Q3 2023 Fluent Inc Earnings Call
[music].
Okay.
Good afternoon and welcome. Thank you for joining us to discuss our third quarter 'twenty earnings results with me today are fluent CEO, Don Patrick interim CFO right perfect.
Chief strategy Officer, Ryan Schulke.
Our call today will begin with comments from Dawn and Ryan perfect followed by a question answer session I would like to remind you that this call is being webcast live and recorded a replay of the event will be available following the call on our website to access the webcast. Please visit our Investor Relations page on our website Www dot.
T O.
The company outcome.
Before we begin I would like to advice to Sears that certain information discussed by management. During this conference call will contain forward looking statements 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 today.
Date hereof ACA.
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 could will estimates and other words of similar meaning.
The company undertakes no obligation to update the information provided on this call for a discussion of the risks and uncertainties associated with fluids business.
Cause you to review the company's filings with the Securities and Exchange Commission.
Clearly in the company's most recent annual report on Form 10-K, and Corey reports on Form 10-Q.
During the call. We will also present certain non-GAAP financial information relating to media margin adjusted EBITDA and adjusted net income management evaluates the financial performance of our business on a variety of indicators.
These non-GAAP metrics the definition of these metrics and reconciliations to the most directly comparable GAAP financial measure are provided in the earnings press release issued earlier today with that I'm pleased to introduce plus G O Don Patrick.
Good afternoon, and thank you all for joining our call today.
I'm here together with Ryan Schulke, our Chief strategy Officer, Chairman of the Board and company founder and right perfect Our interim Chief Financial Officer.
Okay.
I'll make some brief comments about our third quarter results, which clearly reflect our post FTC settlement transition along with the immediate term impact on our business and financials.
Importantly, I will also share more regarding the strategic pivot, we're making via our evolving growth strategies, which further support our confidence and commitment to re establishing fluent as the industry leader in performance marketing.
Our strategic direction is intended to strengthen and modestly grow our core.
Also expanding our margins.
And in parallel establishing fluent credentials in new high volume high growth marketplaces that we are already beginning to successfully enter.
To be clear we are excited about our strategic course.
We believe the road forward will have is clearly differentiates somewhat brands exciting new markets, where we intend to demonstrate our core capabilities and establish a strong competitive advantage.
And it's fluid grows our new emerging businesses, we expect to over time drive enterprise value for all stakeholders.
Our goal is to position fluid at the forefront of our industry.
In a recent FTC settlement fills a void by providing much needed clear industry compliance standards that others would be wise to follow.
To do business that fluent way.
So it's foundational commitment to enhance the quality of consumer engagement within our performance marketplace.
Is an investment we believe is unequivocally worth making.
And in the process.
We have been consciously exiting businesses, we no longer find strategically valuable.
In turn.
We see the near term financial implications, where we will reestablish our base as an investment in the future.
And the return to a more profitable growth of our company.
Bottom line over the last two and a half years, we've consciously walked away from over $80 million in annual revenue in our core performance marketplaces.
We did this because we feel certain revenue sources for no longer strategically compelling.
Perhaps more so in regulatory environment that is continually evolving.
Sacrificing quality for immediate term revenue is somewhat mainstream for many in a dynamic marketplace.
And where we have consciously chosen not to do.
I've referenced fluid strategic pivot. So let me expound further as to why we are confident in our course mindful of the near term financial challenges, we've chosen to manage and that I'll speak to shortly.
Foundation Lee our strategic pivot is based on rebuilding the base of our core performance marketplaces.
Our owned and operated digital properties.
Where fluid is highly differentiated within the industry.
A healthy performance marketplaces are essential to our strategy.
It provides us a unique go to market capability, while also generating the gross profit dollars that we will invest in our growth initiatives.
So simply stated.
We have built unparalleled fluid capabilities and competitive advantage vis vis our core.
<unk> marketplaces, primarily a rewards jobs and content platforms.
These owned and operated marketplaces allow consumers who are seeking high quality engagement.
Meaningful connections to products and services that improve their lives.
We are now leveraging that leading edge owned and operated marketplaces to springboard us into new high growth adjacent marketplaces.
Just as we're doing with that flow.
