Q1 2022 Fluent Inc Earnings Call
At 29, 1% of revenue.
This reflects our ongoing strategic investments focused on expanding our media footprint and adjusted EBITDA of $4 8 million represents five 3% of revenue.
As we've consistently stated throughout 2021.
Our strategic growth plan is focused squarely on consumers and the quality of their experience and our performance marketplace.
We believe this consumer centric strategy represents the winning road forward and.
It provides us a competitive advantage.
Fluent inherent brand strength.
And a foundational principle of our business model.
We're creating a more effective and sustainable customer acquisition solutions for our clients.
While successfully positioned fluent as a market leader in a rapidly evolving industry environment.
Our strategic growth plan, along with our voracious appetite to test and learn.
Validated two major hypotheses.
First delivering consumers more meaningful quality ground experiences has enabled fluent to more frequently reengage them. After their initial visits to our owned and operated media properties all based on their needs and wants.
In turn.
Hansen consumer lifetime value for our clients as well as fluent.
Second.
As we connect the more engaged consumer to our clients' brand platform.
It's enabled us to more efficiently and effectively deliver against our clients' customer acquisition goals, while improving their ROI.
In turn our total alignment with consumers and clients is driving improved monetization across our fluent performance marketplace.
Enhancing our brand equity with clients.
We will continue to focus on revenue growth leaning into a variety of strategic growth initiatives that we believe are sustainable.
As we continue to learn evolve and scorecard our business initiatives. We're also SaaS, where we believe we have a competitive advantage utilizing market share gain as a consumer validated of our longer term potential.
We believe this is the road to strategic revenue growth.
And opens the door for our expanding margins over time.
So in the near term our quarterly margin profile will reflect our strategic investments in growth.
As we've consistently articulated fluids competitive advantage is grounded in three strategic growth pillars are.
Our media footprint.
Platform.
Our performance marketplace.
Strengthening our go to market capabilities with each individual pillar is their everyday emission.
For fluent has differentiated us in building out our preferred marketplace.
While determining a logical point of intersection across each strategic pillar.
We then operational scale for growth.
Enhancing client performance, where our cross functional team play.
The end result is exceeding client performance expectations by way of delivering a more targeted and engaged consumer audience, which also increases client ROI.
In the past you've discussed our media footprint and performance marketplace.
Today, I'll spend a little more time on our platform and a strategic relevance.
Our platform at its highest level of proprietary and integrated data analytics and technology marketing solutions and capabilities.
We previously outlined the investments we've made to expand and strengthen our market position.
The core is our first party data asset.
Which given the ongoing and well documented data privacy changes.
Designed to provide a significant competitive advantage in delivering higher quality <unk>.
Interactions and value for our consumers and clients.
Our performance marketplace.
Apple has moved to enhanced consumer privacy honest devices and Google's announcement of 2023 being the year to end third party cookies is forcing market is to take action is shifting away from third party data.
Data from outside sources can improve short term performance in marketing, but unlike first party data.
<unk> explained the relationship with consumers and their path to purchase.
The breadth and depth influence first party data that gives us an important advantage that it offers that kind of insight that gives us real control of our long term strategic growth plan.
The power of our first party data.
And our ability to gather and enable real time insights through analytics and technology is critical to driving meaningful higher quality consumer engagements tied the measurable performance based outcomes.
When a new consumer visit the property with influence digital media portfolio.
A simple questions to determine the individual interests.
Need and preferences.
And then present relevant offers from our world class clients.
Ultimately, creating a more meaningful and rewarding experience.
When a consumer return.
Proactively enable us with their prior survey responses and performance marketplace experience, which allows us to utilize these key insights as a strategy strength and relevancy and improve consumer engagement.
In essence, increasing lifetime value.
In this manner the consumer when.
As does our roster of clients as.
As you can see our platform is foundational and we believe is a clear competitive advantage that differentiates us in the industry.
Our platform efficiently and effectively connects our media footprint with our performance marketplace.
In turn we've established drilling capability that solves a marketing problem that every advertiser chases.
Delivering the right offer.
At the right time to the right consumer.
And in real time with the convenience of automation.
Over time, as our media footprint and performance marketplace strengthen and expand our platform is strategically positioned to drive long term value to consumers and our clients, which represent the key revenue and margin path to our operating business units.
Given the strategic value data plays within our ecosystem. We recently completed our Q1 data evaluation with <unk>.
Some measures data accuracy in several popular demographic attributes and provides scoring against their current cohort of data providers.
Across 19 top tiered data providers, including axiom.
Salon, K 12 and data Axel.
Fluent ranked number one for accuracy and more attributes and any other data provider except one.
