Q2 2022 Fluent Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the floor in 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question during that time. Please press star one on your telephone keypad.
You'll like to remove yourself from the queue Press Star one again, I'll now hand todays call over to Dan Barsky. Please go ahead Sir.
Okay.
Good afternoon and welcome. Thank you for joining us to discuss our second quarter 2022 earnings results.
Joining me on today's call are fluent CEO , Don Patrick our CFO , So Glenda candour wall and Ryan Schulke, our co founder and Chief strategy Officer.
Our call will begin with comments from Don Patrick and Sieglinde Candour wall, followed by a question and answer session.
I'd like to remind you that this call is being webcast live and recorded a replay of the bank will be available following the call on our website to access the webcast. Please visit our Investor Relations page on our website Www Dot fluent code Dot com.
Before we begin I would like to advise listeners that certain information discussed by management. During this conference call will contain forward looking statements, which are covered under the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Any forward looking statements made during this call speak only as of the date hereof.
Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company's business.
These statements may be identified by words, such as expects plans projects.
Good well.
Ill may anticipate believe should intend estimate and other words of similar meaning.
The company undertakes no obligation to update the information provided on this call.
A discussion of the risks and uncertainties associated with fluids business.
Encourage you to review the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K, and quarterly reports on Form 10-Q.
During this call. We will also present certain non-GAAP financial information relating to media margin adjusted EBITDA and adjusted net income man.
Management evaluates the financial performance of our business on a variety of indicators, including media margin adjusted EBITDA and adjusted net income the.
The definition of these metrics and reconciliations to the most directly comparable GAAP financial measures are provided in the earnings press release issued later today.
With that I'm pleased to introduce fluent CEO Don Patrick.
Thank you Dan and good afternoon.
Thanks to all of you for joining our call today I'm here together with Ryan Schulke, Our Chief strategy Officer, Chairman of Board and company founder.
It got into a condo wall, our chief financial Officer.
I'll make some brief comments about our second quarter results, which we believe reinforces the appropriateness of our commitment to quality and then involving test and learn culture.
I'll take you on the progress against our strategic priorities.
And then discuss the impact of the current economic operating environment.
In Q2 2022, our forward momentum continued and we're quite pleased with our performance.
Financial results were as follows.
Revenue was $98 4 million represents 34% year over year growth.
And it is a positive reflection of prioritizing our long term growth strategies.
As we continue to test learn and validate we are leaning in to opportunities, where we can establish and leverage fluids brand credentials in the marketplace.
Our media margin of $32 3 million is up 60% year over year.
At 32, 8% of revenue.
This reflects ongoing strategic investments focused on expanding our media footprint and strengthening our performance marketplace.
These results exceeded our expectations.
And adjusted EBITDA $9 4 million.
Represents nine 6% of revenue.
$7 6 million year over year.
Fluids strong Q2 revenue growth provides us operating leverage against our performance marketplace and our business models.
Our strong second quarter operating results exhibit the continued progress we're making on our long term strategic growth plan.
Focused squarely on consumer engagement.
Hansen, the quality of their experience and their performance marketplace.
Importantly, we believe the results also further validate our strategy and in turn provide us with competitive advantages by leveraging fluids core go to market capabilities.
Yeah.
The strong revenue and media margin growth also reflected the effects of some of our Q3 2022 strategic initiatives that hit earlier than we originally planned as we leaned into our momentum.
As a key element of our business process, we will continue to assess each initiative strategic relevancy to our core while objectively determining where we make our longer term debt.
And her brand strength and a foundational principle of our business model is creating more effective and sustainable customer acquisition solutions for our clients, while successfully positioned fluent as a market leader.
A rapidly evolving industry environment.
As I've consistently outlined influence ultimate competitive advantage is grounded in our three strategic growth pillars are.
Our media footprint.
Our platform and.
And our performance marketplace.
Strengthening our go to market capabilities within the logical points of intersection across each pillar is our everyday missions.
And it is also what differentiates us in our industry.
We remain fixated on exceeding our client's performance expectations by delivering a higher quality more targeted and engaged consumer audience.
This is essential as we build fluids brand equity, while also firming, our credibility with clients by increasing their ROI.
We continue to make meaningful progress in expanding and strengthening our strategic growth pillars and in Q2 here are some of the highlights.
We accelerated our media footprint expansion into new media channels.
Specifically, our Biddable social platforms showed continued progress we're able to provide more relevant content and offers for the consumers and our clients. While also leveraging macro pricing and platform opportunities based on the value we were providing.
We will continue to test learn and extend our reach into other media channels as we explore longer term growth opportunities that are larger fluent immediate footprint will create.
Regarding our performance marketplace and platform strategic initiatives, we leaned into our CRM capabilities grounded in higher quality consumer experiences.
