Fluent, Inc. (FLNT) Q2 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the IDI Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Jordyn Kopin, Investor Relations. Please go ahead.

Welcome to IDI's first quarterly earnings conference call. We are happy to take this initiative and inform our shareholders of the exciting progress we've made at IDI. Joining us today from IDI are Derek Dubner, Chief Executive Officer; and Dan MacLachlan, Chief Financial Officer. Our call today will begin with comments from Derek Dubner and Dan MacLachlan, 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 Web site. To access the webast, please visit our Investor Relations page on our Web site www.ididata.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call are forward-looking statements covered under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. 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. The company undertakes no obligation to update the information provided on this call. So, a discussion of risk and uncertainties proceeded with IDI business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the reports Form 10-K for the year ended December 31, 2015, filed on March 18, 2016 and subsequent SEC filings. During the call, we may also present certain non-GAAP financial information relating to adjusted EBITDA. Management will value the financial performance of our business on a variety of key indicators, including adjusted EBITDA. Definition of adjusted EBITDA and the reconciliation in direct comparable GAAP financial measure is provided in the earnings press release issued earlier today. With that, I am pleased to introduce IDI's Chief Executive Officer, Derek Dubner.

Good afternoon everyone, and thank you for joining us today. I am pleased to report yet another strong quarter in revenue and adjusted EBITDA. Before we are getting into quarterly results, let me take this opportunity to explain IDI's vision and roadmap. Our management team has built several leading companies in the data fusion industry over the past 15 years or so. Data fusion is a subset of big data. We amass billions of disparate data points, and we fuse that data using proprietary algorithms to create real-time comprehensive views of individuals, businesses, assets, and their interrelationships. In the early 2000s, we built a company called Seisint. Seisint had brilliant technology for its time, and was ultimately sold to Reed Elsevier’s LexisNexis for $775 million in 2004. We next built a company called TLO, and that company was sold to TransUnion in 2013 for $154 million. These systems have historically served the risk management industry, comprised of financial services, insurance, law enforcement, government, collections, legal, corporate security, and others for the purposes of due diligence, risk assessment, identity verification, legislative compliance, and debt recovery. It has been our mission to create a next generation data fusion platform that not only serves the risk management industry, but a platform that is industry and data agnostic, so that we can bring our core competency of data analytics to the much larger addressable markets of consumer marketing and custom analytics. By custom analytics we mean layering our technology over not just our data assets, but massive end-user databases of disparate, structured and unstructured data, and building intelligent applications so that end-users can glean actionable insight from their own data in order to solve those complex problems. The first quarter of 2016 was the start of a transformative year for the company following our acquisition of Fluent. Through the second quarter, we continue to be encouraged by our financial performance as we invest in technology, data, people, and products to ensure long-term growth, and to avail ourselves of the enormous opportunities that lie before us. Revenue and adjusted EBITDA were $41 million, and $3.1 million, a 4% and 30% growth over first quarter 2016 respectively. The acquisitions of Fluent, in December, and Q Interactive, in June of this year, accelerated our entrance into the consumer marketing industry, and serve to expand upon our data assets, our technologies, our customer base, our product offerings, and thought leadership with demonstrable prior success. We firmly believe that data-driven people-based marketing represents the future of advertising. And we are now well-positioned to better serve the consumer marketing industry through our suite of performance-focused solutions, and to continue taking greater share of overall marketing spend. We are encouraged by various metrics, but several key metrics should be highlighted. First, in the marketing side of the business, over 85% of accounts are driven through direct advertiser relationships as opposed to working through advertising agencies. This represents a tremendous opportunity for growth as marketers focus in on performance metrics, and demand more accountability from their ad spend. Second, over 75% of revenue is derived from mobile. This is a key metric that we remain very focused on, as it not only continues to confirm our thesis for acquiring Fluent, but is what all marketing technology companies aspire to accomplish in order to be competitive in today’s digital marketing environment, and to differentiate the company’s offerings from competitor look-alike offerings. Third, is scale, today we are generating in excess of 700,000 consumer registrations per day. This volume of consumer engagement fuels our insights, and enables us to provide a comprehensive suite of products for omni-channel marketing. We are seeing strong trending in various growth verticals, including mobile apps, where, for example, we are helping one of the world’s largest gaming companies scale their new customer acquisition efforts, jobs on demand, where we are supporting one of the world’s largest transportation and logistics companies expand their driver base, and market research, where some of the world’s largest marketers rely on us to help them gain valuable consumer insights that help form the products and services of the future. In furtherance of our objectives, we created our cloud-based next generation data fusion platform, CORE. Utilizing CORE, we released our investigative solution, idiCORE commercially to the risk management industry in May of 2016. We publically announced that we quickly on-boarded 2,800 users of this product. We are extremely proud of our performance in releasing our investigative product idiCORE to the market. Platforms of this nature have taken upwards of three to four years to build, with massive CapEx involved due to the, now, outdated need to build a large data room, invest in, and maintain significant hardware, and build teams of personnel for support. The time to market this platform was just 14 months from completing our Seattle technology team build-out and cost a fraction of legacy systems due to the platform’s cloud-based construct. This is but one example of the differentiation from competitive offerings, and will enable us to bring this technology to various markets and industries in a far more cost effective manner. We know that there is enormous demand for idiCORE from the risk management industry. We hear it every day from prospects and customers. We hear clear frustration about competitor products, customer service, and price. We are working aggressively to evolve the system in order to expand the applicability to increasing use cases within our target verticals. This is a delicate balance of time and resources, so as to focus on the clearest path to revenue, and on delivering the right solution in order to become engrained in the daily workflow of companies and organizations. Most importantly, the release of the CORE platform is a monumental accomplishment as to where we are going as a company. The power and speed of this platform is like none that I have seen in this industry. That, coupled with machine learning, will deliver incredible solutions to our target markets. In closing, I’m pleased with our progress to date in transforming the company for the future. We had yet another strong quarter following Q1. We continue to develop and release our primary technologies, and have exciting products in our pipeline. And we are expanding upon our data assets, which will further enable the execution of our long-term plan. At this time I will turn it over to Dan, who will discuss the financials.

