UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number
FLUENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| ☐ | | ☒ |
Non-accelerated filer |
| ☐ | Smaller reporting company | |
Emerging growth company |
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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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of October 28, 2020, the registrant had
TABLE OF CONTENTS FOR FORM 10-Q
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Item 1. |
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Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 |
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I - FINANCIAL INFORMATION
Unless otherwise indicated or required by the context, all references in this Quarterly Report on Form 10-Q to "we," "us," "our," "Fluent," or the "Company," refer to Fluent, Inc. and its consolidated subsidiaries.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
(unaudited)
September 30, 2020 | December 31, 2019 | |||||||
ASSETS: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net of allowance for doubtful accounts of $ and $ , respectively | ||||||||
Prepaid expenses and other current assets | ||||||||
Total current assets | ||||||||
Restricted cash | ||||||||
Property and equipment, net | ||||||||
Operating lease right-of-use assets | ||||||||
Intangible assets, net | ||||||||
Goodwill | ||||||||
Other non-current assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued expenses and other current liabilities | ||||||||
Deferred revenue | ||||||||
Current portion of long-term debt | ||||||||
Current portion of operating lease liability | ||||||||
Total current liabilities | ||||||||
Long-term debt, net | ||||||||
Operating lease liability | ||||||||
Other non-current liabilities | ||||||||
Total liabilities | ||||||||
Contingencies (Note 10) | ||||||||
Shareholders' equity: | ||||||||
Preferred stock — $ par value, Shares authorized; Shares outstanding — shares for both periods | ||||||||
Common stock — $ par value, Shares authorized; Shares issued — and , respectively; and Shares outstanding — and , respectively | ||||||||
Treasury stock, at cost — and shares, respectively | ( | ) | ( | ) | ||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total shareholders' equity | ||||||||
Total liabilities and shareholders' equity | $ | $ |
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
(unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||
Costs and expenses: |
||||||||||||||||
Cost of revenue (exclusive of depreciation and amortization) | ||||||||||||||||
Sales and marketing | ||||||||||||||||
Product development | ||||||||||||||||
General and administrative | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Goodwill impairment | ||||||||||||||||
Write-off of long-lived assets | ||||||||||||||||
Total costs and expenses | ||||||||||||||||
Income (loss) from operations |
( |
) | ||||||||||||||
Interest expense, net | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Income (loss) before income taxes |
( |
) | ( |
) | ||||||||||||
Income tax (expense) benefit | ( |
) | ( |
) | ||||||||||||
Net income (loss) |
( |
) | ( |
) | ||||||||||||
Basic and diluted income (loss) per share: |
||||||||||||||||
Basic | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||
Diluted | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||
Weighted average number of shares outstanding: |
||||||||||||||||
Basic |
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Diluted |
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Amounts in thousands, except share data)
(unaudited)
Common stock |
Treasury stock |
Additional paid-in |
Accumulated |
Total shareholders' |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
capital |
deficit |
equity |
||||||||||||||||||||||
Balance at June 30, 2020 |
$ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||
Vesting of restricted stock units and issuance of restricted stock |
||||||||||||||||||||||||||||
Increase in treasury stock resulting from shares withheld to cover statutory taxes |
( |
) | ( |
) | ||||||||||||||||||||||||
Exercise of warrants by certain warrant holders (see note 7) | — | — | — | — | — | |||||||||||||||||||||||
Share-based compensation |
— | — | ||||||||||||||||||||||||||
Net income |
— | — | ||||||||||||||||||||||||||
Balance at September 30, 2020 |
$ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||
Balance at December 31, 2019 |
$ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||
Vesting of restricted stock units and issuance of restricted stock |
( |
) | ||||||||||||||||||||||||||
Increase in treasury stock resulting from shares withheld to cover statutory taxes |
( |
) | ( |
) | ||||||||||||||||||||||||
Repurchase of shares into treasury stock |
( |
) | ( |
) | ||||||||||||||||||||||||
Exercise of warrants by certain warrant holders (see note 7) |
— | — | — | — | — | |||||||||||||||||||||||
Share-based compensation |
— | — | ||||||||||||||||||||||||||
Net income |
— | — | ||||||||||||||||||||||||||
Balance at September 30, 2020 |
$ | $ | ( |
) | $ | $ | ( |
) | $ |
Common stock |
Treasury stock |
Additional paid-in |
Accumulated |
Total shareholders' |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
capital |
deficit |
equity |
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Balance at June 30, 2019 | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||
Vesting of restricted stock units and issuance of restricted stock | ||||||||||||||||||||||||||||
Increase in treasury stock resulting from shares withheld to cover statutory taxes | ( |
) | ( |
) | ||||||||||||||||||||||||
Reclassification of exercisable warrants from liability to equity | ( |
) | ( |
) | ||||||||||||||||||||||||
Share-based compensation expense | ||||||||||||||||||||||||||||
Net loss | ( |
) | ( |
) | ||||||||||||||||||||||||
Balance at September 30, 2019 |
$ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||
Balance at December 31, 2018 | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||
Vesting of restricted stock units and issuance of restricted stock | ( |
) | ||||||||||||||||||||||||||
Increase in treasury stock resulting from shares withheld to cover statutory taxes | ( |
) | ( |
) | ||||||||||||||||||||||||
Share-based compensation expense | ||||||||||||||||||||||||||||
Net loss | ( |
) | ( |
) | ||||||||||||||||||||||||
