Q1 2024 Fluent Inc Earnings Call
Okay.
Good afternoon and welcome thank you.
You for joining us to discuss our first quarter 'twenty 'twenty four earnings results.
With me today are Phil wants to eat all Don Patrick interim CFO, Ryan Perfect and Chief Strategy Officer, Ryan show.
When I'll call today will begin with comments from Don and Ron Perfect followed by a question and answer session.
I would like to remind you that this call is being webcast flap 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 at Www Dot co dot com.
Before we begin I would like.
We advise listeners that certain information discussed by management. During this conference call will contain forward looking statements covered under the safe Harbor provision 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 maybe 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. We 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 the call management will also present certain non-GAAP financial information related to media margin adjusted EBITDA and adjusted net income.
Management evaluates the financial performance of our business on a variety of indicators, including these non-GAAP metrics.
The definition of these metrics and reconciliations to the most direct directly comparable GAAP financial measures are provided in the earnings press release issued earlier today.
With that I am pleased to introduce fluent CEO, Don Patrick you may begin.
Good afternoon.
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 Ryan perfect, our Chief Financial Officer.
I'll make some brief comments about our first quarter results that reflect the strategic pivot, we're making in evolving our 'twenty 'twenty four growth strategies focused on leveraging our leadership position in owned and operated marketplaces as a competitive advantage.
In concert.
Our proprietary technology platform.
It's proving to be an effective springboard from our owned and operated marketplaces into new high volume high growth syndicated performance marketplaces that we believe represent long term strategic runways that will ultimately be margin accretive to the core.
In the earnings release today, we reported quarterly results that continue to demonstrate meaningful progress in our new performance marketplaces, while also reflecting our post FTC settlement transition with a corresponding impact on our owned and operated marketplaces business and financials.
Overall, our financial results remained consistent with the roadmap, we laid out in previous earning releases.
Our first quarter financial results were as follows.
Revenue of 66 million, which represents a 14, 6% decline versus Q1 2023.
These results driven primarily by the impact of our FTC settlement and related strategic and financial decisions forgo revenue streams that we felt would no longer strategically compelling, but did not meet our evolving quality standards in our owned and operated marketplaces.
Revenue results were positively offset by the new performance marketplaces, continuing to accelerate with strong double digit growth, albeit off a smaller base.
Our media margin of $22 1 million was an increase of 1% year over year versus Q1 2023.
At 33, 6% of revenue, we saw media margin increased almost 500 basis points from $28 six last year consistent with our strategic plan.
And a direct reflection of shifting our business mix to a higher margin performance marketplaces.
Adjusted EBITDA of <unk> 7 million represents one 1% of revenue, reflecting seasonality as well as our continued investment in what we see is a strategically compelling market proven and sustainable growth agenda.
As outlined in our last earnings release.
We expect to see year over year revenue decline in the first half 2024, given one the residual impact of exiting our non strategic businesses.
Which won't be fully cycled until the second half and to our newer before its marketplaces, which while still growing aggressively year over year, we'll have sequential quarterly decline based on the high seasonality of the verticals we presently serve.
To be clear, we're ahead of expectations on a new performance marketplaces.
Our foundational strength and owned and operated marketplaces provides us valuable access to consumers were rebuilt meaningful relationships that are very attractive to our world class brand partners.
This performance pricing model provides our partners with a differentiated marketplace to meet their customer acquisition growth needs.
Speaker Change: Being strategically aligned with our goals.
The revenue margin pressure on our owned and operated marketplaces are being driven by three significant headwinds to ongoing and one new.
In previous earning releases, we've detailed one the impact of our post FTC settlement.
And two continued macroeconomic headwinds that our advertiser clients continue shifting their consumer acquisition strategy to a clear prioritization of our return on AD spend given the consumer volatility in the market.
Our strategic adjustments to these headwinds have been grounded in our commitment to enhance the quality of our consumer experiences relative to engagement and satisfaction with our owner operated marketplaces or driving higher quality outcome for advertisers.
Speaker Change: Our third headwind is in.