The outcome was encouraging as we continued double digit year over year growth.
While expanding the depth and increasing the length of our relationships with consumers.
CRM provides us with a significant market play.
Creating meaningful downstream consumer engagement, while strengthening our relationship with world class clients in key industry verticals.
Critically inherent in our strategic framework.
Is that we enhance each consumer's lifetime value as we evolve our model.
Not only was revenue quite strong, but as importantly, we also managed business mix across our investment profiles to expand fluids business unit margins.
All while continuing to establish a competitive advantage.
Net in Q2, the majority of our media properties were able to expand margins sequentially relative to Q1 2022.
Obviously this will not always be the case, but it's a great example of how many of you in the mix is a longer term priority for us.
While we realize there's a turbulent economic environment before us we remain excited about Q3.
Given the more unpredictable macro and geopolitical economic outlook, we are certainly seeing a parallel level of unpredictability in the digital advertising industry.
Consumers and clients access the road ahead.
The ramifications are rather complex I wanted to touch on the relevancy to fluids business and our performance marketplace.
The breadth and depth.
So it's first party data gives us an important advantage with our consumers and clients and that it provides qualitative and quantitative real time insights through our analytics and technology platforms.
Historically during recessions in times of economic uncertainty there is both a decline in advertising spend and a significant change in medium mix.
AD spend that is inherently less measurable decline.
And shifts towards advertising, whose results can be clearly and quickly measured and that is a core cooling capability.
By design, our performance model generates revenue for us when the consumer it takes an action that is agreed upon with the client based on their targeted ROI goals.
So its performance marketplace has direct measurable and immediate attribution for our clients and as such de risks their marketing spend regardless of the fact, they may be reducing total ad spend.
In this current environment.
We're remaining disciplined towards our long term strategic growth plan.
Look to accelerate against our growth agenda and take market share in the process.
Regarding the second half of 2022.
We see Q3 growth moderating compared to Q2 related to the current economic uncertainty that has led consumer spending less and our clients' operating more cautiously.
While we see recently seen some consumer sentiment shift across their marketplace become more heavily engaged with relatively lower cost lower consideration products and services like media and entertainment.
Tend to be more recession resilient.
Coupled with the reality that we accelerated some of our Q3 initiatives forward in anticipation of headwind.
We believe it's a strong market position post Q2 and Q3.
But with decidedly different flow.
We feel confident that our total Q2 Q3 results will land, where we planned as we test and learn and ensure revenue is consistent with our strategic course.
We maintain our belief that on a fiscal year basis. Our annual 2022 financial results will continue to show revenue growth returning at or above industry growth rates.
As we look to earn market share.
And we continue to believe we will see sequential margin improvement returned in Q4 as we scale.
We anticipate this environment to remain for the foreseeable future.
And more strategically adapt accordingly to the economic realities in the short term.
In closing.
But we're being very diligent in managing expectations, we remain fixated on our well defined growth pillars, and we'll continue leaning into strategically compelling 2022, and 2023 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 while executing via our operation capabilities will be the key driver of our longer term growth agenda.
This is the decided path to winning more consumers and establishing competitive advantage in the marketplace, while creating shareholder value for our investors.
With that I will turn to segunda to provide more detail on our financial results.
Thank you John and good afternoon to everyone.
Yeah can you sort of go on a strong second quarter merchandize and continued momentum in our business.
It was across all the key P&L metrics.
You may recall.
Do you think decision you'll answer Jonathan Cohen Athena Shannon.
<unk> positioned our business.
The quality of traffic resources into our media properties.
As our business has grown we've also attract larger and most of those generic clients to our platform.
We have delivered a strong quarter and profitable revenue growth.
And we're in the right strategy and strong execution and progress against our operating and SG&A.
And the second quarter and generated 98 1 million.
Our 34% year over year.
There was momentum Mclaughlin will perform in the marketplace.
Channel and you want to go next.
As mentioned.
During the course of Q2 has been found opportunities to deploy and media and beyond what we had anticipated.
So let me talk test and learn across different lines as country.
<unk> success with new promotional campaigns.
Blended out in basketball audiences and new means across the morning after a run across the lines on media properties.
And I wanted to just kind of any business also demonstrated solid growth in both the U S and international markets.
We also continue to improve and optimize our CRM capabilities to drive higher loyalty and retention and customer lifetime value.
By leaning on brands channels and technologies that are encouraging our customers to come back to you on black lung and drive lifetime loyalty and then the trough that generate greater margins for that business.
Lastly, fiance installation my language capability continue to advance our strategic agenda, providing end to end customers not explanations for advertisers.
Strong double digit revenue growth during the quarter was driven by an increase in monetization plan anticipation despite that reduced traffic volume.
