Fluent, Inc. (NASDAQ: FLNT), a leading data-driven performance
marketing company, today reported financial results for
the first quarter ended March 31, 2023.
Don Patrick, Fluent’s Chief Executive Officer,
commented, “Our first quarter results came in as expected
and continue to reinforce the imperative behind ‘Quality as our
North Star,’ while also reflecting the current macroeconomic
headwinds in the digital advertising industry. Our
foundational commitment to enhance the quality of consumer
engagement within our Performance Marketplace, represents the
strategic infrastructure that will facilitate our future growth
while enhancing Fluent brand equity – both with consumers and our
clients. This is our definitive strategic course that will
ultimately create greater shareholder value for our investors.
We continue to make disciplined progress against our strategic
priorities, along with the required tactical enhancements to
upgrade our consumer solutions. Execution against these
initiatives has us encouraged by the positive trendline in our
Performance Marketplace that began at the end of the first quarter
and is continuing into Q2.”
First Quarter Financial Highlights
- Revenue decreased 13% to $77.3 million, from $89.1 million in
Q1 2022
- Gross profit (exclusive of depreciation and amortization) of
$19.0 million, a decrease of 12% over Q1 2022 and representing 25%
of revenue
- Net loss of $31.9 million, or $0.39 per share, primarily due to
non-cash impairment charge of $25.7 million to goodwill, compared
to net loss of $2.0 million, or $0.02 per share, for Q1 2022
- Media margin of $22.0 million, a decrease of 15% over Q1 2022
and representing 28.4% of revenue
- Adjusted EBITDA of $0.4 million, a decrease of $4.3 million
over Q1 2022 and representing 0.6% of revenue
- Adjusted net loss of $2.7 million, or $0.03 per share, compared
to adjusted net income $1.1 million, or $0.01 per share, for Q1
2022
Media margin, adjusted EBITDA, and adjusted net income are
non-GAAP financial measures, as defined and reconciled
below.
Business Outlook
- Focusing on expansion of Fluent’s media footprint by continuing
to leverage our platform to drive consumer insights for additional
growth.
- Strengthening our Performance Marketplace through vertical
expansion in our Call Solutions business and leveraging our
Influencer platform.
- Ensuring we source customer traffic that meets our internal
quality and regulatory requirements, leading to higher user
participation rates, conversion rates and monetization.
- In the current economic environment, continuing to be prudent
in managing our growth, margin, and investment initiatives for
long-term success.
Conference Call
Fluent, Inc. will host a conference call on Monday,
May 15, 2023, at 4:30 PM ET to discuss its
2023 first quarter financial results. The conference call can
be accessed by phone after registering online
at https://register.vevent.com/register/BI0c0937905c584bc39654c75e623b1a46.
The call will also be webcast simultaneously on the Fluent website
at https://investors.fluentco.com/. Following the 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 connect
via https://edge.media-server.com/mmc/p/dtiu8cos. The
replay will be available for one year, via the Fluent
website https://investors.fluentco.com/.
About Fluent, Inc.
Fluent, Inc. (NASDAQ: FLNT) is a leader in customer
acquisition, leveraging its direct response expertise to drive
engagement and power discovery for leading brands. Backed by
proprietary data science, Fluent drives opted-in consumers to
targeted offers, allowing them to find new opportunities, content,
and products that enhance their lives. Established in 2010 and
headquartered in New York City, Fluent’s team of experts has
spent over $1B in media across its digital media portfolio to build
a global audience available through 500+ DSPs, DMPs, online
publishers, and programmatic platforms. 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;
- The outcome of litigation, regulatory investigations or other
legal proceedings in which we are involved or may become
involved;
- Failure to safeguard the personal information and other data
contained in our database;
- Failure to adequately protect intellectual property rights or