Speaker Change: In spite of the fact that fluent has led the industry in establishing and executing leading edge protocols, which we believe are the best in class model for the entire industry.
We're seeing certain competitors accelerate activity via Noncompliant marketing practices that violate the FTC Act and guidance.
In the immediate term these noncompliant competitive practices put us at a market disadvantaging scaling certain media channels.
Speaker Change: We are not naive.
We certainly expected some competitors to try to financially take advantage of this situation, albeit at their own business and regulatory apparel.
But we also felt the FTC would more expeditiously and aggressively address the noncompliant markers across the industry.
Speaker Change: It remains our view that these practices by our competitors will not continue indefinitely and the FTC enforcement along with our regulators at the state and federal level and a very active class action plaintiff bar will eventually eliminate the troublesome practices of some of our competitors and level the playing field.
Regardless, our strategic resolve remains.
As we've seen in the near term financial impact as an investment in distinguishing our brand in the market and creating a distinct competitive advantage.
Given the realities of the current market, we will continue to emphasize growth of our owned and operated marketplaces and manage expenses over the next several quarters until our competitive set accepts and appropriately respond to the new FTC requirements.
The strategic growth engine of our business is grounded in our performance marketplaces, and we're accelerating the fluent brand. It's a very large marketplace opportunities that unleash our core capabilities in dynamic and growing market to date, we've established vertical expertise in health retail and ticketing.
Those businesses are more seasonal than our owner operated marketplaces, which have impacted our trend line in the quarter.
But we are coming into the stronger season, we will continue to grow market share, which youll have fluent enterprise returning to year over year growth in the second half of 2024.
Our AD flowing call solutions performance marketplaces are both driving strong double digit revenue growth.
We expect these businesses to continue to scale become a more meaningful bottom line contributors and we're excited by the early success.
Add flowers, our media solution, we launched in the large and rapidly growing commerce media market a market that is expected to reach 150 billion by 2030 currently 43% of U S brands have commerce media budgets and that is expected to increase to 75% by 2025.
We're headed to where the puck is going and our foundational add flow strategies continue to show dramatic year over year revenue growth driven by new partner wins, which are enabled by leveraging our proprietary technology machine learning and data platform capabilities that have yielded excellent results in these dynamic marketplaces.
We're excited by these early results as they represent a new and growing opportunity for world class brands to reach consumers seeking higher quality engagement at the optimal purchase moment.
Year to date, we've added new AD flow partners in both retail and ticketing, while also expanding into the grocery vertical.
We expect this growing business will provide us broader brand partners access as we scale.
Okay.
We also see significant breakthrough before us that will detail further next quarter.
Where we are now working with our commerce partners to expand the marketplace see your AD flow solution to extend beyond post transaction to include enhancing consumer engagement retention and loyalty across our partners commerce platforms.
Inter call solutions business, we've proven our operating model and established our financial metrics and our new business extension in the heart of the health vertical focused on affordable Care Act market.
Our business is growing double digits, and we will continue to scale, our vertical market expansion by growing existing partners and adding new partners, who are already recognizing our competencies.
HCA has a high sequential high growth opportunity, where we believe fluid can differentiate ourselves within a highly fragmented market.
We find this attractive strategy given the margin potential exceeds the fluid core.
Importantly, our performance marketplace go to market model remains highly differentiated from the competitive set.
Speaker Change: We're uniquely positioned in the industry to leverage the inherent analytical capabilities, we've established over a decade with our owned and operated market platform.
Speaker Change: So while our market leading owned and operated marketplaces continue to stabilize it essentially enables and fuels our pivot into higher quality consumer engagement.
We are quite enthusiastic regarding the strategic and financial roles that are performance marketplaces are playing.
And our longer term growth agenda importantly.
Importantly.
As we grow market share margin accretion will follow.
We will continue to make strategic bets and investments building higher quality digital experiences for our consumers, while creating more effective and sustainable customer acquisition solutions for our clients.
Our solution set is dramatically strengthened and our performance marketplaces are being thoroughly endorsed by our brand partners. The signature of marketplace credibility, we're confident that we're elevating fluids brand equity position within the industry.