Balance at September 30, 2019 |
$ | $ | ( |
) | $ | $ | ( |
) | $ |
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | $ | ( | ) | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | ||||||||
Non-cash interest expense | ||||||||
Share-based compensation expense | ||||||||
Goodwill impairment | ||||||||
Write-off of long-lived assets | ||||||||
Non-cash accrued compensation expense for Put/Call Consideration | ||||||||
Provision for bad debt | ||||||||
Provision for (benefit from) income taxes | ( | ) | ||||||
Changes in assets and liabilities, net of business acquisition: | ||||||||
Accounts receivable | ||||||||
Prepaid expenses and other current assets | ( | ) | ||||||
Other non-current assets | ( | ) | ( | ) | ||||
Operating lease assets and liabilities, net | ( | ) | ||||||
Accounts payable | ( | ) | ||||||
Accrued expenses and other current liabilities | ( | ) | ||||||
Deferred revenue | ||||||||
Other | ( | ) | ||||||
Net cash provided by operating activities | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Business acquisition, net of cash acquired | ( | ) | ( | ) | ||||
Capitalized costs included in intangible assets | ( | ) | ( | ) | ||||
Acquisition of property and equipment | ( | ) | ( | ) | ||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repayments of long-term debt | ( | ) | ( | ) | ||||
Repurchase of treasury stock | ( | ) | ||||||
Taxes paid related to net share settlement of vesting of restricted stock units | ( | ) | ( | ) | ||||
Net cash used in financing activities | ( | ) | ( | ) | ||||
Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ) | ||||||
Cash, cash equivalents and restricted cash at beginning of period | ||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
SUPPLEMENTAL DISCLOSURE INFORMATION | ||||||||
Cash paid for interest | $ | $ | ||||||
Cash paid for income taxes | $ | $ | ||||||
Share-based compensation capitalized in intangible assets | $ | $ | ||||||
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share data)
(unaudited)
1. Summary of significant accounting policies
(a) Basis of preparation
The accompanying unaudited consolidated financial statements have been prepared by Fluent, Inc., a Delaware corporation (the "Company" or "Fluent"), in accordance with accounting principles generally accepted in the United States ("US GAAP") and applicable rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to those rules and regulations.
The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for any future interim periods or for the full year ending December 31, 2020.
From time to time, the Company may enter into relationships or investments with other entities, and, in certain instances, the entity in which the Company has a relationship or investment may qualify as a variable interest entity (“VIE”). The Company consolidates a VIE in its financial statements if the Company is deemed to be the primary beneficiary of the VIE. The primary beneficiary is the party that has the power to direct activities that most significantly impact the operations of the VIE and has the obligation to absorb losses or the right to benefits from the VIE that could potentially be significant to the VIE. As of April 1, 2020, the Company has included Winopoly, LLC in its consolidated financial statements as a VIE (as further discussed in Note 11, Business acquisitions and Note 12, Variable interest entity).
The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 ("2019 Form 10-K") filed with the SEC on March 13, 2020. The consolidated balance sheet as of December 31, 2019 included herein was derived from the audited financial statements as of that date included in the 2019 Form 10-K.
Principles of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant transactions among the Company and its subsidiaries have been eliminated upon consolidation.
(b) Recently issued and adopted accounting standards
In January 2016, FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses, and additional changes, modifications, clarifications or interpretations thereafter, which require a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available-for-sale debt securities at the amounts expected to be collected. The new guidance is effective for annual and interim periods beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
(c) Revenue recognition
Revenue is recognized when control of goods or services is transferred to customers, in amounts that reflect the consideration the Company expects to be entitled to in exchange for those goods or services. The Company's performance obligation is typically to (a) deliver data records, based on predefined qualifying characteristics specified by the customer or (b) generate conversions, based on predefined user actions (for example, a click, a registration or the installation of an app) and subject to certain qualifying characteristics specified by the customer.
If a customer pays consideration before the Company's performance obligations are satisfied, such amounts are classified as deferred revenue on the consolidated balance sheets. As of September 30, 2020 and December 31, 2019, the balance of deferred revenue was $
When there is a delay between the period in which revenue is recognized and when a customer invoice is issued, revenue is recognized and the related amounts are recorded as unbilled revenue within accounts receivable on the consolidated balance sheets. As of September 30, 2020 and December 31, 2019, unbilled revenue included in accounts receivable was $
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
(d) Use of estimates
The preparation of consolidated financial statements in accordance with US GAAP requires the Company’s management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include the allowance for doubtful accounts, useful lives of intangible assets, recoverability of the carrying amounts of goodwill and intangible assets, the portion of revenue subject to estimates for variances between internally-tracked conversions and those confirmed by the customer, purchase accounting, put/call considerations, consolidation of variable interest entity, accruals for contingencies and income tax provision. These estimates are often based on complex judgments and assumptions that management believes to be reasonable, but are inherently uncertain and unpredictable. Actual results could differ from these estimates.
