Fluent, Inc.

Good afternoon and welcome. Thank you for joining us to discuss our second quarter 2023 earnings results. With me today are Fluent CEO, Don Patrick, Interim CFO, Ryan Perfitt, and Chief Strategy Officer, Ryan Shulke. Our call today will begin with comments from Don and Ryan Perfitt, 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 forward-looking statements due to risk and uncertainties associated with the company's business. These statements may be identified by words such as expects, plans, projects, could, will, 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 risk 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 these non-GAAP metrics. The definitions of these metrics and reconciliation to the most directly comparable gap financial measure are provided in the earnings press release issued earlier today. With that, I'm pleased to introduce Fluent CEO, Don Patrick.

Good afternoon and thank you all for joining our call today.

I'm here together with Ryan Schuelke, our Chief Strategy Officer, Chairman of the Board and Company Founder, and Ryan Perfect, our Interim Chief Financial Officer. I'll make some brief comments about our second quarter results that continue to reinforce the imperative behind our commitment to enhance the quality of our consumer engagements within our performance marketplace, while also reflecting the more volatile macroeconomic and evolving regulatory environment we're operating within. I'll then update you on the meaningful progress we're making in establishing Fluent as the industry leader relating to our previously announced FTC settlement. After three plus years of cooperating fully with the FTC and investing strategically and financially in the process, we've now establishing leading edge protocols, which we believe will act as best in class model for our entire industry. This was the imperative we chose to improve consumer experience relative to engagement and satisfaction and drive higher quality outcomes for advertisers while ultimately leveling the industry playing field that our less committed competitors have tilted against us. Our Q2 23 results reflect the current strong headwinds we continue to face and are consistent with the more cautious near-term business roadmap we laid out in previous earnings releases. Our focus is in sequentially rebuilding our base, consisting with the strategic pivots we are making and the new business ventures that we embarked upon some of which we'll explore with you today. Financial results were as follows. Revenue of 82.1 million, representing a 6% increase sequentially over Q1. We continue to see the parallel levels of unpredictability as does the entire digital advertising industry, with consumers and clients pausing to assess the current economic uncertainty. Our median margin of 25.9 million, was the 18% sequential increase over Q1. At 31.5% of revenue, our median margin percentage did expand quarter over quarter as we saw media costs, primarily on the social media platforms, return closer to historical norms. Adjusted EBITDA, 5.6 million, represents 7% of revenue. This reflects both our ongoing strategic investments and our growth opportunities, as well as the impact of additional quality initiatives we proactively implemented during the last two quarters as we continued to learn and react on the regulatory front. Relative to the headwinds, first, our clients' consumer acquisition strategies continued to shift from growth and return on ad spend to clear prioritization on return on ad spend to the continued consumer volatility in the market. In the immediate term, we continue to leverage Fluent's performance marketplace to respond to those shifts by managing media margin mix. Second, second quality results are also directly impacted by our conscious strategic and financial decisions to forego certain revenue streams in our rewards and job businesses that we felt did not meet our evolving quality standards across our performance marketplace. This decision will continue to impact us over the next several quarters as we reestablish our strategic base while setting the course to lean into our growth agenda on a sequential basis in fiscal year 24. To be clear, we look to lead the industry in redefining regulatory standards that exist in the market. despite the short-term impact it will have on growth to include some lingering impact in subsequent quarters. But our leading edge processes and protocols come with strategic purpose, and we are sending a resounding assertive message to the industry and the competitive set that we will lead in elevating the consumer engagement performance standards that we believe must be manifested more broadly in the marketplace. And I'll state again, we are resolute to that degree, that we are willing to invest short-term revenue and profitability in order to serve our commitment to the ongoing strategy that will begin paying more concrete financial dividends in Cisco year 24, as well as longer term. More importantly, we are confident that this path represents a more strategic, sustainable growth in future quarters. So let's speak about our evolving growth agenda. As we're investing today, We are bullish regarding our early stage strategic results in three specific business units where we see more than $150 million of revenue growth potential in the next two years. Importantly, these businesses will drive margin of creative to the core over time. Essential to our growth agenda is our core performance marketplace, a highly differentiated fluent capability, and the foundation on which we are leveraging and fueling our exciting new strategic investments. Although we see a core performance marketplace growing more modestly in the future, a strong and healthy core will act as a catalyst to drive the significant growth opportunities we see in the business units we discussed today, Influencer, Call Solutions, and Adflow. First, we're excited to announce our major launch into the e-commerce market, where 38 billion of U.S. advertising spend is growing double digits. Our Adflow launch, represents unique potential for us to expand our roster of major brand partnerships in a high growth vertical by leveraging our core capabilities in the Fluent Performance Marketplace. Over time, we're confident we can generate consumer