All solutions and Influencer.
More compelling both strategically and financially is that we entered these marketplaces with a proprietary technology platform that unleashes new capabilities that our clients are asking for.
In our core performance marketplaces, we buy media for own account to bring consumers to our owned and operated marketplaces and create meaningful experiences to connect them to world class brands.
Our technology platform expansion now enables us to create new marketplaces by bringing our brands to where valuable consumers exist.
Like post transactional e-commerce for Ad flow.
That's our strategic pivot.
Leveraging our leading edge go to market capabilities of our core performance marketplaces than.
And then leveraging our proprietary technology to extend into new marketplaces, where we connect their client with valuable consumers.
Our strategy has this charting a course, where we are winning with both consumers and world class brands, we partner with.
It's a win win and classic business terms.
So you can see why we are bullish on our growth strategies, we're investing with confidence based on the caliber of iconic brands that already seeking fluid partnerships coupled with the enthusiasm they are exhibiting for our new emerging business initiatives.
Our Q3 financial results are consistent with the more cautious near term business roadmap, we laid out in previous earning releases and were driven largely by the decline in our owned and operated rewards marketplace.
As noted this is due to businesses we are no longer focused again.
Coupled with immediate term pressure.
On margin, which limited our ability to scale media profitably.
Our rewards marketplace margin pressure was driven by two headwinds first the impact of post FTC settlement, which drove strategic and financial decisions to forego certain revenue streams that were no longer strategically compelling.
Or we felt did not meet our evolving quality standards.
Although this conscious decision and will continue to negatively impact rewards growth over the next several quarters.
Our go to market model remains highly differentiated from the competitive set allowed.
Allowing us to continue to leverage our rewards platform towards a higher quality consumer engagement. Unlike anyone else in our industry.
This of course is expected to drive our immediate growth in the medium term.
This transition will reestablish our strategic base.
While setting the course for us to lean into our emerging business growth agenda on a sequential basis in fiscal year 2024.
And we're in the later part of the year, we expect to begin improving margins as we scale.
Second early in Q3 one.
One of our largest clients shifted their consumer acquisition strategies from growth to clear prioritization, our return on AD spend due to competitive pressures in their market.
As discussed in previous earning releases. This is a trend we've seen some other clients throughout the year based on continued consumer volatility in the market.
We began seeing other clients increased spending as it offset in late Q3.
We continued seeing into Q4, leading to our margin sequentially improving in Q4 to date.
We are prepared for a client focused on return on AD spend in the immediate term and we'll continue to leverage fluids performance marketplace.
To respond to these shifts by managing media margin mix.
Financial results were as follows.
Revenue was $66 2 million represents a 19% decline sequentially compared to Q2.
We are repositioning our highly profitable and more stable rewards business at the center of our growth strategy is playing a central role of fueling our new business unit growth.
In concert.
We continue to rebuild our performance marketplace in a post FTC landscape and will update you regarding our progress in future quarters.
Our media margin of $19 3 million was at 25, 6% sequential decrease over Q2 at.
At 29, 2% of revenue, we saw margin declined sequentially from softer pricing across our performance marketplace, primarily from one of our largest clients in the gaming sector, which is not immediately fully absorbed by other bidders due to levels of unpredictability with them the entire digital advertising industry.
Margin did improve later in Q3 and have continued in Q4.
As we're seeing more existing brand partners leaning in.
Long with the on boarding of major new brands.
Adjusted EBITDA of a negative $1 7 million.
Represents negative two 6% of revenue.
This reflects both our ongoing strategic investments in our growth agenda as well as the impact of the additional quality initiatives, we proactively implemented during the flat three quarters.
Results also recognize the businesses, we deemed non strategic and our longer term growth agenda.
Our focus is now sequentially rebuilding our base.
Aligned with the strategic pivot, we're making it.
With exciting new business ventures that we have embarked upon.
Most importantly in Q3.
And as we outlined in our last earnings release, we continued to make significant progress on our emerging businesses and Thats three strategic growth initiatives, where we made our biggest bets.
<unk> solutions add.
Add flow and Influencer.
As we stated in our last earnings release, we see more than $150 million of revenue growth potential in the next two years in these three marketplaces.
