UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 13, 2019
FLUENT, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-37893 | 77-0688094 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
300 Vesey Street, 9th Floor New York, New York | 10282 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (646) 669-7272
33 Whitehall Street, 15th Floor
New York, New York 10004
(Former address of principal executive offices) (Zip Code)
_________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On March 13, 2019, Fluent, Inc. (the "Company") issued a press release announcing its financial results for the fourth quarter and fiscal year ended December 31, 2018. The Company also posted supplemental financial information with respect to its 2017 and 2018 financial results on the Investor Relations section of its website at http://investors.fluentco.com/. The supplemental financial information presents certain GAAP financial measures for each of the quarters in fiscal years 2017 and 2018, as well as reconciliations of certain non-GAAP measures for such quarters to the nearest comparable GAAP measures. The press release and the supplemental financial information issued in connection with the announcement are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K.
The information included herein and in Exhibit 99.1 and Exhibit 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Fluent, Inc. | |||
March 13, 2019 | By: | /s/ Ryan Schulke | |
Name: | Ryan Schulke | ||
Title: | Chief Executive Officer | ||
Exhibit 99.1
Fluent, Inc. Reports Fourth Quarter and Full-Year 2018 Results
• | Q4 2018 revenue of $70.8 million, up 25% over Q4 2017 |
• | GAAP net income from continuing operations of $1.6 million, or $0.02 per share |
• | New non-GAAP metric media margin of $25.1 million, up 27% over Q4 2017 |
• | Adjusted EBITDA of $11.1 million, up 4% over Q4 2017 |
• | Introducing guidance for 2019 |
New York, NY – March 13, 2019 – Fluent, Inc. (NASDAQ: FLNT), a leading data-driven performance marketing company, today reported results for the fourth quarter and fiscal year ended December 31, 2018.
“We are pleased to report strong results for Q4 and full-year 2018, which we believe validate the efficacy of Fluent's business model” commented Ryan Schulke, Fluent’s Chief Executive Officer. “Further, our diligent dual-pronged focus on providing consumers with engaging digital experiences, while delivering highly effective performance-based marketing solutions to our clients, remains at the core of our strategic priorities for 2019 and beyond. During the past year, we grew our team by approximately one-third and we recently announced our new corporate headquarters, setting the stage for anticipated future growth, as reflected in our 2019 guidance which we are introducing today."
Fluent's Chief Financial Officer, Alex Mandel, added "Fluent's results speak to the scale, profitability and growth achieved by the Company and enabled by our colleague base, consumer audience and advertiser clients in 2018. Following the Spin-off in Q1 2018, the Company has been laser-focused on expanding the reach and market awareness of our performance-based marketing solutions."
Fourth Quarter Highlights
• | Revenue of $70.8 million, an increase of 25% over Q4 2017. |
• | Net income from continuing operations of $1.6 million, compared to net loss from continuing operations of $2.8 million in Q4 2017. |
• | Media margin of $25.1 million, representing 35% of revenue and growth of 27% over Q4 2017. |
• | Adjusted EBITDA of $11.1 million, representing 16% of revenue and growth of 4% over Q4 2017. |
• | Adjusted net income of $6.0 million, or $0.08 per share. |
Full-Year 2018 Highlights
• | Revenue of $250.3 million, an increase of 18% over 2017. |
• | Net income from continuing operations of $3.2 million, compared to net loss from continuing operations of $31.7 million in 2017. |
• | Media margin of $92.2 million, representing 37% of revenue and growth of 34% over 2017. |
• | Adjusted EBITDA of $44.1 million, representing 18% of revenue and growth of 35% over 2017. |
• | Adjusted net income of $22.7 million, or $0.30 per share. |
Media margin, adjusted EBITDA and adjusted net income are non-GAAP financial measures. Media margin is defined as revenue minus cost of revenue (exclusive of depreciation and amortization) attributable to variable costs paid for media and related expenses. Adjusted EBITDA is defined as net income (loss) from continuing operations, excluding (1) income taxes, (2) non-cash loss on amendment of warrants, (3) interest expense (net), (4) write-off of long-lived assets, (5) depreciation and amortization, (6) share-based compensation expense, (7) acquisition and restructuring costs, and (8) litigation and certain other costs. Adjusted net income is defined as net income (loss) from continuing operations, excluding (1) non-cash loss on amendment of warrants, (2) write-off of long-lived assets, (3) share-based compensation expense, (4) acquisition and restructuring costs, and (5) litigation and certain other costs. Reconciliations of these non-GAAP measures are provided below.