Except for the impairment of goodwill related to the Company’s All Other reporting unit, as discussed in Note 4, Goodwill, results of operations for the three and nine months ended September 30, 2020 did not include any adjustments to assets or liabilities due to the impact of COVID-19. While the Company has not incurred significant disruptions to its business thus far from the COVID-19 pandemic, management is unable to accurately predict the impact COVID-19 may have on its operations due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities, the impact to customers' and suppliers' businesses and numerous other factors. Management will continue to evaluate the nature and extent that COVID-19 will impact its business, results of operations and financial condition.
2. Income (loss) per share
Basic income (loss) per share is computed by dividing net income by the weighted average number of common shares outstanding during the period, in addition to restricted stock units ("RSUs") and restricted common stock that are vested but not delivered. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock are exercised or converted into common stock and is calculated using the treasury stock method for stock options, restricted stock units, restricted stock, warrants and deferred common stock. Common equivalent shares are excluded from the calculation in loss periods, as their effects would be anti-dilutive.
For the three and nine months ended September 30, 2020 and 2019, basic and diluted income (loss) per share was as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Numerator: | ||||||||||||||||
Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Denominator: | ||||||||||||||||
Weighted average shares outstanding | ||||||||||||||||
Weighted average restricted shares vested not delivered | ||||||||||||||||
Total basic weighted average shares outstanding | ||||||||||||||||
Dilutive effect of assumed conversion of restricted stock units | ||||||||||||||||
Dilutive effect of assumed conversion of warrants | ||||||||||||||||
Dilutive effect of assumed conversion of stock options | ||||||||||||||||
Total diluted weighted average shares outstanding | ||||||||||||||||
Basic and diluted income (loss) per share: | ||||||||||||||||
Basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Diluted | $ | $ | ( | ) | $ | $ | ( | ) |
The following potentially dilutive securities were excluded from the calculation of diluted income per share, as their effects would have been anti-dilutive for the periods presented:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Restricted stock units | ||||||||||||||||
Stock options | ||||||||||||||||
Warrants | ||||||||||||||||
Total anti-dilutive securities |
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
3. Intangible assets, net
Intangible assets, net, other than goodwill, consist of the following:
Amortization period (in years) | September 30, 2020 | December 31, 2019 | ||||||||||
Gross amount: | ||||||||||||
Software developed for internal use | $ | $ | ||||||||||
Acquired proprietary technology | ||||||||||||
Customer relationships | ||||||||||||
Trade names | ||||||||||||
Domain names | ||||||||||||
Databases | ||||||||||||
Non-competition agreements | ||||||||||||
Total gross amount | ||||||||||||
Accumulated amortization: | ||||||||||||
Software developed for internal use | ( | ) | ( | ) | ||||||||
Acquired proprietary technology | ( | ) | ( | ) | ||||||||
Customer relationships | ( | ) | ( | ) | ||||||||
Trade names | ( | ) | ( | ) | ||||||||
Domain names | ( | ) | ( | ) | ||||||||
Databases | ( | ) | ( | ) | ||||||||
Non-competition agreements | ( | ) | ( | ) | ||||||||
Total accumulated amortization | ( | ) | ( | ) | ||||||||
Net intangible assets: | ||||||||||||
Software developed for internal use | ||||||||||||
Acquired proprietary technology | ||||||||||||
Customer relationships | ||||||||||||
Trade names | ||||||||||||
Domain names | ||||||||||||
Databases | ||||||||||||
Non-competition agreements | ||||||||||||
Total intangible assets, net | $ | $ |
The amounts relating to acquired proprietary technology, customer relationships, trade names, domain names, databases and non-competition agreements primarily represent the fair values of intangible assets acquired as a result of the acquisition of Fluent, LLC, effective December 8, 2015 (the "Fluent LLC Acquisition"), the acquisition of Q Interactive, LLC, effective June 8, 2016 (the "Q Interactive Acquisition"), the acquisition of substantially all the assets of AdParlor Holdings, Inc. and certain of its affiliates, effective July 1, 2019 (the "AdParlor Acquisition"), and the acquisition of a
The Company determined that the effects of the macroeconomic conditions arising during the three months ended June 30, 2020 from the global COVID-19 pandemic and the social unrest throughout the United States, which changed the media buying patterns of certain customers directly impacting the All Other reporting unit, constituted an impairment triggering event. As such, the Company conducted an interim test of the recoverability of its long-lived assets as of June 30, 2020. Based on the results of this recoverability test, which measured the Company's projected undiscounted cash flows as compared to the carrying value of the asset group, the Company determined that, as of June 30, 2020, its long-lived assets were not impaired. Management believes that the assumptions utilized in this interim impairment testing, including the determination of estimated future cash flows, were reasonable. The Company completed its quarterly trigger event assessment for the three months ended September 30, 2020 and determined that no triggering event had occurred requiring further interim impairment assessments for its long-lived assets.