Moving forward, we're targeting growing revenue from our emerging businesses by greater than 50% in 2024, which should have fluent returning to year over year consolidated growth in the second half importantly, as we enhance our market position. We are confident that we'll begin growing our total gross profit more rapidly than our Rev.
<unk> in the back half of the year.
Speaker Change: To date, we are ahead of expectations and our new performance marketplaces.
And with that I.
I'll turn to Orion perfect ride more detail on our financial results.
Thank you, Dan and thanks to everyone for joining us today.
I'll now provide some additional color on our Q1 earnings.
In Q1, we generated $66 million in revenue down 15% from prior year and down 9% sequentially from Q4.
As expected our owned and operated marketplace business continued to experience the effects of a challenging macroeconomic environment and changes in business practices to reflect regulatory requirements in connection with the FTC consent order.
These challenges influenced sequential reductions in spend by key clients in the media and entertainment retail and consumer and staffing and recruitment sectors.
However, we are optimistic that the owned and operated business will stabilize in the back half of the year as we continue to set a high standard for industry compliance on behalf of our clients.
Our new syndicated performance marketplaces grew exponentially over Q1 of last year, but were down slightly from Q4 2023 due to expected seasonality.
The fundamentals are strong and our syndicated performance marketplaces, and we are confident in the prospects for growth in this business as we look to the back half of the year for.
For the full year, we believe a better macroeconomic environment will allow for moderate sequential growth in our owned and operated marketplaces and we expect our performance marketplace needs to continue to grow at strong double digit rates year over year.
In Q1 media margin was $22 1 million, which represents 33, 6% of revenue compared to $22 million or 28, 4% of revenue last year.
Please proceed that media margin as a percentage of revenue improved despite decreased revenue in the business, which highlights the growth of our new performance marketplaces.
On a GAAP basis, our aggregate operating expenses for Q1 were $20 million.
A $2 $1 million decrease year over year.
Of note our operating expenses in Q1, 2024, and Q1 2023 include restructuring and other severance costs of 665 and 480000, respectively.
This concludes severance related to a reduction in force during the first quarters to better align our cost structure.
Speaker Change: G&A in the quarter also includes in accrued compensation expense related to the winter I believe true north and tap acquisitions of 782000 for the three months ended March 31, 2024, and 623000 for three months ended March 31 2023.
Q1, 2023 also includes $1 4 million of mitigation and other related costs.
All of these costs fall outside of the normal course of business and thus are excluded from our adjusted EBITDA calculation.
Our Q1, adjusted EBITDA was $665000 or 1% of sales.
Speaker Change: The year over year increase of 217000.
In 2024, we expect media margin growth in the second half driven by our new performance marketplaces to push adjusted EBITDA as a percentage of revenue into the high single digits.
The company cannot provide a reconciliation to expected net income or net loss in 2024 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 first quarter increased to $1 $4 million from 698000 due to higher average interest rates on our citizens term loan and as an effect of increased amortization of debt financing costs related to the citizens facility.
For the quarter, our income tax expense increased to 908000 and effective tax rate of 16, 9% from 101000 and effective tax rate of <unk>, 3% in the first quarter of last year.
Speaker Change: We reported net loss of $6 3 million and an adjusted net loss a non-GAAP measure of $4 2 million equivalent to a loss of <unk> 30 per share.
Moving to the balance sheet, we ended the quarter with $11.7 million in cash and cash equivalents.
Total debt as reflected on the balance sheet as of March 31, 2024 was $31 million, representing a slight increase from $30 5 million as compared to the balance at December 31 2023.
As a reminder, on April 2nd we entered into a credit agreement with SLR credit solution that provides for a $20 million term loan and a revolving credit facility of up to $30 million that matures on April 2nd 2029.
The SLR credit facility had an opening outstanding principal balance of $32 $7 million and we used $30 million of the proceeds to repay our prior credit facility with citizens Bank.
Speaker Change: In addition, we just closed the $10 million equity financing from investors, including our founders our largest shareholder and our CEO.