Add flow our post transaction E Commerce solution turned to positive gross profit in Q3 ahead of plan.
Since July AD flow closed new business wins that will drive an approximately 50% increase in annual run rate volume for AD flow going into 2024.
Our foundational strategies in this dynamic marketplace have yielded excellent results.
In concert, we have market validation that our technology solution drives value for our E Commerce partners and they represent a new opportunity for world class brands to reach high quality consumers at the optimal purchase moment.
We are quite enthusiastic about our major strategic investment we're making in these exciting businesses based on the longer term return on investment and inherent impact on enterprise value.
Progress is also being made in our Influencer business.
Where we continue to experience significant double digit growth year over year.
Immediate term.
We will focus on building and leveraging its media channel to support Fluence owned and operated performance marketplaces.
The larger and more compelling longer term growth opportunity is tied to expanding our proprietary influencer marketplace to drive growth directly for world class brands, we partner with.
And in Q3, our call solutions business launched a new extension in our health vertical focused on the reportable care Act.
Market.
Our new platform capabilities allow us to connect consumers directly to healthcare insurance providers Theres new policyholders.
Does not only deepens our relationship with consumers by bringing them further down the marketing funnel to meet the definitive needs, but also build stronger strategic relationships with world class healthcare brands.
This vertical market expansion will drive growth in Q4 during the ACA open enrollment period that started on November one.
And as highly sequential growth opportunity, where we believe flowing can differentiate ourselves in the marketplace.
So with margin potential that exceeds the fluid core.
Although early stage.
<unk> of all three of these emerging businesses add flow.
Influencer and call solutions continue to validate our strategic course.
Commitment to higher quality consumer engagement that enhances fluids total value proposition for consumers and our clients.
In Q4, we see a sequential growth over Q3 being driven by three important trends first.
Our modest decline in our owned and operated digital properties with margins improving through our focus on higher quality consumer engagement.
As a result more existing brand partners are leaning in a major new brands are coming onboard.
Second.
We will continue to focus on the acceleration of our new strategic initiatives in the emerging business growth that they've outlined as these businesses have opened up entirely new and vibrant marketplaces for fluent and our brand partners.
Last we also anticipate traditional seasonality returned in Q4.
As I've stated, Florida is fulfilled by the leadership role, we played and establish a best in class industry compliance standard.
And we are excited by the prospect of a more level competitive playing field arriving in the later half fiscal year 2024 that should have some returning to growth at or above industry growth rates with sequential margin improvement as well.
However, we must manage through the realities of the immediate term as we expect it will take a few quarters or more for our competitors to implement a parallel compliance standards.
I know that's a lot to digest. So please allow me to summarize and straightforward terms.
One fluent as the industry leader in performance marketing and our core performance marketplace remains a highly differentiated brand equity and competitive advantages within our owned and operated marketplaces.
Two our core performance marketplace took the brunt of the impact of the FTC settlement and over the last two and a half years a reduction in over $80 million in annual revenue.
We expect it will take a couple of quarters to return to growth.
Albeit more modest growth in the entire enterprise.
Fluids foundational commitment to enhance the quality consumer engagement within our performance marketplace is investments, we believe is unequivocally worth making.
And as we've seen the near term financial implications as an investment in the future profitable growth of our company.
Three we've recalibrated our growth strategy with performance.
Marketplace businesses at the core and with a focus on growing strategically in the new marketplaces with business units that leverage our fluent assets.
We are enthusiastic as we've already delivered proof of concept to the delight of the brands we partner with.
In new World class brands that we're adding to our roster of clients, who recognize the unique value proposition.
For as a new marketplaces continue to grow and fluid establishes credentials in the markets in which we're playing we expect to accelerate our growth while expanding our margins.
And with that.
I'll turn it to Ryan to provide more detail on our financial results.
Thank you, Dan and thanks to everyone for joining us today.
Now I'll provide some additional detail on our Q3 earnings provide a year to date comparisons where applicable.
For the quarter fluent produced $66 2 million in revenue down 26% from prior year and down 19% sequentially from Q2.
Year to date, our total revenue stands at $225 6 million, reflecting an 18% decrease from the same period last year.