Thank you, Derek, and good afternoon. I’m extremely pleased with our strong performance in the second quarter of 2016. Accelerated growth, constant innovation, and expanding profitability continue to be key attributes of our business model. Today, I’m going to walk you through our consolidated results of operations, including segment information and adjusted EBITDA. I will continue with the balance sheet and cash flow statements. I will provide results comparing second quarter 2016 to the second quarter 2015, and to the first quarter of 2016. Second quarter consolidated revenue was $41 million compared to $1 million for the second quarter of 2015. Consolidated revenue grew $1.6 million from the first quarter 2016. Adjusted EBITDA was $3.1 million, compared to negative $1.3 million for the second quarter 2015. Adjusted EBITDA grew $0.7 million or 30% from the first quarter. Continuing to the details of our P&L, as mentioned, consolidated revenue was 41 million for the second quarter, our Information Services and Performance Marketing segments contributed 13.4 million and 27.6 million respectively for the second quarter 2016, compared to 1 million and zero for the second quarter 2015, as our Performance Marketing segment did not exist during that period. Information Services revenue grew 2.3 million or 21% from first quarter 2016 with the successful release of our core platform to the risk management industry and the launch of our retargeting data acquisition product ReConnect to the consumer marketing industry. Performance Marketing revenue decreased 0.7 million or negative 2.6% from first quarter 2016. Traditionally, there is seasonal retraction within the marketing industry in the second and third calendar year quarters. Leading into second quarter, we experienced some of this expected retraction in our Performance Marketing segment only, but increased traffic and strong revenue trending in our strategic strong verticals including mobile, jobs on demand, and market research leading out of the second quarter minimize the impact. Cost of revenues was 29.6 million for the second quarter 2016, compared to 0.4 million for the second quarter 2015. Our cost of revenues increased 1.1 million from the first quarter, a result of increased publisher spend and the acquisition of additional data assets. Gross margin remains consistent at 28% for the second and first quarter 2016. SG&A was 16.3 million, compared to 4.2 million for the second quarter 2015. SG&A decreased 0.2 million from the first quarter. The 16.3 million in SG&A for the second quarter consisted mainly of 7.3 million of non-cash share-based compensation and 2.6 million in other sales and marketing expenses. Depreciation and amortization was 3 million in the second quarter of 2016, of which 2.8 million is attributable to the intangible assets acquired in the Fluent and Q Inter active acquisition. Depreciation and amortization increased 0.4 million from the first quarter, a result of the amortization of purchased assets related to the Q Interactive acquisition. Second quarter net loss was 7.2 million, compared to 45.5 million for the second quarter 2015. Net loss increased 0.4 million for the second quarter of 2016 as compared to the first quarter; a result of one-time non-cash expense related to a warrant exchange and increased amortization expense related to the purchased assets of the Q Interactive acquisition. Second quarter earnings per share was negative $0.15 per share based on a weighted average share count of 48.1 million shares. Moving on to the balance sheet, cash and cash equivalents were 11.2 million at June 30, 2016, and 13.5 million at December 31, 2015. Total debt, including the current portion of long-term debt, which was used to finance part of the Fluent acquisition, decreased 0.3 million to 50.6 million at June 30, 2016, compared with 50.9 million at December 31, 2015. Current asset was 38.1 million at June 30, 2016, and 37.6 million at December 31, 2015. Current liabilities, exclusive of the current portion of long-term debt were 20.5 million at June 30, 2016, and 18.8 million at December 31, 2015. Moving on to the statement of cash flows, for the six months ended June 30, 2016, cash provided by operating activities was 1.1 million, compared with negative 4.5 million for the same period 2015. The 1.1 million provided by operating activities was mainly due to a profit of 1.9 million, after adjustments of non-cash items totaling 15.9 million. Cash used in investing activities was 6.5 million for the six months ended June 30, 2016, compared with cash provided by investing activities of 1.6 million for the same period in 2015. The 6.5 million in investing activities used for the six months ended June 30, 2016, resulted from a total of 5.9 million in capitalized IP litigation cost and software developed for internal use. Cash provided by financing activities was 3.2 million for the six months ended June 30, 2016, a result of 4.7 million in net proceeds from a registered direct offering in May 2016, offset by the repayment of 1.1 million in long-term debt. That concludes our prepared remarks on the 2016 second quarter financial results. I will now turn the call back over to Derek.

