Fluent Announces Second Quarter 2020 Financial Results
August 10 2020 - 3:15PM
Fluent, Inc. (NASDAQ: FLNT), a leading data-driven performance
marketing company, today reported financial results for
the second quarter ended 2020.
Ryan Schulke, Fluent’s Chief Executive Officer, commented, "Our
second quarter performance once again demonstrated the
strength and diversification of our platform, as well as the
macro benefits of Performance Marketing, which enabled us to meet
and exceed our prior business outlook.”
“As we continue to navigate this challenging and uncertain
environment, I want to thank all of our employees for their
exceptional work under the most difficult of circumstances and to
reiterate that Fluent remains resilient and steadfast in striving
to support our colleagues, clients, consumers and communities.”
Second Quarter Financial
Summary
- Q2 2020 revenue of $71.5 million, up 1% over Q2 2019
- Net income of $0.5 or $0.01 per share, compared to net income
of $0.7 million, or $0.01 per share, in Q2 2019
- Media margin of $24.8 million, an increase of 8% over Q1 2019
and representing 34.7% of revenue
- Adjusted EBITDA of $9.4 million, representing 13.1% of
revenue
- Adjusted net income of $4.2 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 Q3 2020 returning to more normalized
seasonal patterns, without a recurrence of the factors that
affected its Q3 2019 results.
- Media & Entertainment remains the Company’s fastest growing
vertical, underpinned by direct relationships in the Streaming
Services and Mobile Gaming categories.
- Q2 2020 revenue from engaging consumers in international
markets, primarily the UK, more than doubled as compared with Q2
2019, and represented more than 5% of total company revenue in the
quarter.
- The Company has adapted well to a work-from-home environment,
and, notwithstanding the extraordinary challenges imposed by the
global pandemic, the Company’s business and operations have
remained on solid footing.
Conference Call
Fluent, Inc. will host a conference call on Monday, August 10,
2020 at 4:30 PM ET to discuss its 2020 second
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 10147081. 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; unfavorable global economic conditions, including as
a result of health and safety concerns around the ongoing COVID-19
pandemic; 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 and Winopoly
businesses 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; risks associated with the expansion of
our international operations; 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)
|
June 30, 2020 |
|
|
December 31, 2019 |
|
ASSETS: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
20,218 |
|
|
$ |
18,679 |
|
Accounts receivable, net of
allowance for doubtful accounts of $309 and $1,967,
respectively |
|
55,304 |
|
|
|
60,915 |
|
Prepaid expenses and other
current assets |
|
1,996 |
|
|
|
1,921 |
|
Total current assets |
|
77,518 |
|
|
|
81,515 |
|
Restricted cash |
|
1,480 |
|
|
|
1,480 |
|
Property and equipment,
net |
|
2,566 |
|
|
|
2,863 |
|
Operating lease right-of-use
assets |
|
9,063 |
|
|
|
9,865 |
|
Intangible assets, net |
|
51,094 |
|
|
|
55,603 |
|
Goodwill |
|
165,088 |
|
|
|
164,774 |
|
Other non-current assets |
|
1,592 |
|
|
|
993 |
|
Total
assets |
$ |
308,401 |
|
|
$ |
317,093 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
|
|
Accounts payable |
$ |
11,601 |
|
|
$ |
21,574 |
|
Accrued expenses and other
current liabilities |
|
21,027 |
|
|
|
20,358 |
|
Deferred revenue |
|
2,468 |
|
|
|
1,140 |
|
Current portion of long-term
debt |
|
9,677 |
|
|
|
6,873 |
|
Current portion of operating
lease liability |
|
2,279 |
|
|
|
2,282 |
|
Total current liabilities |
|
47,052 |
|
|
|
52,227 |
|
Long-term debt, net |
|
38,115 |
|
|
|
44,098 |
|
Operating lease liability |
|
8,176 |
|
|
|
9,056 |
|
Other non-current
liabilities |
|
1,243 |
|
|
|
775 |
|
Total
liabilities |
|
94,586 |
|
|
|
106,156 |
|
Contingencies |
|
|
|
|
|
|
|
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 — 79,908,985
and 78,642,078, respectively; and Shares outstanding — 76,292,587
and 75,873,679, respectively |
|
40 |
|
|
|
39 |
|
Treasury stock, at cost —
3,616,398 and 2,768,399 shares, respectively |
|
(9,930 |
) |
|
|
(8,184 |
) |
Additional paid-in
capital |
|
409,961 |
|
|
|
406,198 |