Liquidity and Capital Resources
As of December 31, 2018 Fluent had:
• | 75,292,383 shares outstanding |
• | 2,909,917 vested not delivered restricted stock units or shares of common stock grants |
• | $17.8 million cash and equivalents |
• | $35.0 million working capital, calculated as current assets minus current liabilities |
• | $55.5 million of debt |
Business Outlook - 2019
Fluent is providing revenue, media margin and adjusted EBITDA guidance for first quarter and full-year 2019, as follows:
For first quarter 2019:
• | Revenue is anticipated to be $65.5 - $66.5 million, or 17% - 19% over Q1 2018. |
• | Media margin is anticipated to be in the range of $22.5 - $23.5 million. |
• | Adjusted EBITDA is anticipated to be in the range of $8.8 - $9.6 million. |
Full-year 2019:
• | Revenue is anticipated to be $285 - $293 million, or 14% - 17% over full-year 2018. |
• | Media margin is anticipated to be in the range of $100 - $106 million. |
• | Adjusted EBITDA is anticipated to be in the range of $46 - $50 million, or 5% - 14% over full-year 2018. Full-year adjusted EBITDA guidance reflects additions to our colleague base and our new corporate headquarters, among other factors. |
Fluent is not able to provide a reconciliation of projected media margin or adjusted EBITDA to the most directly comparable expected GAAP results, due to the unknown effect, timing and potential significance of certain operating costs and expenses, share-based compensation expense, depreciation and amortization expense, interest expense (net), and the provision for (benefit from) income taxes.
Conference Call and Webcast
Fluent, Inc. will host a conference call on Wednesday, March 13, 2019 at 4:30 PM ET to discuss its 2018 fourth quarter and full-year financial results. To listen to the conference call on your telephone, please dial (888) 339-0797 for domestic callers or (412) 317-5248 for international callers. To access the live audio webcast, visit the Fluent website at investors.fluentco.com. Please login at least 15 minutes prior to the start of the call to ensure adequate time for any downloads that may be required. Following completion of the earnings call, a recorded replay of the webcast will be available for those unable to participate. To listen to the telephone replay, please dial (877) 344-7529 or (412) 317-0088 with the replay passcode 10127987. The replay will also be available for one week on the Fluent website at investors.fluentco.com.
About Fluent, Inc.
Fluent (NASDAQ: FLNT) is a leading performance marketing company with expertise in creating meaningful connections between consumers and brands. Leveraging our proprietary first-party database of opted-in consumer profiles, Fluent drives intelligent growth strategies that deliver superior outcomes. Founded in 2010, the company is headquartered in New York City. For more information, visit www.fluentco.com.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
The matters contained in this press release may be considered to be “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Those statements include statements regarding the intent, belief or current expectations or anticipations of Fluent and members of our management team. Factors currently known to management that could cause actual results to differ materially from those in forward-looking statements include the following: compliance with a significant number of governmental laws and regulations, including those laws and regulations regarding privacy and data; failure to safeguard the personal information and other data contained in our database; failure to compete effectively against other online marketing and advertising companies; dependence on third-party publishers, internet search providers and social media platforms for a significant portion of visitors to our websites; dependence on our key personnel; dependence on emails, text messages and telephone calls, among other channels, to reach users for marketing purposes; competition we face for web traffic; ability to compete in an industry characterized by rapidly-changing internet media and advertising technology, evolving industry standards, regulatory uncertainty, and changing user and client demands; liability related to actions of third-party publishers; limitations on our or our third-party publishers’ ability to collect and use data derived from user activities; ability to remain competitive with the shift of online interactions from computers to mobile devices; dependence on third-party service providers;
management of the growth of our operations; management of unfavorable publicity and negative public perception about our industry; failure to meet our clients’ performance metrics or changing needs; failure to detect click-through or other fraud on advertisements; achievement of some or all of the benefits that we expect to achieve from our separation from red violet; failure to adequately protect intellectual property rights or allegations of infringement of intellectual property rights; compliance with the covenants of our credit agreement; and the potential for failures in our internal control over financial reporting. These and additional factors to be considered are set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 and in our other filings with the Securities and Exchange Commission. Fluent undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results or expectations.
FLUENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
(unaudited)
December 31, 2018 | December 31, 2017 | ||||||
ASSETS: | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 17,769 | $ | 16,564 | |||
Accounts receivable, net of allowance for doubtful accounts of $1,751 and $1,624 as of December 31, 2018 and 2017, respectively | 48,652 | 36,278 | |||||
Prepaid expenses and other current assets | 1,971 | 1,865 | |||||
Current assets of discontinued operations | — | 2,274 | |||||
Total current assets | 68,392 | 56,981 | |||||
Restricted cash | 1,480 | — | |||||
Property and equipment, net | 1,380 | 687 | |||||
Intangible assets, net | 61,812 | 74,354 | |||||
Goodwill | 159,791 | 159,791 | |||||
Other non-current assets | 414 | 1,097 | |||||
Non-current assets of discontinued operations | — | 24,089 | |||||
Total assets | $ | 293,269 | $ | 316,999 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 7,855 | $ | 7,408 | |||
Accrued expenses and other current liabilities | 21,566 | 14,967 | |||||
Deferred revenue | 444 | 265 | |||||
Current portion of long-term debt | 3,500 | 2,750 | |||||
Current liabilities of discontinued operations | — | 7,389 | |||||
Total current liabilities | 33,365 | 32,779 | |||||
Promissory notes payable to certain shareholders, net | — | 10,837 | |||||
Long-term debt, net | 51,972 | 49,376 | |||||
Other non-current liabilities | 766 | — | |||||
Total liabilities | 86,103 | 92,992 | |||||
Shareholders' equity: | |||||||
Preferred stock—$0.0001 par value, 10,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2018 and 2017 | — | — | |||||
Common stock—$0.0005 par value, 200,000,000 shares authorized; 76,525,581 and 61,631,573 shares issued as of December 31, 2018 and 2017, respectively; and 75,292,383 and 61,279,050 shares outstanding as of December 31, 2018 and 2017, respectively | 38 | 31 | |||||
Treasury stock, at cost, 1,233,198 and 352,523 shares as of December 31, 2018 and 2017, respectively | (3,272 | ) | (1,274 | ) | |||
Additional paid-in capital | 395,769 | 392,687 | |||||
Accumulated deficit | (185,369 | ) | (167,437 | ) | |||
Total shareholders’ equity | 207,166 | 224,007 | |||||
Total liabilities and shareholders’ equity | $ | 293,269 | $ | 316,999 | |||
FLUENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
(unaudited)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue | $ | 70,821 | $ | 56,523 | $ | 250,280 | $ | 211,690 | |||||||
Costs and expenses: | |||||||||||||||
Cost of revenue (exclusive of depreciation and amortization) | 46,440 | 37,709 | 161,560 | 146,382 | |||||||||||
Sales and marketing expenses (1) | 3,755 | 2,590 | 13,663 | 11,973 | |||||||||||
Product development (1) | 1,723 | 657 | 5,279 | 2,578 | |||||||||||
General and administrative expenses (1) | 10,619 | 11,495 | 36,007 | 55,094 | |||||||||||
Depreciation and amortization | 3,153 | 3,319 | 13,174 | 13,055 | |||||||||||
Write-off of long-lived assets | 1,517 | — | 1,517 | 3,626 | |||||||||||
Spin-off transaction costs (1) | — | — | 7,708 | — | |||||||||||
Total costs and expenses | 67,207 | 55,770 | 238,908 | 232,708 | |||||||||||
Income (loss) from operations | 3,614 | 753 | 11,372 | (21,018 | ) | ||||||||||
Interest expense, net | (1,925 | ) | (2,585 | ) | (8,134 | ) | (9,683 | ) | |||||||
Other expenses, net | — | (1,005 | ) | — | (1,005 | ) | |||||||||
Income (loss) before income taxes from continuing operations | 1,689 | (2,837 | ) | 3,238 | (31,706 | ) | |||||||||
Income taxes | (46 | ) | — | (46 | ) | — | |||||||||
Net income (loss) from continuing operations | 1,643 | (2,837 | ) | 3,192 | (31,706 | ) | |||||||||
Discontinued operations: | |||||||||||||||
Loss from operations of discontinued operations, net of $0 income taxes | — | (3,140 | ) | (2,084 | ) | (21,500 | ) | ||||||||
Loss on disposal of discontinued operations, net of $0 income taxes | — | — | (19,040 | ) | — | ||||||||||
Net loss from discontinued operations | — | (3,140 | ) | (21,124 | ) | (21,500 | ) | ||||||||
Net income (loss) | $ | 1,643 | $ | (5,977 | ) | $ | (17,932 | ) | $ | (53,206 | ) | ||||