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
Amortization expense of $
As of September 30, 2020, estimated amortization expense related to the Company's intangible assets for the remainder of 2020 and through 2025 and thereafter are as follows:
Year | September 30, 2020 | |||
Remainder of 2020 | $ | |||
2021 | ||||
2022 | ||||
2023 | ||||
2024 | ||||
2025 and thereafter | ||||
Total | $ |
4. Goodwill
Goodwill represents the cost in excess of fair value of net assets acquired in a business combination. As of September 30, 2020, the total balance of goodwill was $
In accordance with ASC 350, Intangibles - Goodwill and Other, goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value. The measurement date of the Company's annual goodwill impairment test is October 1.
The Company determined that the effects of the macroeconomic conditions arising during the three months ended June 30, 2020 from the global COVID-19 pandemic and the social unrest throughout the United States, which changed the media buying patterns of certain customers directly impacting the All Other reporting unit, constituted an impairment triggering event. As such, the Company conducted an interim test of the fair value of its goodwill for potential impairment as of June 30, 2020. The results of this interim impairment test, which used a combination of the income and market approaches to determine the fair value of the All Other reporting unit, indicated that its carrying value exceeded its estimated fair value by
The Company completed its quarterly trigger event assessment for the three months ended September 30, 2020 and determined that no triggering event had occurred requiring further interim impairment assessments for its remaining goodwill. However, if the ongoing economic uncertainty proves to be more severe than estimated, or if the economic recovery takes longer to materialize or does not materialize as strongly as anticipated, this could result in future impairment charges.
As of September 30, 2020 and December 31, 2019, the change in the carrying value of goodwill for the Company's operating segments are listed below:
Fluent | All Other | Total | ||||||||||
Balance as of December 31, 2019 | $ | $ | $ | |||||||||
Winopoly Acquisition | ||||||||||||
Goodwill impairment | ( | ) | ( | ) | ||||||||
Balance as of September 30, 2020 | $ | $ | $ |
5. Long-term debt, net
Long-term debt, net, related to the Refinanced Term Loan and Note Payable (as defined below) consisted of the following:
September 30, 2020 | December 31, 2019 | |||||||
Refinanced Term Loan due 2023 (less unamortized discount and financing costs of $2,687 and $3,715, respectively) | $ | $ | ||||||
Note Payable due 2021 (less unamortized discount of $36 and $100, respectively) | ||||||||
Long-term debt, net | ||||||||
Less: Current portion of long-term debt | ( | ) | ( | ) | ||||
Long-term debt, net (non-current) | $ | $ |
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
Refinanced Term Loan
On March 26, 2018, Fluent, LLC refinanced and fully repaid its existing term loans and certain promissory notes, which had been entered into on December 8, 2015, with a new term loan in the amount of $
The Refinanced Term Loan matures on March 26, 2023 and interest is payable monthly. Scheduled principal amortization of the Refinanced Term Loan is $
Note Payable
On July 1, 2019, in connection with the AdParlor Acquisition (as defined in Note 11, Business acquisitions), the Company issued a promissory note (the "Note Payable") in the principal amount of $
Maturities
As of September 30, 2020, scheduled future maturities of the Refinanced Term Loan and Note Payable are as follows:
Year | September 30, 2020 | |||
Remainder of 2020 | $ | |||
2021 | ||||
2022 | ||||
2023 | ||||
2024 | ||||
Total maturities | $ |
Fair value
As of September 30, 2020, the fair value of long-term debt is considered to approximate its carrying value. The fair value assessment represents a Level 2 measurement.
6. Income taxes
The Company is subject to federal and state income taxes in the United States. The tax provision for interim periods is determined using an estimate of the Company's annual effective tax rate. The Company updates its estimated annual effective tax rate on a quarterly basis and, if the estimate changes, makes a cumulative adjustment.
As of September 30, 2020 and December 31, 2019, the Company has recorded a full valuation allowance against net deferred tax assets, and intends to continue maintaining a full valuation allowance on these net deferred tax assets until there is sufficient evidence to support the release of all or a portion of these allowances. Based on current income and anticipated future earnings, the Company believes there is a reasonable possibility that within the next twelve months sufficient positive evidence may become available to allow a conclusion to be reached that a significant portion, if not all, of the valuation allowance will be released. Release of some or all of the valuation allowance would result in the recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in which such a release may be recorded, however, the exact timing and amount of any valuation allowance release are subject to change, depending upon the level of profitability the Company is able to achieve and the net deferred tax assets available.
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
For the nine months ended September 30, 2020 and 2019, the Company's effective income tax rate of
The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances and information available as of the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the Company's financial statements.
