Release Date: August 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fluent Inc (FLNT, Financial) has successfully launched its syndicated performance marketplace, showing sequential improvements in both revenue and gross profit.
- The company expects to deliver single-digit consolidated year-over-year growth in Q3 and double-digit growth in Q4.
- Fluent Inc (FLNT) has added new brand partners in grocery, quick-serve restaurant, and travel verticals, which are expected to drive growth.
- The company has stabilized its owned and operated marketplace, providing a foundation for future growth.
- Fluent Inc (FLNT) is optimistic about its Adflow platform, which has shown significant growth and is expected to continue driving revenue.
Negative Points
- Revenue for Q2 2024 was $58.7 million, representing an 11% decline versus Q1 2024.
- Media margin decreased by 29.3% versus Q1 2024, and adjusted EBITDA was negative $4.5 million.
- The company faced unauthorized third-party activity in its ACA business, necessitating a $3.1 million write-down of accounts receivable.
- Fluent Inc (FLNT) exited non-strategic businesses and faced regulatory changes in its call solutions business, impacting revenue.
- The company reported a net loss of $11.6 million and an adjusted net loss of $7.3 million for Q2 2024.
Q & A Highlights
Q: Can you talk more about the unauthorized activity for the ACA policies this quarter that impacted you? Was it something that impacted the industry more broadly or your platform more so? What measures or initiatives have you implemented to prevent this going forward?
A: (Donald Patrick, CEO) The unauthorized activity affected the entire ACA industry, not just Fluent. The issue arose from a lack of controls in the CMS's ACA database, allowing unauthorized agents to change the agency of record (AOR) without consumer approval. This led to a $3.1 million write-down of accounts receivable. CMS has since fixed the issue by implementing stricter rules, but we are pausing this initiative to ensure we have the right processes in place to prevent future occurrences.
Q: Could you talk about any potential liquidity needs and how investors should think about the options available to you on that front?
A: (Donald Patrick, CEO) We have a favorable credit facility with SLR Credit Solutions, which provides us with the necessary liquidity to execute our business plan. We recently added roughly $2 million to ensure sufficient liquidity and feel confident that this, along with our revenue acceleration, will support our needs.
Q: Are there any other specific issues you're aware of that we should be concerned about going into the next couple of quarters?
A: (Donald Patrick, CEO) We do not foresee any issues that would impact our ability to execute our plan and grow. Our favorable facility with our debt partner allows us to access cash as we grow, which will serve us well in the back half of 2024 and into 2025.
Q: Can you explain how the Adflow platform works and discuss the mix of syndicated platforms versus your owned and operated places?
A: (Donald Patrick, CEO) Adflow is a proprietary platform that serves ads in a post-transaction environment, leveraging our first-party data to deliver relevant ads. This platform has shown significant growth and predictability, allowing us to forecast better. We are expanding into new verticals like grocery, quick-serve restaurants, and travel, which will help balance our revenue throughout the year.
Q: Is the addition of grocery, QSR, and travel businesses through Adflow expected to mitigate the strong cyclicality of your business?
A: (Donald Patrick, CEO) Yes, these new verticals tend to have different cycles and will help bring more balance to our revenue throughout the year. While we will still be Q4 heavy, the addition of these verticals will make us less so than before.
Q: Would you anticipate that the absolute rate of growth in Q1 will be greater than Q4, and the rate of growth in Q2 greater than Q1?
A: (Donald Patrick, CEO) There will still be some fall-off from Q4 in our core business, but we will continue to see double-digit growth in Q1. The percentage rate of growth might see a small dip, but we will maintain double-digit growth.
Q: Are you trying to find owned and operated platforms to serve the new verticals you're serving through syndicated access right now?
A: (Donald Patrick, CEO) No, our owned and operated marketplaces provide a competitive advantage and are stable. We leverage these assets into higher growth businesses with higher margins, and we do not plan to grow the owned and operated business in different verticals.
Q: How do you plan to address the challenges faced by your call solutions business due to regulatory changes?
A: (Donald Patrick, CEO) We have proactively built compliance solutions to address upcoming regulatory changes, positioning us well for future growth. We are closely evaluating ongoing changes to ensure we can differentiate ourselves in the market.
Q: Can you provide more details on your strategic pivot and the expected financial impact?
A: (Donald Patrick, CEO) We have stabilized our owned and operated marketplace and are accelerating growth in our performance marketplaces. We expect single-digit consolidated year-over-year growth in Q3 and double-digit growth in Q4, with continued momentum into 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
