FLNT - Earnings call transcript Q4 2023

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Operator

Good afternoon, and welcome. Thank you for joining us to discuss our fourth quarter 2023 earnings results. With me today are Fluent's CEO, Don Patrick; Interim CFO, Ryan Perfit; and Chief Strategy Officer, Ryan Schulke.

Our call today will begin with comments from Don and Ryan Perfit, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded. event available the on the of website. our replay will following be call A

webcast, our please on the access To visit www.fluentco.com. our Investor website, page Relations

the Before of will Any during contain listeners hereof. statements covered of to date by would XXXX. safe forward-looking during Securities forward-looking we this harbor Litigation the only information Act provisions management call made certain as Private call discussed advise conference this under begin, I the statements of that speak like Reform

Actual differ by from uncertainties undertakes the company this stated our of projects, business. identified those forward-looking the to plans, obligation information will, and provided no on expects, be These could, with words results similar risks by estimates materially meaning. could as other call. update or words statements may The statements implied due associated such company's to and

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

definition of the in earnings net on to The including comparable call, indicators, these and measure non-GAAP Management performance present management earlier will are adjusted financial the non-GAAP provided press relating evaluates media a business of variety the margin, EBITDA of reconciliations GAAP today. metrics and these certain metrics. the issued our financial to financial most adjusted During information directly also release income.

to pleased CEO, that, Patrick. introduce Don Fluent's I'm With

Donald Patrick

pivot together some about our Financial Perfit, Strategy Founder; validating as commitment measured with all Officer. further Board and leader Chief for joining making with the confidence strategic in Ryan Schulke, and in our performance Officer, to Good are fourth I'll and evolving we call growth XXXX Chief the our I'm along Fluent you make progress and annual comments afternoon. here company today. XXXX the brief while reinforcing Thank we in Chairman our the strategies, marketing. our that our of Ryan continue reflect quarter results make industry

the competitive our owned Over a we position decade, and advantage. as can leadership operated that better a now leverage earned past marketplaces in we've

is more purposely growing industry Our this status, strategic albeit to our designed maintain modestly. plan core

goals. strength stated, our customer foundational owned provide that world-class in we us very attractive capabilities, that access acquisition relationships meets performance the marketplaces to growth are their we the Succinctly consumers, partners needs high-growth syndicated valuable built go-to-market differentiated technology have fluent long-term Our a our represent believe platform coupled where new, with with leading-edge a springboard brand operated and with marketplace while marketplaces Fluent's model aligned their partners. that proprietary provides performance us being economically our pricing into high-volume, runways. enabled to In to meaningful

elevating Fluent's At the consumers from expanding the quality are on higher to we industry. interaction our brand the are and with our from consumers are core, our demand are the And confident, position enthusiastic connect we the direct we feedback ability who along clients, clients response engagement. serving, within based equity we with

our we progress So indicated are are as making. strategic new we've invested in pleased and with aggressively XXXX, performance the financial throughout we marketplaces

we further XXXX, on reflection validate share via consumer direct delivering. we continue lean the to will in, are which market a In proposition is our growing course value

second in emerging our than growing to have Moving should and by investment to half. which our in growth businesses XX% the effort Fluent year-over-year accelerate is forward, our plan returning greater XXXX,

the the our half enhance Importantly, more back as are we our of profit year. position, we our than revenue confident that we will market gross growing begin in rapidly

earnings transition with results of ahead expectations XXXX and that we In XXXX were the impact post-FTC previous reported decline results in out with $XXX.X our of corresponding the our we were marketplaces. XXXX. business performance earnings we're release results consistent top represents map a XX% as financial full road today, settlement versus on year these million, in date, To follows: line which laid financials. releases. new reflect a business these financial revenue Overall, our of

of by our These primarily were compelling we driven our At the of business revenue FTC advertiser decrease settlement percentage flat headwinds by Results prioritization their clients to quality revenue, our impacts return keep of mix acquisition or customer results the margin, the year-over-year. standards. versus spend. from shifting longer our clear decisions evolving media of certain million streams meet XXXX. to gross strategic that that XX.X% further strategies strategic not growth to had and ad $XX.X financial XX% a on were managed did on we and felt related margin forgo compounded macroeconomic no

