Fluent, Inc. (NASDAQ: FLNT), a leading data-driven performance
marketing company, today reported financial results for the first
quarter ended March 31, 2019.
Ryan Schulke, Fluent’s Chief Executive Officer, commented, "Our
2019 first quarter results delivered on our previously articulated
goals. We continue to gain market recognition for Fluent's unique
data-driven approach and first-party proprietary data asset, along
with the effectiveness of our performance campaigns, particularly
in the mobile app acquisition space. Coupling this with additions
to our senior-level leadership team supports the delivery of our
longer-term strategic priorities."
First Quarter Highlights
- Revenue of $66.6 million, an increase of 19% over Q1 2018.
- Net income from continuing operations of $1.0 million, or $0.01
per share, compared to net loss from continuing operations of $5.6
million, or $0.08 per share, in Q1 2018.
- Media margin of $23.1 million, an increase of 20% over Q1 2018
and representing 35% of revenue.
- Adjusted EBITDA of $9.1 million, representing 14% of
revenue.
- Adjusted net income of $4.1 million, or $0.05 per share.
Media margin, adjusted EBITDA and adjusted net income are
non-GAAP financial measures. 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.
Adjusted EBITDA is defined as net income (loss) from continuing
operations, 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 related costs,
and (8) one-time items. Adjusted net income is defined as net
income (loss) from continuing operations, excluding (1) share-based
compensation expense, (2) acquisition-related costs, (3)
restructuring and certain severance costs, (4) certain litigation
and related costs, and (5) one-time items. Adjusted net income is
also presented on a per share (basic and diluted) basis.
Reconciliations of these non-GAAP measures are provided below.
Conference Call
Fluent, Inc. will host a conference call on Wednesday, May 8,
2019 at 4:30 PM ET to discuss its 2019 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 10130460. 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
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; 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, 2018 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. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Amounts in thousands, except share and per share
data) |
(unaudited) |
|
|
|
March 31, 2019 |
|
December 31, 2018 |
ASSETS: |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
18,707 |
|
|
$ |
17,769 |
|
Accounts receivable, net of
allowance for doubtful accounts of $595 and $1,751 |
|
44,023 |
|
|
48,652 |
|
Prepaid expenses and other
current assets |
|
2,572 |
|
|
1,971 |
|
Total current assets |
|
65,302 |
|
|
68,392 |
|
Restricted cash |
|
1,480 |
|
|
1,480 |
|
Property and equipment,
net |
|
2,838 |
|
|
1,380 |
|
Right-of-use asset |
|
10,584 |
|
|
— |
|
Intangible assets, net |
|
59,059 |
|
|
61,812 |
|
Goodwill |
|
159,791 |
|
|
159,791 |
|
Other non-current assets |
|
435 |
|
|
414 |
|
Total
assets |
|
$ |
299,489 |
|
|
$ |
293,269 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY: |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
6,364 |
|
|
$ |
7,855 |
|
Accrued expenses and other
current liabilities |
|
15,528 |
|
|
21,566 |
|
Deferred revenue |
|
674 |
|
|
444 |
|
Current portion of long-term
debt |
|
4,824 |
|
|
3,500 |
|
Current portion of operating
lease liability |
|
1,134 |
|
|
— |
|
Total current liabilities |
|
28,524 |
|
|
33,365 |
|
Long-term debt, net |
|
50,092 |
|
|
51,972 |
|
Operating lease liability |
|
10,037 |
|
|
— |
|
Other non-current
liabilities |
|
795 |
|
|
766 |
|
Total
liabilities |
|
89,448 |
|
|
86,103 |
|
Shareholders' equity: |
|
|
|
|
Preferred stock - $0.0001 par
value, 10,000,000 shares authorized; 0 shares issued
and outstanding at March 31, 2019 and December 31, 2018 |
|
— |
|
|
— |
|
Common stock - $0.0005 par
value, 200,000,000 shares authorized; 77,603,189 and 76,525,581
shares issued at March 31, 2019 and December 31, 2018,
respectively; and 76,048,360 and 75,292,383 shares outstanding at
March 31, 2019 and December 31, 2018, respectively |
|
39 |
|
|
38 |
|
Treasury stock, at cost,
1,554,829 and 1,233,198 shares at March 31, 2019 and December 31,
2018, respectively |
|
(4,882 |
) |
|
(3,272 |
) |
Additional paid-in
capital |
|
399,208 |
|
|
395,769 |
|
Accumulated deficit |
|
(184,324 |
) |
|
(185,369 |
) |
Total shareholders'
equity |
|
210,041 |
|
|
207,166 |
|
Total liabilities and
shareholders' equity |
|
$ |
299,489 |
|
|
$ |
293,269 |
|
FLUENT, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(Amounts in thousands, except share and per share
data) |
(unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
2019 |
|
2018 |
Revenue |
|
$ |
66,561 |