Thank you, Dan. As you can see, we put on another solid quarter. We continue to invest in the business while delivering innovative products and solutions to our various markets. And now we will entertain some questions.

Thank you. [Operator Instructions] Our first question today comes from the line of Ezra Marbach [ph]. After Fluent and Q Interactive, are there any more potential acquisition targets on your radar?

Thank you. As I stated from time to time, we are focused on building this company organically, and on delivering shareholder value. That said, we are always seeking to identify potential acquisitions that served to either advance or roadmap in serving our three addressable markets of risk management, consumer marketing, and custom analytics. As well, we will look to acquisitions if it advances our technology, if it expands upon our products, or our customer base or cross-selling opportunities, or if it onboards talented thought leadership. But again, let me restate, however, we will remain intensely focused on shareholder value.

Thank you. And as a follow-up to that, are there any plans to raise additional capital?

So, at present we have no intention of raising capital. But we have been transparent all along that we will continue to invest in the company for the long-term by investing in, as I have said repeatedly, technology, more data assets, products, and people. We will continue to be mindful as I have stated on shareholder value, but we will do what is best for building the company for the long-term. Dan, do you have any comments on that question?

Yes. Thank you, Derek. One thing that I want [technical difficulty] kind of have been historical perspective in just less than two years. If you back out the capital that was specifically raised for acquisition, and look out how much money we brought into the business outside of acquisitions. We've raised approximately $21 million. If you back out the litigation that we've had, that is really non-business related of approximately $6 million, what we have accomplished and what we have built in less than 24 months on $15 million is staggering.

Thanks, Dan.