The accuracy of our first party data is a reflection of higher quality consumer experiences and the more fluid marketplace.
And further enhances our relationship with them, while enabling us to competitively leverage irrelevant strategic insights with our clients.
In Q1.
We were also encouraged by our continued progress with our other two strategic growth pillars.
Our media footprint.
Our performance marketplace.
We're actively expanding our media footprint via strategic growth initiatives that extend and reach into new media channels, where.
Where we can provide more relevant content and offers to consumers and our clients.
This leaves us strategically and financially motivated as we explore longer term growth opportunities that are larger fluid media footprint will create.
While we concurrently extend our reach into new media channels.
We'll discuss this further as we learn more.
Relative to our performance marketplace, our key strategic growth initiatives continue to primarily be driven by building up fluid sales solutions and separately our CRM capabilities.
Both of which are grounded in higher quality consumer experiences.
These strategic initiatives provide a significant marketplace and creating meaningful downstream experiences for consumers, while expanding our relationship with world class clients in key industry verticals.
Critically inherent to our strategic framework is that we're enhancing each consumer's lifetime value.
More to follow here in subsequent quarters.
In closing, we remain fixated on a well defined pillars and.
And we'll continue leaning into strategically compelling 2022 revenue opportunities, where we believe we have a differentiated position and significant consumer runway.
Earning market share, where we can leverage our consumer centric core and execute via our operational capabilities will be the key driver of our longer term growth agenda.
These are the strategic bets, we are constantly making prudently investing as we launch and establish our longer term path in a growing marketplace.
In parallel we'll manage the business mix across our investment profiles with a clear goal of expanding fluent business margins as we scale.
And establish a competitive advantage.
Overall, we believe our 2022 financial results will show revenue growth, returning at or above industry growth rates.
Requiring priority number one.
We are then shifting our sights on sequential margin improvement as we scale.
And with that.
I will turn to Segunda to provide more details on our financial results.
Thank you John and good afternoon to everyone.
He is a strong first quarter results and continued momentum in that business.
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Uh huh.
I'm traveling on strategy.
That body of data and strong advertiser relationships have put us in a great competitive position.
The Q1 results and the momentum that you saw at the close 2021 in terms of progress against both our strategic and operational priorities.
And the first quarter and generated $89 $1 million of revenue up 27% year over year and above the guidance provided.
Got it in the previous earnings call.
This growth was driven by three primary areas.
Lastly, we saw significant strength in our core business driven by expanding our media footprint in both the U S and international markets.
The largest piece of the current business and our portfolio into that site in the U S.
Canada, Australia, and then at the mobile App.
Millions of consumers that I Didnt wanted properties that BJ today's avid products and offers by lending lines and we are encouraged by the strong top line growth somebody wanted properties.
And the second area of growth in the fourth quarter, but our internal CRM capability, primarily email and SMS.
Which enables us to reengage consumers wherever I do that just kind of on our own media properties and enhance it over a lifetime value.
Lastly, fluence installations remains a strategic priority for us and continues to be a key travelers.
So this language and capability and are able to drive new demand across different industry verticals.
And high concentration category filing season dataset contracted call Center personnel.
As part of the traffic quality I know Shannon, we took a strategic and deliberate approach and building high quality targeted media traffic.
Reducing the volume of pure quality traffic.
And that'd be a conscious.
It's going to quantity the reduced traffic volume CRP lease and then monetization increase almost 50% in Q1 as compared to the same quarter last year.
Brian the strong double digit revenue growth.
Our media margin in Q1 $26 million up 4% here, everybody in and representing 29, 1% of revenue.
For context, we spent nearly $63 million in tape media in the quarter, our largest cost component.
And of course at the planned media spend Nissan access to new promotional campaigns, which expanded our addressable audience and.
New means of transporting our program across all media properties.
On the last earnings call you noted the opportunity to drive high quality traffic comparable platform.
Bad margin levels below the affiliate side, if I read the amex.
We expect this next shift to digital media platform to continue in the near future we remain confident.
To optimize our spend levels and ultimately drive higher profitability over time.
Our operating expenses on a GAAP basis for Q1, comprising sales and marketing product development and G&A grew in aggregate by $196 million, an eight 8% year over year to $19 $7 million.
But then that next sales and marketing increased by $900000 driven largely by an increase in business travel events and in person meetings.
I'll try and development expense increased by $1 1 million.
<unk> continued investments that we made in our technology and analytics platform as well has gone up and up new advanced media companies expanding beyond our traditional focus on it.
Media properties.
Lastly, G&A expense came down by $400000.
The decrease was mainly a result of an accrued expense, but put call consideration related to the monopoly acquisition. During the first quarter 2021 that did not exist in the first quarter of this year.