|
Accumulated deficit |
|
(186,256 |
) |
|
|
(187,116 |
) |
Total shareholders'
equity |
|
213,815 |
|
|
|
210,937 |
|
Total liabilities and
shareholders' equity |
$ |
308,401 |
|
|
$ |
317,093 |
|
FLUENT, INC.CONSOLIDATED
STATEMENTS OF OPERATIONS(Amounts in thousands,
except share and per share
data)(unaudited)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Revenue |
$ |
71,509 |
|
|
$ |
70,560 |
|
|
$ |
150,443 |
|
|
$ |
137,121 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue (exclusive of depreciation and amortization) |
|
49,007 |
|
|
|
49,133 |
|
|
|
105,631 |
|
|
|
93,962 |
|
Sales and marketing (1) |
|
2,888 |
|
|
|
3,058 |
|
|
|
5,718 |
|
|
|
6,492 |
|
Product development (1) |
|
3,115 |
|
|
|
2,287 |
|
|
|
5,846 |
|
|
|
4,445 |
|
General and administrative (1) |
|
10,044 |
|
|
|
10,294 |
|
|
|
21,120 |
|
|
|
20,329 |
|
Depreciation and amortization |
|
3,853 |
|
|
|
3,306 |
|
|
|
7,586 |
|
|
|
6,623 |
|
Goodwill impairment |
|
817 |
|
|
|
— |
|
|
|
817 |
|
|
|
— |
|
Total costs and
expenses |
|
69,724 |
|
|
|
68,078 |
|
|
|
146,718 |
|
|
|
131,851 |
|
Income from
operations |
|
1,785 |
|
|
|
2,482 |
|
|
|
3,725 |
|
|
|
5,270 |
|
Interest expense, net |
|
(1,333 |
) |
|
|
(1,767 |
) |
|
|
(2,865 |
) |
|
|
(3,545 |
) |
Income before income
taxes |
|
452 |
|
|
|
715 |
|
|
|
860 |
|
|
|
1,725 |
|
Income tax benefit |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
35.0 |
|
Net
income |
|
452 |
|
|
|
715 |
|
|
|
860 |
|
|
|
1,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.01 |
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
$ |
0.02 |
|
Diluted |
$ |
0.01 |
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
78,510,383 |
|
|
|
79,388,383 |
|
|
|
78,557,331 |
|
|
|
79,297,599 |
|
Diluted |
|
78,666,776 |
|
|
|
81,132,304 |
|
|
|
78,905,792 |
|
|
|
80,443,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts include
share-based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
$ |
269 |
|
|
$ |
160 |
|
|
$ |
487 |
|
|
$ |
529 |
|
Product development |
|
286 |
|
|
|
277 |
|
|
|
523 |
|
|
|
522 |
|
General and administrative |
|
726 |
|
|
|
2,517 |
|
|
|
2,668 |
|
|
|
4,178 |
|
Share-based compensation |
$ |
1,281 |
|
|
$ |
2,954 |
|
|
$ |
3,678 |
|
|
$ |
5,229 |
|
FLUENT, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(Amounts in
thousands)(unaudited)
|
Six Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net income |
$ |
860 |
|
|
$ |
1,760 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
7,586 |
|
|
|
6,623 |
|
Non-cash interest expense |
|
694 |
|
|
|
648 |
|
Share-based compensation expense |
|
3,678 |
|
|
|
5,229 |
|
Goodwill impairment |
|
817 |
|
|
|
— |
|
Non-cash accrued compensation expenses for Put/Call
Consideration |
|
530 |
|
|
|
— |
|
Provision for bad debt |
|
131 |
|
|
|
189 |
|
Changes in assets and liabilities, net of business
acquisition: |
|
|
|
|
|
|
|
Accounts receivable |
|
5,513 |
|
|
|
2,758 |
|
Prepaid expenses and other current assets |
|
(75 |
) |
|
|
(522 |
) |
Other non-current assets |
|
(599 |
) |
|
|
(21 |
) |
Operating lease assets and liabilities, net |
|
(81 |
) |
|
|
1,560 |
|
Accounts payable |
|
(9,973 |
) |
|
|
(1,551 |
) |
Accrued expenses and other current liabilities |
|
(515 |
) |
|
|
(3,762 |
) |
Deferred revenue |
|
1,328 |
|
|
|
202 |
|
Other |
|
(62 |
) |
|
|
— |
|
Net cash provided by operating activities |
|
9,832 |
|
|
|
13,113 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Business acquisition, net of cash acquired |
|
(1,426 |
) |
|
|
— |
|
Acquisition of property and equipment |
|
(37 |
) |
|
|
(1,894 |
) |
Capitalized costs included in intangible assets |
|
(1,211 |
) |
|
|
(978 |
) |
Net cash used in investing activities |
|
(2,674 |
) |
|
|
(2,872 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Repayments of long-term debt |
|
(3,873 |
) |
|
|
(3,095 |
) |
Taxes paid related to net share settlement of vesting of restricted
stock units |
|
(446 |
) |
|
|
(3,079 |
) |
Repurchase of treasury stock |
|
(1,300 |
) |
|
|
— |
|
Net cash used in financing activities |
|
(5,619 |
) |
|
|
(6,174 |
) |
Net increase in cash, cash
equivalents and restricted cash |
|
1,539 |
|
|
|
4,067 |
|
Cash, cash equivalents and
restricted cash at beginning of period |
|
20,159 |
|
|
|
19,249 |
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
21,698 |
|
|
$ |
23,316 |
