of of of be always for is worked could be lot the our who an always a We ecosystem. Absolutely. greater of would product business advertiser third

developing drive great really productized came types fully the integrated, it referring a and and is us looking for the us real forward productive of rapid We're to new to segmentation The we're And there able about our are and the data or with capability. who how success third-party together completely through pace. as tenants how what coming a being with the able of together ends of consumers agreed top business. a end, sets funnel a Fluent receive see teams, teams being the to lot of of in from arm's service time. a such interacted audience optimize also data partners live just end on-boarded were phone up has teams of really lead and particular with really a together. was call that length advertiser the live point, at to from product And being agent same being opposed Winopoly we just connecting going of said made the business been the more team core with in and the our world frankly, to to scripting coming a agent teams product who connected, and or being We're a around entrepreneur connection and solving that actually just new problems that's knows great with difference. as concepts, qualified at service this So to we

So that's about. something that we're really excited

Bill Dezellem

the you taking questions. all for Thank

Alexander Mandel

Thanks, Bill.

Operator

our question-and-answer as today's well concludes presentation. for session as This call. you conference attending today's Thank

may You disconnect. now

Fluent (FLNT) 17 Mar 212020 Q4 Earnings call transcript