Fluent, Inc.

Good day and welcome to the Fluent, Inc. Q1 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ryan McCarthy. Please go ahead.

Good afternoon and welcome. Thank you for joining us to discuss our first quarter 2020 earning results. Joining me on today's call are Fluent CEO Ryan Schulke and CFO Alex Mandel. Our call will begin with comments from Ryan Schulke and Alex Mandel followed by a question and answer session. I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our website. To access the webcast, please visit our investor relations page on our website, www.fluentco.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call will contain forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements made during this call speak only as of the date hereof. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. These statements may be identified by words such as expects, plans, projects, could, will, may, anticipates, believes, should, intends, estimates, and other words of similar meaning. The company undertakes no obligation to update the information provided on this call. For a discussion of the risks and uncertainties associated with Fluent's business, we encourage you to review the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K and quarterly reports on Form 10-2. During the call, we will also present certain non-GAAP financial information relating to media margin, adjusted EBITDA, and adjusted net income. Management evaluates the financial performance of our business on a variety of indicators, including media margin, adjusted EBITDA, and adjusted net income. The definitions of these metrics and reconciliations to the most directly comparable GAAP financial measure are provided in the earnings press release issued earlier today. With that, I'm pleased to introduce Fluent CEO, Ryan Schulke.

Thanks, Ryan, and good afternoon, and thanks to everyone for joining us today. I hope you're all healthy and staying safe. Needless to say, the backdrop of today's call is unlike any time I or perhaps any of us have ever experienced. It's a time that requires unique and special considerations. We all know the real heroes are those on the front lines of the COVID-19 crisis working tirelessly to support those who are sick or in need of aid. We're extremely grateful for the commitments and sacrifices healthcare professionals, first responders, and essential personnel are providing in an unprecedented situation. While you can rest assured we're extremely focused on driving our business forward, it's critical that our priorities are being led through the lens of safety and well-being of our employees, families and business partners, and that we operate in a manner that fully respects the sensitivities of the conditions we're all confronting. Since our offices closed across North America in mid-March, we've made a conscious decision to make no layoffs while committing many resources and financial aid to fluent colleagues and the communities we operate in. Foremost, our home base here in New York City, where the majority of our colleague base resides. In spite of the uncertainty in the marketplace, as we and our clients navigate unchartered waters, we delivered a solid Q1 with revenue up 19%, media margin up 4%, and adjusted EBITDA off just 1% in each case versus previous year. Even while some of our valued clients are taking a cautious approach, our revenue growth is a strong indicator that Fluent is forging stronger bonds with leading brands across numerous verticals. We're becoming a more critical component of our partners' overall marketing strategy in the process. Yes, we chose to invest some margin, but we did so in strategically important growth areas centered around solutions we provide our clients, growing our media footprint domestically, and now investing in international expansion. where we feel confident we'll improve our margin mix over time. Let's start with some headlines. First, I'll touch on how the crisis has impacted our business and what we're doing about it. Second, I'll speak to the three core pillars driving Fluent's performance marketplace, our performance solutions, our publishing platform, and our in-house technology platform. Big overarching trend that's been well documented across our industry is that while consumers are spending more time on the internet, advertisers are spending less overall dollars to reach them. In turn, Fluent's business model as a performance marketing company playing in a range of verticals has helped somewhat insulate us from the volatility occurring across the marketing and advertising space. Good news is that we're seeing more traffic to our media properties at lower cost to acquire that traffic. But the offset in this challenging window is that we have had certain advertiser segments Decreased pricing were temporarily paused depending upon how their industry and business has been impacted by the crisis. With that said, we've talked about how diversified Fluent's advertiser base is due to the nature of our business model and the multitude of verticals in which we play. This diversification has helped us maintain our balance through this period while capturing greater market share in our sector. Our revenue growth was an important metric driving our strategy. as we continue to build strong relationships with top-tier brands who rely on Fluent for profitable customer acquisition solutions at scale. While media