Fluent, Inc.

Good day and welcome to the Fluent Incorporated fourth quarter and fiscal year 2020 conference call. All participants will be in a 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 this event is being recorded. I would like now to turn the conference over to Ryan McCarthy of Fluid, Inc. Please go ahead.

Good afternoon and welcome. Thank you for joining us to discuss our fourth quarter and full year 2020 earnings results. Joining me on today's call are Fluid's CEO, Ryan Schuelke, and our CFO, Alex Mandel. Our call will begin with comments from Ryan Schuelke 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. 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 Schilke.

thank you ryan and good afternoon thanks to everyone for joining us today fiscal 2020 was a year unlike any other and i'm extremely proud of our team and their execution against our strategic plan this past year our industry saw a significant acceleration in the adoption of digital marketing services this shift has profound implications for consumers and advertisers and we're pleased that so many entrusted us to provide innovative and valuable performance marketing solutions Back in mid-January, we released preliminary metrics for Q4 and the full year 2020. Today, we're providing final figures, and I'm pleased to report that we came in at the high end of the ranges across revenue, median margin, and adjusted EBITDA. For the full year 2020, we delivered $310.7 million of revenue, $110.4 million of median margin, and $41.2 million of adjusted EBITDA. which represents top-line growth of 10.3%, growth in median margin of 18%, and adjusted EBITDA of 18.7% over 2019. Adjusted EBITDA represents a margin of 13.3% of revenue. For the fourth quarter, revenue came in at $82 million, median margin was $32 million, and adjusted EBITDA was $11.1 million. On our last call at the end of October, we indicated cautious optimism that Q4 would show seasonal growth over Q3, notwithstanding the uncertainties arising from the election, the pandemic, and a very different holiday shopping season. Ultimately, our Q4 did deliver on that outlook, growing 4.7% sequentially over Q3, similar to our experiences in both 2017 and 2018. Reflecting on both full year and the fourth quarter, I'll share some thoughts in the context of our three strategic growth pillars, which I've spoken to over the last few calls. We're excited to update you on the significant progress we made on two of these, our performance marketplace and our platform. And our strategic advances against these two pillars have motivated us to redefine our third pillar, our media footprint. There, we see our commitment to driving higher quality traffic as the road to sustainable growth, even though it has implications for our near-term revenue and earnings profile, which I'll speak to further in a moment. Regarding the first pillar, our performance marketplace, or the client demand side of our business, in 2020, we're highly motivated by the fact that we partnered with five of the 25 largest companies in the world by market cap. Of those, three were new in a year, including one in the fourth quarter. As I've noted before, we see ourselves as a reflection of the brands we partner with, and this progress further confirms that we're bringing an innovative and valuable solution to a large addressable market opportunity. In Q4, with the enhanced capabilities of our live agent platform now fully integrated, we saw very strong demand from high-quality clients and high-value verticals like Senior Health through the Medicare Open Enrollment Cycle. In sum, we're seeing incredible market demand from quality clients, demonstrating that they have a strategic appetite for our performance marketing solutions. The second pillar I've spoken to is our platform, where we've made significant investments in technology, analytics, and CRM over the last two years. On the last call, I referred to some innovative new promotions we began that were resonating well with consumers. Those continued through Q4 and are still performing for us in the new year. Also notable on our platform initiatives has been a significant improvement in our ad serving effectiveness, which delivered meaningful lift in monetization during the second half of 2020. Through a combination of new promotions and more effective ad serving against the premium tier advertiser demand I just referenced, we effectively doubled our unit monetization in 2020 when comparing Q4 with Q1. And we anticipate this to be a sustainable win. As a result, volume to our platform is now incrementally more valuable for us. Our third strategic pillar, our media footprint, is an area we're now focused on making some strategic adjustments. As our business has grown, we've attracted larger and more sophisticated clients to the platform. To further increase our value proposition to these top-tier clients, and frankly to all of our clients, while fortifying our leadership position in relation to the evolving regulatory landscape of our industry, we commenced a traffic quality initiative in 2020. Over the last year, I've spoken on our earnings calls about evolving our business model and our products, improved against an industry backdrop that is experiencing rapid change in many ways, including regulatory changes. And as our industry is evolving, so too is Fluent, and we're doing so leading by example. Through our traffic quality initiative, we're bringing an enhanced, longer-term focus to our media strategy. In doing so, we are foregoing some revenue in the near term based on our belief that on the other side of this transition, we'll fundamentally deliver a higher quality offering to our clients, which will build Fluence brand equity with our clients and enterprise value for our stakeholders. While we currently anticipate taking an 11% to 13% hit on top line in Q1 2021, as compared with Q1 of last year, we are convinced that this strategic determination will pave the way for future growth. We believe our go-forward model in the year ahead will be one where more Fortune 500 brands see the value that Fluent can play as their marketing partner. So while we'll deliver somewhat less volume, we'll be at higher quality and monetization. We're peddled to the metal on rebuilding our supply base under our traffic quality initiative and anticipate this transition will take a couple of quarters to reestablish prior trend levels. From there, we believe we can achieve substantial, sustainable growth with a revenue and earnings profile that will be more highly valued by our clients and the market. Again, for context, demand is strong, clients are leaning in for more, and monetization of consumer traffic has been robust at nearly two times where we were in Q1 of last year. In turn, our commitment to higher quality traffic represents a sustainable and profitable growth plan. To conclude my prepared thoughts for today, I want to reiterate that we see our mission as fully intact. Fluent provides an innovative, high-value solution that addresses a massive market opportunity. The quality metrics of our client base and increasing demand from our clients encourages our vision seven days a week. Our foundation is rock solid and rests on timeless operating principles, sustainable business strategy, leading-edge operating protocols, and best-in-class code of conduct. Fluent remains diligent in enhancing our brand equity, improving our own standards for the benefit of our clients and consumers, as well as our shareholders. And with that, I'll turn things to Alex for the detailed financial results.