The sequential decline was driven by the media and entertainment industry, specifically, the gaming sector, driven by our pricing pullback from one of our largest clients.
As Don mentioned, the pullback was in effect of our clients shift from growth to grow as a near similar adjustments that we've seen across our client base over the last four quarters.
Conversely, we were encouraged by sequential revenue growth in the streaming services sector and from other clients within the gaming sector that helped to offset the decline.
We expect moderate recovery in the gaming sector, along with the growth of our other new business initiatives that Don mentioned to strengthen our marketplace and drive sequential revenue growth in Q4.
That said, we do expect economic headwinds as reflected by our clients consumer acquisition strategies, coupled with our efforts to exemplify current regulatory standards to continue to cause quarter over same quarter growth challenges into mid 2024.
Media margin in Q3 of $19 3 million represents a 31% year over year decline and 29, 2% of revenue.
Year to date, our media margin of $67 2 million represents a 22% decline over the same period last year.
29, 8% of revenue.
The declines versus prior year periods were largely a factor of the previously mentioned client spend challenges not being offset by lower cost of media.
The sequential decline in media margin as a percentage of revenue from 31, 5% can be attributed to the aforementioned marketplace pressure created by one of our largest clients.
On a GAAP basis, our aggregate operating expenses for Q3 were $17 8 million or $2 million a year over year decrease.
For the nine months ended September 30th our aggregate operating expenses were $52 5 million a $7 9 million decrease from the same period last year.
Of note our G&A line in Q3 includes specific litigation and related expenses amounting to 153000, and a $1 $8 million benefit from insurance reimbursements related to the FTC settlement.
For the nine months ended September 30th G&A includes a $6 million net benefit from specific litigation and related expenses.
The G&A line also includes accrued compensation expenses linked to the winner Billie and true north acquisitions of $517001 7 million for.
For the three and nine months ended September 30, respectively.
All of these costs and benefits fall outside the normal course of business and thus are excluded from our adjusted EBITDA calculation.
The company determined that the drop in our market cap from Q2, coupled with our performance during the quarter represented a triggering event and an indication of impairment of goodwill.
Based on an analysis the company recorded a noncash impairment charge to goodwill.
Of $29 $7 million associated with the acquisition of the fluid operating business in 2015, and the acquisition of AD parlor in 2019.
The noncash impairment charge is excluded from our adjusted EBITDA and has no impact on our operations or liquidity.
Our Q3, adjusted EBITDA, some to negative $1 $7 million, representing a negative two 6% of revenue.
This amounts to a year over year decrease of $7 6 million and was a consequence of the previously noted decline in revenue coupled with the decreased media margin as a percentage of revenue.
For the nine months ended September 32023, adjusted EBITDA of $4 3 million represents one 9% of revenue and $15 $8 million decline from the same period last year.
We.
Sequential revenue growth in Q4 to drive a return to a positive adjusted EBITDA in Q4 and beyond.
But over the next few quarters, we anticipate positive adjusted EBITDA as a percentage of revenue to remain in the low single digits as we continue to invest into growing our performance marketplace initiatives like call solutions, Influencer and add as well.
The company cannot provide a reconciliation to expected net income or net loss in Q4 due to the unknown effect timing and potential significance of certain operating costs and expenses share based compensation expense and the provision for or benefit from income taxes.
Interest expense in the third quarter increased over prior year by 419000 to 936000 as an effect of the increased interest rates.
For the nine months ended September 32023.
Interest expense increased $1 1 million to $2 4 million also an effect of increased rates.
For the quarter the provision for income taxes was a benefit of $1 $2 million.
For the year to date period, the provision is a $551000 expense.
For the third quarter, we reported net loss of $33 6 million and an adjusted net loss a non-GAAP measure of $4 1 million equivalent to the loss of <unk> <unk> per share.
Year to date, our net loss sums to 61 3 million with adjusted net loss of $6 8 million equivalent to a loss of eight cents per share.
Now looking to our balance sheet.
We ended the quarter with $25 million in cash and cash equivalents.
Our $470000 declined from June 32023, and a $5 million decline from December 31, 2022.
Total debt as reflected on the balance sheet as of September 32023.
It was $32 $5 million.