allegations of infringement of intellectual property rights;
- Unfavorable global economic conditions, including as a result
of health and safety concerns around the ongoing COVID-19
pandemic;
- Dependence on our key personnel;
- Dependence on third-party service providers;
- Management of the growth of our operations, including
international expansion and the integration of acquired business
units or personnel;
- The impact of the Traffic Quality Initiative, including our
ability to replace lower quality consumer traffic with traffic that
meets our quality requirements;
- Ability to compete and manage media costs in an industry
characterized by rapidly-changing internet media and advertising
technology and evolving industry standards;
- Regulatory uncertainty, and changing user and client demands;
management of unfavorable publicity and negative public perception
about our industry;
- Failure to compete effectively against other online marketing
and advertising companies;
- The competition we face for web traffic;
- Dependence on third-party publishers, internet search providers
and social media platforms for a significant portion of visitors to
our websites;
- Dependence on emails, text messages and telephone calls, among
other channels, to reach users for marketing purposes;
- 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 to mobile
applications;
- Failure to detect click-through or other fraud on
advertisements;
- The impact of increased fulfillment costs;
- Failure to meet our clients’ performance metrics or changing
needs;
- 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, 2022 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, 2023 |
|
|
December 31, 2022 |
|
ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
26,567 |
|
|
$ |
25,547 |
|
Accounts receivable, net of
allowance for doubtful accounts of $317 and $544, respectively |
|
|
56,759 |
|
|
|
63,164 |
|
Prepaid expenses and other
current assets |
|
|
5,588 |
|
|
|
3,506 |
|
Total current assets |
|
|
88,914 |
|
|
|
92,217 |
|
Property and equipment,
net |
|
|
861 |
|
|
|
964 |
|
Operating lease right-of-use
assets |
|
|
4,743 |
|
|
|
5,202 |
|
Intangible assets, net |
|
|
27,650 |
|
|
|
28,745 |
|
Goodwill |
|
|
33,354 |
|
|
|
55,111 |
|
Other non-current assets |
|
|
1,648 |
|
|
|
1,730 |
|
Total
assets |
|
$ |
157,170 |
|
|
$ |
183,969 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
12,929 |
|
|
$ |
6,190 |
|
Accrued expenses and other
current liabilities |
|
|
33,189 |
|
|
|
35,626 |
|
Deferred revenue |
|
|
1,005 |
|
|
|
1,014 |
|
Current portion of long-term
debt |
|
|
5,000 |
|
|
|
5,000 |
|
Current portion of operating
lease liability |
|
|
2,349 |
|
|
|
2,389 |
|
Total current liabilities |
|
|
54,472 |
|
|
|
50,219 |
|
Long-term debt, net |
|
|
34,404 |
|
|
|
35,594 |
|
Operating lease liability |
|
|
3,242 |
|
|
|
3,743 |
|
Other non-current
liabilities |
|
|
2,128 |
|
|
|
458 |
|
Total
liabilities |
|
|
94,246 |
|
|
|
90,014 |
|
Contingencies (Note 10) |
|
|
|
|
|
|
|
|
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 — 85,545,397
and 84,385,458, respectively; and Shares outstanding — 80,933,828
and 80,085,306, respectively (Note 7) |
|
|
43 |
|
|
|
42 |
|
Treasury stock, at cost —
4,611,569 and 4,300,152 Shares, respectively (Note 7) |
|
|
(11,407 |
) |
|
|
(11,171 |
) |
Additional paid-in
capital |
|
|
424,531 |
|
|
|
423,384 |
|
Accumulated deficit |
|
|
(350,243 |
) |
|
|
(318,300 |
) |
Total shareholders'
equity |
|
|
62,924 |
|
|
|
93,955 |
|
Total liabilities and
shareholders' equity |
|
$ |
157,170 |
|
|
$ |
183,969 |
|
|
|
|
|
|
|
|
|
|
FLUENT, INC.CONSOLIDATED
STATEMENTS OF OPERATIONS(Amounts in thousands,
except share and per share
data)(unaudited)
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
Revenue |
|
$ |
77,254 |
|
|
$ |
89,063 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
Cost of revenue (exclusive of depreciation and amortization) |
|
|
58,272 |
|
|
|
67,562 |
|
Sales and marketing |
|
|
4,813 |
|
|
|
3,852 |
|
Product development |
|
|
4,938 |
|
|
|
4,556 |
|
General and administrative |
|
|
12,325 |
|
|
|
11,287 |
|
Depreciation and amortization |
|
|
2,359 |
|
|
|
3,307 |
|
Goodwill impairment and write-off of intangible assets |
|
|
25,700 |
|
|
|
128 |
|
