Fluent, Inc. (NASDAQ:FLNT) Q1 2024 Earnings Call Transcript

Fluent, Inc. (NASDAQ:FLNT) Q1 2024 Earnings Call Transcript May 15, 2024

Fluent, Inc. misses on earnings expectations. Reported EPS is $-0.45 EPS, expectations were $-0.05.

Operator: Good afternoon and welcome. Thank you for joining us to discuss our First Quarter 2024 Earnings Results. With me today, are Fluent’s CEO, Don Patrick; Interim CFO, Ryan Perfit and Chief Strategy Officer, Ryan Schulke. On our call today, we’ll begin with comments from Don and Ryan Perfit, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our website. To access the webcast, please visit our Investor Relations page on our website www.fluentco.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call will contain forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any forward-looking statements made during this call speak only as of the date hereof. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company’s business. These statements may be identified by words such as expects, plans, projects, could, will, estimates, and other words of similar meaning. The company undertakes no obligation to update the information provided on this call. For a discussion of the risks and uncertainties associated with Fluent’s business, we encourage you to review the company’s filings with the Securities and Exchange Commission, including the company’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

During the call, management will also present certain non-GAAP financial information relating to media margin, adjusted EBITDA and adjusted net income. Management evaluates the financial performance of our business on a variety of indicators, including these non-GAAP metrics. The definitions of these metrics and reconciliations to the most directly comparable GAAP financial measure are provided in the earnings press release issued earlier today. With that, I’m pleased to introduce Fluent’s CEO, Don Patrick.

Don Patrick: Good afternoon. Thank you all for joining our call today. I’m here together with Ryan Schulke, our Chief Strategy Officer, Chairman of the Board and Company Founder and Ryan Perfit, our Chief Financial Officer. I’ll make some brief comments about our first quarter results that reflect the strategic pivot we are making in evolving our 2024 growth strategies focused on leveraging our leadership position in owned and operated marketplaces as a competitive advantage. In concert, a proprietary technology platform is proving to be an effective springboard from our owned and operated marketplaces into new high volume, high growth, syndicated performance marketplaces that we believe represent long-term strategic runways that will ultimately be margin accretive to the core.

In the earnings release today, we reported quarterly results that continue to demonstrate meaningful progress in our new performance marketplaces, while also reflecting our post FTC settlement transition with the corresponding impact on our owned and operated marketplace’s business and financials. Overall, our financial results remain consistent with the roadmap we laid out in previous earning releases. Our first quarter financial results were as follows, revenue of $66 million, which represents the 14.6% decline versus Q1 2023. These results driven primarily by the impact of our FTC settlement and a related strategic and financial decisions to forego revenue streams that we felt were no longer strategically compelling or did not meet our evolving quality standards in our owned and operating marketplaces.

Revenue results were positively offset by the new performance marketplaces continuing to accelerate with strong double-digit growth, albeit off a smaller base. Our media margin of $22.1 million was an increase of 1% year-over-year versus Q1 2020. At 33.6% of revenue, we saw media margin increase almost 500 basis points from 28.6% last year, consistent with our strategic plan and a direct reflection of shifting our business mix to a higher margin performance marketplaces. Adjusted EBITDA of $0.7 million represents 1.1% of revenue, reflecting seasonality as well as our continued investment and what we see as a strategically compelling market-proven and sustainable growth agenda. As outlined in our last earnings release, we expect to see year-over-year revenue decline in the first half of 2024, given one, the residual impact of exiting our non-strategic businesses, which won’t be fully cycled until the second half and two, our newer performance marketplaces, which while still growing aggressively year-over-year, will have sequential quarterly declines based on the high seasonality of the verticals we presently serve.