Thank you. And our last question from Ezra [ph], any updates on the TRU litigation? If it continues, is it costly? And if IDI loses, what's the impact?

Thank you. So, by the TRU litigation, I am assuming that's the question regarding our TranUnion litigation. For those on the call that are unaware of our TransUnion litigation, this is litigation regarding a dispute over ownership of certain intellectual property currently being used by TransUnion to power our competitive product. The IPN [ph] dispute, which we maintain is owned by our company IDI, was created by our Chief Science Officer, Ole Poulsen, as a Founder of that previous company of which certain assets were acquired by TransUnion in 2013. This litigation has been ongoing for quite some time, and it finally went to trial in June. We are awaiting the court's ruling. To be clear our primary focus remains on serving our customers with our newly developed proprietary technology idiCORE and we do not foresee any disruption in our ability to serve customers in the event of an adverse ruling. If such adverse ruling, we will explore all options including an appeal. If we prevail, we will among other remedies available to us seek substantial damages. We have of course, incurred significant legal fees over the course of this litigation which Dan just referenced. We expect the legal fees post ruling to be significantly less than those fees leading up to the trial.

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

Thank you. Derek, I have a couple of questions; first, regarding the moat if you will to the idiCORE product. How many other agents can have access to the same type of data that you are able to access and analyzed in the sensitive way?

Once you help me out, by the way and nice hearing from you. What do you mean by agents, you mean other [technical difficulty] other competitor. Yes.

Other competitors, because I think not anyone can go out and get the sort of excess sort of data. I'm sure there are certain [indiscernible] have to jump through, so that would also restrict the number of competitors that would be irrelevant in that area?

Absolutely. Thank you, Jim. So it's one of the situations that there is a very high various entry in this business. First, I would add it's the capital required to get into this business and to acquire the data assets, the technology, and the ability to enter this market. Most importantly I think at least from my background is you have to demonstrate the infrastructure and the security, and the credentialing in place in order to work with any of the data vendors in the industry to companies such as ours. We have built out a very impressive infrastructure, a cloud based infrastructure that is more secure than I've seen in my 15 years, and in the two companies previously that I was involved with and competitor companies. You have to forge the relationships that I've had the good fortune of forging with some of the leaders in this industry over the last 15 years and you have to build trust. And with that you have to demonstrate your ability to house, to maintain, and to keep secure these data assets. But once you've done that and once you've accomplished all of those high hurdles it's not just about getting data in-house, any one single data point isn't very intuitive. It's the proprietary algorithms. It's the ability to use that data to provide a comprehensive view of a subject to solve complex problems that differentiate the company from all of its competitors, and with all as our Chief Science Officer, and the only individual that I'm aware of in data fusion that has built as a primary systems architect, the legacy systems. I don't believe it attainable at least in our space by anybody else. So I think that there is a very small group of competitors including us in this industry. But I think we bring attributes that permit us to expand and make inroads into other industries with our analytics as we're demonstrating a Fluent in the marketing space, and custom analytics that I think we are demonstrating over a very short period of 20 months why we're different from the competition.

Okay, I've got a couple of others to then and maybe I'll come back later. But one related to custom analytics, to get the major job that I think is sort of an ultimate end game. How much time do you think you'll go through to build the infrastructure with the core idiCORE and get through a point where you can get the exceptionally profitable positions? And secondly, you had a companion announcement with Harry Jordan coming on as COO and he had been with I guess he have been involved in buying size in traditionally and he was involved in healthcare it said and I'm wondering does that move healthcare opportunity up the scale and what drove him to want to get back into a smaller startup company after having been with the aerial RELX [ph].