<unk> expenses offset partially by increased litigation cost and certain acquisition related costs.
On March 31, 2022, released a settlement with the new update department of taxation and finance regarding sales and use tax.
Six $5 million.
The amount was paid to the tax department on April one 2022.
Our accrual increased from $823000 in the fourth quarter of 2021 to one $5 million, resulting in an incremental expense I'll say $27000 in Q1.
Finally on profitability adjusted EBITDA for the first quarter was $4 $8 million.
Presenting pipeline, 3% of revenue and upbeat about 5% of everybody else.
This is higher than the outlook, we provided on the last earnings call and it's driven largely by the benefit you saw in media margin.
Moving forward, we will continue to focus on driving revenue growth and market share gains and maintaining a disciplined approach to overall operating expenses go and grab and go down to the bottom line.
Our interest expense declined by $600000 theater over year benefiting from the lower cost of debt no not new credit facility.
In Q1, we continue to be a noncash federal tax status to get even a bit out of your Nols.
We reported GAAP net loss of 2 million.
In the quarter and adjusted net income a non-GAAP measure.
$1 million.
As a reminder, our non-GAAP metrics are reconciled in the earnings release, and our 10-Q filings.
Turning to the balance sheet, we ended the quarter with $29 million of cash and cash equivalents.
This represents a decrease of 12% year over year.
Working capital defined as current assets minus current liabilities ended the quarter at $46 $6 million up one 7% of everybody else.
Total debt as reflected on the balance sheet ended the quarter at $45 million.
Again, we are pleased with our first quarter results and feel good about the underlying strength of our business.
Our leadership team has a number of exciting strategic initiatives currently underway that will allow us to differentiate ourselves and enhance joint value proposition and generate a strong revenue and earnings growth.
Thank you for your time, they had got to take questions now.
If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove a question. Please press star followed by two.
Again to ask a question press star one.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question. We will pause briefly as questions are registered.
The first question is from Michael Graham with Canaccord.
Line is now open.
Yes.
Thanks, a lot and hey, everyone. Thanks for all the good information on the call there.
I wanted to ask a couple of questions. If I could the first one is just it seems like youre on your traffic quality initiative.
It seems like you are still getting some good benefits from that can you just.
Maybe provide a little context on like where you think we are there in terms of the evolution.
Of that footprint and then I have one other one.
Okay.
Michael Thanks for the question.
The <unk> is something that we're over a year into and it originally started around the traffic in and around the quality of that.
It is something that as we originally thought it was going to be a project for about a year and then remove move on from that actually we've seen such strong benefits from it in our business that at this point, it's embedded into our core operating principles.
And the quality of the traffic is paying dividends, both with our clients from an ROI perspective.
And as equally importantly, our monetization side so.
So we continue to work with our partners aggressively to continue to improve their quality. So we can drive better results for our clients and better results for us so.
I feel good about where we are from a foundational perspective, but theres still a lot of opportunity around the monetization side that we think we can play into.
Okay. Thanks, Dawn and then.
That makes sense I also just wanted to ask about CTV more broadly.
Such a dynamic area and I just want to kind of get some some updates for you in terms of like how it would go and how it's impacting kind of your your business model going forward.
Mike I'll turn it over Ryan who is who has been leading that effort for us so but thanks for the question yes.
Yes, Michael in terms of channel expansion connected TV and <unk>.
Other mediums, where we can go out and utilize our first party data.
<unk>.
Everything that comes with that strength.
Is very very attractive to us.
TB is a new format for us, where we're testing and learning as we go here, but seeing some really interesting performance trends as we start to apply some of the best practices.
David driven approaches from the digital world into places like connected television and start to learn more on the creative side of how that will influence things. So.
It's still very new but exciting for us exciting for our partners. This type of traffic is coming in at a different quality profile, we're seeing different types of.
Behavioral trends just with somebody thats coming off of these new types of mediums that we're testing into so.
It certainly is something we're optimistic about growing.
As we rollout here.
Alright awesome. Thanks, Brian .
Go back in the queue guys. Thank you.
Yes.
Thanks, Michael.
Thank you.
The next question is from Jim Goss with Barrington Research. Your line is now open.
Okay. Thanks, I just had a couple first it seems that the initiative involve sort of reducing the number of overall clients.
To favor quality over quantity.
That's a correct assumption. Please tell me that and is there a way to scale.
Just how many.
Contact you have right now relative to how many you did have and where that would be headed.
Yes.
Thanks, Tim.
So you're reducing the number of clients.
Lyons not consumers that your questions about.
Yes.
Conservative.
The ones, who are targeting and wrapping up the business clients.
Individuals assure to our consumers to yes, yes.
Yes, yes.