Basic and diluted net income (loss) per share: | |||||||||||||||
Continuing operations | $ | 0.02 | $ | (0.04 | ) | $ | 0.04 | $ | (0.52 | ) | |||||
Discontinued operations | $ | — | $ | (0.05 | ) | $ | (0.28 | ) | $ | (0.35 | ) | ||||
Net income (loss) | $ | 0.02 | $ | (0.09 | ) | $ | (0.23 | ) | $ | (0.87 | ) | ||||
Weighted average number of shares outstanding: | |||||||||||||||
Basic and diluted | 78,201,971 | 65,138,638 | 76,705,877 | 61,153,069 | |||||||||||
(1) Amounts include share-based compensation expense as follows: | |||||||||||||||
Sales and marketing expenses | $ | 731 | $ | 213 | $ | 2,856 | $ | 2,254 | |||||||
Product development | 189 | 118 | 676 | 423 | |||||||||||
General and administrative expenses | 1,906 | 5,338 | 5,739 | 28,448 | |||||||||||
Spin-off transaction costs | — | — | 5,410 | — | |||||||||||
Total share-based compensation expense | $ | 2,826 | $ | 5,669 | $ | 14,681 | $ | 31,125 | |||||||
FLUENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | (17,932 | ) | $ | (53,206 | ) | |
Net loss from discontinued operations | 21,124 | 21,500 | |||||
Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities: | |||||||
Depreciation and amortization | 13,174 | 13,055 | |||||
Non-cash interest expense and related amortization | 1,830 | 3,027 | |||||
Share-based compensation expense | 14,681 | 31,125 | |||||
Non-cash loss on amendments of warrants | — | 1,005 | |||||
Write-off of long-lived assets | 1,517 | 3,626 | |||||
Provision for bad debt | 462 | 1,733 | |||||
Allocation of expenses to red violet | (325 | ) | (3,646 | ) | |||
Deferred income taxes | 46 | — | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (12,836 | ) | (7,747 | ) | |||
Prepaid expenses and other current assets | (304 | ) | (432 | ) | |||
Other non-current assets | 683 | 127 | |||||
Accounts payable | 249 | (2,864 | ) | ||||
Accrued expenses and other current liabilities | 6,771 | 5,594 | |||||
Deferred revenue | 179 | 27 | |||||
Net cash provided by operating activities from continuing operations | 29,319 | 12,924 | |||||
Net cash used in operating activities from discontinued operations | (5,835 | ) | (10,411 | ) | |||
Net cash provided by operating activities | 23,484 | 2,513 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Acquisition of property and equipment | (238 | ) | (732 | ) | |||
Capitalized costs included in intangible assets | (1,236 | ) | (927 | ) | |||
Capital contributed to red violet | (19,728 | ) | — | ||||
Net cash used in investing activities from continuing operations | (21,202 | ) | (1,659 | ) | |||
Net cash used in investing activities from discontinued operations | (1,386 | ) | (6,468 | ) | |||
Net cash used in investing activities | (22,588 | ) | (8,127 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from issuance of shares, net of issuance costs | 13,392 | — | |||||
Proceeds from exercise of warrants by certain warrant holders | — | 3,485 | |||||
Proceeds from debt obligations, net of debt costs | 67,182 | 13,883 | |||||
Repayments of long-term debt | (76,787 | ) | (4,310 | ) | |||
Taxes paid related to net share settlement of vesting of restricted stock units | (1,989 | ) | (743 | ) | |||
Repurchase of treasury stock | (9 | ) | — | ||||
Net cash provided by financing activities | 1,789 | 12,315 | |||||
Net increase in cash, cash equivalents and restricted cash | 2,685 | 6,701 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 16,564 | 9,863 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 19,249 | $ | 16,564 | |||
SUPPLEMENTAL DISCLOSURE INFORMATION | |||||||
Cash paid for interest | $ | 6,429 | $ | 6,706 | |||
Cash paid for income taxes | $ | — | $ | — | |||
Definitions, Use and Reconciliation of Non-GAAP Financial Measures
The following non-GAAP measures are used in this release:
Media margin is defined as revenue minus cost of revenue (exclusive of depreciation and amortization) attributable to variable costs paid for media and related expenses. Media margin is also presented as percentage of revenue.
