Fluent(FLNT)2024-11-15 21:30Revenue and Profitability - Revenue decreased 3% to $64.5 million in Q3 2024 compared to $66.2 million in Q3 2023[156] - Revenue decreased 16% to $189.2 million for the first nine months of 2024 compared to $225.6 million in the same period of 2023[156] - Revenue for the three months ended September 30, 2024 decreased by 3% to $64.5 million compared to $66.2 million in the same period in 2023[181] - Revenue for the nine months ended September 30, 2024 decreased by 16% to $189.2 million compared to $225.6 million in the same period in 2023[181] - Gross profit decreased 3% to $15.7 million in Q3 2024, maintaining a 24% margin[156] - Gross profit (exclusive of depreciation and amortization) for the three months ended September 30, 2024 was $15.7 million, representing 24% of revenue, compared to $16.1 million (24% of revenue) in the same period in 2023[171] - Gross profit (exclusive of depreciation and amortization) for the nine months ended September 30, 2024 was $46.9 million, representing 25% of revenue, compared to $57.7 million (26% of revenue) in the same period in 2023[171] - Media margin decreased 6% to $18.2 million in Q3 2024, representing 28.1% of revenue[156] - Media margin for the three months ended September 30, 2024 was $18.2 million, representing 28.1% of revenue, compared to $19.3 million (29.2% of revenue) in the same period in 2023[171] - Media margin for the nine months ended September 30, 2024 was $56.0 million, representing 29.6% of revenue, compared to $67.2 million (29.8% of revenue) in the same period in 2023[171] Net Loss and Adjusted EBITDA - Net loss improved to $7.9 million in Q3 2024 from $33.6 million in Q3 2023[156] - Net loss improved to $25.8 million for the first nine months of 2024 from $61.3 million in the same period of 2023[156] - Net loss for the three months ended September 30, 2024 was $7.9 million compared to $33.6 million in the same period in 2023[173] - Net loss for the nine months ended September 30, 2024 was $25.8 million compared to $61.3 million in the same period in 2023[173] - Adjusted EBITDA improved to negative $0.1 million in Q3 2024 from negative $1.7 million in Q3 2023[156] - Adjusted EBITDA for the three months ended September 30, 2024 was $(71) thousand compared to $(1.7) million in the same period in 2023[173] - Adjusted EBITDA for the nine months ended September 30, 2024 was $(3.9) million compared to $4.3 million in the same period in 2023[173] - Net loss for the three months ended September 30, 2024 was $7.9 million, a 76% decrease compared to $33.6 million in the prior period[211] - Net loss for the nine months ended September 30, 2024 was $25.8 million, a 58% decrease compared to $61.3 million in the prior period[211] Cost of Revenue and Expenses - Cost of revenue (exclusive of depreciation and amortization) decreased by 3% to $48.9 million in Q3 2024 compared to $50.1 million in Q3 2023, driven by lower owned and operated media costs due to FTC compliance changes[184] - Commerce Media Solutions cost of revenue increased to $6.9 million in Q3 2024 from $2.1 million in Q3 2023, driven by new media partnerships[184] - Total cost of revenue as a percentage of revenue remained consistent at 76% for Q3 2024 compared to Q3 2023[185] - Sales and marketing expenses decreased by 10% to $4.0 million in Q3 2024 from $4.4 million in Q3 2023, primarily due to lower employee salaries and benefits[189] - Product development expenses decreased by 9% to $4.1 million in Q3 2024 from $4.5 million in Q3 2023, driven by lower salaries and IT-related vendor spend[191] - General and administrative expenses increased by 4% to $9.1 million in Q3 2024 from $8.7 million in Q3 2023, primarily due to the absence of litigation-related credits[193] - Depreciation and amortization costs decreased by 11% to $2.4 million in Q3 2024 from $2.7 million in Q3 2023, due to the full amortization of certain intangible assets[196] - Goodwill impairment was $0 in Q3 2024 compared to $29.7 million in Q3 2023, reflecting no impairment in the current period[199] - Interest expense increased by 37% to $1.3 million in Q3 2024 from $0.9 million in Q3 2023, driven by higher average interest rates on the SLR term loan[201] - Workforce reductions in 2024 resulted in $2.5 million in exit-related restructuring costs, with $0.7 million settled in Q1 2024 and $0.6 million to be settled by December 2024[195] - The company recognized a $2.8 million unrealized loss related to the fair value adjustment of Convertible Notes in the three months ended September 30, 2024, compared to none in the prior period[202][206] - The company reported a $1.0 million loss on early extinguishment of debt related to the Citizens Credit Agreement in the nine months ended September 30, 2024, compared to no loss in the prior period[205] - Loss before income taxes decreased by $26.9 million in the three months ended September 30, 2024, primarily due to a $29.7 million decrease in goodwill impairment and a $1.3 million decline in cost of revenue[206] - Loss before income taxes decreased by $35.0 million in the nine months ended September 30, 2024, driven by a $54.1 million decrease in goodwill impairment and a $25.6 million decline in cost of revenue[207] Cash Flow and Liquidity - Net cash used in operating activities was $12.0 million for the nine months ended September 30, 2024, compared to net cash provided by operating activities of $9.7 million in the prior period[213] - The company had cash, cash equivalents, and restricted cash of $7.8 million as of September 30, 2024, a decrease of $8.0 million from $15.8 million as of December 31, 2023[216] - The company entered into the SLR Credit Agreement on April 2, 2024, providing a $20.0 million term loan and a $30.0 million revolving credit facility[217] - The company raised $2.1 million through convertible subordinated notes as part of the Second Amendment to the SLR Credit Agreement on August 19, 2024[222] - The company must raise at least $7.5 million of additional capital by November 29, 2024, as per the Third Amendment to the SLR Credit Agreement[223] - The company's SLR Credit Facility has an opening interest rate of 10.81%, which increased to 11.03% as of September 30, 2024[224] - The company faces substantial doubt about its ability to continue as a going concern for one year after the date of the Quarterly Report[228] Impairment and Fair Value Adjustments - The company recorded a non-cash impairment charge of $383 in Q2 2024 for long-lived assets[230] - The company recorded a non-cash impairment charge of $1,261 for goodwill in Q2 2024, with the carrying value exceeding the estimated fair value by 58%[231] - The fair value of the company's convertible notes was determined to be $4,860 as of Q3 2024[232] Strategic Initiatives and Outlook - Approximately 90% of users engage with the company's media on mobile devices or tablets[149] - The company's Commerce Media Solutions platform generates meaningful income for media partners while driving high-quality customer acquisition[151] - The company expects growth in Commerce Media Solutions to offset revenue declines in owned and operated marketplaces in Q4 2024[161] - The company updated its projections for Q4 2024 due to economic downward trends, reflecting continued pressure on operating results[223] - The company expects to be in compliance with new financial covenants for the next 12 months but acknowledges uncertainty due to past failures to meet projections[228] - The company is considering cost reduction measures and has divested non-core business units to meet budget and cash flow requirements[225] - The company may explore acquisitions of complementary businesses, products, or technologies, potentially requiring additional financing[226]