The additional liquidity reduces our dependence on the sale of our credit facility during our strategic pivot and reflects our confidence in the strategy.
Working capital as defined as current assets minus current liabilities was negative $2 1 million at quarter end.
This represents a decline from $29 2 million at December 31, 2023, due to the required presentation of the entire $31 million debt balance as current related to potential financial covenant noncompliance under our credit agreement.
In Q1, we invested $1 8 million into capitalized product development and technology as compared to $1 1 million in Q1 2023.
As we look into 2020 for the management team continues to focus on the stabilization of our owned and operated marketplaces, while we continue to grow the new syndicated performance marketplaces that provide our clients with high quality customer acquisition opportunities.
Speaker Change: We're confident that our growth strategy will produce substantial long term financial benefit in 2024 and beyond we appreciate your ongoing support.
We will be happy to take questions at this time.
Thank you.
Ladies and gentlemen to ask a question. Please press star one on your telephone.
And then wait to hear your name announced.
To withdraw your question. Please press star one again please.
Please standby, while we compile the Q&A roster.
Our first question comes from the lineup of Maria <unk> with Canaccord. Your line is open.
Great. Good afternoon. Thanks for taking my questions first I just wanted to ask you about your media margins and really have been pretty strong last couple of quarters. Despite the revenue softness.
Seems like a big part of that is coming from kind of growth in your emerging businesses, but how should investors think about sort of.
Some of the levers.
Media margin expansion going forward and do you anticipate further improvements from current levels.
Maria: Okay, great. Thanks for the question Maria.
Speaker Change: So when Youre looking at media margin is sort of three pieces that are in play here. The first is revenue and we've talked about the decline of our owned and operated.
That is being partially made up by the new performance marketplaces.
And the gross profit margin and specifically the new performance marketplaces have all have higher gross profit margins and are making up for the decline in that business.
And then the third piece, which will play a little bit into Q1 and more into Q2 is just the seasonality of these new marketplaces. So.
Speaker Change: They tend to they are very.
Based on retail and ticketing and healthcare there.
They are more on the second half and Q1 tends to be a little bit lower coming off of Q4 Q2 tends to be the low point for it bounces back in Q3, so those three and those three trends we see our GP.
Continuing to increase in the back half of this year.
Speaker Change: Probably probably equal in in Q2 slightly down in Q2 compared to Q1, just based on the seasonality of those new marketplaces.
Got it that's very helpful. And then maybe talk about sort of performance of the gaming vertical just given how important sort of batteries for your revenue base and maybe more broadly are there any sort of new functionality or add products that you have are working on to be able to maybe better serve some of their advertisers within this.
Vertical.
Yeah, Great question Maria.
So gaming continues to be our largest vertical by far.
Speaker Change: If you if you guys remember in Q, beginning part of Q3 last year one of our largest.
Speaker Change: Clients pulled back in.
And we were able to replace replace that demand and also <unk>.
Keep it steady as we go so it has been a solid.
Vertical for US and has been basically at the same revenue margin over revenue rate over the last couple of quarters.
The players tend to change a little bit.
The top five list.
Based on whether they are leaning into growth or more on return on AD spend but that continues to be a very strong vertical for us.
We have been working specifically on AD products, both specifically around the syndicated.
The syndicated performance marketplaces around gaming, we also have been doing some things in the in App solution that we expect to rollout.
And we're really really been pushing that demand into the other and the other marketplaces to continue to serve that market.
Got it that's very helpful. Thank you Don.
Thank you Maria.
Please standby for our next question.
Our next question comes from the line of Jim Goss with Barrington Research. Your line is open.
Good afternoon.
James Charles Goss: I'm wondering if.
It seems like media and entertainment, which had been a pretty important vertical has been deemphasize somewhat and I'm curious why that would be given the nature of the.
The streaming wars, they're pretty intent pretty intense.
Yep Yep.
Thanks for the question Jim.
Speaker Change: The past when we broke out verticals, we had a number of things in media and entertainment.
And as soon as that is.
