Fluent(FLNT) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. Consolidated Balance Sheets Total assets and shareholders' equity significantly decreased from December 2022 to September 2023, driven by goodwill impairment and net loss Consolidated Balance Sheets (in thousands) | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----- | :-------------------------------- | :------------------------------- | | Total Assets | $112,090 | $183,969 | | Total Liabilities | $76,600 | $90,014 | | Total Shareholders' Equity | $35,490 | $93,955 | - Current portion of long-term debt increased significantly from $5,000 thousand to $31,799 thousand, indicating a reclassification due to covenant non-compliance and potential acceleration[98] Consolidated Statements of Operations Revenue declined and net loss increased for both Q3 and 9M 2023, primarily due to goodwill impairment Three Months Ended September 30 (in thousands) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :----- | :------------------ | :------------------ | :--------- | | Revenue | $66,239 | $89,046 | -26% | | Total Costs and Expenses | $100,173 | $88,419 | +13% | | Income (loss) from operations | $(33,934) | $627 | NM | | Net income (loss) | $(33,627) | $3,113 | NM | | Basic EPS | $(0.41) | $0.04 | NM | | Diluted EPS | $(0.41) | $0.04 | NM | Nine Months Ended September 30 (in thousands) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :----- | :------------------ | :------------------ | :--------- | | Revenue | $225,638 | $276,470 | -18% | | Total Costs and Expenses | $283,986 | $328,864 | -14% | | Income (loss) from operations | $(58,348) | $(52,394) | +11% | | Net income (loss) | $(61,319) | $(55,844) | +10% | | Basic EPS | $(0.74) | $(0.69) | +7% | | Diluted EPS | $(0.74) | $(0.69) | +7% | - Goodwill impairment and write-off of intangible assets significantly impacted the three-month period, with a charge of $29,705 thousand in 2023 compared to none in 2022[73] Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity significantly decreased from December 2022 to September 2023, primarily due to a substantial net loss Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric | December 31, 2022 (in thousands) | September 30, 2023 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Total Shareholders' Equity | $93,955 | $35,490 | | Accumulated Deficit | $(318,300) | $(379,619) | | Common Stock Issued | 84,385,458 shares | 85,803,727 shares | | Treasury Stock | 4,300,152 shares ($11,171) | 4,611,569 shares ($11,407) | - The net loss of $61,319 thousand for the nine months ended September 30, 2023, was the primary driver of the decrease in total shareholders' equity[76] - Share-based compensation contributed $3,090 thousand to additional paid-in capital for the nine months ended September 30, 2023[76] Consolidated Statements of Cash Flows Net cash from operations increased for 9M 2023 despite higher net loss, driven by working capital changes; cash used in investing and financing also increased Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :----------------- | :--- | :--- | | Net cash provided by operating activities | $9,695 | $7,134 | | Net cash used in investing activities | $(5,368) | $(4,297) | | Net cash used in financing activities | $(9,361) | $(4,198) | | Net decrease in cash and cash equivalents | $(5,034) | $(1,361) | | Cash and cash equivalents at end of period | $20,513 | $33,106 | - The increase in cash used in investing activities was mainly due to increased investment in capitalized software and the TAPP consolidation[305] - The increase in cash used in financing activities was primarily due to a $5.0 million debt prepayment and fees related to debt modification[325] Notes to Consolidated Financial Statements 1. Summary of significant accounting policies Accounting policies and estimates are detailed, highlighting substantial doubt about the company's going concern ability due to debt and covenant issues - Management concluded there is substantial doubt about the Company's ability to continue as a going concern through the one-year period after the issuance date, contingent on a new Credit Agreement amendment, cost reductions, and growth opportunities[22][85] - Revenue is recognized when control of goods or services is transferred, typically based on delivering data records, generating conversions, verifying user interest, or delivering media spend[117] - The company uses a fair value hierarchy (Level 1, 2, 3) for assets and liabilities, with certain non-financial assets measured at Level 3 due to unobservable inputs[93][143] 2. Income (loss) per share Basic and diluted income (loss) per share calculations are presented, with certain stock equivalents excluded from diluted EPS due to their anti-dilutive nature in loss periods Income (Loss) Per Share (Three Months Ended September 30) | Metric | 2023 | 2022 | | :----- | :--- | :--- | | Basic EPS | $(0.41) | $0.04 | | Diluted EPS | $(0.41) | $0.04 | Income (Loss) Per Share (Nine Months Ended September 30) | Metric | 2023 | 2022 | | :----- | :--- | :--- | | Basic EPS | $(0.74) | $(0.69) | | Diluted EPS | $(0.74) | $(0.69) | - Anti-dilutive securities, including 7,330,375 restricted stock units and stock options for the nine months ended September 30, 2023, were excluded from diluted EPS calculations due to loss periods[95][123] 3. Intangible assets, net Net intangible assets decreased to $27,710 thousand as of September 30, 2023, from $28,745 thousand at December 31, 2022, with amortization expenses recognized and impairment assessed Net Intangible Assets (in thousands) | Asset Type | September 30, 2023 | December 31, 2