To be clear, we’re ahead of expectations on our new performance marketplaces. Our foundational strength in owned and operated marketplaces, provides us valuable access to consumers where we built meaningful relationships that are very attractive to our world-class brand partners. Fluent’s performance pricing model provides their partners with a differentiated marketplace that meets their customer acquisition growth needs, while being strategically aligned with their goals. The revenue margin pressure on our owned and operated marketplaces, they’re being driven by three significant headwinds, two ongoing and one new. In previous earning releases, we’ve detailed one, the impact of our post FTC settlement and two, continued macroeconomic headwinds that our advertiser clients continue shifting their consumer acquisition strategies to a clear prioritization on return on ad spend, given the consumer volatility in the market.

Our strategic adjustments to these headwinds have been grounded in our commitment to enhance the quality of our consumer experiences relative to the engagement and satisfaction with our owned and operated marketplaces, while driving higher quality outcome for advertisers. Our third headwind is that in spite of the fact that Fluent has led the industry in establishing and executing leading edge protocols, which we believe are the best-in-class model for the entire industry, we are seeing certain competitors accelerate activity via non-compliant marketing practices that violate the FTC Act and guidance. In the immediate term, these non-compliant competitive practices put us at a market disadvantage in scaling certain media channels. We are not naive and we certainly expected some competitors to try to financially take advantage of this situation, albeit at their own business and regulatory peril, but we also felt the FDC would more expeditiously and aggressively address the noncompliant marketers across the industry.

It remains our view that these practices by our competitors will not continue indefinitely and the FTC enforcement, along with our regulators at the state and federal level and a very active class action plaintiff bar will eventually eliminate the troublesome practices of some of our competitors in the level of playing field. Regardless, our strategic resolve remains, as we’ve seen in the near term financial impact as an investment in distinguishing our brand in the market and creating a distinct competitive advantage. Given the realities of the current market, we’ll continue to de-emphasize growth of our owned and operated marketplaces and manage expenses of the next several quarters until our competitive set accepts an appropriate response to the new FTC requirements.

The strategic growth engine of our business is grounded in in our performance marketplaces and we’re accelerating the Fluent brand into very large marketplace opportunities that unleash our core capabilities in dynamic and growing markets. To date, we’ve established vertical expertise in health, retail and ticketing. Those businesses are more seasonal than our owner operated marketplaces, which have impacted our trend line in the quarter, but we are coming to the stronger season and will continue to grow market share, which will have Fluent enterprise returning to year-over-year growth in the second half of 2024. Our ad flow and call solutions performance marketplaces are both driving strong double-digit revenue growth. We expect these businesses to continue to scale, become a more meaningful bottom line contributors and we’re excited by their early success.

Ad flow is our media solution we launched in the large and rapidly growing commerce media market, a market that is expected to reach $150 billion by 2030. Currently 43% of US brands have commerce media budgets, and that is expected to increase to 75% by 2025. We’re headed to where the puck is going and our foundational ad flow strategies continue to show dramatic year-over-year revenue growth, driven by new partner wins, which are enabled by leveraging our proprietary technology, machine learning and data platform capabilities that have yielded excellent results in these dynamic marketplaces. We’re excited by these early results that they represent a new and growing opportunity for world-class brands to reach consumers, seeking higher quality engagement at the optimal purchase moment.

Year-to-date, we’ve added new ad flow partners in both retail and ticketing, while also expanding into the grocery vertical. We expect this growing business will provide us broader brand partners access as we scale. We also see significant breakthrough before us that will detail further next quarter, where we are now working with our commerce partners to expand the marketplace via ad flow solution to beyond post transaction to include enhancing consumer engagement, retention and loyalty across our partners commerce platforms. In our call solutions business, we’ve proven our operating model and established our financial metrics and our new business extension in the heart of the health vertical, focused on the Affordable Care Act market. Our business is growing double digits and we’ll continue to scale our vertical market expansion by growing existing partners and adding new partners who are already recognizing our competencies.

ACA is a high sequential high growth opportunity, where we believe Fluent can differentiate ourselves within a highly fragmented market. We find this attractive strategy given the margin potential exceeds the Fluent core. Importantly, our performance marketplace go-to-market model remains highly differentiated from the competitive set. We’re uniquely positioned in the industry to leverage the inherent analytical capabilities we’ve established over a decade with our owned and operated market platform. So while our market-leading owned and operated marketplaces continue to stabilize, it essentially enables and fuels our pivot into higher quality consumer engagement. We are quite enthusiastic regarding the strategic and financial roles that our performance marketplaces are playing in our longer term growth agenda.

