Fluent, Inc.

Good day and welcome to the Fluent, Inc. second quarter 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 a touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Ryan McCarthy. Please go ahead, sir.

Good afternoon and welcome. Thank you for joining us to discuss our second quarter 2020 earnings 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-Q. During the call, we will also present certain non-GAAP financial information relating to media margin, adjusted EBITDA, and adjusted net income. Good afternoon, and thanks to everyone for joining us today.

As we continue to navigate this challenging and uncertain environment, I want to thank our entire colleague base for their exceptional work under the most difficult of circumstances. During these unprecedented times, Fluent remains resilient and steadfast in striving to support our colleagues, clients, consumers, and communities. The second quarter's performance once again demonstrated the strength and diversification of our platform and the macro benefits of performance marketing. In spite of uncertainty in the marketplace, we delivered a solid Q2, with revenue up 1% and media margin up 8%, ahead of our prior business outlook for results in line with the previous year. Adjusted EBITDA is up 3% versus last year's Q2, which reflects an investment into our owned and operated media properties, as well as the overhead impact of AdParlor, whose business we acquired in Q3 of last year. On today's call, I'd like to first speak about the Q2 operating environment, along with our results, and then provide broader context relative to our strategic growth pillars. Regarding the operating environment, our core focus remains on access to cost-effective media at scale while leveling out volatility across our advertiser base. Concurrently, we're enhancing our owned and operated media properties, which enable consumers to earn, win, or save with Fluent and our partners. While media remained accessible at relatively favorable pricing for most of the quarter, we did see a bit more unpredictability on a channel-by-channel basis, and our team did an excellent job of right-sizing our pricing against volume. On the advertiser side of our business, the diverse nature of our client base helped to offset any verticals that lacked in demand as a result of COVID. From a vertical standpoint, the quarter was again a standout for our media and entertainment clients. particularly in the streaming services and gaming app categories where we continue to fortify strategic relationships with top tier global brands. A key strategy we remain enthusiastic about is our international expansion. In particular, the UK business more than doubled its top line year over year while expanding its media margin profitability. In fact, revenue from non-US markets exceeded 5% of total revenue in the quarter for the first time. Now I'll turn to an update on Fluent's three strategic growth pillars. First, our performance marketplace. This refers to the demand or interactions between our advertising clients and consumers on our platform. Fluent's advertiser solutions enable our clients to bid on outcomes, not impressions, at predictable pricing and scale. As part of our ongoing effort to expand our performance solution offering, in April we acquired 50% interest in Winopoly, a contact center That further extends our ability to engage consumers in order to connect them with our advertisers' products and services across multiple industries. Winopoly is specifically geared operationally to service fluent consumers, affording us the opportunity to provide high quality experiences while yielding incremental monetization. To date, Winopoly is achieving its plan and continuing to scale. We view this as a critical capability in further extending the lifecycle of Fluent's relationship with its consumers. Second, our media footprint. This pillar represents our portfolio of media properties, which enable us to entice and engage consumers, learn about their interests and preferences, and match them with brands and offers within our performance marketplace. A key path to extending our equity and expanding our media footprint has been via deployment beyond the U.S. Our European launch now includes two large markets, the UK and Germany, and in North America, we're in the early stages of testing Canada. Our growth in the UK in Q2, which I touched on, was enabled by operational enhancements that increased our monetization or LTV profile, thereby further enabling us to drive additional traffic. We'll continue to focus on non-US markets and anticipate continued growth over the next few years. Third, our platform. represents the technology, analytics, and product innovation that wire the first two pillars together. I earlier referenced investments being made into our media properties as we constantly seek to better align our value proposition with consumer expectations. While some of these enhancements increase certain operating expenses, we believe they create a foundation for future revenue centers and strategic growth for the business. In addition to these front-end platform upgrades, We also made meaningful improvements to our backend technology, which seek to help us onboard advertisers with greater efficiency and test new media channels at a more rapid pace. We're excited about how these new capabilities and features should help us move faster in the back half of 2020 into 2021. In closing, given the current operating environment, we're pleased with our second quarter results. Our business remains solid, benefiting from the strength and diversification of our platform and our unique and advantageous positioning within the industry. Looking ahead to Q3, we'll continue to adjust to the dynamic realities of the marketplace during COVID, and we'll remain focused on driving our business forward on behalf of Fluent and our clients through further innovation, such as media format expansion, deeper insights around conversion behavior, and exploring new channels to engage consumers cost-effectively. We see this operating environment as further validation regarding the benefits of performance marketing to our clients. We're bringing consumers further down the path to purchase while giving our clients clarity on their ROI, creating predictability that de-risks their marketing budget. We see this as a fundamental alignment with our clients' needs and objectives. As a result, we believe the dollars available to us are more predictable in times like this than with other marketing channels, which don't provide the same benefits and financial return. Thank you for your support now, as always. Let me turn the discussion to Alex to review the numbers more specifically, and I'll return for Q&A afterward.