At scale, we started to break those things out between.
Streaming services gaming et cetera, so part of that context, Tim might be just said, we lump things Ben.
A broader category a couple of years ago, and now we are not breaking out based on the importance of that.
Overall, our brand is still focused on rail as.
Overgrowth.
It tends to be very vertical specific year over year, the strong growth in subscription and in health and loyalty and in retail.
Gaming is as I've mentioned before with various question was basically flat and theres been some weakness in the streaming services business just around.
Just around they're really focusing on retention and not so much on acquisition.
Okay.
Speaker Change: Okay.
When you talk about.
Sort of reducing the emphasis on the owned and operated.
Sites in favor of syndicated marketplace could you describe that process, a little more and talk about the timeframe.
Just how it how the execution will take place.
Sure.
Well first of all owned and operated marketplaces as you know Jim has been with US for 12 years. It is still a foundational piece of our business and it has very distinct competitive advantages for us to build off those so the fact that we have that is critical in terms of launching us into those new syndicated performance marketplaces.
We talked about.
Basically what we have been doing is leveraging the either the demand or the technology stack that we've developed.
Or or around our analytics and data capabilities across owned and operated and watching them into those syndicated marketplace. So we're leveraging capabilities that we built over the years that allow us to move faster and quite honestly scale.
Much much faster rate than we could if we were launching these into ourselves.
Over the last couple of years, you guys have seen.
We have done some.
Changing of our head count we've reduced head count and then we brought back in head count there have been no more geared towards the new performance marketplaces, we've been doing it in a very measured way based on the performance of that business and where it plays.
And what we started consolidating.
Our advertising business across all of those solutions.
Now we have much broader solution set which to go out to the <unk>.
Brands that we work with and offer things beyond already operated in into add flow into our AD flow module and call solutions and our purpose health. So it's been a sort of a gradual transition over the last couple of years as we scale those businesses, but everything starts with the foundational piece of that owned and operated.
Speaker Change: Competencies and competitive advantages that we have.
Are there certain.
Financial metrics that will.
Shift and adjust based on this transition.
Yes, yes, good question Youll see two things.
Jim one is.
The owned and operated marketplace stabilizes, which as we pointed out is in the second half of this year Youll start to see that revenue growth return based on the growth in the new performance marketplaces. So when we say that were down close to 14, 6%. Obviously the owned and operated marketplaces are down deeper and our.
Performance marketplaces are growing aggressively just at a lower pace. So youll start to see that revenue shift in the second half to be in growth overall for fluent and then.
Speaker Change: And then Youll continue to see the margin improvement all of these syndicated margins of marketplaces at margins higher than our core and.
Speaker Change: And Youll start to see margin expansion at the same time.
Speaker Change: Okay last question is.
Excuse me the $10 million equity investment.
Excuse me could you tell me how that was effected.
Speaker Change: What was the nature of the investment.
Sure.
Yeah, Hi, Jim This is Brian if this was a private placement.
With.
Five individuals.
We sold pre funded warrants.
$2 $95 5 million of them at.
Speaker Change: At a purchase price of $3 and 38 four cents each.
There will be a shareholder approval expected in July.
Okay. Thank you very much.
Kim: Thank you Kim.
As a reminder, ladies and gentlemen that star one wanted to ask the question.
Please standby for our next question.
Our next question comes from the line of Bill does Allen with Titan Capital Management. Your line is open.
Thank you I came in late so I apologize if some of these questions are repeats and if so just let me know and we can talk talk offline.
Speaker Change: First of all would you please discuss how.
Media margin was up 1% with with the revenues being down.
And that seems like a.
Surprisingly favorable outcome.
Yes, Bill Thanks for the question, we did touch on that basically.
As we talked about this sort of three things that are playing into our numbers right now the revenue on the owner operated marketplaces are declining greater than 14% 14, 6%.
Partially being made up by the growth.
And the new performance marketplaces, I'd add flow cost solutions and in purpose Alf.
Speaker Change: But all of those the new the new performance marketplaces have higher gross profit margins in the quarter. So even though it's not growing as fast as the decline in owned and operated in Q1, the margin because of business mix.
