Fluent, Inc. — 2015 Q3 filing summary
Entity note: The supplied filing is IDI, Inc.’s Form 10-Q, not a filing identified as Fluent, Inc. The filing covers the quarter ended September 30, 2015 and was signed November 16, 2015. Financial statement amounts below are in U.S. dollars; unless otherwise noted, figures are in millions.
Business context and reporting period
IDI, formerly Tiger Media, focused on data analytics and data-fusion services for risk management, including identity verification, fraud prevention, and due diligence. The March 2015 merger with TBO was accounted for as a reverse acquisition, with IDI Holdings as accounting acquirer; consequently, comparisons with 2014 are limited and reflect only the predecessor’s period from incorporation in September 2014.
In June 2015, the company decided to exit its China-focused out-of-home advertising business, citing its shift in strategic focus and the business’s negative operating cash flow. All related assets and liabilities had been disposed of by September 30.
Financial performance and position
| Metric | Q3 2015 | Nine months 2015 |
|---|---|---|
| Data-fusion revenue | $1.002 million | $3.254 million |
| Gross profit | $0.236 million; 24% margin | $1.510 million; 46% margin |
| Sales and marketing expense | $0.524 million | $1.529 million |
| General and administrative expense | $4.235 million | $9.783 million |
| Operating loss | $4.523 million | $9.802 million |
| Loss from continuing operations | $4.402 million | $9.946 million |
| Net loss attributable to IDI | $4.789 million | $51.896 million |
| Loss per share, basic and diluted | $0.32 | $4.27 |
Nine-month discontinued-operations loss was $41.950 million, driven principally by a $41.095 million disposal loss, largely non-cash. The disposal loss included $35.472 million of goodwill write-offs and $4.080 million of intangible-asset write-offs. Q3 discontinued operations included a $0.376 million disposal gain, but a $0.387 million net loss attributable to IDI.
Nine-month operating cash use was $7.058 million; investing activities provided $0.740 million, including $3.569 million of acquisition-related proceeds and offset by investment in property, software, and intellectual property; financing activities provided $9.400 million. Cash rose from $5.996 million at year-end 2014 to $9.078 million at September 30, 2015.
At September 30, total assets were $20.057 million, total liabilities $1.911 million, and shareholders’ equity $18.146 million. Current assets of $10.881 million exceeded current liabilities of $1.911 million. The balance sheet reports no debt. The company had $13.350 million of non-cancellable data-licensing commitments and $1.729 million of future operating-lease payments.
Changes, outlook, risks, and unusual items
- Revenue was newly reported in the 2015 periods; the corresponding 2014 revenue figures were zero. The filing says the 2014 comparative period was not material, so it does not provide a like-for-like operating comparison.
- Management expected data-fusion revenue to increase as it expanded its sales organization, entered additional markets, and launched products. It was developing and commercializing idiCORE and building cloud infrastructure and data capabilities. Management also expected increased sales, marketing, administrative, and infrastructure costs.
- Management believed cash resources would fund operations and expected capital expenditures for the next 12 months, based on projected revenue growth. It cautioned that further equity or debt financing could be needed; financing might be unavailable or unfavorable, and equity financing could dilute shareholders. Failure to generate positive cash flow or obtain financing could impair the business plan or continued operations.
- Gross margin varied substantially between the reported three- and nine-month periods. Management attributed margin sensitivity to data costs and licensing timing, product and channel mix, sales volume, and pricing.
- Share-based compensation was $3.424 million for the first nine months, including $1.548 million in Q3. Q3 general and administrative expense also included $1.7 million of professional fees; the filing identifies $0.2 million of Q3 fees for reviewing potential strategic acquisitions. The nine-month professional-fee total included $0.3 million related to the merger.
- Customer and supplier concentration is notable: one customer represented 17% of nine-month data-fusion revenue and 21% of receivables at quarter-end. Two suppliers represented 36% and 23% of Q3 data purchases; together they accounted for 70% of accounts payable at quarter-end.
- Ongoing disputes with TransUnion-related entities involve intellectual-property ownership and alleged noncompetition breaches. The filing warns that adverse rulings in certain executive and employee cases could have an immediate near-term effect on financial position, results, and liquidity. A separate securities class action was dismissed without payment.
- Related-party arrangements include consulting, office rent, equity awards, and an aircraft lease entered into after quarter-end with an affiliate of the Executive Chairman. The filing also describes potential merger earn-out shares and substantial restricted stock unit awards.
Important facts for investors to verify
- Confirm the filing applies to the intended issuer: this document names IDI, Inc., not Fluent, Inc.
- Assess whether revenue growth, product launches, and margin improvement can support the company’s stated 12-month liquidity expectation, given operating cash use and the $13.350 million data-licensing commitments.
- Review the nature and timing of data-license payment obligations, as well as supplier concentration and the effect of contractual terms on cash flow.
- Examine merger accounting, the large non-cash disposal loss, and the resulting reported accumulated deficit of $52.506 million.
- Evaluate potential dilution from the July offering and warrants, merger earn-outs, and outstanding or unrecognized equity compensation.
- Track the intellectual-property and noncompetition litigation, related-party transactions, and any subsequent developments affecting operations or liquidity.