Importantly, as we grow market share, margin accretion will follow. We’ll continue to make strategic bets and investments, building higher quality digital experiences for consumers, while creating more effective and sustainable customer acquisition solutions for our clients. Our solution set is dramatically strengthened and our performance marketplaces are being thoroughly endorsed by our brand partners, the signature of marketplace credibility. We are confident that we’re elevating Fluent’s brand equity position within the industry. Moving forward, we’re targeting growing revenue from our emerging businesses by greater than 50% in 2024, which should have Fluent returning to year-over-year consolidated growth in the second half. Importantly, as we enhance our market position, we are confident that we’ll begin growing our total gross profit more rapidly than our revenue in the back half of the year.

To date, we are ahead of expectations in our new performance marketplaces. And with that, I’ll turn to Ryan Perfit to provide more detail on our financial results.

Ryan Perfit: Thank you, Don, and thanks to everyone for joining us today. I’ll now provide some additional color on our Q1 earnings. In Q1, we generated $66 million in revenue down 15% from prior year and down 9% sequentially from Q4. As expected, our owned and operated marketplace business continued to experience the effects of a challenging macroeconomic environment and changes in business practices to reflect regulatory requirements in connection with the FTC consent order. These challenges influence sequential reductions in spend by key clients in the media and entertainment, retail and consumer and staffing and recruitment sectors. However, we are optimistic that the owned and operated business will stabilize in the back half of the year as we continue to set a high standard for industry compliance on behalf of our clients.

Our new syndicated performance marketplaces grew exponentially over Q1 of last year, but were down slightly from Q4 2023 due to expected seasonality. The fundamentals are strong in our syndicated performance marketplaces and we are confident in the prospects for growth in this business as we look to the back half of the year. For the full year, we believe a better macroeconomic environment will allow for moderate sequential growth in our owned and operated marketplaces, and we expect our performance marketplaces to continue to grow at strong double-digit rates year-over-year. In Q1 media margin was $22.1 million, which represents 33.6% of revenue compared to $22 million or 28.4% of revenue last year. We are pleased to see that media margin as a percentage of revenue improved despite decreased revenue in the business, which highlights the growth of our new performance marketplaces.

On a GAAP basis, our aggregate operating expenses for Q1 were $20 million, a $2.1 million decrease year-over-year. Of note, our operating expenses in Q1 2024 and Q1 2023 include restructuring and other severance costs of $665,000 and $480,000 respectively. This includes severance related to a reduction in force during the first quarters to better align our cost structure. G&A in the quarter also includes an accrued compensation expense related to the Winopoly, True North and Tap acquisitions of $782,000 for the three months ended March 31, 2024, and $623,000 for the three months ended March 31, 2023. Q1 2023 also includes $1.4 million of litigation and other related costs. All of these costs fall outside of the normal course of business and thus are excluded from our adjusted EBITDA calculation.

Our Q1 adjusted EBITDA was $665,000 or 1% of sales a year-over-year increase of $217,000. In 2024, we expect media margin growth in the second half driven by our new performance marketplaces to push adjusted EBITDA as a percentage of revenue into the high single digits. The company cannot provide a reconciliation to expected net income or net loss in 2024 due to the unknown effect, timing and potential significance of certain operating costs and expenses, share-based compensation expense and the provision for or benefit from income taxes. Interest expense in the first quarter increased to $1.4 million from $698,000 due to higher average interest rates on our Citizens’ term loan, and as an effect of increased amortization of debt financing costs related to the Citizen’s facility.