Adjusted EBITDA is defined as net income (loss) from continuing operations, excluding (1) income taxes, (2) non-cash loss on amendment of warrants, (3) interest expense (net), (4) write-off of long-lived assets, (5) depreciation and amortization, (6) share-based compensation expense, (7) acquisition and restructuring costs, and (8) litigation and certain other costs.
Adjusted net income is defined as net income (loss) from continuing operations, excluding (1) non-cash loss on amendment of warrants, (2) write-off of long-lived assets, (3) share-based compensation expense, (4) acquisition and restructuring costs, and (5) litigation and certain other costs. Adjusted net income is also presented on a per share (basic and diluted) basis.
Below is a reconciliation of media margin from net income (loss) from continuing operations, which we believe is the most directly comparable GAAP measure.
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net income (loss) from continuing operations | $ | 1,643 | $ | (2,837 | ) | $ | 3,192 | $ | (31,706 | ) | |||||
Income taxes | 46 | — | 46 | — | |||||||||||
Non-cash loss on amendment of warrants | — | 1,005 | — | 1,005 | |||||||||||
Interest expense, net | 1,925 | 2,585 | 8,134 | 9,683 | |||||||||||
Spin-off transaction costs | — | — | 7,708 | — | |||||||||||
Write-off of long-lived assets | 1,517 | — | 1,517 | 3,626 | |||||||||||
Depreciation and amortization | 3,153 | 3,319 | 13,174 | 13,055 | |||||||||||
General and administrative expenses | 10,619 | 11,495 | 36,007 | 55,094 | |||||||||||
Product development | 1,723 | 657 | 5,279 | 2,578 | |||||||||||
Sales and marketing expenses | 3,755 | 2,590 | 13,663 | 11,973 | |||||||||||
Non-media cost of revenue (1) | 706 | 889 | 3,473 | 3,571 | |||||||||||
Media margin | $ | 25,087 | $ | 19,703 | $ | 92,193 | $ | 68,879 | |||||||
Revenue | $ | 70,821 | $ | 56,523 | $ | 250,280 | $ | 211,690 | |||||||
Media margin % of revenue | 35.4 | % | 34.9 | % | 36.8 | % | 32.5 | % | |||||||
(1) Represents the portion of cost of revenue (exclusive of depreciation and amortization) not attributable to variable costs paid for media and related expenses.
Below is a reconciliation of adjusted EBITDA from net income (loss) from continuing operations, which we believe is the most directly comparable GAAP measure.
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net income (loss) from continuing operations | $ | 1,643 | $ | (2,837 | ) | $ | 3,192 | $ | (31,706 | ) | |||||
Income taxes | 46 | — | 46 | — | |||||||||||
Non-cash loss on amendment of warrants | — | 1,005 | — | 1,005 | |||||||||||
Interest expense, net | 1,925 | 2,585 | 8,134 | 9,683 | |||||||||||
Write-off of long-lived assets | 1,517 | — | 1,517 | 3,626 | |||||||||||
Depreciation and amortization | 3,153 | 3,319 | 13,174 | 13,055 | |||||||||||
Share-based compensation expense | 2,826 | 5,669 | 14,681 | 31,125 | |||||||||||
Acquisition and restructuring costs | — | 749 | 3,149 | 5,541 | |||||||||||
Litigation and other costs | — | 201 | 164 | 204 | |||||||||||
Adjusted EBITDA | $ | 11,110 | $ | 10,691 | $ | 44,057 | $ | 32,533 | |||||||
Below is a reconciliation of adjusted net income from net income (loss) from continuing operations, which we believe is the most directly comparable GAAP measure.