as $X.X during of reflects at owned We of saw dollars which This a digital industry. pricing marketplaces quarters. from operated agenda and we of margin softer million and EBITDA, decline X sustainable the across adjusted entire X.X% see XX% of both first with decline as the a advertising ongoing strategic softness our within impact growth the consistent year-over-year additional our the well our initiatives quality investments as what revenue. we implemented is

feel first planned, through these of as forgo to the to of and decisions we half will Important made impact XXXX. strategic to have the we we businesses certain note, continue

modest as sequentially follows: Our our owned marketplaces increase quarter operated QX, accelerate our revenue continued with performance more new by were and over was results to $XX.X growth. million represents decline XX% with in double-digit marketplace driven fourth a

as, At one, XX.X% we showing stability owned marketplace increase operated is Our pricing, stronger media revenue, and our a increase with increases margin from in of sequential margin a sequential well gaming agenda. our marketplaces from, was $XX.X million ongoing of of margin performance strategic saw in X.X% mix revenue of QX. was XX% primarily over Adjusted representing growth investments sector two, the higher-margin million, $X.X as our larger our EBITDA revenue. reflecting

stabilization year through sound continue will half and financial plan we XXXX with the half. and the momentum difficult entered financially and into our a was crystallize our move challenges strategic XXXX operated will that recognize first But performance, historical that we second of along a as Fluent's to clarity with decisions Relative XXXX. further strategic marketplaces owned

to in in decline second year-over-year our impact of of will businesses, have won't the and our and revenue our owned two, sequential given: residual verticals the And have new high door seasonal opened presently half; through expect based marketplaces, serve. us the exiting those expertise Currently, aggressively half businesses be seasonality first nonstrategic see retail and marketplaces. on than for performance quarterly the of growing which ticketing. XXXX declines operated vertical one, performance more we still We to health, are establish cycled until year-over-year, marketplaces our which, while the fully the

share, market Fluent in second have year-over-year half Regardless, which will the we returning XXXX at of rates. growth growth will to industry or grow above

marketplaces a modest through consumer and to our our media margins strategically operated with also We focus in see our on higher-quality footprint. decline more owned continue improving engagements while expanding

still major while are concurrently work in as the pleased we half we we to more leaning existing in, brand family. do are on-boarding XXXX, are first the new Fluent of brands partners further with While to have our progress

upside marketplace that These partnerships. and marketplace owned expand platform platform. influencer is those operated example with and our emerging are onto of build performance brands One success as our our we newer can strategic we

faster competitive year-over-year, channel business leveraging experience in influencer and we keenly to marketplaces. we business to significant media grow operated than this building are market while support and our Fluent's market place growth are double-digit Our building this Consistent strategies presently test-and-learn and putting metrics on the to with being operating culture, continued owned and advantage. focused the

previously our year both Commerce also retail sequentially marketplaces, we while scale, to in driven bottom markets wins path XXXX, contributors our in quarterly we further solutions. by Solution and and are seasonality QX. expect Media ticketing strong favorable revenue size. As businesses results. from in that enhancing validating encouraged continue multibillion QX the our financial by partner in to verticals, tripled fiscal dollars are primarily and more our our new growth strategic AdFlow stated, In Driven a call by become also meaningful double-digit line performance AdFlow,

Our quality consumers opportunity to a foundational strategies optimal moment. purchase dynamic represent these brands new and higher the world-class reach have in at yielded results excellent engagement seeking marketplaces for

by growth technology, proprietary as scale. access XXXX learning that capabilities agenda we will platform be data leveraging our brand provide and partner machine Our will a broader enabled with us

return We are on are based quite investment we the on strategic additional impact the on longer-term about entering our value. enthusiastic plan exciting this coupled major enterprise of AdFlow will positively investment the making with business we that when verticals solution, in

also Care on earning successfully launched our health our are Act have where solutions position we focused call in market of new Affordable the extension ACA. a market, business vertical credible We a

relationship This funnel we health further connect to directly as us relationship care trust. bringing with with consumers allow Our them by brands concurrently health as policyholders. their new platform care while our providers marketing new the capabilities that strategic world-class consumers to building needs stronger our definitive insurance consumers deepens meet down

business our QX, metrics. out the and and model ACA scaled In financial our to prove launched successfully we establish operating