For the quarter, our income tax expense increased to $908,000, an effective tax rate of 16.9% from $101,000, an effective tax rate of 0.3% in the first quarter of last year. We reported net loss of $6.3 million and an adjusted net loss, a non-GAAP measure of $4.2 million, equivalent to a loss of $0.30 per share. Moving to the balance sheet, we ended the quarter with $11.7 million in cash and cash equivalents. Total debt as reflected on the balance sheet as of March 31, 2024 was $31 million representing a slight increase from $30.5 million as compared to the balance at December 31, 2023. As a reminder, on April 02, we entered into a credit agreement with SLR Credit Solution that provides for a $20 million term loan and a revolving credit facility of up to $30 million that matures on April 02, 2029.

The SLR credit facility had an opening outstanding principle balance of $32.7 million, and we used $30 million of the proceeds to repay our prior credit facility with Citizens Bank. In addition, we just closed a $10 million equity financing from investors, including our founders, our largest shareholder, and our CEO. The additional liquidity reduces our dependence on the SLR credit facility during our strategic pivot and reflects our competence in the strategy. Working capital as defined as current assets minus current liabilities was negative $2.1 million at quarter end. This represents a decline from $29.2 million at December 31, 2023 due to the required presentation of the entire $31 million debt balance as current related to potential financial covenant non-compliance under our credit agreement.

In Q1, we invested $1.8 million into capitalized product development of technology as compared to $1.1 million in Q1 2023. As we look into 2024, the management team continues to focus on the stabilization of our owned and operated marketplaces, while we continue to grow the new syndicated performance marketplaces that provide our clients with high quality customer acquisition opportunities. We’re confident that our growth strategy will produce substantial long-term financial benefit in 2024 and beyond. We appreciate your ongoing support. We’ll be happy to take questions at this time.

Q&A Session

Operator: [Operator instructions] Our first question comes from the line of Maria Ripps with Canaccord. Your line is open.

Maria Ripps: Great, good afternoon and thanks for taking my questions. First I just wanted to ask you about your media margins and which are have been pretty strong last couple of quarters despite sort of revenue softness, sort of, it seems like a big part of that is coming from kind of growth in your emerging businesses, but how should investors think about sort of some of the levers of media margin, maybe expansion going forward, and do you anticipate sort of further improvements from the current levels?

Don Patrick: Great, great. Thanks for the question, Maria. So when you’re looking at media margins, there’s sort of three pieces that are in play here. First is revenue, and we’ve talked about the decline of our owned and operated that is being partially made up by the new performance marketplaces in and the gross profit margins, specifically the new performance marketplaces have high — all have higher gross profit margins and are making up for the decline in that business. And then the third piece, which will play a little bit into Q1 and more into Q2, is just the seasonality of these new marketplaces. So, they tend to — they’re very based on retail and ticketing and healthcare. They’re more on the second half and Q1 tends to be a little bit low coming off of Q4, Q2 tends to be the low point before it bounces back on Q3.

So those three – in those three trends we see our GP continuing to increase in the back half of this year. Probably, equal in Q2, slightly down in Q2 compared to Q1, just based on the seasonality of those new marketplaces.

Maria Ripps: Got it. That’s very helpful. And then can you maybe talk about sort of performance of the gaming vertical, just given how important that is for your revenue base and maybe more broadly, are there any sort of newer functionality or ad products that you have are working on to be able to maybe better serve some of their advertisers within this vertical?

Don Patrick: Great question, Maria. So gaming continues to be our largest vertical by far. If you guys remember, beginning part of Q3 last year, one of our largest clients pulled back and we were able to replace that demand and also keep it steady as we go. So it has been the solid vertical for us and has been basically at the same revenue margin over — revenue rate over the last couple quarters. The players tend to change a little bit on the top five list based on whether they’re leaning into growth or more on return on ad spend, but that continues to be a very strong vertical for us. We have been working specifically on ad products, both specifically around the syndicated — some of the syndicated performance marketplaces around gaming. We also have been doing some things in the in-app solution that we expect to roll out and we’re really been pushing that demand into the other — into the other marketplaces to continue to serve that market.