Presenting an $8 $8 million reduction as compared to the balance at December 31, 2022.
For the three months ended September 32023, the company was not in compliance with the total leverage ratio as defined in the existing credit agreement with citizens Bank.
As a result, the company entered into a temporary waiver with the bank in which the bank agreed to waive the rights arising from the breach through January 2015 to 2024.
Prior to the end of the waiver term. It is management's intention to negotiate a fifth amendment to the credit agreement that modifies certain financial covenants for the five quarters ended December 31 2024.
As the company is not currently in compliance with financial covenants and has not yet amended the credit agreement to revise covenants.
The maturity dates under the credit agreement could be accelerated following the waiver period and therefore, the Form 10-Q includes a disclosure, indicating significant doubt to remain as a going concern for one year period following the filing date.
The company and citizens Bank had previously entered into amendments to the credit agreement and management expects to be able to enter into a new amendment that would alleviate the going concern qualification for the upcoming Form 10-K.
Working capital as defined as current assets minus current liabilities was $4 1 million at the end of the quarter.
Decline from $34 9 million at Q2 quarter end due to the required presentation of the entire $32 $5 million debt balance as current.
Related to the status of the financial Covenant compliance under our credit agreement.
In Q3, we invested $1 7 million into capitalized product development and technology as compared to $1 1 million in Q3 of 2022.
Year to date, the company has capitalized $4 1 million in product development and technology versus $3 3 million for the same period last year.
As a management team our focus is on fortifying the core owned and operated performance marketplace, while growing the strategic extensions to the marketplace to provide our clients with enhanced growth opportunities.
We're confident that our strategy will yield substantial and enduring financial benefits in 2024 and beyond.
We appreciate your ongoing support.
At this.
Time will now conduct a question and answer session. As a reminder to ask a question you May press star one on your telephone.
Your name to be announced toy drawing a question. Please press star one again based on Violet compile the Q&A roster.
One moment for our first question.
Our first question comes from the line of.
Maria <unk> from Canaccord Your line is open.
Good afternoon, and thanks for taking my question first is there any additional color you could share on competitive behavior in the aftermath of your settlement with the FTC. Once it is in line with your expectations that some competitors may continue to operate with less compliant traffic standards and if so when would you expect this to sort of compare.
And that mix to normalize.
Sorry speakers can you.
<unk> please.
Yes can you hear me.
I can hear you Maria.
Speakers on mute your line.
Good morning, guys.
Yeah.
Okay. I can hear you now are you able to hear the speakers.
Good morning can you hear me.
Great. Thank you for your question Maria.
Basically it was what we expected when the settlement came out there was a lot of activity around understanding the new.
Compliance standards that we set forth with the FTC and there was a lot of activity around around understanding that.
And I understand where we were clearly laying down the lines of how we're going to run our business.
And there is a fair amount of activity.
And to understand that.
We have not seen any significant change in behavior in terms of how our competitors are.
Alright.
Competing against Us from a compliance perspective, we have seen a couple that have leveled up the game.
And have continued to work with us but for the most part.
They've gone into of understanding what we're doing looking at where we're going and then <unk>.
<unk> their behavior moving forward around here.
Question on timing.
And we always said it would go it would take probably a couple of quarters.
Interestingly enough, we have to do a fair amount of reporting to the FTC going forward.
And that includes traffic.
You can also others. So we believe that there's going to be a lot more activity from.
From the FTC, they said as much when they settled with US along with others that this is just the beginning and at the end so.
We're looking at sort of the back half of 'twenty, four where we see a level of competitive playing field.
Got it thank you Don.
You reiterated an additional 150.
Million revenue opportunity from your Influencer call solutions and <unk> businesses.
Is there any additional color you can share in terms of maybe building blocks to capture that revenue opportunity and how should investors think about the revenue cadence heading into next year and 2025.
Yes. Thanks. Good question here, yet so we talked about this little bit unless last call.
Around the building blocks.
And flow of all three of the businesses are past proof of concept there are in our in what I'll call the scaling mode.
So that means that we our margins are not where they want we want them to be yet or nor where they should be but theyre scaling revenue and growing growing aggressively.
