Fluent, Inc. (NASDAQ: FLNT), a leading data-driven performance
marketing company, today reported financial results for
the first quarter ended 2020.
Ryan Schulke, Fluent’s Chief Executive Officer, commented,
"Amidst the extraordinary challenges we are all facing during the
current global pandemic, we express our most sincere gratitude to
those working tirelessly to support people in need. We also take
great pride in the expressions of caring and concern by our
colleague base, to support each other's families and
respective communities."
"At the same time, we are extremely fortunate that our team has
been so adaptive and resilient, enabling Fluent to maintain focus
in driving our business forward, by executing on our core business
goals and strategic agenda. We see our revenue growth in the
quarter as an important indicator that Fluent continues to forge
stronger bonds with leading brands across multiple verticals, and
become a more critical component of our partners' overall
marketing strategies."
First Quarter Financial
Summary
- 19% growth in Q1 2020 revenue over Q1
2019, to $78.9 million
- Net
income of $0.4 or $0.01 per
share, compared to net income of $1.0 million,
or $0.01 per share, in Q1 2019
- Media margin of $23.9 million, an increase
of 4% over Q1 2019 and representing 30.3% of
revenue
- Adjusted EBITDA of $9.0 million, representing 11% of
revenue
- Adjusted net income of $3.8 million, or $
0.05 per share
Media margin, adjusted EBITDA and adjusted net income are
non-GAAP financial measures, as defined and reconciled
below.
Business Outlook
- Fluent currently sees Q2 2020 trending in-line with Q2 2019
revenue and media margin.
- Volume of consumer traffic to our websites continues to be
elevated year over year, reflecting consumers spending more time on
their mobile devices, as the country largely shelters at home.
- Cost of media in Q2 2020 is trending favorably compared to Q2
2019, while monetization reflects the economic uncertainties our
advertiser clients are responding to.
Conference Call
Fluent, Inc. will host a conference call on Monday, May 11,
2020 at 4:30 PM ET to discuss its 2020 first quarter
financial results. To listen to the conference call on your
telephone, please dial (888) 339-0797 for domestic callers, or
(412) 317-5248 for international callers. To access the live audio
webcast, visit the Fluent website at investors.fluentco.com. Please
login at least 15 minutes prior to the start of the call to ensure
adequate time for any downloads that may be required. Following
completion of the earnings call, a recorded replay of the webcast
will be available for those unable to participate. To listen to the
telephone replay, please dial (877) 344-7529 or (412) 317-0088 with
the replay passcode 10143972. The replay will also be
available for one week on the Fluent website at
investors.fluentco.com.
About Fluent, Inc.
Fluent (NASDAQ: FLNT) is a leading performance marketing company
with expertise in creating meaningful connections between consumers
and brands. Leveraging our proprietary first-party database of
opted-in consumer profiles, Fluent drives intelligent growth
strategies that deliver superior outcomes. Founded in 2010, the
company is headquartered in New York City. For more information,
visit www.fluentco.com.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
The matters contained in this press release may be considered to
be “forward-looking statements” within the meaning of the
Securities Act of 1933 and the Securities Exchange Act of 1934.