Total costs and
expenses |
|
|
108,407 |
|
|
|
90,692 |
|
Loss from
operations |
|
|
(31,153 |
) |
|
|
(1,629 |
) |
Interest expense, net |
|
|
(689 |
) |
|
|
(384 |
) |
Loss before income
taxes |
|
|
(31,842 |
) |
|
|
(2,013 |
) |
Income tax expense |
|
|
(101 |
) |
|
|
— |
|
Net loss |
|
|
(31,943 |
) |
|
|
(2,013 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted loss
per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.39 |
) |
|
$ |
(0.02 |
) |
Diluted |
|
$ |
(0.39 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
81,906,913 |
|
|
|
80,889,052 |
|
Diluted |
|
|
81,906,913 |
|
|
|
80,889,052 |
|
|
|
|
|
|
|
|
|
|
FLUENT, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(Amounts in
thousands)(unaudited)
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(31,943 |
) |
|
$ |
(2,013 |
) |
Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
2,359 |
|
|
|
3,307 |
|
Non-cash loan amortization
expense |
|
|
61 |
|
|
|
68 |
|
Share-based compensation
expense |
|
|
1,061 |
|
|
|
988 |
|
Goodwill impairment |
|
|
25,700 |
|
|
|
— |
|
Write-off of intangible
assets |
|
|
— |
|
|
|
128 |
|
Provision for bad debt |
|
|
(55 |
) |
|
|
81 |
|
Deferred income taxes |
|
|
— |
|
|
|
— |
|
Changes in assets and
liabilities, net of business acquisitions: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
6,460 |
|
|
|
5,127 |
|
Prepaid expenses and other
current assets |
|
|
(2,082 |
) |
|
|
451 |
|
Other non-current assets |
|
|
82 |
|
|
|
(13 |
) |
Operating lease assets and
liabilities, net |
|
|
(82 |
) |
|
|
(42 |
) |
Accounts payable |
|
|
6,739 |
|
|
|
(3,348 |
) |
Accrued expenses and other
current liabilities |
|
|
(3,362 |
) |
|
|
(6,251 |
) |
Deferred revenue |
|
|
(9 |
) |
|
|
(174 |
) |
Other |
|
|
(39 |
) |
|
|
(85 |
) |
Net cash provided by
(used in) operating activities |
|
|
4,890 |
|
|
|
(1,776 |
) |
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Capitalized costs included in
intangible assets |
|
|
(1,134 |
) |
|
|
(1,071 |
) |
Business acquisitions, net of
cash acquired |
|
|
(1,250 |
) |
|
|
(971 |
) |
Acquisition of property and
equipment |
|
|
— |
|
|
|
(7 |
) |
Net cash used in
investing activities |
|
|
(2,384 |
) |
|
|
(2,049 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Repayments of long-term
debt |
|
|
(1,250 |
) |
|
|
(1,250 |
) |
Taxes paid related to net
share settlement of vesting of restricted stock units |
|
|
(236 |
) |
|
|
(448 |
) |
Net cash used in
financing activities |
|
|
(1,486 |
) |
|
|
(1,698 |
) |
Net increase
(decrease) in cash, cash equivalents and restricted
cash |
|
|
1,020 |
|
|
|
(5,523 |
) |
Cash, cash equivalents and
restricted cash at beginning of period |
|
|
25,547 |
|
|
|
34,467 |
|
Cash, cash equivalents and
restricted cash at end of period |
|
$ |
26,567 |
|
|
$ |
28,944 |
|
|
|
|
|
|
|
|
|
|
Definitions, Reconciliations and Uses of Non-GAAP
Financial Measures
The following non-GAAP measures are used in this release:
Media margin is defined as that portion of gross profit
(exclusive of depreciation and amortization) reflecting the
variable costs paid for media and related expenses and excluding
non-media cost of revenue. Gross profit (exclusive of depreciation
and amortization) represents revenue minus cost of revenue
(exclusive of depreciation and amortization). Media margin is also
presented as percentage of revenue.
Adjusted EBITDA is defined as net income (loss) excluding
(1) income taxes, (2) interest expense, net, (3) depreciation
and amortization, (4) share-based compensation expense,
(5) goodwill impairment, (6) write-off of intangible assets,
(7) acquisition-related costs, (8) restructuring and other
severance costs, and (9) certain litigation and other related
costs.
Adjusted net income (loss) is defined as net income (loss)
excluding (1) share-based compensation expense, (2) goodwill
impairment, (3) write-off of intangible assets, (4)
acquisition-related costs, (5) restructuring and other
severance costs, and (6) certain litigation and other related
costs. Adjusted net income (loss) is also presented on a per
share (basic and diluted) basis.
Below is a reconciliation of media margin from gross profit
(exclusive of depreciation and amortization), which we believe is
the most directly comparable GAAP measure.