As of September 30, 2020 and December 31, 2019, the balance of unrecognized tax benefits was $
The Company does not anticipate a significant increase or reduction in unrecognized tax benefits within the next twelve months.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law. The CARES Act includes several provisions for corporations, including increasing the amount of deductible interest, allowing companies to carryback certain Net Operating Losses (“NOLs”) and increasing the amount of NOLs that corporations can use to offset income. Management is currently assessing the future implications of these provisions pursuant to the CARES Act, but does not anticipate the impact to be material to the Company's consolidated financial statements.
7. Common stock, treasury stock and warrants
Common stock
As of September 30, 2020 and December 31, 2019, the number of issued shares of common stock was
For the nine months ended September 30, 2020, the change in the number of issued shares of common stock was the result of an aggregate
Treasury stock
As of September 30, 2020 and December 31, 2019, the Company held shares of treasury stock of
The Company's share-based incentive plans allow employees the option to either make cash payment or forfeit shares of common stock upon vesting to satisfy federal and state statutory tax withholding obligations associated with equity awards. The forfeited shares of common stock may be taken into treasury stock by the Company or sold on the open market. For the nine months ended September 30, 2020,
Warrants
As of September 30, 2020 and December 31, 2019, warrants to purchase an aggregate of
On July 9, 2018 the Company entered into First Amendments (the "First Amendments") to the Amendments to Warrants and Agreements to Exercise ("Amended Whitehorse Warrants") with (i) H.I.G. Whitehorse SMA ABF, L.P. regarding
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
8. Share-based compensation
As of September 30, 2020, the Company maintains two share-based incentive plans: the Cogint, Inc. 2015 Stock Incentive Plan (the "2015 Plan") and the Fluent, Inc. 2018 Stock Incentive Plan (the "2018 Plan") which, combined, authorize the issuance of
Stock options
The Compensation Committee of the Company's Board of Directors approved the grant of stock options to certain Company officers, which were issued on February 1, 2019, December 20, 2019 and March 1, 2020, respectively, under the 2018 Plan. Subject to continuing service,
Issuance Date | February 1, 2019 | December 20, 2019 | March 1, 2020 | |||||||||
Fair value lower range | $ | $ | $ | |||||||||
Fair value higher range | $ | $ | $ | |||||||||
Exercise price | $ | $ | $ | |||||||||
Expected term (in years) | ||||||||||||
Expected volatility | % | % | % | |||||||||
Dividend yield | % | % | % | |||||||||
Risk-free rate | % | % | % |
For the nine months ended September 30, 2020, details of stock option activity were as follows:
Number of options | Weighted average exercise price per share | Weighted average remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
Outstanding as of December 31, 2019 | $ | $ | — | |||||||||||||
Granted | $ | |||||||||||||||
Forfeited | ( | ) | ||||||||||||||
Expired | ( | ) | ||||||||||||||
Outstanding as of September 30, 2020 | $ | $ | ||||||||||||||
Options exercisable as of September 30, 2020 | $ | $ |
The aggregate intrinsic value amounts in the table above represent the difference between the closing price of the Company's common stock at the end of the reporting period and the corresponding exercise prices, multiplied by the number of in-the-money stock options as of the same date.
For the nine months ended September 30, 2020, the unvested balance of options was as follows:
Number of options | Weighted average exercise price per share | Weighted average remaining contractual term (in years) | ||||||||||
Unvested as of December 31, 2019 | $ | |||||||||||
Granted | $ | |||||||||||
Forfeited | ( | ) | ||||||||||
Vested | ( | ) | $ | |||||||||
Unvested as of September 30, 2020 | $ |
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
Compensation expense recognized for stock options of $
Restricted stock units and restricted stock
For the nine months ended September 30, 2020, details of unvested RSU and restricted stock activity were as follows:
Number of units | Weighted average grant-date fair value | |||||||
Unvested as of December 31, 2019 | $ | |||||||
Granted | $ | |||||||
Vested and delivered | ( | ) | $ | |||||
Withheld as treasury stock (1) | ( | ) | $ | |||||
Vested not delivered (2) | $ | |||||||
Forfeited | ( | ) | $ | |||||
Unvested as of September 30, 2020 | $ |
(1) | As discussed in Note 7, Common stock, treasury stock and warrants, the increase in treasury stock was due to shares withheld to cover statutory withholding taxes upon the delivery of shares following vesting of RSUs. As of September 30, 2020, there were |
(2) | Vested not delivered represents vested RSUs with delivery deferred to a future time. For the nine months ended September 30, 2020, there was a net decrease of |
Compensation expense recognized for RSUs and restricted stock of $
As of September 30, 2020, unrecognized share-based compensation expense associated with the granted RSUs and stock options amounted to $
For the three and nine months ended September 30, 2020 and 2019, share-based compensation for the Company's stock option, RSU, common stock and restricted stock awards were allocated to the following accounts in the consolidated financial statements:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Sales and marketing | $ | $ | $ | $ | ||||||||||||
Product development | ||||||||||||||||
General and administrative | ||||||||||||||||
Share-based compensation expense | ||||||||||||||||
Capitalized in intangible assets | ||||||||||||||||
Total share-based compensation | $ | $ | $ | $ |
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
9. Segment information
The Company identifies operating segments as components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and performance assessment. The profitability measure employed by CODM is segment income (loss) from operations. As of September 30, 2020, the Company has Note 11, Business acquisitions), and is included for purposes of reconciliation of the respective balances below to the consolidated financial statements. “Fluent,” for the purposes of segment reporting, represents the consolidated operating results of the Company excluding “All Other.”