|
|
$ |
55,989 |
|
Costs and
expenses: |
|
|
|
|
|
|
Cost of revenue (exclusive of
depreciation and amortization) |
|
44,829 |
|
|
37,619 |
|
Sales and marketing (1) |
|
3,434 |
|
|
3,102 |
|
Product development (1) |
|
2,150 |
|
|
734 |
|
General and administrative
(1) |
|
10,043 |
|
|
6,659 |
|
Depreciation and
amortization |
|
3,317 |
|
|
3,331 |
|
Spin-off transaction costs
(1) |
|
— |
|
|
7,708 |
|
Total costs and
expenses |
|
63,773 |
|
|
59,153 |
|
Income (loss) from
operations |
|
2,788 |
|
|
(3,164 |
) |
Interest expense, net |
|
(1,778 |
) |
|
(2,394 |
) |
Income (loss) before
income taxes from continuing operations |
|
1,010 |
|
|
(5,558 |
) |
Income tax benefit |
|
35 |
|
|
— |
|
Net income (loss) from
continuing operations |
|
1,045 |
|
|
(5,558 |
) |
Discontinued
operations: |
|
|
|
|
Loss from operations of
discontinued operations, net of $0 income taxes |
|
— |
|
|
(2,084 |
) |
Loss on disposal of
discontinued operations, net of $0 income taxes |
|
— |
|
|
(19,040 |
) |
Net loss from
discontinued operations |
|
— |
|
|
(21,124 |
) |
Net income
(loss) |
|
$ |
1,045 |
|
|
$ |
(26,682 |
) |
Basic and diluted
income (loss) per share: |
|
|
|
|
Continuing operations |
|
$ |
0.01 |
|
|
$ |
(0.08 |
) |
Discontinued operations |
|
$ |
— |
|
|
$ |
(0.30 |
) |
Net income (loss) |
|
$ |
0.01 |
|
|
$ |
(0.37 |
) |
Weighted average
number of shares outstanding: |
|
|
|
|
Basic |
|
79,097,426 |
|
|
71,537,743 |
|
Diluted |
|
80,063,989 |
|
|
71,537,743 |
|
|
|
|
|
|
(1) Amounts include
share-based compensation expense as follows: |
|
|
|
|
Sales and marketing |
|
$ |
369 |
|
|
$ |
666 |
|
Product development |
|
245 |
|
|
158 |
|
General and administrative |
|
1,661 |
|
|
415 |
|
Spin-off transaction costs |
|
— |
|
|
5,409 |
|
Total share-based compensation
expense |
|
$ |
2,275 |
|
|
$ |
6,648 |
|
FLUENT, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Amounts in thousands) |
(unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
|
2019 |
|
|
|
2018 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Net (income) loss |
|
$ |
1,045 |
|
|
$ |
(26,682 |
) |
Net loss from discontinued
operations |
|
— |
|
|
21,124 |
|
Adjustments to reconcile net
income (loss) from continuing operations to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
3,317 |
|
|
3,331 |
|
Non-cash interest expense and related amortization |
|
319 |
|
|
724 |
|
Share-based compensation expense |
|
2,275 |
|
|
6,648 |
|
Recovery of bad debt |
|
— |
|
|
(14 |
) |
Allocation of expenses to Red Violet |
|
— |
|
|
(325 |
) |
Deferred income taxes |
|
(35 |
) |
|
— |
|
Changes in assets and
liabilities: |
|
|
|
|
Accounts receivable |
|
4,629 |
|
|
2,127 |
|
Prepaid expenses and other current assets |
|
(601 |
) |
|
(1,609 |
) |
Other non-current assets |
|
(21 |
) |
|
537 |
|
Operating lease assets and liabilities |
|
587 |
|
|
— |
|
Accounts payable |
|
(1,629 |
) |
|
(3,291 |
) |
Accrued expenses and other current liabilities |
|
(4,929 |
) |
|
359 |
|
Deferred revenue |
|
230 |
|
|
(46 |
) |
Other liabilities |
|
(22 |
) |
|
— |
|
Net cash provided by
operating activities from continuing operations |
|
5,165 |
|
|
2,883 |
|
Net cash used in operating
activities from discontinued operations |
|
— |
|
|
(5,835 |
) |
Net cash provided by (used in)
operating activities |
|
5,165 |
|
|
(2,952 |
) |
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
Acquisition of property and
equipment |
|
(1,385 |
) |
|
(22 |
) |
Capitalized costs included in
intangible assets |
|
(357 |
) |
|
(177 |
) |
Capital contributed to Red
Violet |
|
— |
|
|
(19,728 |
) |
Net cash used in
investing activities from continuing operations |
|
(1,742 |
) |
|
(19,927 |
) |
Net cash used in investing
activities from discontinued operations |
|
— |
|
|
(1,386 |
) |
Net cash used in investing
activities |
|
(1,742 |
) |
|
(21,313 |
) |
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
Proceeds from issuance of
shares, net of issuance costs |
|
— |
|
|
13,392 |
|
Proceeds from debt
obligations, net of debt costs |
|
— |
|
|
67,182 |
|
Repayments of long-term
debt |
|
(875 |
) |
|
(67,107 |
) |
Taxes paid related to net
share settlement of vesting of restricted stock units |
|
(1,610 |
) |
|
(398 |
) |
Net cash (used in)
provided by financing activities |
|
(2,485 |
) |
|
13,069 |
|
Net increase
(decrease) in cash, cash equivalents and restricted
cash |
|
938 |
|
|
(11,196 |
) |
Cash, cash equivalents and
restricted cash at beginning of period |
|
19,249 |
|
|
16,564 |
|
Cash, cash equivalents and
restricted cash at end of period |
|
$ |
20,187 |
|
|
$ |
5,368 |
|
|
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 (loss) from continuing
operations, 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 related costs,
and (8) one-time items.