Operator: Our next question comes from the line of Jim Goss with Barrington Research. Your line is open

Jim Goss: Good afternoon. I’m wondering if it seems like media and entertainment, which had been a pretty important vertical, has been the emphasized somewhat, and I’m curious why that would be given the nature of the streaming wars that are pretty intense.

Don Patrick: Yes. Thanks for the question, Jim. In the past when we broke out verticals, we had a number of things in media and entertainment and as those — as that is scaled, we started to break those things out between streaming services, gaming etcetera. So part of that context, Jim, might be just that we lump things in a broader category a couple years ago, and now we’re now breaking out based on the importance of that. Overall our brand is still focused on ROAS over growth, but it tends to be very vertical specific. Year-over-year, there’s strong growth in subscription and in health and in loyalty and in retail. Gaming is, as I’ve mentioned before with Maria’s question was basically flat and there’s been some weakness in the streaming services business just around just around they’re really focusing on retention and not so much on acquisition.

Jim Goss: Okay. And when you talk about sort of reducing the emphasis on the owned and operated sites in favor of syndicated marketplaces, could you describe that process a little more and talk about the timeframe and just how it — how the execution would take place?

Don Patrick: Sure. Well, first of all, owned and operated marketplaces as you know, Jim has been with us for 12 years. It is still a foundational piece of our business and it has very distinct competitive advantages for us to build off those. So the fact that we have that is critical in terms of launching us into those new syndicated performance marketplaces that we talked about. Basically what we have been doing is leveraging the, either the demand or the technology stack that we’ve developed or around our analytics and data capabilities across owned and operated in launching them into those syndicated marketplaces. So we’re leveraging capabilities that we’ve built over the years that allow us to go move faster and quite honestly, scale at a much, much faster rate than we could if we were launching these into ourselves.

Over the last couple years, you guys have seen, we have done some changing of our head count. We’ve reduced head count and then we brought back in headcount that have been more geared towards the new performance marketplaces. We’ve been doing it in a very measured way based on the performance of that business and where it plays and what we’ve started consolidating our advertising business across all of those solutions and so now we have much broader solution set, which to go out to these great brands that we work with and offer things beyond owned and operated and into ad flow — into our ad flow modules and call solutions and our purpose health. So it’s been a sort of gradual transition over the last couple years of, as we scale those businesses, but everything starts with a foundational piece of that owned and operated competencies and competitive advantages that we have.

Jim Goss: Are there certain financial metrics that will shift and adjust based on this transition?

Don Patrick: Yes. Good question. You’ll see two things Jim. One is, as the owned and operated marketplace stabilizes, which as we pointed out is in the second half of this year, you’ll start to see the revenue growth return based on the growth in the new performance marketplaces. So when we say that we’re down, close to 14.6%, obviously the owned and operated marketplaces are down deeper and our performance marketplaces are growing aggressively just at a lower pace. So you’ll start to see that revenue shift in the second half to being growth overall for Fluent, and then you’ll continue to see the margin improvement. All of these syndicated margins — marketplaces have margins higher than our core and you’ll start to see margin expansion at the same time.

Jim Goss: Okay. The last question is, excuse me, the $10 million equity investment, excuse me, could you tell me how that was affected? What was the nature of the investment? Did you — shares or…

Ryan Perfit: Yes. Hi, Jim. This is, this is Ryan Perfit. This is a private placement with five individuals. We sold pre-funded warrants$.955 million of them at a purchase price of $3.0384 each. There will be a shareholder approval expected in July.

Operator: [Operator instructions] Our next question comes from the line of Bill Dezellem with Tieton Capital Management. Your line is open.

Bill Dezellem: Thank you. I came in late, so I apologize if some of these questions are repeats, and if so, just let me know and we can talk offline, but first of all, would you please discuss how the media margin was up 1% with the revenues being down and it seems like a a surprisingly favourable outcome?