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
(In thousands, except share data) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net income (loss) from continuing operations | $ | 1,643 | $ | (2,837 | ) | $ | 3,192 | $ | (31,706 | ) | |||||
Non-cash loss on amendment of warrants | — | 1,005 | — | 1,005 | |||||||||||
Write-off of long-lived assets | 1,517 | — | 1,517 | 3,626 | |||||||||||
Share-based compensation expense | 2,826 | 5,669 | 14,681 | 31,125 | |||||||||||
Acquisition and restructuring costs | — | 749 | 3,149 | 5,541 | |||||||||||
Litigation and other costs | — | 201 | 164 | 204 | |||||||||||
Adjusted net income | $ | 5,986 | $ | 4,787 | $ | 22,703 | $ | 9,795 | |||||||
Adjusted net income per share: | |||||||||||||||
Basic and diluted | $ | 0.08 | $ | 0.07 | $ | 0.30 | $ | 0.16 | |||||||
Weighted average number of shares outstanding: | |||||||||||||||
Basic and diluted | 78,201,971 | 65,138,638 | 76,705,877 | 61,153,069 | |||||||||||
We present media margin, adjusted EBITDA and adjusted net income as supplemental measures of our financial and operating performance because we believe they provide useful information to investors. More specifically:
Media margin is a measure of the efficiency of the Company’s operating model. We use media margin and the related measure of media margin as a percentage of revenue as primary metrics to measure the financial return on our media and related costs, specifically to measure the degree by which the revenue generated from our digital marketing services exceeds the cost to attract the consumers to whom offers are made through our services. Media margin is used extensively by our management to manage our operating performance, including evaluating operational performance against budgeted media margin and understanding the efficiency of our media and related expenditures. We also use media margin for performance evaluations and compensation decisions regarding certain personnel.
Adjusted EBITDA is another primary metric by which we evaluate the operating performance of our business, on which certain operating expenditures and internal budgets are based and by which, in addition to media margin and other factors, our senior management is compensated. Adjusted EBITDA excludes from net income (loss) from continuing operations items including (1) income taxes, (2) non-cash loss on amendment of warrants, (3) interest expense (net), (4) write-off of long-lived assets, (5) depreciation and amortization, (6) share-based compensation expense, (7) acquisition and restructuring costs, and (8) litigation and certain other costs, certain of which are recognized and recorded under GAAP in particular periods but which might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded, or may be non-recurring in nature. We consider an item to be non-recurring if it is infrequent or unusual and has not occurred in the past two years or is not expected to recur in the next two years, in accordance with SEC rules.
Adjusted net income and the related measure of adjusted net income per share exclude from net income (loss) from continuing operations items including (1) non-cash loss on amendment of warrants, (2) write-off of long-lived assets, (3) share-based compensation expense, (4) acquisition and restructuring costs, and (5) litigation and certain other costs, certain of which are recognized and recorded under GAAP in particular periods but which might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded, or may be non-recurring in nature. We believe adjusted net income affords investors a different view of the overall financial performance of the Company than adjusted EBITDA and the GAAP measure of net income from continuing operations.
Media margin, adjusted EBITDA and adjusted net income are not intended to be performance measures that should be regarded as an alternative to, or more meaningful than, net income (loss) from continuing operations as indicators of operating performance. None of these metrics are presented as measures of liquidity. The way we measure media margin, adjusted EBITDA and adjusted net income may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in our various agreements.
Contact Information:
Investors:
Investor Relations
Fluent, Inc.