Because I'm trying to think quality.
In Q2, and monetization increased 88% as compared to the same quarter last year.
23% sequentially over Q1.
And the high quality traffic has resulted in higher engagement by consumers.
Media properties.
And then better conversion rates and provided more valuable customer acquisition announcements Northland.
We believe our focus on traffic quality will continue to yield strong monetization, Michigan can then reinvest into media source thing I'm trying to development.
What are the client satisfaction and loyalty and planting the flag on Marvel.
As it relates to media margin that family drama continues to be the mix of our media and with mean traditionally lost any outsources and dependable platform.
On media margin in Q2 was $33 million.
Up 16% year over year, and representing 32, 8% of revenue.
But context invested nearly $66 million in band media and what are our largest cost component.
Beginning on last quarter's call, we noted the opportunity to drive high quality traffic.
Medical platform, which we are seeking to optimize into higher profitability over time.
And the second quarter the increase in one time items on a media spend and profitability.
The frac water.
Back to the same quarter last year.
And then margin expansion across our media properties backlog, there, but it doesn't mix, resulting in stronger overall profitability in the second quarter.
And operating expenses on a GAAP basis for Q2, comprising sales and marketing product development and G&A, If you don't mind answering it.
It was $3 million or 17% year over year.
$1 million.
Okay, then that makes the sales and marketing expenses increased by one and a half million dollars.
Driven by an increase in business travel and in person meetings.
I'm, John as Devin I'm Gonna expenses increased by $1 $1 million.
<unk> continued investments that we have made in our technology and analytics last month as well as development of new App based media properties expanding beyond our traditional brokers and then based media properties.
And lastly, our G&A expense increased by $160000.
The increased operating expenses reflect strategic investments in the business as well as enhancements to our technology platform in internal capabilities.
Finally on profitability on an adjusted EBITDA, a non-GAAP measure so does that can go on and was $94 million.
Venting nine 6% of revenue and up seven $6 million a year, though it is.
These profit levels, driven by higher topline as well as.
Margin expansion, along with a disciplined approach to overall operating expenses.
Moving forward, we will continue to manage our media mix by focusing on margin accretive initiatives and driving operating leverage.
Our team has a number of exciting strategic initiative in place this year.
As Don mentioned, we began some of these initiatives earlier in Q2.
The early momentum that has helped us accelerate our learning.
The economic environment and advertiser spend levels.
Q3 growth will be moderate on a sequential basis.
Interest expense remained flat year over year, and approximately $420000 benefiting from the lower cost of debt under our replacements that excess liquidity.
As of Q2, we expect our cash tax liability due for the federal jurisdiction.
While the remaining antibody fanatics walnuts in the 2020 to taxpayer.
As described in our earnings release, the company determined that the Knicks.
Finally in our stock price during Q2 represented a triggering event and an indication of environmental goodwill associated with the acquisition of fluent operating business in 2015.
Based on this analysis the company took a noncash impairment charge to goodwill of $55 $4 million in the second quarter.
The noncash impairment charge is excluded from our adjusted EBITDA and will have no impact from that operation more liquidity.
We reported GAAP net loss after $36 $9 million in the quarter.
Adjusted net income a non-GAAP measure of $550000.
As a reminder, our non-GAAP metrics that we can consult to comparable GAAP metrics in the earnings release, and our 10-Q and 10-K filings.
Turning to the balance sheet, we ended the quarter with $26 $4 million in cash and cash equivalents.
This represents an increase of 5% year over year.
While working capital defined as current assets minus liabilities was $51 $6 million at the end of the quarter up 16% year over year.
Total debt as reflected on the balance sheet was $23 million at the end of the quarter.
In closing we are confident.
High quality traffic model.
And strategic investments and the lifeblood to achieving sustainable growth in that business.
As the economy transitions, just flu I grew up and they had NOI uncertain times, our management team is laser focused on execution and operating discipline.
The goal of creating long term value for consumers.
<unk> and sealants shareholders.
In that regard, we intend to expand our investor relations strategy and outreach and hopes that equity markets like I'm just need the value we see in our business and the value we are building for our consumers and clients.
Thank you for your time.
I'm glad to take questions now.
As a reminder, if you'd like to ask a question press star one on your telephone keypad.
Again, if you'd like to ask a question press star one we'll pause for a moment to compile the Q&A roster.
At this time there are no questions I will now hand, the call back over to Don for any closing remarks.
Great. Thank you.
We are pleased with our strong Q2 results and we are very proud of our team and the hard work that they are putting in in terms of our.
Our strategic path on our growth initiatives.
We have a very disciplined operating plan and we look to take market share in this environment. So thank you so much for your support and thank you for being on the call today.
This concludes today's call. Thank you for joining you may now disconnect.
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