Those statements include statements regarding the intent, belief or
current expectations or anticipations of Fluent and members of our
management team. Factors currently known to management that could
cause actual results to differ materially from those in
forward-looking statements include the following: compliance with a
significant number of governmental laws and regulations, including
those laws and regulations regarding privacy and data; failure to
safeguard the personal information and other data contained in our
database; failure to compete effectively against other online
marketing and advertising companies; dependence on third-party
publishers, internet search providers and social media platforms
for a significant portion of visitors to our websites; dependence
on our key personnel; dependence on emails, text messages and
telephone calls, among other channels, to reach users for marketing
purposes; competition we face for web traffic; ability to compete
and manage media costs in an industry characterized by
rapidly-changing internet media and advertising technology,
evolving industry standards, regulatory uncertainty, and changing
user and client demands; liability related to actions of
third-party publishers; limitations on our or our third-party
publishers’ ability to collect and use data derived from user
activities; ability to remain competitive with the shift of online
interactions from computers to mobile devices; dependence on
third-party service providers; management of the growth of our
operations, including the integration of the AdParlor business and
other acquired business units or personnel; management of
unfavorable publicity and negative public perception about our
industry; failure to meet our clients’ performance metrics or
changing needs; failure to detect click-through or other fraud on
advertisements; achievement of some or all of the benefits that we
expect to achieve as a stand-alone company; failure to adequately
protect intellectual property rights or allegations of infringement
of intellectual property rights; compliance with the covenants of
our credit agreement; and the potential for failures in our
internal control over financial reporting. These and additional
factors to be considered are set forth under “Risk Factors” in our
Annual Report on Form 10-K for the fiscal year ended December
31, 2019 and in our other filings with the Securities and Exchange
Commission. Fluent undertakes no obligation to update or revise
forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating
results or expectations.
FLUENT, INC.CONSOLIDATED
BALANCE SHEETS(Amounts in thousands, except share
and per share data)(unaudited)
|
|
March 31, 2020 |
|
|
December 31, 2019 |
|
ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
13,086 |
|
|
$ |
18,679 |
|
Accounts receivable, net of
allowance for doubtful accounts of $665 and $1,967,
respectively |
|
|
61,012 |
|
|
|
60,915 |
|
Prepaid expenses and other
current assets |
|
|
1,944 |
|
|
|
1,921 |
|
Total current assets |
|
|
76,042 |
|
|
|
81,515 |
|
Restricted cash |
|
|
1,480 |
|
|
|
1,480 |
|
Property and equipment,
net |
|
|
2,684 |
|
|
|
2,863 |
|
Operating lease right-of-use
assets |
|
|
9,448 |
|
|
|
9,865 |
|
Intangible assets, net |
|
|
52,720 |
|
|
|
55,603 |
|
Goodwill |
|
|
164,774 |
|
|
|
164,774 |
|
Other non-current assets |
|
|
1,106 |
|
|
|
993 |
|
Total
assets |
|
$ |
308,254 |
|
|
$ |
317,093 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
15,854 |
|
|
$ |
21,574 |
|
Accrued expenses and other
current liabilities |
|
|
18,857 |
|
|
|
20,358 |
|
Deferred revenue |
|
|
1,526 |
|
|
|
1,140 |
|
Current portion of long-term
debt |
|
|
4,750 |
|
|
|
6,873 |
|
Current portion of operating
lease liability |
|
|
2,271 |
|
|
|
2,282 |
|
Total current liabilities |
|
|
43,258 |
|
|
|
52,227 |
|
Long-term debt, net |
|
|
43,579 |
|
|
|
44,098 |
|
Operating lease liability,
net |
|
|
8,607 |
|
|
|
9,056 |
|
Other non-current
liabilities |
|
|
745 |
|
|
|
775 |
|
Total
liabilities |
|
|
96,189 |
|
|
|
106,156 |
|
|
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
|
|
|
Preferred stock — $0.0001 par
value, 10,000,000 Shares authorized; Shares outstanding — 0 shares
for both periods |
|
|
— |
|
|
|
— |
|
Common stock — $0.0005 par
value, 200,000,000 Shares authorized; Shares issued — 79,809,417