emerging With businesses, Fluent's exceeds Fluent's as of commitment that and XXXX. AdFlow, we will partners these market growth validate core higher-quality proposition and ourselves existing to adding highly continues Call core. where engagement continue this given consumer expansion success metrics new we opportunity and to new clients growth our Fluent We shareholders. in strategic to a potential Influencer opportunity while consumers, total for fragmented scale place, believe margin attractive value ACA strategic for X growing The differentiate sequential for a our in find our these the partners high demonstrating market. our within is course solutions the can enhances by our vertical an

regarding the we are performance now and in can you our role understand, long-term quite are our marketplaces agenda. As growth that better financial playing enthusiastic strategic

we follow. in as Importantly, about to excited agenda on bullish market We and accretive grow margins strategic pivot. will the momentum remain core we our generated the our share,

our market We to core the began made scale quality-centric nonstrategic and that have operated we are these a strategic marketplaces, and the are will the reset owned we financial our methodically longer-term that allow financial beyond. appropriate In performance second margins as XXXX agenda as building believe and expand as businesses; as new will enhance strategic block and XXXX. decisions of we one, to soon we our And to marketplaces and proactively performance marketplace two, foundational the credentials. exit solutions repositioning agenda; us half three, summary: establishing for our we growth

strategic quality for more course. and customer is This to creating sustainable building We winning bets acquisition our clients. will and are higher make our consumers investments solutions for we effective continue in digital experiences

Perfit fundamentals and that, on to provide will pay And year that fiscal the are the strategic I'll put We Ryan confident with over we've turn longer-term it results. last dividends. place details over financial more also to our in financial

Ryan Perfit

to revenue, we earnings. now Thank $XX.X today. sequentially but for Don. additional us QX our And In you, everyone color year down generated thanks XX% million and in QX, joining on I'll XXXX provide from up XX% QX. prior year, from full some

from year, decrease For million in the the XXXX. $XXX.X company XX% revenue, full a produced

the retail in all industry. nonstrategic Partially was The industry, bolstered and and and of driven new sector. subscription verticals. across of was the sequential declines decline the sector and services a sector syndicated streaming headwinds the marketplaces from an gains almost media the rebound gaming consumer performance growth increase business by of the entertainment by of drove Year-over-year was industry exit the expected seasonal the our macroeconomic and offsetting

X headwinds sequential challenges and over continued of expect quarter growth expected mid-XXXX. same the the into first Given quarter during year, seasonality and quarters we

marketplaces year, operated we grow sequential environment macroeconomic at to owned better will strong continue marketplaces rates while moderate for our full and a the year-over-year. our believe growth in performance new that For double-digit allow

was and In QX, XX%, respectively. represents media and of margin revenue $XX.X XX.X% X% of sequential increases which million, and year-over-year

of $XX.X XX.X% as full the year The in and and marketplaces. from of further mentioned marketplaces decline client XX% lower in and a were of XXXX. a both the a revenue percentage margin margin effect previously media new growth quarterly revenue our flux increases of performance and XXXX, For our media media million margin in in helped owned of cost spend operated by represents media of

aggregate revenue full expenses revenue million, as the declining the and GAAP basis, as of our in margin media $X.X QX of year, decline margin million On $XX.X a decrease percentage a year-over-year. strictly were For was virtually media flat. remained operating for a function

$XX.X a For expenses XXXX. full full operating million our million, XXXX, year from year $XX.X aggregate were decrease

in settlement. G&A our for note, reimbursements expenses includes related benefit largely and the FTC a QX of comprised of related specific to Of $XXX,XXX litigation insurance costs

acquisitions related and and includes expenses ended ] [ True and The the North includes million costs. million $X for G&A respectively. specific accrued million XX, from related year, $X.X benefit the full the untapped For net $X.X X G&A litigation to of months line compensation December Winopoly, XX also

the business EBITDA benefits calculation. our outside are from These adjusted and costs and fall normal of thus course excluded

detailed XX-Q filings, of coupled cap, company the market As our XXXX goodwill. that indication quarters performance events in impairment prior the during in first triggering and drop our of third an with determined the of for our represented

on XXXX operations operating are impairment associated in excluded Fluent noncash charges remained the recorded and and on our no impairment an our acquisition to for EBITDA immaterial impact year company the noncash XXXX business at Based balance charges the from of of $XX.X XXXX. liquidity. adjusted result, in or on the AdParlor acquisition The sheet amount goodwill And of with full the million a analysis, the of goodwill as have aggregate year-end. an