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
Revenue |
|
$ |
77,254 |
|
|
$ |
89,063 |
|
Less: Cost of revenue (exclusive of depreciation and
amortization) |
|
|
58,272 |
|
|
|
67,562 |
|
Gross profit
(exclusive of depreciation and amortization) |
|
$ |
18,982 |
|
|
$ |
21,501 |
|
Gross profit
(exclusive of depreciation and amortization) % of
revenue |
|
|
25 |
% |
|
|
24 |
% |
Non-media cost of revenue (1) |
|
|
2,981 |
|
|
|
4,449 |
|
Media
margin |
|
$ |
21,963 |
|
|
$ |
25,950 |
|
Media margin % of
revenue |
|
|
28.4 |
% |
|
|
29.1 |
% |
(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
loss for the three months ended March 31, 2023 and 2022,
respectively, which we believe is the most directly comparable GAAP
measure.
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
Net loss |
|
$ |
(31,943 |
) |
|
$ |
(2,013 |
) |
Income tax expense |
|
|
101 |
|
|
|
— |
|
Interest expense, net |
|
|
689 |
|
|
|
384 |
|
Depreciation and
amortization |
|
|
2,359 |
|
|
|
3,307 |
|
Share-based compensation
expense |
|
|
1,061 |
|
|
|
988 |
|
Goodwill impairment |
|
|
25,700 |
|
|
|
— |
|
Write-off of intangible
assets |
|
|
— |
|
|
|
128 |
|
Acquisition-related
costs(1)(2) |
|
|
623 |
|
|
|
558 |
|
Restructuring and other
severance costs |
|
|
480 |
|
|
|
— |
|
Certain litigation and other
related costs |
|
|
1,378 |
|
|
|
1,402 |
|
Adjusted
EBITDA |
|
$ |
448 |
|
|
$ |
4,754 |
|
(1) Balance includes compensation expense related to
non-competition agreements entered into as a result
of acquisitions.(2) Balance includes earn-out expense of
$85 for the three months ended March 31, 2023 as a
result of an acquisition.
Below is a reconciliation of adjusted net income (loss) and
adjusted net income (loss) per share from net loss for the
three months ended March 31, 2023 and 2022, respectively, which we
believe is the most directly comparable GAAP measure.
|
|
Three Months Ended March 31, |
|
(In thousands, except
share and per share data) |
|
2023 |
|
|
2022 |
|
Net loss |
|
$ |
(31,943 |
) |
|
$ |
(2,013 |
) |
Share-based compensation
expense |
|
|
1,061 |
|
|
|
988 |
|
Goodwill impairment |
|
|
25,700 |
|
|
|
— |
|
Write-off of intangible
assets |
|
|
— |
|
|
|
128 |
|
Acquisition-related
costs(1)(2) |
|
|
623 |
|
|
|
558 |
|
Restructuring and other
severance costs |
|
|
480 |
|
|
|
— |
|
Certain litigation and other
related costs |
|
|
1,378 |
|
|
|
1,402 |
|
Adjusted net income
(loss) |
|
$ |
(2,701 |
) |
|
$ |
1,063 |
|
Adjusted net income
(loss) per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
Diluted |
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
81,906,913 |
|
|
|
80,889,052 |
|
Diluted |
|
|
81,906,913 |
|
|
|
81,021,030 |
|
(1) Balance includes compensation expense related to
non-competition agreements entered into as a result of an
acquisitions.(2) Balance includes earn-out expense of
$85 for the three months ended March 31, 2023 as a
result of an acquisition.
We present media margin, media margin as a percentage of
revenue, adjusted EBITDA, adjusted net income (loss), and
adjusted net income (loss) 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
litigation and other related costs associated with legal matters
outside the ordinary course of business. We consider items 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. There were no
adjustments for one-time items in the periods presented in this
Quarterly Report on Form 10-Q.
Adjusted net income (loss), as
defined above, and the related measure of adjusted net income
(loss) 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. We
believe adjusted net income (loss) affords investors a
different view of our overall financial performance as compared to
adjusted EBITDA and the GAAP measure of net income (loss).
Media margin, adjusted EBITDA, adjusted net income (loss), and
adjusted net income (loss) per share are non-GAAP financial
measures with certain limitations regarding their usefulness.
They do not reflect our financial results in accordance with
GAAP, as they do not include the impact of certain expenses that
are reflected in our condensed consolidated statements of
operations. Accordingly, these metrics are not indicative of our
overall results or indicators of past or future financial
performance. Further, they are not financial measures of
profitability and are neither intended to be used as a proxy
for the profitability of our business nor to imply
profitability. The way we measure media margin, adjusted
EBITDA, and adjusted net income (loss) 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.(212)
785-0431InvestorRelations@fluentco.com
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