Fluent(FLNT) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2023 was $82.1 million, a 6% sequential increase from Q1 but a 16% decrease year-over-year [4][22] - Adjusted EBITDA for Q2 was$ 5.6 million, representing 6.8% of revenue, down from the previous year [25][40] - Net income for Q2 was $1.2 million, while year-to-date net loss stood at$ 30.8 million [27][22] - Media margin for Q2 was $25.9 million, a 20% year-over-year decline but an 18% sequential increase, representing 31.5% of revenue [52][4] Business Line Data and Key Metrics Changes - The core performance marketplace is expected to grow modestly, with significant growth opportunities identified in Influencer, Call Solutions, and AdFlow business units [14][45] - AdFlow is already active on over a dozen e-commerce sites, with a strong pipeline for new partners [16][45] - The company has seen double-digit growth in Influencer and Call Solutions businesses year-over-year [45][51] Market Data and Key Metrics Changes - The digital advertising industry is experiencing unpredictability, with clients prioritizing return on ad spend due to economic uncertainty [4][12] - The company anticipates challenges in the financial services and staffing sectors, while the media and entertainment sector, particularly gaming and streaming, showed sequential growth [51][60] Company Strategy and Development Direction - The company is focused on enhancing the quality of consumer engagement and establishing itself as an industry leader following the FTC settlement [46][41] - A commitment to quality is seen as essential for long-term growth, with investments in new strategic business ventures expected to yield significant revenue growth potential of over$ 150 million in the next two years [6][75] - The company aims to leverage its compliance leadership to gain market share as competitors adapt to new regulatory standards [47][85] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing economic headwinds and the need for time to return to a growth trajectory, particularly in fiscal year 2024 [21][50] - The company is optimistic about the medium-term advantages stemming from the FTC settlement, which is expected to level the playing field [61][85] - Management emphasizes the importance of maintaining strong consumer engagement and return on ad spend for clients [57][12] Other Important Information - The company will not file its Form 10-Q on time due to ongoing disclosures and will utilize a permitted extension [29] - A non-cash impairment charge of $25.7 million was recognized year-to-date for goodwill associated with a previous acquisition, which does not impact operations or liquidity [53][24] Q&A Session Summary Question: What is the revenue trajectory expected in the second half of the year? - Management noted that while there are positive signs in some verticals, overall spending remains cautious due to economic uncertainties [60][84] Question: How does the FTC settlement impact competitors? - The settlement sets new compliance standards that competitors must follow, which could create a short-term advantage for those not adhering to these standards [68][85] Question: What is the expected growth potential from new business units? - The company believes there is$ 150 million of incremental revenue potential from new business units over the next two years [75][79] Question: How are operating expenses being managed? - Management indicated that they are pushing on all fronts, balancing investments in growth areas with operational leverage in more mature business units [70][84]