The impairment in of fourth event the no intangibles company long-lived determined quarter. that indicating triggering there was

Our X.X% $X.X QX $XXX,XXX of million. a increase million, revenue, a decrease EBITDA of was adjusted from $X.X representing of and sequential year-over-year QX

the adjusted decline million $XX.X EBITDA from $X.X XXXX. year December and represents XXXX, XX, X.X% revenue For of million a of full ended

provision to as net growth a effect, and or we and income for the net XXXX our by timing taxes. second operating EBITDA share-based reconciliation single cannot of driven in expenses XXXX, half, potential from a The media and performance significance benefit to loss digits. push new into certain expect to company provide the In income expected revenue unknown compensation the costs expense marketplaces high or percentage due margin for of the adjusted

Interest expense increased quarter year of prior $XXX,XXX in by over the fourth an $XXX,XXX rates. as increased effect to interest

$X.X to of increased For also full rates. in expense million, effect year interest million $X.X XXXX, increased

the the was benefit taxes was provision For the full for year, $XXX,XXX. of of quarter, the benefit provision $XXX,XXX for a a income

loss net For share. loss million per to the $X.X $XXX,XXX, a adjusted an of of net of fourth equivalent quarter, of a measure we loss reported and non-GAAP $X.XX

the loss full share. equivalent loss to year, net million, stands an loss to our adjusted For $X.X net per $X.XX million, $XX.X of a with of

Moving with sheet. decline million a and equivalents quarter million XXXX, We decline balance $XX.X a XXXX. XX, from in to December the cash from $X.X September cash the million and ended XX, $X.X

compared a XXXX. Total debt of million, reflected as balance million reduction the to December as sheet the XX, on $XX.X $X.X December at representing balance XXXX, XX, as was

operating agreement that was credit we $XX X, extended XX, of December revolving of April that loan with agreement with XX, XXXX. a million under April for Citizens term waiver As And XXXX, Solutions Credit up matures Bank the on April facility was until a a $XX company on credit X, million provides XXXX. a entered that to SLR and into

XX plus applicable to The Borrowings the voluntarily X the than principal next to agreement years. facility X.X. amortization over we of applicable prior the has a the interest an prepay rate facility under beneficial We the million increased may once facility X-month in be under repay time, loan over at in bear will growth of availability agreement. our credit SLR is term We used the the business the provides There beyond. proceeds maturity $XX to of first X% million, fixed to or within coverage the equal months opening reduced subject X.XX% principal charge be and prior margin. outstanding ratio any the to flexibility our whole premium cash will margin part credit and The balance greater to is Citizens $XX.X Bank. with credit believe term new no the and

increase the entire quarter, current was the at minus million XX, end assets September from balance capital, million the the $XX.X due $XX.X million current. of an current and as of XXXX, presentation defined as to of liabilities, Working debt $XX.X

technology debt As $X.X development capitalized of term is a in to as QX, and QX sheet. the December on XXXX as million of result product SLR invested noncurrent balance XXXX. XX, compared into facility, credit long In we presented the million $X.X

technology year company in million million $X.X full product full XXXX, the XXXX. development year versus For for capitalized $X.X and

team that to syndicated clients on provide stabilization high-quality customer with to the XXXX, As we continues continue focus into owned the while opportunities. our grow the acquisition operated of our look new we marketplaces, marketplaces and management performance

will our ongoing long-term beyond. your We're appreciate growth We benefits that financial support. in strategy confident substantial and produce XXXX

We are happy to take questions this at time.