Sure. So thanks again for the question. As far as the custom analytics go we've been very clear that we recognize that the custom analytics are a bit of a longer sales cycle. In building out idiCORE for the risk management industry, it is faced we built this team has built it in the past, we know it well, and we're fully in it with both feet right now. We have built the system. We have the analytics. We have the data. We're using it and we're releasing it in just one after another big dataset after another. So that market's easy for us. Now adding Fluent to our portfolio was an excellent opportunity for us because they already have the relationships with top tier advertisers, established companies throughout the nation very credible Fortune 100, Fortune 500 companies. Fluent has demonstrated that I don't trust with those organizations to deliver conversion data back to them. So that Fluent can run it’s analytics to identify and segment the best customer for those advertisers. That trust is not easy to establish, it's very hard to get a top tier advertiser to deliver its most valuable asset its customer data. So by combining Fluent with us, we bring our core competency of those data analytics, and we're running very quickly right now Jim to build out those analytics to layer it over those customer databases. And to work with those advertisers to have them deliver greater and greater size of data set. So we can run the analytics. So that was very as advantages to us by acquiring Fluent. As well as far as the custom analytics model in sort of a palinteer [ph] fashion if you're all familiar with the term of layering our technology over those end user databases. The technology isn't that much different, again we've built our platform to be data and industry agnostic. So it's about layering that technology over those end user databases. It's about a team understanding what those complex problems are that the end user would like to solve and about making the connections with those disparate data points of that end user. So that they can green the intelligence via some type of intelligent application that we've built, I'm sure you recognize that that is a bit of a longer service cycle than simply accessing an existing platform. So I would like to say that we will be building that out to enter that space probably within two to three quarters. And that's a goal as far as for our roadmap. As far as Harry joined the team, we are all extremely excited about this addition. We have been spending some time and looking for the right fit for a COO role. We are running fast, we're building an incredibly dynamic company and with that we need incredibly dynamic people. We need talented individuals and we were fortunate to make Harry’s acquaintance. Harry as you correctly stated led the due diligence teams for Reed Elsevier's LexisNexis in acquiring Seisint and as well in acquiring ChoicePoint. He built out the healthcare vertical, as well as government solutions which we were very excited about. And those are verticals that we are jumping in with both feet. Our timing was perfect with Harry. It just completely made sense. We knew it when we met him, as we did when we met our Fluent team. And as we continue to explore with Harry, he realized I believe and I'll take the liberty of speaking for him as he said in the press release, he realized that this is a very differentiated company than those in the past. This is a multidimensional data and analytics company that we're building. And he was as passionate about joining us, as we were of him joining us.

Sounds great. Thanks very much.

Thank you.

Thank you. Our next question comes from the line of Jim McIlree with Chardan Capital. Your line is open.

Yes, thanks a lot. Nice quarter. Can you talk about how much Q Interactive contributed to revenue this quarter?

Yes, Jim this is Dan. So, we don’t specifically. We don’t specifically give revenue at an entity level or what I can say is we acquire them on June 8. There was some relationship that was consolidated out in regards to revenue and expenses that were conducted from a business relationship between Q Interactive in Fluent as a result that revenue was in material to the quarter.

Okay, great and well -- anyway but it sounds like you wouldn’t answer a question of ballpark how much you think you can contribute over 12 months time period.

No, we do not give guidance on a forward looking nature.

Dan I think about litigation expenses in the second half or may be you didn’t litigation in the second half is there a litigation expenses in the second half that would be less than equal to or greater than what you spent in the first half.

Yes, as Derek mentioned, with the case going to trial in the second quarter, the spend around the IT litigation will go down substantially obviously once a rolling comes down we will take a look at what that rolling is and what next steps would be but based on the fact that the majority of the case and the workload that goes with that has been completed. We would expect that the litigation around that from an extend standpoint would decrease substantially.

And you talked about performance marketing having a seasonal aspect to it and that’s -- and that’s you attributed the Q2 decline in performance marketing partly on seasonality was little bit confused by your comment on Q3 will you saying that Q3 is also seasonally down historically from Q2 or you’re just saying Q2 and Q3 are historically down in Q1?

So from a calendar year perspective looking at the quarterly calendar year within the consumer marketing and add space traditionally the second -- third quarter is slower relative to first and fourth quarter however as I said leading out of the second quarter we saw some really good trending on the performance marketing side of the business and we are very encouraged going into the third quarter.