and 78,642,078, respectively; and Shares outstanding — 76,207,613
and 75,873,679, respectively |
|
|
40 |
|
|
|
39 |
|
Treasury stock, at cost —
3,601,804 and 2,768,399 shares, respectively |
|
|
(9,900 |
) |
|
|
(8,184 |
) |
Additional paid-in
capital |
|
|
408,633 |
|
|
|
406,198 |
|
Accumulated deficit |
|
|
(186,708 |
) |
|
|
(187,116 |
) |
Total shareholders'
equity |
|
|
212,065 |
|
|
|
210,937 |
|
Total liabilities and
shareholders' equity |
|
$ |
308,254 |
|
|
$ |
317,093 |
|
FLUENT, INC.CONSOLIDATED
STATEMENTS OF OPERATIONS(Amounts in thousands,
except share and per share
data)(unaudited)
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
Revenue |
|
$ |
78,934 |
|
|
$ |
66,561 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Cost of revenue (exclusive of depreciation and amortization) |
|
|
56,624 |
|
|
|
44,829 |
|
Sales and marketing (1) |
|
|
2,830 |
|
|
|
3,434 |
|
Product development (1) |
|
|
2,731 |
|
|
|
2,150 |
|
General and administrative (1) |
|
|
11,076 |
|
|
|
10,043 |
|
Depreciation and amortization |
|
|
3,733 |
|
|
|
3,317 |
|
Total costs and
expenses |
|
|
76,994 |
|
|
|
63,773 |
|
Income from
operations |
|
|
1,940 |
|
|
|
2,788 |
|
Interest expense, net |
|
|
(1,532 |
) |
|
|
(1,778 |
) |
Income before income
taxes |
|
|
408 |
|
|
|
1,010 |
|
Income tax benefit |
|
|
— |
|
|
|
35 |
|
Net
income |
|
$ |
408 |
|
|
$ |
1,045 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted
income per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.01 |
|
|
$ |
0.01 |
|
Diluted |
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
78,604,280 |
|
|
|
79,097,426 |
|
Diluted |
|
|
78,753,770 |
|
|
|
80,063,989 |
|
|
|
|
|
|
|
|
|
|
(1) Amounts include
share-based compensation expense as follows: |
|
|
|
|
|
|
|
|
Sales and marketing |
|
$ |
218 |
|
|
$ |
369 |
|
Product development |
|
|
237 |
|
|
|
245 |
|
General and administrative |
|
|
1,942 |
|
|
|
1,661 |
|
Share-based compensation |
|
$ |
2,397 |
|
|
$ |
2,275 |
|
FLUENT, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(Amounts in
thousands)(unaudited)
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
408 |
|
|
$ |
1,045 |
|
Adjustments to reconcile net income to net cash (used in)
provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
3,733 |
|
|
|
3,317 |
|
Non-cash interest expense |
|
|
356 |
|
|
|
319 |
|
Share-based compensation expense |
|
|
2,397 |
|
|
|
2,275 |
|
Provision for bad debt |
|
|
183 |
|
|
|
— |
|
Deferred income tax benefit |
|
|
— |
|
|
|
(35 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(280 |
) |
|
|
4,629 |
|
Prepaid expenses and other current assets |
|
|
(23 |
) |
|
|
(601 |
) |
Other non-current assets |
|
|
(113 |
) |
|
|
(21 |
) |
Operating lease assets and liabilities, net |
|
|
(43 |
) |
|
|
587 |
|
Accounts payable |
|
|
(5,720 |
) |
|
|
(1,629 |
) |
Accrued expenses and other current liabilities |
|
|
(1,501 |
) |
|
|
(4,929 |
) |
Deferred revenue |
|
|
386 |
|
|
|
230 |
|
Other |
|
|
(30 |
) |
|
|
(22 |
) |
Net cash (used in) provided by operating activities |
|
|
(247 |
) |
|
|
5,165 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Acquisition of property and equipment |
|
|
(7 |
) |
|
|
(1,385 |
) |
Capitalized costs included in intangible assets |
|
|
(625 |
) |
|
|
(357 |
) |
Net cash used in investing activities |
|
|
(632 |
) |
|
|
(1,742 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Repayments of long-term debt |
|
|
(2,998 |
) |
|
|
(875 |
) |
Taxes paid related to net share settlement of vesting of restricted
stock units |
|
|
(416 |
) |
|
|
(1,610 |
) |
Repurchase of treasury stock |
|
|
(1,300 |
) |
|
|
— |
|
Net cash used in financing activities |
|
|
(4,714 |
) |
|
|
(2,485 |
) |
Net decrease in cash, cash
equivalents and restricted cash |
|
|
(5,593 |
) |
|
|
938 |
|
Cash, cash equivalents and
restricted cash at beginning of period |
|
|
20,159 |
|
|
|
19,249 |
|
Cash, cash equivalents and
restricted cash at end of period |
|
$ |
14,566 |
|
|
$ |
20,187 |
|
Definitions, Reconciliations and Uses of Non-GAAP
Financial Measures
The following non-GAAP measures are used in this release:
Media margin is defined as revenue minus cost of revenue
(exclusive of depreciation and amortization) attributable to
variable costs paid for media and related expenses. Media margin is
also presented as percentage of revenue.