Operator

Our Instructions] [Operator line of Canaccord. from Ripps first question the will come with Maria

Maria Ripps

you're Is and maybe there having your any that tone color around share maybe of of you market some with sort core conversations the broader of clients. advertising can the

the point of out. given were trying share quarter, have that key Just visibility in color play the in we of And QX. could second of terms rest any sort you much ready the in to dynamics operating sort technically this on can year how how of at then see you

Donald Patrick

question. for the you Thank Maria.

conversations return the Our things been have take out, sort spend. they've digital been measured over on has marketing, ad clients on primarily our of advertisers and approach with to focusing our similar last but year, to X continued a bullish quarters around

period. couple bullish a doing So and ad are much their although on the what they return a in spend actions on more -- their focus continued on current interim payback more quarters and purpose shorter out they're of in is

to media in that The back in data talked about we primarily provide clients transaction most insights are are before. those providing sharing that there. us clients, meeting more consumer industry. really the have past drive better transparency seeing for leading event to We're They're we've to we to more the gaming with in, active our us drive are the best

seeing a competitive they obviously large work headwinds fairly which We're services, to a verticals fair with historically that vertical in the conservative us, for them. helps. that we but have of industry been services through. around amount approach clients has also keep continue financial seeing streaming aggressively is it to some grow we We The in

Additionally, that and think drive other that providers we're loyalty. thing are is metrics the advertisers which can really seeing, interesting retention I that is solution prioritizing

are and expanding our that talking with we in market and about we the So there progress our solutions this in advertisers, forward look there to future.

visibility and second in QX. QX right, Your was just question around that Maria? Is

Maria Ripps

yes. Yes,

the and So anything spending QX? highlight of forward about of broader around to sort visibility then just going kind

Donald Patrick

Yes.

headwinds a outlined healthy we our So we and stable operated to our consumer release, and owned earnings financial perspective. some But businesses some continue One advertiser FTC as certainly clients in marketplaces the we on that see are exit we to we of is for continue -- had that based our ones. settlement we around from primarily and about perspective, talked a X around exit. what -- had from we the to to

of seeing and then that And We competitors seen compliance QX in standards a thing majority settlement, is in the the competitors movement saw sort our competitors not new of -- go our adopting positive most the industry-leading to practices. old we're vast our where after second of back are people we've a standards.

on we're a owned uneven and obviously, field bit little playing So playing operated the marketplaces. an in

We continue there. to into lean quality

drive quality a growth and compete to rather ROAS on better perspective from than continue a perspective. We

and seasonal year-over-year, leadership And the growth. great more and at a in outlined, of the it retail here focus be about more operated to of marketplaces when which have on the but very we're up. in health do when. does, and matter as owned The that in get the back industry compared the businesses currently ticketing. to Maria, compliance market growth because will -- growth level we is share moment across we're the position performance and and going we've taking we on excited just comfortable very It's to a it because And position

and reasons. around we'll marketplaces the as half and flip we in have decline we'll less progress second tailwinds later for that X made the the we'll QX in into second of we'll continued with QX and -- into is is the we'll see QX. then along see growth revenue QX. go seasonality the part One And we'll have for the continued So -- year-over-year see

Maria Ripps

you your here. then sort this of kind sort key very milestones And of of need it. achieve sort generate I is business that kind appreciate initiatives. scale And from That's million growth target helpful. XX% said I are operational to some sort in Got to what a color this next as all growth to the another I guess, around years these you of expect believe you year initiatives? still from of of $XXX that couple of on the reach initiatives. these you revenue over growth Are

Donald Patrick

Yes. Thanks, Maria.

operational So other imagine, our different, can each Maria, is adjacent these one metrics operated owned you fuel the marketplaces and as marketplaces.

technology, bringing our where relationships owned So our consumer our other and meaningful into we're more leveraging from operated ones. we're experiences the client either expanding we're

kind detail into one time a try not you. I'll So at to for it take of get

technology from in and The excited that are the very and right our this AdFlow This on a that leaning the -- moment. the is have and and is piece, post transaction. we're purchased ability -- we take, right the advertisers on operated AdFlow, technology of after this tech before type we confirmation and that get our purchase marketplaces. someone ad seeing operated built of owned type we the the has marketplace are optimal platform you the in consumers is about top of high-quality owned monetization But and in

our already more to valuable moment. bought those something. So in world-class consumers they're for because and because that and those you're purchase they're bidding up obviously they've pay They're willing our leaning more are advertisers for in advertisers,

very continue So the into that piece to is side. we're at bring of and around It is monetization really new new happy We're metric -- supply now main happy looking technology the partners business. becomes around very how partners on that the marketplace. we're

in X -- QX about added growing. QX, we'll talk how and of terms QX terms in that we feel QX pipeline and in is We of