operating segments and corresponding reporting units, “Fluent” and “All Other,” and reportable segment. “All Other” represents the operating results for the three and nine months ended September 30, 2020 of AdParlor, LLC (see
Summarized financial information concerning the Company's segments is shown in the following tables below:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Fluent segment revenue: | ||||||||||||||||
United States | $ | $ | $ | $ | ||||||||||||
International | ||||||||||||||||
Fluent segment revenue | $ | $ | $ | $ | ||||||||||||
All Other segment revenue: | ||||||||||||||||
United States | $ | $ | $ | $ | ||||||||||||
International | ||||||||||||||||
All Other segment revenue | $ | $ | $ | $ | ||||||||||||
Segment income (loss) from operations: | ||||||||||||||||
Fluent | $ | $ | ( | ) | $ | $ | ||||||||||
All Other | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total income from operations | ( | ) | ||||||||||||||
Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income (loss) before income taxes | $ | $ | ( | ) | $ | $ | ( | ) |
September 30 | December 31 | |||||||
2020 | 2019 | |||||||
Total assets: | ||||||||
Fluent | $ | $ | ||||||
All Other | ||||||||
Total assets | $ | $ |
|
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
10. Contingencies
In the ordinary course of business, the Company is subject to loss contingencies that cover a range of matters. An estimated loss from a loss contingency, such as a legal proceeding or claim, is accrued if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued, the Company evaluates, among other factors, the degree of probability and the ability to reasonably estimate the amount of any such loss.
On October 26, 2018, the Company received a subpoena from the New York Attorney General’s Office (“NY AG”) regarding compliance with New York Executive Law § 63(12) and New York General Business Law § 349, as they relate to the collection, use, or disclosure of information from or about consumers or individuals, as such information was submitted to the Federal Communication Commission (“FCC”) in connection with the FCC’s rulemaking proceeding captioned “Restoring Internet Freedom,” WC Docket No. 17-108. The Company has been fully cooperating with the NY AG and has been engaged in settlement discussions with the NY AG concerning the resolution of this matter. As of September 30, 2020, the Company accrued $
On December 13, 2018, the Company received a subpoena from the United States Department of Justice (“DOJ”) regarding the same issue. On March 12, 2020, the Company received a subpoena from the Office of the Attorney General of the District of Columbia ("DC AG") regarding the same issue. The Company has been fully cooperating with the DOJ and the DC AG.
On June 27, 2019, as a part of two sales and use tax audits covering the period from December 1, 2010 to November 30, 2019, the New York State Department of Taxation and Finance (the “Tax Department”) issued a letter stating its position that revenue derived from certain of the Company’s customer acquisition and list management services are subject to sales tax, as a result of being deemed information services. The Company disputed the Tax Department's position on several grounds, but on January 14 and 15, 2020, the Tax Department issued Statements of Proposed Audit Adjustment totaling $
On January 28, 2020, the Company received a Civil Investigative Demand (“CID”) from the Federal Trade Commission (“FTC”) regarding compliance with the Federal Trade Commission Act, 15 U.S.C. §45 or the Telemarketing Sales Rule, 16 C.F.R. Part 310, as they relate to the advertising, marketing, promotion, offering for sale, or sale of rewards and other products, the transmission of commercial text messages, and/or consumer privacy or data security. The Company has been fully cooperating with the FTC and is responding to the CID. At this time, it is not possible to predict the ultimate outcome of this matter or the significance, if any, to the Company’s business, results of operations or financial position.