and advertiser value that will make us a credible player in the market. Fluent's core business brings consumers to our own digital owned and operated properties, and through survey and discovery, we curate a more meaningful consumer experience that connects them to world-class brands. With the recent launch of our turnkey e-commerce solution, Adflow, Fluent is now leveraging our core proprietary performance marketplace technology platform and our robust first-party data to connect world-class brands where high-quality consumers exist. This business creates an exciting new and growing market opportunity for Fluent while opening the door to new brand partners we've yet to do business with. Adflow delivers incremental profit streams to our e-commerce partners while representing a new opportunity for world-class brands to reach consumers at the optimal purchase point. Appearing between the purchase processing and the confirmation page, Adflow's powerful machine learning leverages the e-commerce partner's first-party data to analyze consumer behavior, preferences, and purchase history in order to deliver relevant and personalized offers. Although early stage, Adflow is already active on more than a dozen e-commerce sites with a strong pipeline of new partners, where we are building a foundation by testing and learning to enhance our differentiated value proposition. We are quite enthusiastic about this major strategic investment we're making based on the longer-term ROI of this exciting new business. And good progress is being made, as we reported last quarter, where we continue to experience significant double-digit growth in our influencer and call solution businesses year over year. Both of these smaller strategic footprints are also high continuing sequential growth opportunities where we believe Fluent can differentiate ourselves in the marketplace with margin potential that exceeds Fluent's core. Importantly, in further validating our strategic veracity around the future course, all three of these business units, Adflow, Influencer, and Call Solutions, enhance Fluent's total value proposition for consumers and clients and are designed to generate greater long-term shareholder value. We are quite excited by the early stage results. You can see why we continue to accelerate our strategic agenda and why we're so enthusiastic about our course. Yet like so many in our industry, we're facing challenging and evolving regulatory environment where the rules of consumer engagements are rapidly changing in a meaningful manner And this will be reflected in our short-term results over the next several quarters as we continue to reestablish our growth agenda. Last month, Fluent settled with the Federal Trade Commission, resolving the FTC's previously disclosed investigation. Working tirelessly and collaboratively with the FTC over three years, we're pleased to have reached a resolution. Our goal is to position Fluent at the forefront of our industry, and the FTC consent order sets a clear new industry compliance standard that we have led, the Fluent way. Fluent's foundational commitment to enhance the quality of consumer engagement within our performance marketplace is an investment we believe is unequivocally worth making, so will come at immediate term expense of top and bottom line. With our commitment to quality consumer engagement at the forefront, we saw opportunity to improve our go-to-market capabilities and client deliverables in a differentiated manner, so we chose to lead and are forging ahead with those core fibers in place. While it may take a few quarters or more for the industry playing field to finally level, we will look to leverage our leadership position to grow our market share with our media and client partners. Importantly, we'll monitor the reality that some of our competitors regrettably and sometimes unabashedly operate with less compliant protocols as they will now be strongly urged to meet our standards or take significant regulatory risk. So what we have thoughtfully planned and executed over a couple years will require competitors to react more immediately or risk regulatory action. Of strategic relevance and in light of these industry changes, who can now leverage our proven track record of pivoting our performance marketplace to leverage higher quality consumer engagement and create competitive differentiation and distance. This positively impacts our longer term business while providing us a unique opportunity to develop deeper strategic relationships, both consumers and world class brands. The successful FTC settlement gives us important clarity on our strategic roadmap, and we will continue to appropriately invest in our growth agenda, quality as our North Star, and with higher quality consumer experience as our scorecard. And we are excited about the level of competitive playing field that should have fluent returning to growth at or above industry growth rates with sequential margin improvement. However, in the immediate term, As the market reacts to the new industry standard Fluent has chosen to lead, we believe it will take a few quarters or more for competitors to implement these industry compliance standards. And frankly, we expect some of them to try to take advantage of it financially at their own business and regulatory peril. Given a lack of short-term clarity on this important industry inflection point, along with our continued investment in our exciting new strategic business ventures, We see it taking time for us to return to sequential growth trajectory in fiscal year 24. In closing, we've invested aggressively and prudently in our forward path and remain confident that the fundamentals we have continued to put in place over the last fiscal year will pay longer term strategic and financial dividends as we move further into fiscal year 24. Ultimately, market and industry conditions will improve, and the new consumer norm will prevail. And our new business units will continue to strengthen our market position given the investments we're making. In the immediate term, we'll continue to implement our strategy while managing the mix across our different business units as a clear path to deliver our margin expansion goals. And with that, I'll turn to Ryan to provide more detail on our financial results.