|
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) goodwill impairment, (5) accrued compensation
expense for Put/Call Consideration, (6) share-based compensation
expense, (7) acquisition-related costs, (8) restructuring and
certain severance costs, (9) certain litigation and other related
costs, and (10) one-time items. |
|
|
|
Adjusted net income is defined as net income
excluding (1) goodwill impairment, (2) accrued
compensation expense for Put/Call Consideration, (3) share-based
compensation expense, (4) acquisition-related costs, (5)
restructuring and certain severance costs, (6) certain litigation
and other related costs, and (7) 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 June 30, |
|
|
Six Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net income |
$ |
452 |
|
|
$ |
715 |
|
|
$ |
860 |
|
|
$ |
1,760 |
|
Income tax benefit |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(35 |
) |
Interest expense, net |
|
1,333 |
|
|
|
1,767 |
|
|
|
2,865 |
|
|
|
3,545 |
|
Goodwill impairment |
|
817 |
|
|
|
— |
|
|
|
817 |
|
|
|
— |
|
Depreciation and
amortization |
|
3,853 |
|
|
|
3,306 |
|
|
|
7,586 |
|
|
|
6,623 |
|
General and
administrative |
|
10,044 |
|
|
|
10,294 |
|
|
|
21,120 |
|
|
|
20,329 |
|
Product development |
|
3,115 |
|
|
|
2,287 |
|
|
|
5,846 |
|
|
|
4,445 |
|
Sales and marketing |
|
2,888 |
|
|
|
3,058 |
|
|
|
5,718 |
|
|
|
6,492 |
|
Non-media cost of revenue
(1) |
|
2,312 |
|
|
|
1,475 |
|
|
|
3,915 |
|
|
|
2,836 |
|
Media
margin |
$ |
24,814 |
|
|
$ |
22,902 |
|
|
$ |
48,727 |
|
|
$ |
45,995 |
|
Revenue |
$ |
71,509 |
|
|
$ |
70,560 |
|
|
$ |
150,443 |
|
|
$ |
137,121 |
|
Media margin % of revenue |
|
34.7 |
% |
|
|
32.5 |
% |
|
|
32.4 |
% |
|
|
33.5 |
% |
(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,
which we believe is the most directly comparable GAAP measure.
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Net income |
$ |
452 |
|
$ |
715 |
|
$ |
860 |
|
$ |
1,760 |
|
Income tax benefit |
|
— |
|
|
— |
|
|
— |
|
|
(35 |
) |
Interest expense, net |
|
1,333 |
|
|
1,767 |
|
|
2,865 |
|
|
3,545 |
|
Depreciation and
amortization |
|
3,853 |
|
|
3,306 |
|
|
7,586 |
|
|
6,623 |
|
Goodwill impairment |
|
817 |
|
|
— |
|
|
817 |
|
|
— |
|
Accrued compensation expense
for Put/Call Consideration |
|
530 |
|
|
— |
|
|
530 |
|
|
— |
|
Share-based compensation
expense |
|
1,281 |
|
|
2,954 |
|
|
3,678 |
|
|
5,229 |
|
Acquisition-related costs |
|
15 |
|
|
448 |
|
|
62 |
|
|
448 |
|
Restructuring and certain
severance costs |
|
— |
|
|
250 |
|
|
— |
|
|
360 |
|
Certain litigation and other
related costs |
|
1,115 |
|
|
227 |
|
|
2,022 |
|
|
716 |
|
One-time items |
|
— |
|
|
— |
|
|
— |
|
|
168 |
|
Adjusted
EBITDA |
$ |
9,396 |
|
$ |
9,667 |
|
$ |
18,420 |
|
$ |
18,814 |
|
Below is a reconciliation of adjusted net income and adjusted
net income per share from net income, which we believe is the
most directly comparable GAAP measure.
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(In thousands, except
share data) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income |
$ |
452 |
|
$ |
715 |
|
$ |
860 |
|
$ |
1,760 |
Goodwill impairment |
|
817 |
|
|
— |
|
|
817 |
|
|
— |
Accrued compensation expense
for Put/Call Consideration |
|
530 |
|
|
— |
|
|
530 |
|
|
— |
Share-based compensation
expense |
|
1,281 |
|
|
2,954 |
|
|
3,678 |
|
|
5,229 |
Acquisition-related costs |
|
15 |
|
|
448 |
|
|
62 |
|
|
448 |
Restructuring and certain
severance costs |
|
— |
|
|
250 |
|
|
— |
|
|
360 |
Certain litigation and other
related costs |
|
1,115 |
|
|
227 |
|
|
2,022 |
|
|
716 |
One-time items |
|
— |
|
|
— |
|
|
— |
|
|
168 |
Adjusted net
income |
$ |
4,210 |
|
$ |
4,594 |
|
$ |
7,969 |
|
$ |
8,681 |
Adjusted net income
per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.05 |
|
$ |
0.06 |
|
$ |
0.10 |
|
$ |
0.11 |
Diluted |
$ |
0.05 |
|
$ |
0.06 |
|
$ |
0.10 |
|
$ |
0.11 |
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
78,510,383 |
|
|
79,388,383 |
|
|
78,557,331 |
|
|
79,297,599 |
Diluted |
|
78,666,776 |
|
|
81,132,304 |
|
|
78,905,792 |
|
|
80,443,530 |
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 six months
ended June 30, 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 six months ended June 30,
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
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