11. Business acquisitions
Winopoly acquisition
On April 1, 2020, the Company acquired, through a wholly owned subsidiary, a
The preliminary fair value of the acquired customer relationships of $
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
At any time between the fourth and sixth anniversary of the Winopoly Acquisition, the sellers may exercise a put option whereby the Company is required to acquire the remaining
Although the sellers maintain an equity interest in Winopoly, LLC, the Company has deemed this equity interest to be non-substantive in nature, as the sellers will primarily benefit from the Winopoly Acquisition based on periodic distributions of the earnings of Winopoly, LLC and the Put/Call Consideration, both of which are dependent on the sellers' continued service. Without providing service, the sellers could benefit from their pro rata share of the proceeds upon a third-party sale or liquidation of Winopoly, LLC; however, such a liquidity event is considered unlikely. Therefore, no non-controlling interest has been recognized. Periodic distributions for services rendered will be recorded as compensation expense. In addition, the Company will estimate the amount of the Put/Call Consideration, which will be accreted over the
AdParlor acquisition
On July 1, 2019, two wholly owned subsidiaries of the Company, AdParlor, LLC (formerly known as AdParlor Acquisition, LLC), a Delaware limited liability company, and Fluent Media Canada, Inc., a British Columbia company (together with AdParlor, LLC, each a "Buyer" and collectively "Buyers"), completed the acquisition of substantially all of the assets of AdParlor Holdings, Inc., a Delaware corporation ("AdParlor Holdings"), AdParlor International, Inc., a Delaware corporation ("AdParlor International"), AdParlor Media, Inc., a Delaware corporation ("AdParlor Media US"), and AdParlor Media ULC, a British Columbia unlimited liability company (together with AdParlor Holdings, AdParlor International and AdParlor Media US, each a "Seller" and collectively "Sellers"), pursuant to an Asset Purchase Agreement (the "Purchase Agreement") dated June 17, 2019, by and among Buyers, Sellers and the parent of the Sellers, v2 Ventures Group LLC, a Delaware limited liability company (the "AdParlor Acquisition"). The purpose of the acquisition was to expand the Company's performance-based marketing capabilities. In accordance with ASC 805, the Company determined that the AdParlor Acquisition constituted the purchase of a business.
At closing, the Buyers paid to Sellers cash consideration of $
FLUENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts in thousands, except share data)
(unaudited)
The following table summarizes the fair values of the assets acquired and the liabilities assumed at the closing date:
July 1, 2019 | ||||
Cash and cash equivalents | $ | |||
Accounts receivable | ||||
Prepaid expenses and other current assets | ||||
Property and equipment | ||||
Intangible assets | ||||
Goodwill | ||||
Other non-current assets | ||||
Accounts payable | ( | ) | ||
Accrued expenses and other current liabilities | ( | ) | ||
Deferred revenue | ( | ) | ||
Total net assets acquired | $ |
The fair values of the identifiable intangible assets and goodwill acquired at the closing date are as follows:
Fair Value | Weighted Average Amortization Period (Years) | ||||||
Trade name & trademarks | $ | ||||||
Developed technology | |||||||
Customer relationships | |||||||
Goodwill | |||||||
Total intangible assets, net | $ |
With the assistance of a third-party valuation firm, the fair value of the acquired customer relationships was determined using the excess earnings method, a variation of the income approach, while the fair values of the acquired developed technology, and trade names & trademarks were determined using the relief from royalty method of the income approach. The amount of the purchase price in excess of the fair value of the net assets acquired was recorded as goodwill and primarily relates to intangible assets that do not qualify for separate recognition, including assembled workforce and synergies. For tax purposes, the goodwill is deductible over fifteen years.
12. Variable Interest Entity
The Company has determined that Winopoly, LLC (as discussed in Note 11, Business acquisitions) qualifies as a VIE, for which the Company is the primary beneficiary. A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. The primary beneficiary is the party that has the power to direct activities that most significantly impact the operations of the VIE and has the obligation to absorb losses or the right to benefits from the VIE that could potentially be significant to the VIE. We assess whether we are the primary beneficiary of a VIE at the inception of the arrangement and at each reporting date.
Winopoly is a VIE, and the Company is its primary beneficiary, as contractual arrangements provide the Company with control over certain activities that most significantly impact its economic performance. These significant activities include the compliance practices of Winopoly, LLC and the Company's provisions of leads that Winopoly, LLC uses to generate its revenue, which ultimately give the Company its controlling interest. The Company therefore consolidates Winopoly, LLC in its consolidated financial statements, inclusive of deemed compensation expense to the sellers for services rendered.
13. Related party transactions
The Company earns revenue and incurs expenses from a client in which the Company's Chief Executive Officer holds a significant ownership interest. For the three and nine months ended September 30, 2020, the Company recognized revenue from this client of $
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion in conjunction with our consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), about our expectations, beliefs, or intentions regarding our business, financial condition, results of operations, strategies, the outcome of litigation, or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in this and our other Quarterly Reports on Form 10-Q, as well as the disclosures made in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 filed on March 13, 2020 ("2019 Form 10-K"), and other filings we make with the Securities and Exchange Commission (the "SEC"). We do not undertake any obligation to update forward-looking statements, except as required by law. We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.
Overview
Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company"), is an industry leader in data-driven digital marketing services. We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach. We deliver data and performance-based marketing executions to our clients, which in 2019 included over 500 consumer brands, direct marketers and agencies across a wide range of industries, including Financial Products & Services, Retail & Consumer, Media & Entertainment, Staffing & Recruitment and Marketing Services.
We attract consumers at scale to our owned digital media properties primarily through promotional offerings and employment opportunities. On average, our websites receive over 900,000 first-party user registrations daily, which include users’ names, contact information and opt-in permission to present them with offers on behalf of our clients. According to comScore, we reach 13% of the U.S. digital population on a monthly basis through our owned media properties. Nearly 90% of these users engage with our media on their mobile devices or tablets. Our always-on, real-time capabilities enable users to access our media whenever and wherever they choose.