Speaker Change: Higher margin.
We're able to keep margins.
Flat.
1% up over over over a year ago.
So in essence, I'd say its a mix phenomenon most specifically.
That's right the business mix side of it which we believe especially in the second half.
We'll be we'll be at a big advantage to us because the new performance marketplaces right now are more seasonal than our core.
So youll see youll see that accelerate in the second half.
Great.
That's helpful. Thank you.
And.
Talk to US if you would please about the signs that you are seeing that the new initiatives are working you have mentioned that they are growing rapidly, but presumably that's off a smaller base but.
Probably some data points that are relevant to the longer term implications here.
Sure.
So I'll.
Focus mostly bill on external and as you know everything comes down to down to the brands and what they choose to interact with.
Speaker Change: We have had great success in those performance market with those performance marketplace with brands coming on board and equally important.
Speaker Change: I brought this up in a very narrow way.
They are asking us to do more than just what the solution. The solution. Currently is for example ad flow.
Speaker Change: Till about a quarter ago was 100% focused on post transaction. So after you purchase something before you get the confirmation page.
Ed module then.
The most relevant AD to that consumer.
Speaker Change: E Commerce site, we are now being asked to help you.
We use that same technology and the same.
The same.
Demand and help bring into loyalty retention.
And engagement across the Commerce site. So the brands are speaking, obviously with their with their wallet in their intent in terms of getting us more aggressively into their business and help them drive a pretty important.
Opportunity for them and we gave some stats in the in the in the page in the earnings release, just how big This commerce media market is and how it is growing so I think where we're sitting at the right place and the right time.
With a lot of tailwind from that market. So ultimately it comes from the brand side and then leaning in and that's winning the new brands internally build theres lots of operating metrics in terms of how do we get to what's the right number to get to scale. How are we running based on either revenue metrics our cost metrics are.
Our engagement metrics.
We're fortunate enough to have a very clear model, what we need to go after and we look at that on top of it.
Speaker Change: They are pretty much a minute by minute basis to make sure that we're moving towards towards those are exceeding those internal metrics.
Speaker Change: Great.
Speaker Change: That's also helpful and so.
<unk>.
Let me ask you about the restructuring and severance expense in the quarter of 665000, which would you.
Dive into that.
Help us understand what you're doing behind the scenes there. Please.
Hey, Bill this is Ryan perfect.
Yes that happened in January and it was a reduction enforce essentially aligned around where we are.
Our investments so as kind of mentioned previously by Don.
Taking resources away from the owned and operated as we focus on building out our syndicated performance marketplaces.
And so no there was not a reduction in force with these these new performance marketplaces.
And that was a new ones.
Okay, great. Thank you and then.
Income tax.
Speaker Change: It actually paid their head up 900000 of income tax even though you had a pre tax loss what were the what were the dynamics that led to that.
There's a lot of pieces that go into that.
Obviously.
Our tax income is different than our.
Then the income on our Q.
Last year, we had.
Speaker Change: Impairment of goodwill and tax credits from.
Research and development tax credit. So there were a number of things that pushed it down to nearly zero last year as compared to this year, but.
But at 16, 9%, we're still below the 21%.
Okay.
Speaker Change: <unk> four four.
Great.
Great. Thank you and then.
Do we have time for me to do a couple more.
Sure Yes.
Yes.
So.
First of all I guess.
You have referenced that your competitors in the owned and operated market.
Speaker Change: Have not been.
Following the FTC guidelines.
Rules after they were following them.
Earlier after your after your settlement.
Has there been any change either.
More compliance or less compliance here in the first quarter relative to the fourth quarter.
Yes.
Yes.
To qualify a couple of things one is.
First of all the compliance has.
It has everything to do with our owned and operated marketplaces, not our new performance marketplaces. So.
Everything that we talked about the new performance marketplaces.
It's not around this compliance issue so.
Speaker Change: And secondly, if we saw people leaning in our competitors leaning in to find out what the settlement was in the new rules and the guidelines. The FTC was putting in into our best practices. When we settled in May and.