Adjusted net income is defined as net income (loss) from
continuing operations, excluding (1) share-based compensation
expense, (2) acquisition-related costs, (3) restructuring and
certain severance costs, (4) certain litigation and related costs,
and (5) one-time items. Adjusted net income per share is defined as
adjusted net income per basic and diluted weighted average shares
outstanding. Adjusted net income is also presented on a per share
(basic and diluted) basis.
Below is a reconciliation of media margin from net income (loss)
from continuing operations, which we believe is the most directly
comparable GAAP measure.
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
(In
thousands) |
|
2019 |
|
2018 |
Net income (loss) from continuing operations |
|
$ |
1,045 |
|
|
$ |
(5,558 |
) |
Income tax benefit |
|
(35 |
) |
|
— |
|
Interest expense, net |
|
1,778 |
|
|
2,394 |
|
Spin-off transaction
costs |
|
— |
|
|
7,708 |
|
Depreciation and
amortization |
|
3,317 |
|
|
3,331 |
|
General and
administrative |
|
10,043 |
|
|
6,659 |
|
Product development |
|
2,150 |
|
|
734 |
|
Sales and marketing |
|
3,434 |
|
|
3,102 |
|
Non-media cost of revenue
(1) |
|
1,361 |
|
|
943 |
|
Media
margin |
|
$ |
23,093 |
|
|
$ |
19,313 |
|
Revenue |
|
$ |
66,561 |
|
|
$ |
55,989 |
|
Media margin % of
revenue |
|
34.7 |
% |
|
34.5 |
% |
|
(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
(loss) from continuing operations, which we believe is the most
directly comparable GAAP measure.
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
(In
thousands) |
|
2019 |
|
2018 |
Net income (loss) from continuing operations |
|
$ |
1,045 |
|
|
$ |
(5,558 |
) |
Income taxes |
|
(35 |
) |
|
— |
|
Interest expense, net |
|
1,778 |
|
|
2,394 |
|
Depreciation and
amortization |
|
3,317 |
|
|
3,331 |
|
Share-based compensation
expense |
|
2,275 |
|
|
6,648 |
|
Acquisition-related costs |
|
— |
|
|
417 |
|
Restructuring and certain
severance costs |
|
110 |
|
|
2,322 |
|
Certain litigation and other
related costs |
|
489 |
|
|
46 |
|
One-time items |
|
168 |
|
|
— |
|
Adjusted
EBITDA |
|
$ |
9,147 |
|
|
$ |
9,600 |
|
|
Below is a reconciliation of adjusted net income and the related
measure of adjusted net income per share from net income (loss)
from continuing operations, which we believe is the most directly
comparable GAAP measure.
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
(In thousands, except
share data) |
|
2019 |
|
2018 |
Net income (loss) from continuing operations |
|
$ |
1,045 |
|
|
$ |
(5,558 |
) |
Share-based compensation
expense |
|
2,275 |
|
|
6,648 |
|
Acquisition-related costs |
|
— |
|
|
417 |
|
Restructuring and certain
severance costs |
|
110 |
|
|
2,322 |
|
Certain litigation and other
related costs |
|
489 |
|
|
46 |
|
One-time items |
|
168 |
|
|
— |
|
Adjusted net
income |
|
$ |
4,087 |
|
|
$ |
3,875 |
|
Adjusted net income
per share: |
|
|
|
|
Basic and diluted |
|
$ |
0.05 |
|
|
$ |
0.05 |
|
Weighted average number of
shares outstanding: |
|
|
|
|
Basic |
|
79,097,426 |
|
|
71,537,743 |
|
Diluted |
|
80,063,989 |
|
|
71,537,743 |
|
|
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 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 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. Adjusted EBITDA is defined as net income
(loss) from continuing operations, 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 related costs, and (8) one-time items. 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
related costs associated with extraordinary legal matters. 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 periods
presented.
Adjusted net income and the related measure of adjusted net
income per share exclude from net income (loss) from continuing
operations (1) share-based compensation expense, (2)
acquisition-related costs, (3) restructuring and certain severance
costs, (4) certain litigation and related costs, and (5) one-time
items. These items 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 periods 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 from continuing operations.
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 (loss) from continuing operations 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
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