Release Date: May 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fluent Inc (FLNT, Financial) is leveraging its leadership in owned and operated marketplaces to enter high-growth, high-margin performance marketplaces, which are expected to be margin accretive.
- The company reported a media margin increase to 33.6% of revenue, up nearly 500 basis points from the previous year, reflecting a strategic shift towards higher margin performance marketplaces.
- Fluent Inc (FLNT) is experiencing strong double-digit growth in new performance marketplaces like Adflow and call solutions, indicating successful expansion and market adoption.
- Despite overall revenue decline, the company is ahead of expectations in its new performance marketplaces, showing effective strategic execution.
- Fluent Inc (FLNT) has successfully attracted new Adflow partners in retail and ticketing, and expanded into the grocery vertical, demonstrating the ability to scale and diversify.
Negative Points
- Fluent Inc (FLNT) reported a 14.6% decline in revenue compared to Q1 2023, primarily due to the impact of the FTC settlement and strategic decisions to exit non-strategic businesses.
- The company faces significant headwinds including ongoing macroeconomic challenges and aggressive competition from rivals engaging in noncompliant marketing practices.
- Fluent Inc (FLNT) is experiencing seasonal impacts on its new performance marketplaces, leading to sequential quarterly declines which could affect short-term financial performance.
- There are ongoing challenges in the owned and operated marketplaces, with a need to manage expenses and navigate through competitive disadvantages due to compliance with FTC requirements.
- The company's strategic pivot to de-emphasize growth in owned and operated marketplaces in favor of performance marketplaces may involve risks and uncertainties in execution and market acceptance.
Q & A Highlights
Q: Can you discuss the media margins which have been strong despite revenue softness?
A: (Donald Patrick, CEO) - The media margin strength is due to three factors: the decline in owned and operated marketplaces, growth in new performance marketplaces with higher gross profit margins, and the seasonality of these marketplaces, which typically perform better in the second half of the year.
Q: Could you elaborate on the performance of the gaming vertical?
A: (Donald Patrick, CEO) - Gaming remains our largest vertical. Despite a major client pulling back last year, we've maintained revenue by replacing that demand. We're also developing new ad products to better serve advertisers in this vertical.
Q: Why has there been a shift from media and entertainment to other verticals?
A: (Donald Patrick, CEO) - The shift is partly due to breaking down the media and entertainment category into more specific segments like streaming and gaming. The focus is on return on ad spend (ROAS) rather than growth, with strong performance in subscriptions, health, and retail.
Q: Can you describe the transition from owned-and-operated sites to syndicated marketplaces?
A: (Donald Patrick, CEO) - We're leveraging our existing technology and data capabilities from owned-and-operated marketplaces to expand into syndicated performance marketplaces. This transition involves reallocating resources and aligning our workforce with our strategic focus.
Q: How is the $10 million equity investment structured?
A: (Ryan Perfit, Interim CFO) - The investment was through a private placement of pre-funded warrants to five individuals, priced at $3.384 each. Shareholder approval is expected in July.
Q: Could you explain the favorable media margin outcome despite lower revenues?
A: (Donald Patrick, CEO) - The improvement in media margin is primarily due to the business mix, with new performance marketplaces having higher gross profit margins. These marketplaces are seasonal and expected to accelerate in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