And we saw them, we saw our competitors leaning in to figure out what what we what we agreed to how it could work that way.
We never saw them really adopt to our levels. So it wasn't that somebody say took us.
Adopted it took a step back but over the last four to five months.
So at the beginning year, we've seen the competitors actually revert back to more noncompliant behavior.
We can we can.
Speaker Change: Guess guesses on why that is.
Speaker Change: Part of it we believe is that there is a lack of a clear further FTC action.
Speaker Change: Second as the industry headwinds we have they have.
And I think.
It creates opportunity for them to economically in the very short term Julien.
<unk> incentives.
Run towards finance.
Part of their business rather than towards compliance.
So we don't we've been unwavering in our driving and are driving our commitment to quality.
Know that in the long term.
When the industry levels up either by the FTC or buy.
State or federal regulators that we will be in a great position to accelerate and take back market share.
Speaker Change: But we did underestimate.
We thought that the industry will keep moving towards us.
Speaker Change: But we did not expect people to move back over the last four to five months.
Don: Don have you heard any comments out of the federal Trade Commission referencing.
That.
Firms that demonstrate some increased compliance and then less compliant.
Suddenly become more comparable with that bad behavior because they.
Essentially showed their hand.
I can't complain cannot come.
Ignorance because.
We're actually trying to be.
Don: Move towards the guidelines and then went backwards and so ultimately that that the FTC views that.
Lack of compliance even less favorably have you heard anything like that.
So don't take this wrong way, but we're really happy that we don't hear from the FTC all the time anymore because he's here.
Talk to them pretty much every day.
So and we are in we are in a.
We're not obviously inquiry mode with them now we are in our reporting mode.
Bill: Our contacts that we dealt with directly obviously the good news is it's more on our commitment to keep the reporting in the context. So in theory Bill everything you say makes sense and.
And I will tell you when we were going through or inquiry.
There was a lot of.
A lot of.
Spotlights on Okay. You did this and why did you do this way.
And if there was.
Bill: For US there was no lack of.
Bill: Not trying to do the right thing it was around business sides, where if they see that from an economic perspective.
I can imagine it would be much harder NOI charter.
Bill: Discussion and settlement with them.
Yes, it will be fascinating to watch that unfold.
So relative to your media margin in the first quarter. It was 33 six.
That was up slightly from the fourth quarter at $33, one even though Q1.
Revenues are seasonally lower versus the fourth quarter now I know.
Speaker Change: But in your response to my first question you referenced.
The mix.
As the as the performance marketplaces have grown but you've also referenced that there is seasonality with with US performance marketplaces that maybe it would work against this so can you can you address that.
Margin media margin percentage on a sequential basis and a bit more detail.
Yes, yes.
Very good question.
Speaker Change: These businesses are scaling.
Actually the AD flow business has been scaling and we've been investing in technology and analytics. So what youre seeing there is not only even though in Q4 is a big.
Is a big increase in volume.
Our ability to gain revenue per what they call session has continued to increase in Q1, even though the volume has gone down so you're seeing the monetization.
Increase which the good news as you know from these this business model is we have a revenue share with our with our partners. So the more we make tomorrow partners makes them more successful. They are also so it's around really improving the.
Margin in the monetization of that business.
So that should have very favorable implications for the second half of the year when the seasonal strength in revenues picks up.
Yes, absolutely.
Okay that is how you are viewing it also then.
Yes, yes, great. Thank you for taking all my questions.
Thank you Bill.
Thank you.
I'm showing no further questions in the queue I would now like to turn the call back over to Don for closing remarks.
Don: Thank you for joining our Q2 2024 earnings we remain steadfast in our strategic pivot leveraging our owned and operated marketplaces competitive advantage to launch into adjacent high growth high margin performance marketplaces that will enhance to influence brand equity and also create shareholder value.
Thank you for your continued support and we look forward to giving you an update after Q2.
Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
Don: Goodbye.
Okay.
[music].
Don: Yeah.
Thank you.