(917) 310-2070
InvestorRelations@fluentco.com
Fluent, Inc. Supplemental Financial Information and Operating Metrics Q4 2018 Earnings ($ in thousands, except per share amounts; rounding differences may occur) 2017 2018 Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 GAAP - As Reported (unaudited) (unaudited) (unaudited) Revenue $49,194 $51,031 $54,942 $56,523 $55,989 $56,935 $66,535 $70,821 $211,690 $250,280 Cost of revenue (exclusive of depreciation and amortization) (a) 34,851 36,042 37,780 37,709 37,619 35,757 41,744 46,440 146,382 161,560 Sales and marketing expenses (a)(b) 3,169 3,053 3,161 2,590 3,102 3,166 3,640 3,755 11,973 13,663 Product development (a)(b) 662 612 647 657 734 1,142 1,680 1,723 2,578 5,279 General and administrative expenses (a)(b) 11,286 13,921 18,392 11,495 6,659 8,954 9,775 10,619 55,094 36,007 Depreciation and amortization 3,205 3,234 3,297 3,319 3,331 3,338 3,352 3,153 13,055 13,174 Write-off of long-lived assets 3,626 - - - - - - 1,517 3,626 1,517 Spin-off transaction costs (b) - - - - 7,708 - - - - 7,708 Total costs and expenses 56,799 56,862 63,277 55,770 59,153 52,357 60,191 67,207 232,708 238,908 (Loss) income from operations (7,605) (5,831) (8,335) 753 (3,164) 4,578 6,344 3,614 (21,018) 11,372 Interest expense, net (2,227) (2,445) (2,426) (2,585) (2,394) (1,933) (1,882) (1,925) (9,683) (8,134) Other expenses, net - - - (1,005) - - - - (1,005) - (Loss) income before income taxes from continuing operations (9,832) (8,276) (10,761) (2,837) (5,558) 2,645 4,462 1,689 (31,706) 3,238 Income taxes - - - - - - - (46) - (46) Net (loss) income from continuing operations (9,832) (8,276) (10,761) (2,837) (5,558) 2,645 4,462 1,643 (31,706) 3,192 Discontinued operations: Loss from operations of discontinued operations, net of $0 income taxes (2,893) (12,133) (3,334) (3,140) (2,084) - - - (21,500) (2,084) Loss on disposal of discontinued operations, net of $0 income taxes - - - - (19,040) - - - - (19,040) Net loss from discontinued operations (2,893) (12,133) (3,334) (3,140) (21,124) - - - (21,500) (21,124) Net (loss) income ($12,725) ($20,409) ($14,095) ($5,977) ($26,682) $2,645 $4,462 $1,643 ($53,206) ($17,932) Basic and diluted (loss) earnings per share: Continuing operations ($0.16) ($0.14) ($0.18) ($0.04) ($0.08) $0.03 $0.06 $0.02 ($0.52) $0.04 Discontinued operations (0.05) (0.20) (0.05) (0.05) (0.30) - - - (0.35) (0.28) Net (loss) income ($0.21) ($0.34) ($0.23) ($0.09) ($0.37) $0.03 $0.06 $0.02 ($0.87) ($0.23) Weighted average number of shares outstanding: Basic and Diluted 60,157,609 60,647,307 61,159,471 65,138,638 71,537,743 78,196,959 78,199,579 78,201,971 61,153,069 76,705,877 (a) Gives effect to the reclassification of certain operating expenses as described in Note 2 to the Consolidated Financial Statements included in Form 10-K for the year ended December 31, 2018. (b) Amounts include share-based compensation expense as follows: Sales and marketing expenses $666 $704 $671 $213 $666 $742 $717 $731 $2,254 $2,856 Product development 118 116 71 118 158 193 136 189 423 676 General and administrative expenses 6,070 7,274 9,766 5,338 414 1,679 1,740 1,906 28,448 5,739 Spin-off transaction costs - - - - 5,410 - - - - 5,410 Total share-based compensation $6,854 $8,094 $10,508 $5,669 $6,648 $2,614 $2,593 $2,826 $31,125 $14,681