margin obviously grew at a more modest rate, we're bullish on our ability to optimize down the road as we continue to press on capturing greater share of wallet with advertisers through the expansion of our media footprint. In this challenging environment, we're continuing to look for opportunities to provide value to our partners. While the marketing environment remains dynamic and where we will need to react to our new realities, here's an example of a strategy where Fluent is winning. We've consistently emphasized the importance of our media and entertainment sector, which hosts two key stables of clients, streaming services and mobile games. We have deeply embedded partnerships with a host of clients in each of these verticals, and they're performing very well in this environment. I believe our momentum will continue here as we enhance these strategic relationships. On a global scale, Fluent aspires to be a much larger performance marketplace, connecting consumers with great products and services while empowering advertisers to execute more efficient digital marketing programs. Three pillars driving Fluent's performance marketplace are, one, our performance solutions, which service the advertiser demand driving the marketplace dynamic, two, Our publishing platform, which establishes our media footprint, including a portfolio of web properties and the channels where we engage consumers to traffic those sites. And three, our in-house platform, which is the data, technology, and analytics that tie the marketplace together. Our first pillar, performance solutions, enable us to directly partner with thousands of top advertisers across numerous verticals. Our clients are able to operate with us on a pay-for-performance basis across a number of executions, such as app installs, subscriptions, lead generation, and inbound phone calls. We're leaning in here to enhance our capabilities as we recently announced our investment into Winopoly, which is essentially a contact center with technology to enable live agents to work from home while still protecting sensitive consumer data. This further expands our marketplace, enabling us to host sales calls on behalf of our advertising partners, in addition to driving things like inbound calls and phone verified leads. The second pillar, our publishing platform, which today is predominantly comprised of a number of owned and operated web properties, with about 90% of consumption happening on mobile devices. We previously talked about product development initiatives centered around winning big on messaging and video applications. These are taking shape nicely and represent some of the fastest-growing revenue streams, though understandably at slightly lower media margin. Importantly, Facebook, Snapchat, and some of the emerging social and gaming platforms still represent a large growth opportunity for Fluent and will continue to be an area of focus. The other key avenue to grow our media footprint via the publishing platform is through international expansion. We've learned a lot in our 10 years in the marketplace, both successes and failures, Now it's time for us to leverage all that key learning as we crystallize and expand our international strategy. We data-launched Germany in November and are now ready to begin scaling. To do so, we've engaged on-the-ground resources to help us take that effort to the next level. Importantly, we believe this investment is leaning into pre-validated client demand. Our existing clients who operate leading global brands are asking us to expand our footprint to meet their needs. Our European footprint now includes two large markets, the UK and Germany. We're also prioritizing additional markets in Europe and North America and anticipate this will be a continued area of focus and growth over the next few years. Third pillar is Fluent's in-house platform, which utilizes proprietary, first-party data collected on our media properties and our technology and analytics stack to service our marketplace and expand our media footprint. You can think of this as the creation of relevant experiences for consumers as they engage with us and offer us information about themselves, along with the opportunity to present our clients' offerings. In closing, we're doing all of this under a set of conditions we certainly didn't plan for since we closed our offices in mid-March. Thankfully, our colleague base has transitioned well to working in remote environments. Our team has always exhibited a high degree of adaptability and agility, and thus our business has remained solid. And looking forward to the second quarter, we too will be affected by the near-term industry realities. We see our revenue pacing is relatively flat compared to the same period a year ago. Within this challenging environment, we also believe we are strengthening the fundamental alignment between Fluent's performance marketing capabilities and our clients' objectives. Our platform brings consumers further down the funnel, providing greater clarity on consumer needs while increasing our clients' return on investment and de-risking their marketing budgets. As a result, we believe the dollars being deployed to us are more sustainable in good times and in bad, as they are a better alternative than the marketplace in general. Thank you for your support. Let me turn the discussion to Alex to review the numbers more specifically, and I'll return for Q&A afterward.