Adjusted EBITDA is defined as net income excluding (1)
income taxes, (2) interest expense, net, (3) depreciation and
amortization, (4) share-based compensation expense, (5)
acquisition-related costs (6) restructuring and certain severance
costs, (7) certain litigation and other related costs, and (8)
one-time items.
Adjusted net income is defined as net income excluding (1)
share-based compensation expense, (2) acquisition-related costs,
(3) restructuring and certain severance costs, (4) certain
litigation and other related costs, and (5) one-time items.
Adjusted net income is also presented on a per share (basic and
diluted) basis.
Below is a reconciliation of media margin from net income,
which we believe is the most directly comparable GAAP measure.
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
Net income |
|
$ |
408 |
|
|
$ |
1,045 |
|
Income tax benefit |
|
|
— |
|
|
|
(35 |
) |
Interest expense, net |
|
|
1,532 |
|
|
|
1,778 |
|
Depreciation and
amortization |
|
|
3,733 |
|
|
|
3,317 |
|
General and
administrative |
|
|
11,076 |
|
|
|
10,043 |
|
Product development |
|
|
2,731 |
|
|
|
2,150 |
|
Sales and marketing |
|
|
2,830 |
|
|
|
3,434 |
|
Non-media cost of revenue
(1) |
|
|
1,603 |
|
|
|
1,361 |
|
Media
margin |
|
$ |
23,913 |
|
|
$ |
23,093 |
|
Revenue |
|
$ |
78,934 |
|
|
$ |
66,561 |
|
Media margin % of
revenue |
|
|
30.3 |
% |
|
|
34.7 |
% |
(1) Represents the portion of cost of revenue (exclusive of
depreciation and amortization) not attributable to variable costs
paid for media and related expenses.
Below is a reconciliation of adjusted EBITDA from net income,
which we believe is the most directly comparable GAAP measure.
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
Net income |
|
$ |
408 |
|
|
$ |
1,045 |
|
Income tax benefit |
|
|
— |
|
|
|
(35 |
) |
Interest expense, net |
|
|
1,532 |
|
|
|
1,778 |
|
Depreciation and
amortization |
|
|
3,733 |
|
|
|
3,317 |
|
Share-based compensation
expense |
|
|
2,397 |
|
|
|
2,275 |
|
Acquisition-related costs |
|
|
47 |
|
|
|
— |
|
Restructuring and certain
severance costs |
|
|
— |
|
|
|
110 |
|
Certain litigation and other
related costs |
|
|
907 |
|
|
|
489 |
|
One-time items |
|
|
— |
|
|
|
168 |
|
Adjusted
EBITDA |
|
$ |
9,024 |
|
|
$ |
9,147 |
|
Below is a reconciliation of adjusted net income and the related
measure of adjusted net income per share from net income,
which we believe is the most directly comparable GAAP measure.