Okay, okay, great, and I’d like to try Jim Goss' question one more time as initial question about how many others are in that -- how many others have access to that sensitive information, so I think -- to phrase the another way Jim Goss and I would form a comparative company today and we built up all of that technology and we have the people –is the typically a matter of getting a license or getting government approval or getting the FDI blessing in order to have access that sensitive data is, there is some special process and somebody has to go through and how many have gone through that process right now.

So, it's Derek. Here is what I can tell you, Jim. I don’t mean to be reparative but the previous companies we’ve created were acquired by two very large organizations and those two large organizations have a lot of data and they are very well funded, very profitable companies and when they desire to gain their entry into this market, they acquired for it, they didn’t go there. Now, you can draw whatever conclusion you want from that. I will reiterate what I said previously there is a massive financial hurdle in getting into this market – security, any infrastructure to be able to contract for the data, where is available to be contracted for I might add, you do have to know what other sources are our there where it might be public record and available and the significant of that data and that time passes if you think about early 2000s when landline was important and today your cell phones important. And we have proliferation of mobile data and ecommerce data and all data assets really change in the relevance, you have to have the know-how and the intelligence, the skill sets to acquire the relevant data and the few of the data is together to create a comprehensive view again that insight for so, sure a party can contract for a data set, there are many parties that can contract for the number of data sets that we contract for and that the leading competitors contract for and there are even less companies that now what to do with that data, assuming of course they have the technology that was built by Holly Portland [ph] and his teams over the last 15 years. So again I would say there is a very high level to enter this market.

I got it, I got it. Great, thank you. And just one more if I may. So the middle of last month, I think you announced the history ingredient into idiCORE and my question is I know that the product is never done but the sweet spot of this in phases are we kind of complete with the first phase or can you just kind of place the development of idiCORE in terms of how you where it is and its product development?

Sure. What I can say and that is kind of a difficult question Jim but thank you for it, I can say that I guess we're done with the first phase, I say that because we have built an unbelievable platform in 14 months. We are onboarding customers at a frequent pace and we're hearing great things, we are getting insights from those customers for expressing dissatisfaction in the industry and the willingness to want to stay with us while we develop the product. So if that is in your mind constitutes satisfying the first phase and yes we've done that. But as you, as you stated this platform will evolve for years and its intelligence, the idiCORE generated off of that platform will evolve for years and the amount of data that we bring in. I don’t want to hit my hand to competitors on the types of those datasets but I would love to give you examples but I just can't. So we have a roadmap of datasets that we believe are just key assets in determining fraud and abuse and insider trading and other anomalies to be detected. So, yes, again to restate I think we had passed that first inning but we have a lot more to go and everyone is very enthusiastic over here to execute.

That is great, thank you so much. Thanks for the answers and congrats on the quarter.

Thank you, Jim.

Thank you. Our next question comes from the line of Peter Delgado with Threshold Capital. Your line is open.

Yes. Hey guys, good afternoon.

Hi Peter, good afternoon.

Yes, congratulations on just an outstanding quarter results and my question is actually probably very related to the previous gentlemen's. Again back in July, you guys announced the integration of the criminal histories very quickly following the fee with the motor vehicle records, I'm curious now that we are I guess three months into your roll out of this at the idiCORE program without tipping your hand too much there, could you just curious if you could share some of the feedback from your customers what they are saying about it, what they liked about it, things like that. Thanks.

Sure. Thanks, Peter. Just to say it a very high level because I think it's important from a competitive standpoint, we are hearing customers that are first very excited to have a new entrant to the market even though our story might be recognized but it's there for quite some time to many customers with the new entrant. They are very excited that this team has built the previous companies and have been so involved in those companies. They've recognized our ability and our willingness to listen to them. We are very vocal with our customers. We want to know what they want to see in the product. We like to comment, or I'd like to say that together we are going to build a revolutionary product. So, what we are hearing a lot of is the speed, the fusion of the data that we have in the system today, the linkages look more intelligent, the design of the interface being that much more user-friendly, and that's really important in a work flow for a larger organization. It's about efficiency. It's about maximizing the time of anyone's job. And so, that efficiency in using our interface and our platform, and as we roll more data in and create those linkages, we are very excited that this only gets better. It does help as I mentioned that due to how we build this in the cloud based construct and the data contract that we've been building and other datasets we've obtained that we believe we are going to deliver solution that are far more cost-effective price point than the competitors. And they know that, and as I need to use that expression, but that's music to anyone's ears if you can deliver that better product at a better price point. So we are very focused on that, Peter, and we will continue to be.