Fluent, Inc. Supplemental Financial Information and Operating Metrics Q4 2018 Earnings ($ in thousands, except per share amounts; rounding differences may occur) 2017 2018 Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 Reconciliation of Non-GAAP Measures (unaudited) (unaudited) (unaudited) Reconciliation of net (loss) income from continuing operations to media margin(a): Net (loss) income from continuing operations ($9,832) ($8,276) ($10,761) ($2,837) ($5,558) $2,645 $4,462 $1,643 ($31,706) $3,192 Income taxes - - - - - - - 46 - 46 Non-cash loss on amendment of warrants - - - 1,005 - - - - 1,005 - Interest expense, net 2,227 2,445 2,426 2,585 2,394 1,933 1,882 1,925 9,683 8,134 Spin-off transaction costs - - - - 7,708 - - - - 7,708 Write-off of long-lived assets 3,626 - - - - - - 1,517 3,626 1,517 Depreciation and amortization 3,205 3,234 3,297 3,319 3,331 3,338 3,352 3,153 13,055 13,174 General and administrative expenses 11,286 13,921 18,392 11,495 6,659 8,954 9,775 10,619 55,094 36,007 Product development 662 612 647 657 734 1,142 1,680 1,723 2,578 5,279 Sales and marketing expenses 3,169 3,053 3,161 2,590 3,102 3,166 3,640 3,755 11,973 13,663 Non-media cost of revenue(b) 873 709 1,100 889 943 814 1,010 706 3,571 3,473 Media margin $15,216 $15,698 $18,262 $19,703 $19,313 $21,992 $25,801 $25,087 $68,879 $92,193 Revenue 49,194 51,031 54,942 56,523 55,989 56,935 66,535 70,821 211,690 250,280 Media margin % of revenue 30.9% 30.8% 33.2% 34.9% 34.5% 38.6% 38.8% 35.4% 32.5% 36.8% Reconciliation of net (loss) income from continuing operations to adjusted EBITDA(c): Net (loss) income from continuing operations ($9,832) ($8,276) ($10,761) ($2,837) ($5,558) $2,645 $4,462 $1,643 ($31,706) $3,192 Income taxes - - - - - - - 46 - 46 Non-cash loss on amendment of warrants - - - 1,005 - - - - 1,005 - Interest expense, net 2,227 2,445 2,426 2,585 2,394 1,933 1,882 1,925 9,683 8,134 Write-off of long-lived assets 3,626 - - - - - - 1,517 3,626 1,517 Depreciation and amortization 3,205 3,234 3,297 3,319 3,331 3,338 3,352 3,153 13,055 13,174 Share-based compensation expense 6,854 8,094 10,508 5,669 6,648 2,614 2,593 2,826 31,125 14,681 Acquisition and restructuring costs 668 1,650 2,474 749 2,713 317 119 - 5,541 3,149 Litigation and other costs - - 3 201 72 92 - - 204 164 Adjusted EBITDA $6,748 $7,147 $7,947 $10,691 $9,600 $10,939 $12,408 $11,110 $32,533 $44,057 Reconciliation of net (loss) income from continuing operations to adjusted net income(d): Net (loss) income from continuing operations ($9,832) ($8,276) ($10,761) ($2,837) ($5,558) $2,645 $4,462 $1,643 ($31,706) $3,192 Non-cash loss on amendment of warrants - - - 1,005 - - - - 1,005 - Write-off of long-lived assets 3,626 - - - - - - 1,517 3,626 1,517 Share-based compensation expense 6,854 8,094 10,508 5,669 6,648 2,614 2,593 2,826 31,125 14,681 Acquisition and restructuring costs 668 1,650 2,474 749 2,713 317 119 - 5,541 3,149 Litigation and other costs - - 3 201 72 92 - - 204 164 Adjusted net income $1,316 $1,468 $2,224 $4,787 $3,875 $5,668 $7,174 $5,986 $9,795 $22,703 Adjusted net income per share: Basic and Diluted $0.02 $0.02 $0.04 $0.07 $0.05 $0.07 $0.09 $0.08 $0.16 $0.30 Weighted average number of shares outstanding: Basic and Diluted 60,157,609 60,647,307 61,159,471 65,138,638 71,537,743 78,196,959 78,199,579 78,201,971 61,153,069 76,705,877 (a) Defined as: revenue minus cost of revenue (exclusive of depreciation and amortization) attributable to variable costs paid for media and related expenses. (b) Represents the portion of cost of revenue (exclusive of depreciation and amortization) not attributable to variable costs paid for media and related expenses. (c) Defined as: net income (loss) from continuing operations, excluding (1) income taxes, (2) non-cash loss on amendment of warrants, (3) interest expense (net), (4) write-off of long-lived assets, (5) depreciation and amortization, (6) share- based compensation expense, (7) acquisition and restructuring costs, and (8) litigation and other costs. (d) Defined as: net income (loss) from continuing operations, excluding (1) non-cash loss on amendment of warrants, (2) write-off of long-lived assets, (3) share-based compensation expense, (4) acquisition and restructuring costs, and (5) litigation and other costs.