Once users have registered with our sites, we integrate proprietary direct marketing technologies to engage them with surveys, polls and other experiences, through which we learn about their lifestyles, preferences and purchasing histories. Based on these insights, we serve targeted, relevant offers to them on behalf of our clients. As new users register and engage with our sites and existing registrants re-engage, we believe the enrichment of our database expands our addressable client base and improves the effectiveness of our performance-based campaigns.
Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences. We have permission to contact the majority of users in our database through multiple channels, such as email, home address, telephone, push notifications and SMS text messaging. We leverage our data primarily to serve advertisements that we believe will be relevant to users based on the information they have provided. We have also begun to leverage our existing database into new revenue streams, including utilization-based models, such as programmatic advertising, as well as services-based models, such as marketing research and insights.
Third Quarter Financial Summary
Three months ended September 30, 2020 compared to three months ended September 30, 2019:
• |
Revenue increased 21% to $78.3 million, from $64.6 million. |
|
• | Net income was $1.2 million, or $0.01 per share, compared to net loss of $4.5 million or $0.06 per share. | |
• | Media margin increased 39% to $29.7 million, from $21.3 million, representing 37.9% of revenue. | |
• | Adjusted EBITDA increased 167% to $11.6 million, based on net income of $1.2 million, from $4.3 million, based on a net loss of $4.5 million. | |
• | Adjusted net income was $6.3 million, or $0.08 per share, compared to adjusted net loss of $1.0 million, or $0.01 per share. |
Nine months ended September 30, 2020 compared to nine months ended September 30, 2019:
• |
Revenue increased 13% to $228.7 million, from $201.7 million. |
|
• | Net income was $2.0 million, or $0.03 per share, compared to net loss of $2.7 million or $0.03 per share. | |
• | Media margin increased 17% to $78.4 million, from $67.3 million, representing 34.3% of revenue. | |
• | Adjusted EBITDA increased $6.9 to $30.0 million, based on net income of $2.0 million, from $23.2 million, based on a net loss of $2.7 million. | |
• | Adjusted net income was $14.3 million, or $0.18 per share, compared to $7.7 million, or $0.10 per share. |
Media margin, adjusted EBITDA and adjusted net income (loss) are non-GAAP financial measures.
COVID-19 Update
On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. At this time, our operations have not been significantly impacted by the global economic impact of COVID-19, and we have taken appropriate measures to ensure that we are able to conduct our business remotely without significant disruptions. The economic uncertainty caused by COVID-19 has had varying degrees of impact on certain of our advertiser clients in certain industry verticals over the course of the pandemic. For example, the staffing and recruitment vertical has generally exhibited reduced pricing and/or demand since the onset of the pandemic, whereas other verticals, such as financial products and services, experienced similar dynamics earlier on but have since recovered. We have taken steps to manage our costs of acquiring traffic and to match available consumers with those advertiser clients in the various industries we serve who have exhibited appropriate demand during different periods, thereby enabling us to more effectively manage our margins during this time. We anticipate additional shifts in pricing and/or demand among affected clients, as the trajectory of the pandemic and future economic outlook remain uncertain.
We implemented company-wide work-from-home beginning on March 13, 2020. While we believe we have adapted well to a work-from-home environment, COVID-19 increases the likelihood of certain risks of disruption to our business, such as the incapacity of certain employees or system interruptions, which could lead to diminishment of our regular business operations, technological capacity and cybersecurity capabilities, as well as operational inefficiencies and reputational harm.
Please see "Results of Operations" and Item 1A. Risk Factors for further discussion of the possible impact of the COVID-19 pandemic on our business.
Definitions, Reconciliations and Uses of Non-GAAP Financial Measures
We report the following non-GAAP 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. Media margin is also presented as percentage of revenue.
Adjusted EBITDA is defined as net income (loss) excluding (1) income taxes, (2) interest expense, net, (3) depreciation and amortization, (4) goodwill impairment, (5) write-off of long-lived assets, (6) accrued compensation expense for Put/Call Consideration, (7) share-based compensation expense, (8) acquisition-related costs, (9) restructuring and certain severance costs, (10) certain litigation and other related costs, and (11) one-time items.
Adjusted net income (loss) is defined as net income (loss) excluding (1) goodwill impairment, (2) write-off of long-lived assets, (3) accrued compensation expense for Put/Call Consideration, (4) share-based compensation expense, (5) acquisition-related costs, (6) restructuring and certain severance costs, (7) certain litigation and other related costs, and (8) one-time items. Adjusted net income (loss) is also presented on a per share (basic and diluted) basis.
Below is a reconciliation of media margin from net income (loss), which we believe is the most directly comparable GAAP measure.
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Net income (loss) |
$ | 1,169 | $ | (4,463 | ) | $ | 2,029 | $ | (2,703 | ) | ||||||
Income tax expense (benefit) |