Ryan Perfit: Yes. Bill, thanks for the question. We did touch on that. Basically, as we talked about, there’s sort of three things that are playing into our numbers right now. The revenue on the owner-operated marketplaces are declining greater than that 14% — 14.6% and partially being made up by the growth in the new performance marketplaces like ad flow call solutions and purpose health. But all those, the new performance marketplaces have higher gross profit margins than the core. So even though it’s not growing as fast as the decline in own and operated in Q1, the margins because of the business mix at a much higher margin, we were able to keep margins flat to 1% up over a year ago.

Bill Dezellem: So in essence, it’s a mix phenomenon most specifically,

Ryan Perfit: That’s right. The business mix on which we believe, especially in the second half will be at a big advantage to us because the new performance marketplaces right now are more seasonal than our core. So you’ll see that accelerate in the second half.

Bill Dezellem: Great. That’s helpful. Thank you. And talk to us, if you would, please, about the signs that you are seeing that the new initiatives are working. You’ve mentioned that they’re growing rapidly, but presumably that’s off a smaller base, but there’s probably some data points that are relevant to the longer term implications here.

Don Patrick: Sure. So, I’ll focus mostly Bill, on external and as you know, everything comes down to the brands and what they choose to interact with. We have had great success in those performance market — those performance marketplaces with brands coming on board and equally important, and I brought this up in a very narrow way. They’re asking us to do more than just what the solution currently is. For example, ad flow until about a quarter ago is a 100% focused on post-transaction. So after you purchase something, before you get the confirmation page, our ad module then serve the most relevant ad to that consumer on a commerce site. We are now being asked to help use that same technology in the same the same demand and help bring into loyalty, retention and engagement across the commerce site.

So the brands are speaking, obviously with their wallet and their intent in terms of getting us more aggressively into their business and help them drive a pretty important, opportunity for them and we gave some stats in the page, in the earnings release, just that how big this commerce media market is and how it’s growing. So I think we’re sitting at the right place in the right time with a lot of tailwinds from that market. So ultimately it comes from the brand side and them leaning in and us winning the new brand. Internally, Bill, there’s lots of operating metrics in terms of how do we get to — what’s the right number to get to scale? How are we running based on either revenue metrics or cost metrics or engagement metrics. We’re fortunate enough to have a very clear model what we need to go after, and we look at that on probably a pretty much a minute-by-minute basis to make sure that we’re moving towards those or exceeding those internal metrics.

Bill Dezellem: Great. That’s also helpful. And so let me ask about the restructuring and severance expense in the quarter, the $665,000. Would you kind of dive into that? Help us understand what you’re doing behind the scenes there, please.

Ryan Perfit: Hey, bill, this is Ryan Perfit. That happened in January and it was a reduction in force, essentially aligned around where we are making our investment. So as kind of mentioned previously by Don, taking resources away from the owned and operated as we focus on building out syndicated performance marketplaces,

Bill Dezellem: And so, no there was not a reduction in force with these new performance marketplaces.

Ryan Perfit: Not, not with the new ones, no.

Bill Dezellem: Okay, great. Thank you. And then income tax you actually paid or had a $900,000 of income tax even though you had a pre-tax loss. What were the dynamics that led to that?

Ryan Perfit: There’s a lot of pieces that go into that. Obviously, our tax income is different than our — than the income on our queue. Last year we had an impairment of goodwill and tax credits from research and development tax credits. So there were a number of things that pushed it down to nearly zero last year as compared to this year. But at 16.9% we’re still below the 21% level for our income rate.

Bill Dezellem: Great, thank you. And then do we have time for me to do a couple more?

Don Patrick: Sure. Yep.

Bill Dezellem: So first of all, I guess you have referenced that your competitors in the owned and operated market have not been following the FTC guidelines or rules after they were following them earlier after your settlement. Has there been any change, either more compliance or less compliance here in the first quarter relative to the fourth quarter?