I think the great news is add scale. These businesses will all have margins that are above the core fluids business. So.
If we take each one has slightly different they'd add flow who has been a heavy investment on the technology side.
Where we leveraged the core fluid technology to build out this capability.
It is really and it is now scaling nicely from a monetization perspective, it has become more of a but I'll say revenue game in terms of how do we get new publishers on into the market and I referenced that we've added.
Our number in Q3 that basically increased our volume by 50% for all of 2024, So we're winning in that marketplace.
We're winning we're winning against the competition, we feel great about that piece that is probably the largest piece of that $150 million over.
The incremental revenue that we see over the next two years.
On the call solutions business.
We mentioned in our earnings script today around the extension of the business into purpose health, which is a.
Which is tied towards the ACA business.
We see that as sort of the second biggest piece.
Opportunity both from a revenue and profit perspective. It is more early days, we launched it in August.
We are going through the ACA a period right now and we are scaling it we will be able to beat that as more of a bigger play towards the second half of next year.
As we prove out all of the numbers and prove out our ability to scale that but is that the more early stage venture and on the Influencer business, we talked about how that unlocks.
Phenomenal opportunities in terms of customer.
Sumer acquisition for for our brands.
And the impact that Influencers now have on on purchasing decisions in and the ability to drive drive consumers.
To purchasing behaviors, we haven't built the.
The FERC, what I'll call. The first version of our marketplace technology.
We are building.
<unk> piece of that.
And we are targeting right now.
<unk>.
It helps drive our core owned and operated businesses.
So that will be a nice <unk>.
Growth opportunity and has been a nice growth opportunity. This year, the larger bigger opportunities that where we go directly with brands, where we connect the influencers directly to brands to drive consumer acquisition Theres, a little bit more.
Technology involved around that and that sort of again, a second half of 2020 for.
Opportunity.
Regarding your last question about how we hit a 150 million splits out over the next we see it sort of equally.
Half in 'twenty, four and half in 'twenty five.
Got it. Thank you so much for the color Tom.
Thank you Mary Anne.
Thank you and one moment for our next question.
No.
And our next question comes from the line of James Goss from Barrington Research. Your line is open.
Thank you this is Pat on for Jim.
I was wondering if you could talk a little bit about what sort of differentiates.
Kind of your core business from the parts that are impacted from the FTC settlement.
Yes.
Thanks for the question.
I'll just.
Lately.
The FTC settlement really highlight and actually.
So it makes our competitive advantage is stronger so it's not so much that it takes away from it that but basically we have a little under half a million consumers that come onto our web onto our digital owned and operated properties everyday we have meaningful experiences with them, we build along long term.
Our relationship with them and then we connect them with brands and continue on with the relationship around.
Around CRM and LTV opportunity with them, so our ability to bring consumers to our properties to be able to serve them meaningful experiences and understand things that they are interested in that day provides fantastic first party data long term relationships with because they consume.
<unk> and equally important connect them to world class brands.
We work with.
All three of those and then technology underneath that obviously is what brings the median the supply the connect them together in our newer businesses that we're growing pad leveraging one or more or all three of those pieces right, where you're taking that technology to go into go into add flow and were either bringing the brands in the world class brand.
And so we can cross sell across those opportunities, where we're bringing the consumers like we do with call solutions further down the funnel to extend extend that marketplace, but the distinct competitive advantage. We have is our ability to attract consumers onto our properties to have a relationship with them and then connect them in a meaningful way to process.
Services that improve their lives that the phenomenal leverage point for us in terms of foundational in terms of how we bad value for consumers and brands and can grow with the rest of our business.
Okay, and then could you maybe talk about just what the traditional seasonality is in Europe.
I guess remaining businesses.
Yep Yep.
So we've.
The core owned and operated businesses had some seasonality into Q4.
Pat and I think you know us well enough to know like the traditional seasonality that we had that usually was around budgets around end of year.
Numbers.
Or rather a retailer around some of the verticals.
The businesses that we're growing right now actually make us a little bit more seasonal than we have in the past so.
The call solutions business with being around healthcare and around ACA, obviously, theres open enrollment periods in the Q in Q4 that drive that seasonality.