|
|
Three Months Ended March 31, |
|
(In thousands, except
share data) |
|
2020 |
|
|
2019 |
|
Net income |
|
$ |
408 |
|
|
$ |
1,045 |
|
Share-based compensation
expense |
|
|
2,397 |
|
|
|
2,275 |
|
Acquisition-related costs |
|
|
47 |
|
|
|
— |
|
Restructuring and certain
severance costs |
|
|
— |
|
|
|
110 |
|
Certain litigation and other
related costs |
|
|
907 |
|
|
|
489 |
|
One-time items |
|
|
— |
|
|
|
168 |
|
Adjusted net
income |
|
$ |
3,759 |
|
|
$ |
4,087 |
|
Adjusted net income
per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.05 |
|
|
$ |
0.05 |
|
Diluted |
|
$ |
0.05 |
|
|
$ |
0.05 |
|
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
78,604,280 |
|
|
|
79,097,426 |
|
Diluted |
|
|
78,753,770 |
|
|
|
80,063,989 |
|
We present media margin, adjusted EBITDA, adjusted
net income and adjusted net income per share as
supplemental measures of our financial and operating performance
because we believe they provide useful information to investors.
More specifically:
Media margin, as defined above, is a measure of the efficiency
of the Company’s operating model. We use media margin and the
related measure of media margin as a percentage of revenue as
primary metrics to measure the financial return on our media and
related costs, specifically to measure the degree by which the
revenue generated from our digital marketing services exceeds the
cost to attract the consumers to whom offers are made through our
services. Media margin is used extensively by our management to
manage our operating performance, including evaluating operational
performance against budgeted media margin and understanding the
efficiency of our media and related expenditures. We also use media
margin for performance evaluations and compensation decisions
regarding certain personnel.
Adjusted EBITDA, as defined above, is another primary metric by
which we evaluate the operating performance of our business, on
which certain operating expenditures and internal budgets are based
and by which, in addition to media margin and other factors, our
senior management is compensated. The first three adjustments
represent the conventional definition of EBITDA, and the remaining
adjustments are items recognized and recorded under GAAP in
particular periods but might be viewed as not necessarily
coinciding with the underlying business operations for the periods
in which they are so recognized and recorded. These adjustments
include certain severance costs associated with department-specific
reorganizations and certain litigation and other related costs
associated with legal matters outside the ordinary course of
business. Items are considered one-time in nature if they are
non-recurring, infrequent or unusual and have not occurred in the
past two years or are not expected to recur in the next two years,
in accordance with SEC rules. Adjusted EBITDA for the three months
ended March 31, 2019 excluded as one-time items $0.2 million
of costs associated with the move of our corporate headquarters.
There were no other adjustments for one-time items in the current
period presented.
Adjusted net income, as defined above, and the related measure
of adjusted net income per share exclude certain items that are
recognized and recorded under GAAP in particular periods but might
be viewed as not necessarily coinciding with the underlying
business operations for the periods in which they are so recognized
and recorded. Adjusted net income for the three months ended March
31, 2019 excluded as one-time items $0.2 million of costs
associated with the move of our corporate headquarters. There were
no other adjustments for one-time items in the current
period presented. We believe adjusted net income affords
investors a different view of the overall financial performance of
the Company than adjusted EBITDA and the GAAP measure of
net income.
Media margin, adjusted EBITDA, adjusted net income and adjusted
net income per share are not intended to be performance measures
that should be regarded as an alternative to, or more meaningful
than, net income as indicators of operating performance. None
of these metrics are presented as measures of liquidity. The way we
measure media margin, adjusted EBITDA and adjusted net income
may not be comparable to similarly titled measures presented by
other companies and may not be identical to corresponding measures
used in our various agreements.
Contact Information: Investor
RelationsFluent, Inc.(917)
310-2070InvestorRelations@fluentco.com
|
• |
19% growth in
Q1 2020 revenue over
Q1 2019, to $78.9 million |
|
• |
Net income of
$0.4 million, or $0.01 per share |
|
• |
Media margin of
$23.9 million, up 4% over Q1 2019 and
representing 30.3% of revenue |
|
• |
Adjusted EBITDA of
$9.0 million, representing 11% of revenue |
|
• |
Adjusted net income of
$3.8 million, or $ 0.05 per share |
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