Excellent, wonderful. If I can shift a little bit over here to the Fluent side of the business, I remember when you guys first brought them on Board to have -- they have a proprietary database of over 100 million U.S. customers, I'm curious as to you could kind of give us a ballpark as to where that number is now present day and where you think it will be at year-end, and again, why that database is so important to you guys?

Sure. So we haven't put anything out publicly out there, Peter. I guess, several states think this is public, but we are probably in excess of 120 million today in the consumer database, and I believe that's the higher, we are running analysis on it now. Net data and the premise for acquiring Fluent as to the data have not changed the premise for that acquisition. That data is a key differentiator to the competition in our market. As you may know on the traditional risk management public record search products and companies out there, it's highly transactional data, public record data such as motor vehicles and bankruptcies, leans and judgments and mortgages and the like. So by individuals conducting their daily activities in commerce, they sort of leave their footprint and it's highly transactional data. But what we are getting on the consumer marketing side of the business is heavy data inflow sort of conversationally with the consumer. The consumer is interacting with our owned media properties, whether at the incentive base or whatever else. And they are providing information on a regular basis. Now, there are few keys to that. It's not just that first visit, but they maybe interested in 90 days from now in some other type of incentive or something that might be interesting in their life like re-financing a mortgage or an auto, and they will interact again. And for us, that's an update to data, and that's important on the marketing side of course, because Fluent makes the ads more relevant to the customer. It's increasing the consumer experience, and its one thing -- it's making the consumer want to engage more in the future. None of us want to be engaged with your irrelevant ads. We all know what happens in that business. There is nothing interesting about that over the last decade and a half. Their interactions go away. There is attrition on the datasets. Fluent does not do that. They are doing the opposite. They are making it a relevant and engaging experience, and they are driving that data in. Now with that data, we are seeing information that we traditionally wouldn’t see on the other side of the business, on the risk side of the business. Again, let's extract from the risk side of the business for this conversation though, set early regulated data. That data is off on the side. Well, when we look at those consumers interacting, it's that type of a slice of America where they might be frequent movers, they maybe an apartment as opposed to an owner, they may have multiple cell phones and household and set of landline, and as I view it as an example, you may get those 22-year-old millennials who are now so commonly living back in mom and dad's house. So, that's very important data. It's underserved consumer or that future consumer that has yet not laid any footprint out in industry. So that's a very valuable data asset.

Very good. Okay, thanks guys, congratulations again, it looks tremendous results.

Thank you, Peter.

Thank you. [Operator Instructions] Our next question comes from the line of Sam Schaefer with Global Value Research. Your line is open.

Thank you for taking my question. I have a few here, and the first on, you had mentioned machine learning, can you describe what you mean by that and how those idiCORE utilize this technology?

Sure. Well, machine learning is a data science technique under artificial intelligence, and with machine learning, the goal is to identify patterns or anomalies in data to sort of bring to light or bring to the apparent, the otherwise unattainable or otherwise unrecognizable data that maybe gleaned from that. And that's really on the forefront of all data analytics, and a very important key things building any system in today's technology world.

Are any of the current competitors using this technology?

Honestly, I can't speak to what the current competitors are doing as far as the technology goes. We believe we built a different system the way we built it. We believe our system which with its linkages will continue to grow by itself once making connections and adding more connections, it will continue to be a more intelligent system, any more informative than intuitive system. And by doing so, we are of the belief that other systems out there will essentially be degrading in their design. Hopefully, we are giving outputs that are far more intelligent.

Okay, great, and thank you for that. Moving a little bit here, you had mentioned in the release that your average registrations per day grew from 500 to 700,000 a day. I'm really kind of curious, what does this number represent and what really drove this 40% increase?