And then on the AD flow business over time, it will not be as seasonal but the.
Great brands that we've or the publishers that we won and brought on.
I have been around the ticketing or been around sports and event around retail, which obviously has.
Sort of.
Which obviously it means you have a big Q4 with those with those sessions.
That that business is growing and were adding new publishers will make it less seasonal as we add new publishers along the year, but.
Historically, if you look historically those there will be larger Q4 than we have traditionally had.
Okay. Thank you.
Thanks Pat.
One moment for our next question.
And our next question comes from the line of Bill does woman from Titan capital.
Management Your line is open.
Thank you.
Okay.
Let me start relative to the new large customers that you said that you are onboarding would you. Please discuss those in a bit more detail.
Sure Hi, Bill this is regarding our core marketplace that we've talked about I believe.
Is that right yes.
Yes, so we talked about one of our largest.
Clients pulled back early in Q3.
More towards return on AD spend around investment.
And what we were able to do is bring on we brought on significant new brands.
Across primarily three verticals one is gaming the second is subscription.
Or is there sort of rewards like.
Products that were able to essentially take up.
The inventory that they were or they are walking back and bidding up and getting our getting our margins back up so.
Primary came over 10 plus clients.
When we when we measure these things it's can they be larger than a $1 million a year.
And revenue in those clients all sort of hit that hit that number but there across those three verticals bill.
That's helpful and on that.
Those 10 customers.
And maybe you can just talk in general and then more specific do they tend to ramp very quickly to that million plus or to their ultimate run rate or does it tend to be a very measured.
Measured ramp and so I guess, you're asking that question in part a and part B would be just in general what's normal and then B. How are you viewing. These these 10 specifically.
Yes, yes, thanks Bill.
It's a great question.
Unlike media, where we can scale up and down pretty fast like in minutes.
On the client side it takes a little bit time, when you've landed new clients.
There's usually a sort of at your testing to creative Youre testing audience audiences and how they respond and then you're getting that data and then equally and responding to it and then building out it takes sort of a number of iterations to get it right to where they are ready to scale. So Tim.
Typically it takes sort of two to three month time period.
If a client has an aggressive growth mode to get them up and get them.
To where the scaling.
We are not an aggressive growth mode. It might take a little bit longer to go after that the ones that we have.
We have obviously very strong reputation in gaming and as subscription services. So.
We were able to get clients in based on our reputation and based on the quality of audiences that we have.
It wasn't as hard to get them in but it took it took some time to scale and we're seeing them still scaling as we go into Q4.
Thank you and then you had mentioned that Youre now seeing some of your existing customers leaning in.
Are these the same customers that earlier this year that you were talking about pulling back and if so.
Yes, either way what is different about the environment today versus earlier in the year.
Yes, it's a great question, we've been hearing optimism for a long time bill from our client.
About budgets in Nevada.
Specifically around the second half budgets, and how they're going to start to move towards more towards growth but.
But as we talked about another earning releases we didn't see that.
And so that is sort of in Q2 and then in early part of Q3.
There is both existing clients and there is also the new clients that are that are leaning in and we're just seeing just a general more.
They are still very focused on return on AD spend and if you notice the client those verticals that we're talking about.
Obviously are very sophisticated and are able to work with us to give us data to make sure that we're driving the right type of growth in <unk>.
But we're just seeing a little bit more.
More towards the growth side and a better balance between the two we're early really this time last year.
We saw clients aggressively move towards cutting cutting spend.
And increasing their return on ad spend.
Requirement so it really has been.
A general more balancing across that and primarily on verticals that are better, but I will say really leverages the fluid platform better by giving us data pass the action and allowing us to help build better audience and higher quality on audiences that that mean more to them in a more valuable which then lead.
It allows them to lean it also.
Thanks, Don I'm going to follow up on what you said.
And <unk>.
Really coming at it from the perspective.
We're hearing if one picks up.
Newspaper that economic activity is in question and the impact of higher rates slowing the economy et cetera.
And yet youre seeing the opposite.
Yes.
I wanted to ask I guess relative to what you just said about.
Clients, giving you more data you can provide them more valuable leads are they leaning in because of that specifically or are they leaning in tied to something bigger that may be is the opposite of what we're reading in.
