Miami, FL – September 5, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on Fluent, Inc. (NASDAQ: FLNT).
With data privacy protection becoming the latest buzzword, almost half of the world’s nations have already adopted data privacy laws. Following the recent Cambridge Analytica fiasco on illegal acquisition of Facebook (NASDAQ: FB)users information, the European Union passed a law called “General Data Protection Regulation (GDPR),” to enforce stricter data privacy law. Several companies have committed to the adoption of these regulations, which would shift the power away from large data-mining companies such as Alphabet Inc. (NASDAQ: GOOG) and Facebook.
One of the beneficiaries in the increased data privacy solutions is an under the radar company based in New York named Fluent Inc. (NASDAQ: FLNT).The company’s operating model relies on “performance-based” fees from their portfolio of clients including, Finish Line (NASDAQ: FINL), Western Digital (NASDAQ: WDC), Shoe Carnival (NASDAQ: SCVL), Western Union (NYSE: WU),Cheap Flights, and BuildDirect Technologies, Inc., to help their clients acquire and retain customers through legitimate means. This means that Fluent runs digital campaigns, promotions, and marketing activities to targeted consumers; in turn, legally acquiring the relevant consumer information that would be valuable to their clients.
The Positive Impact of Data Privacy Regulation
While Fluent has minimal presence in Europe, corporations are expected to ramp up their budget to comply with GDPR standards– thanks to the increased data privacy awareness globally.
As a “first-party data collector,” Fluent gathers data from users who volunteer to provide their sensitive information, since they have particular interest in the product or service. More importantly, the collected information will not be exposed to the public, assuring their clients that they would not be violating any data privacy regulations or standards.
Given their owned media network and information from past marketing campaigns, Fluent managed to develop a proprietary database of approximately 150 million consumer profiles in the US, resulting in a considerable competitive advantage over other digital marketing firms. With this proprietary database, the company can target users who are more likely to be interested in the product or service, and respond to the marketing content.
Red Violet Spinoff
Fluent’s historical financial performance has been disappointing, to say the least – with reported net losses widening from $4 million in 2013 to $53 million 2017, attributed to their data and analytics division, Red Violet (NASDAQ: RDVT). This division has incurred relatively high levels of fixed costs with minimal revenue generation, and Fluent has been essentially covering these expenses, in turn creating a drag on their bottom line figures.
Further, this creates confusion among investors as Red Violet has a different operating structure with no synergistic benefits to the performance marketing business. Ultimately, this led to the company’s decision to spin-off Red Violet, which could unlock the value of Fluent and Red Violet as separate entities.
Post-Red Violet spinoff, management said that Fluent would immediately report positive financial performance with pro-forma revenues and EBITDA of $212 million and $34 million, respectively.
Fluent Inc. is operating in a favorable environment where corporations and consumers are increasingly aware of the need for data privacy, despite no clear guidance from the US Congress on future legislation. On the other hand, the Red Violet spinoff will allow the company to report positive financial performance, thereby improving investor confidence.
Consequently, the above factors serve as key catalysts for Fluent shares to trade at higher valuation multiples over the next 12 months. Based on 3-year average consumer cyclical industry EV/EBITDA multiple of 11.77x, share price should be valued at $5.17 per share, implying a 122% hike from current price levels.
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