Sure. So, we don’t generally disclose how across different products or media properties or even companies that we drive those registrations. Those registrations however just from a high-level are individuals surfing and conducting their daily activities on the Internet, being driven down into a funnel, sort of speak, if you can picture it, down to our owned media properties. And we are engaging with those individuals via incentive-based offer, for example, job postings, financial services, health newsletters, any products of interest, and we are engaging with those individuals to have them provide information to us, so we can better serve them. And those are the registrations that we are speaking of.

So, those all come from online registrations. Moving to the new product that you announced, the ReConnect product, I haven't heard of that in the past, can you provide a little bit more detail on that?

Sure, just from a very high level, ReConnect is a product that we identify consumers that might have visited a client's Web site and expressed interest at that Web site, for example, just by viewing it, that if we then see them again, one of our owned media properties, we are able to intelligently advise our clients that we've seen them. They are in market, and they are here. And so, Fluent and our other marketing arm is able to serve them.

Interesting. And then one last question, absent the stock-based comp, net income would have been a breakeven, I'm curious how much stock-based comp should we expect moving forward?

You shouldn’t expect anything, but ordinary course of business grabs.

Okay, great, and thank you for taking my questions. And good luck on the future quarters.

Thank you so much.

Thank you. Our next question comes from the line of Jeff Geygan with Global Value Investment. Your line is also open.

Good afternoon gentlemen, very nice report.

Hi, Jeff, thank you.

Derek, during your prepared comments you indicated the custom analytics market is one of the markets you participate in; can you pull little color on the size of that, and if you can, market share and opportunities?

Jeff, that's a difficult one to quantify. It's a massive market. There are many large companies doing it very successfully and many will claim that they doing it successfully. It's a difficult market to define. When you look at the volunteers of the world, when you look at some of the new tech organizations out there like that as well as the traditional Salesforces and Oracles and other organizations, it's where do you draw the parameters around the definition of that market. It's billions and billions of dollars. I am sure it's probably in the aggregate trillions, because just the stories and scale of the entities I just mentioned. And it's about making inroads, one brick at a time for us, and demonstrating our analytics, and entering into those long-term contracts which are multimillion dollar contracts where we can continue to run the analytics and serve that organization. So I would not be able to dig too deep in detail with you, Jeff, but it's just a big market.

I appreciate the answer. You have two quarters in a row now where you are running round numbers 40 million, when and how much -- when should we expect to increase in that and what does the trajectory of that slope?

Yes. Jeff, this is Dan. So, we don’t give any forward-looking guidance, but what I can say is you know, based on the remarks and what we've talked about during this, on the performance side, traditionally, second and third quarter you would see some retraction. Coming out of the second quarter, we have seen some great trending on our performance marketing side. Our information service side is really starting to see some strong trending as well. We are looking forward to the second half of the year, and are very excited about what we will be able to do over the next two quarters.

Great. And final question, you talked about competitors and how you stack up against some with product, service, and price; which of those are most important and why?

Well, for me -- Jeff, it's Derek, I am a product guy, I believe if you build a revolutionary product, they will beat their way to your doorstep. And so, we focus on products first. And with that, it's the technology and the analytics behind it. And then of course you know, what goes with that product is we have to focus on people, because the people are the ones that execute upon that trust. So, we're continuously looking for the smartest, the brightest, and the best. And I think so far we have built one of the best technology teams that are, again I've seen in my past with the Seattle team and with the infrastructure and IT teams down here, and I could say the same of New York and our subsidiary we just added. So, I am a product guy first, and then appraisal fall into place.

Well, great, I appreciate it. Congratulations and good luck going forward.

Thank you very much, Jeff.

Thank you. And that does conclude today's Q&A portion of the call. I would like to turn the call back over to Derek Dubner for any closing remarks.

Thank you very much. I just want to thank you everyone for joining us today. We've tried over the past 20 months through press releases and others to tell our story. And so, we were very excited to finally conduct this first earnings call. So, thank you again for joining us.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.