And the headlines yep Yep.
I would tell you.
The bigger part of it Bill is that delayed again around around the data, but you also if you look across those areas of the gaming and subscription and rewards theyre lower consideration lower value services and products right. So from a macro perspective allows a pullback you are hearing and seeing and feeling especially around <unk>.
Rates are higher cost higher value.
Purchases so.
The consumer perspective, we believe there is still a lot of.
Distress around in the economy, but they are they're basically you see the spending levels still exists they've just moved down in our marketplace has been able to accommodate some of the lower costs lower value.
Products and services that are that are important to them at this point.
Thank you and May I continue with another question or two.
Sure.
So thank you and so relative to revenue and your guidance Q4 will be up sequentially Thats a seasonal expectation.
How are you thinking beyond that do.
Do we continue to have sequential.
The increase.
Increases in basically the entire business, except for solutions, which has that health care.
Enrollment period, or and then beyond continue to see sequential growth.
Thinking about that right now.
Yes, I can't give you probably the detail that you want bill.
But I think I can talk about at a higher level that sort of color and some things though.
<unk>.
We kind of let me put it in the core right. We've owned and operated what we call the core marketplace owned and operated right.
For historical purposes that business ran and it was growing double digits.
Historically for us.
Because of the FTC settlement and because of our commitment to quality and the revenue that we took off the table that we've gone into detail with that business is still.
Strong, but it's obviously not going to grow the way it historically, we see it growing single digits. So that's the core owned and operated marketplaces still foundation Lee critical to our success, but it is not the growth engine in.
In and of itself.
It's the fuel that's going to that's going to really.
The other business that we go after.
If you look at the call solutions business, obviously, there is more seasonality to that so we will have.
A somewhat more.
When you look at sequentially Youll see are going to go down in Q1 and Youll see it also go down in Q2 as it starts to ramp back up.
And on and on.
The AD flow businesses and some of the others.
We obviously feel that we are adding enough.
Publishers, and adding enough partners and bringing on the right on the right technology in order for us to continue to sequentially grow that.
On a quarter over quarter basis based on the growth prospects that it has so.
We from a sequential perspective in Q4, we see.
We obviously see it up compared to Q3 and.
And we will you.
You will see some dip based on on the call solutions and the seasonality of those businesses.
Alright, Thank you and then lastly.
So there is.
Maybe a good clarity relative to.
To your note and the 10-Q that there'll be a going concern.
Uh huh.
Walk us through again.
You are comfortable that that will be temporary and will be.
Removed for the 10-K.
Yes, Hi, this is Ryan.
So.
Our ASC $205 40, right given that the maturity dates of the debt can be accelerated within the next 12 months, we're required to disclose significant doubt to remain as a going concern.
That said, we do expect to be able to negotiate an amendment before the end of the waiver term, which would be January 15th amend that would alleviate the doubt.
Beyond that.
Theres not much too much more to say that that wont already be said in the in the <unk>.
<unk> wasn't said in the earnings call.
So Ryan this is.
This is essentially a.
An accounting requirement as opposed to an indication that you.
You have trouble relations.
Or negotiations with your with your bank.
Yes.
I want to reiterate the first part of <unk>, but we do have a good relationship with citizens Bank and we continue to work with them. This is no indication of that.
Great. Thank you both.
Thank you Bill Thank you and I'm not showing any further questions I would like to turn the call back over to Ryan for any further remarks.
I wanted to let our listeners know that we will not be filing our Form 10-Q today as we continue to finalize our disclosures, we will avail ourselves of the permitted extension by timely filing a notice under SEC rule <unk> 25.
I'll turn it to Don.
Thank you.
For joining the call today as a management team, we're very focused on executing the strategic pivot that we outlined today.
Fortify our core owned and operated performance marketplaces and leverage those competitive advantages into exciting new high growth and.
High volume marketplaces, and leverage and the client partnerships that we already have.
We maintained strong confidence that the groundwork that we're laying out now will yield substantial and evolving strategic and financial benefits for our company and thank you all for joining and for your continued support.
Thank you for your participation in today's conference. This does conclude the program and you may now disconnect everyone have a great day.
Goodbye.
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