We pipeline, by that. have great a excited

we to in about more the are that work. have looking care less we in right leaning can especially and -- comes health supply the it the and the the sort quality we -- it, it it's a demand call side get the get order of demand, have we can at for the On from solutions right side, providers

on QX side. the the And is next channel. influencer, and supply there sort phenomenal you be it -- more of for the last focus one, it's QX will as know, the a our So

billion. for growing the they eventually the type influence's over opinion XX% influencers driven more to we build do XX% properties right third-party to where It's properties. the large It's It's curate to marketing the our make Thank and decisions. in about be how consumer order that Maria. $XX and consumers you, look build right can

Operator

Our Capital next question comes Bill with from Dezellem Tieton of the Management. line

William Dezellem

The line up Dezellem? for broke that was Bill

Operator

Yes.

William Dezellem

towards follow-up, I'd competitors rules Did new then your that put like to hear of had first adjusted regressed they they comment since. Don, some you to that the on but on industry the QX relative that and I the FTC has in of have back all? correctly,

Donald Patrick

Yes, Bill. did. you. you Thank

William Dezellem

Yes. you. Thank

you risky loud just very I'm essentially, the So another are leaves they proposition they and if future. if Are at me there out are the a they not them seems the the to seems way I heard to willfully now much reading message that for like deciding is am going risk competitor which the FTC am? that tea greater would because same here, twist signaling put to to Or a riddle? comply are thinking that like I this

Donald Patrick

question. to before with and Thank the answer Fluent decided obviously it a competitors, We because with lead it leading it's even right? you compliance from for your perspective position for industry-leading FTC. take -- our the to settlement all hard a answer I'll

sustainability for perspective, more business. it and valuable that we thought sustainable our do was purposes only build a from and to thing more the business So not right

to road better lead and more knew deeper our higher clients. relationships quality the also that would with We

clearly we're us out has we that marketplaces going new at look And for performance when after. proven that these

So headwinds when going they this continue unfortunately, is FTC is or industry we clearly that have in end. piece to strong not the to the compliance said our us, announced with beginning, fortunately third decided to the take the the settlement and road is

QX, seen we've to release So, feel start earnings -- comfortable look thought immediately that. different some the specifically in see immediate continuing in we there'll terms dividends. that long-term we talked term, But actions our We position QX, we in when we in be down when you and around we'd and sat lead to it. feel not of

So competition the perspective, there's business through our they that this was a and our the would from amount even do have. that thing the FTC, to we risk would thought gone assume And a fair it from I they regarding with take, having of right risk perspective.

William Dezellem

Yes. someone if that be shooting shoes if Yes, the FTC complied of seems the would if chose a fish you I and uncomply, then barrel put that will. myself in to in like

Donald Patrick

That's right. Yes.

William Dezellem

So let little me more the to with a had you ask first to questioner circle prior the back about detail asked quarter. bit

second bracketed it You have quarter gosh, last headwinds. face please you compelled, of helpful that to QX you in would the down range also. that first the anticipating as will continue year decline quarter? be be you are bracket from stated in you thinking the range then, would to feel the be Would revenue would that if really And relative what you're

Donald Patrick

know, give So as guidance. we don't Bill, you

revenue moving decline QX think QX, that range QX and of seen I of in in in that of sort So we type sort the expect of in be to you've sort within and QX. also

One into to that But QX. obviously, fighting the we're of things will in as we that be think settlement through businesses the lessen June. against. we've the X have, cycled we most have go that will cycle is -- for part, because through exited we'll continue We and QX and decline that we'll

of and of through terms the of growth piece it. new the in go we the marketplaces those just around how is And those seasonality second

Operator

like further Don back [Operator to for to I'd call remarks. in time. queue turn We're the no showing Patrick closing Instructions] at this questions

Donald Patrick

rest on strategic you continued pivot the our earnings against agenda updating throughout Thank QX your exciting and progress attending call Great. you support for look our this and year. growth our of to Fluent. forward We of

for thank So you joining.

Operator

you concludes for participating. This call. today's Thank conference

now may You disconnect.

Fluent (FLNT) 2 Apr 242023 Q4 Earnings call transcript