Yes, Greg it's a good question Tim Thanks.
Multiple pieces to answer here, so I'll sort of walk through a couple.
First is as we've talked about before there's there is when the consumer first comes onto our our properties and then it's how long and our lifetime value that we have in terms of our relationship with them. So one of the things that we've been talking about now for a little over a year as all our CRM efforts and our ability to build the consumer journeys and <unk>.
And that in a much longer time period than it has traditionally been influenced so.
Although there might be less overall consumers coming in the number of consumers that are on our properties. Every single day has continued to increase.
The second Big thing is look we've talked about in terms of just how when theyre on our websites and they are on our digital properties.
How many interactions that we're having with them and what can we do with those interactions with our first party data so.
We have millions of site interactions per day, we have hundreds of thousand campaigns interactions per day, and we use that data to make it more relevant for the consumer.
And obviously drive better ROI for our clients. So it's more about the quality and the lifetime value of that extended the second piece I'd answer Jim.
We've been extending our what I'll call our media footprint.
Our pillar and that is not only on sort of the traditional web based properties, but we've been expanding internationally, we've been expanding with mobile apps, we have an expanding with other properties like jobs and expanding that also allows us to.
To continue to drive the consumers and the Mount that we have in and also the interactions that we have with them.
Okay.
Okay.
<unk> two <unk>.
Sort of maintain more of a continuous release continuing relationship with these.
Clients and how do you how do you effectively make that happen.
Yeah, absolutely we are.
We're looking to maintain and continue to leverage that over a longer time period.
That is defined by the engagement that we have with the consumers and the value that they're getting out of it. So the key a key piece of our fundamental.
Business proposition is that when the consumers come on to our digital properties, how relevant is that and how.
How engaging is that to the here the needs and wants at that time when they are on our property. So the way we sort of measure of that is around is around how often theyre coming back.
They are.
The monetization what they are what they are what verticals. They are interested in and the length of time in which we were able to work with them, whether it's 30 days 60 days three years five years Thats. The measurements that we're looking at that Jim.
Okay last thing for me.
You made a comment about accuracy of first party data.
And I was just wondering how is that measured in back home.
The example, we gave in the earnings release as a third party.
Evaluation company called <unk>, they do it quarterly.
And they look they Paul cohorts together they volunteer people ask data provides us to come in and they independently.
Value I think independently ranked the data providers based on the data that comes in how accurate is based on <unk>.
External sources, so it's independent.
And as I said, we rank first we ranked first in more categories than everyone else, except one and the names youre going against our very long standing data providers that have been in this business for a real long time so.
It tells you the power of that as they come onto our properties.
If declared data.
First party and the relevancy of us being able to use that to provide meaningful experiences to them allows them to continue to interact with us and give more give more insight into what they'd like to see and what they like to be engaged with.
Okay. Thank you very much I appreciate it.
Thanks, Jim.
Thank you for your question. There are currently no further questions registered so as a reminder, it is star one on your telephone keypad.
The next question is a follow up from Michael Graham Your line is now open.
Yes. Thanks, I just wanted to slip in one more you mentioned your sales capabilities and.
And kind of expanding those and I just wonder if you could put any.
Kind of framework around the magnitude of that effort.
What it looks like over the next year or so.
Alright.
Thanks, Michael.
We've seen we've continued to see strong growth in the fluid sales solutions group.
And the Q1 was certainly.
Another very strong quarter for us.
The way we talked about last time is that we really leaned heavily into the health vertical.
And then in Q1, we got into the life.
Our life insurance and then right now we're really spinning up.
Our third vertical which is around auto.
The one big difference is as we've talked about is.
As our competitors didn't take a sales approach to the business. They look at the demand and they say how do I get the supply for it we're taking a very audience very consumer centric approach here.
Look at the audiences and we look at our consumers on our on our digital properties and then we say how can we build the right audience and connect them to.
To the World class brands. So we will not be the biggest but we certainly think our quality and our consumer experience will be the best.
We did grow double digits, we continue to look to have double digit growth.
On the top end side throughout 2022, and it's going to be mostly around building out the new verticals getting the marketplace right and continuing to drive that value within those within those core verticals. So youll see another vertical.
In Q3, and as we continue to test and learn Youll see another one in Q4, so we're being very methodical in how we grow those out.
Alright, Thanks, a lot.
Thanks, Michael.
Thank you for your question.
There are no additional questions waiting at this time, so I'll pass the conference over to the management team for closing remarks.
I want to thank everyone for joining us today.
We.
Earnings release will be out shortly.
Thank you very much for your support and your questions.
Yeah.
That concludes.
<unk> the fluid in Q1 2022 earnings call. Thank you for your participation you may now disconnect your lines.