Don Patrick: I would yeah, just to qualify a couple things. The one is, first of all, the compliance has and it has everything to do with our owned and operated marketplaces, not our new performance marketplaces. So everything that we talked about the new performance marketplaces, it’s not around this compliance issue. And secondly, we saw people leaning in, our competitors leaning in to find out what the settlement was and the new rules and the guidelines that FTC was putting in into our best practices when we settled in May, and but, and we saw them — we saw our competitors leaning in to figure out what it — what we agreed to, how they could work that way. We never saw them really adopt to our levels. So it wasn’t so much they took — they adopted and took a step back.

But over the last four to five months until the beginning year, we’ve seen the competitors actually revert back to more noncompliant behaviour. We can make guess guesses on why that is. Part of it we believe is that there’s, a lack of a clear further FTC action and second is the industry headwinds we have, they have and I think it creates opportunity for them to economically in the very short term do the incentive to run towards finance the financial part of their business rather than towards compliance. So we don’t — we’ve been unwavering in our driving to — in our drive and our commitment to quality. We know that in the long term when the industry levels up either by the FTC or by state or federal regulators, that we will be in a great position to accelerate and take back market share, but we did underestimate we thought that the industry would keep moving towards us, but we did not expect people to move back over the last four to five months.

Bill Dezellem: Don, have you heard any comments out of the Federal Trade Commission referencing that firms that demonstrate some increased compliance and then less compliance ultimately become more culpable with that bad behaviour because they essentially showed their hand that they can’t complain — cannot claim ignorance because they were actually trying to be move towards the guidelines and then went backwards. And so ultimately that the FTC views that lack of compliance even less favourably? Have you heard anything like that?

Don Patrick: So don’t take this wrong way, but we’re happy that we don’t hear from the FTC all the time anymore because we, for four years, we talk to them pretty much every day and we are in a — we’re not in obviously inquiry mode with them now, we’re in a reporting mode. So, our contact that we dealt with directly, obviously the good news is it’s more on our just commitment to keep the reporting in the contact. So in theory, Bill, everything you say makes sense. And I will tell you when we were going to ring free, there was a lot of spotlights on okay, you did this and why does you do this way and if there was for us there was no lack of not trying to do the right thing. It was around business sides where if they see that from an economic perspective, I can imagine there it would be much harder a much harder discussion and settlement with them.

Bill Dezellem: Yes. That will be fascinating to watch that unfold. So relative to your media margin, in this first quarter, in this 33.6% and that was slightly from the fourth quarter at 33.1%, even though Q1 revenues are seasonally lower versus the fourth quarter. Now I know before and in response to my first question, you referenced the mix as the performance marketplaces have grown, but you have also referenced that there is seasonality with those performance marketplaces that may be would work against this. So can you address that margin — that media margin percentage on a sequential basis in a bit more detail?

Ryan Perfit: It’s a very good question. These businesses are scaling — especially in the ad flow business has been scaling and we’ve been investing in it, in a technology and analytics and what you’re seeing there is not only even though Q4 is a big increase in volume, our ability to gain revenue in pro what they call fashion is continuity increase in Q1 even though it’s volume has gone down. So you’re seeing the amortization increase which is a good news as you know from this business model is we have a revenue share with our partners. So the more we have, the more our partners make. So the more successful they are also. So it’s around really improving the margin and the amortization of that business.

Bill Dezellem: So that should have very favourable implications for the second half of the year when their seasonal strength in the revenues picks up?

Don Patrick: Yes. Absolutely.

Bill Dezellem: Okay. That is how you are viewing it also then.

Don Patrick: Yes.

Bill Dezellem: Great. Thank you for taking all my questions.

Don Patrick: Yes. Thank you, Bill.

Operator: Thank you. I am showing no further questions in the queue. I’d now like to turn the call back over to Don for closing remarks.

Don Patrick: Thank you for joining our Q2 2024 earnings. We remain steadfast in our strategic pivot, leveraging our owned and operated marketplace’s competitive advantage to launch and do adjacent high growth, high margin performance marketplaces that will enhance Fluent’s brand equity and also create shareholder value. Thank you for your continued support and we look forward to giving you an update after Q2

Operator: Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.