Good day, ladies and gentlemen, and welcome to Cogint’s Fourth Quarter and Full Year 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 follow at that time. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to turn the conference over to our host for today's program, Jordyn Kopin, Investor Relations. Please go ahead.

Good afternoon and welcome. Thank you for joining us to discuss our fourth quarter and full year 2016 earnings results. With me today are Derek Dubner, our Chief Executive Officer; and Dan MacLachlan, our 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 webcast, please visit our Investor Relations web page on our Web site www.cogint.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 provisions of the Private Securities Litigation Reform Format of 1995. Actual results could differ materially from those stated or implied by our 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. For discussion of risks and uncertainties associated with Cogint's business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-K and the subsequent 10-Q. During the call, we may also present certain non-GAAP financial information relating to adjusted EBITDA. Management evaluates the financial performance of our business on a variety of key indicators, including adjusted EBITDA. The definition of adjusted EBITDA and the reconciliations to most directly comparable GAAP financial measure is provided in the earnings press release issued earlier today. With that, I am pleased to introduce Cogint's Chief Executive Officer, Derek Dubner.

Good afternoon and thank you for joining us today to discuss Cogint's fourth quarter and full year 2016 results. I am very proud to report an exceptional fourth quarter, which concludes a very strong 2016 for Cogint. During the fourth quarter, we delivered record top-line revenue, profitability and a doubling of adjusted EBITDA from Q3. These results were driven by compliments of anticipated events, namely, the acceleration of our product road map, the release of innovative new products driven by our next generation technology platforms and the increasing adoption of our machine critical solutions by customers across markets. Put simply, our team executed brilliantly against various initiatives leading up to and throughout the quarter. The results we announced today demonstrate the power and scalability of our business model, which makes us very excited about our opportunities for 2017 and beyond. Revenue and adjusted EBITDA were $54.2 million and $6.3 million, a 4% and 100% growth over third quarter 2016 respectively. We saw continued strength across both of our Information Services and Performance Marketing Segments during the quarter. Our Information Services and Performance Marketing Segments contributed $16.2 million and $38 million respectively for the fourth quarter 2016. Information Services revenue grew $1.4 million, a 9% increase over third quarter and Performance Marketing revenue increased $0.6 million, a 2% increase over third quarter. We are also proud to announce that gross profit margin increased to 33% from 24% in Q3. Our success is attributable to several competitive advantages and macro trends, which I’ll discuss, that continued to provide tailwinds to the business in the near-term and well into the future. We’ve built extraordinarily valuable technology. Our cloud based next generation data fusion platform CORE continues to evolve at a fast pace. While I’ve mentioned this previously, it’s fair saying it again. This…

Thank you, Derek and good afternoon. Before diving into the financial results and in addition to the key accomplishments Derek addressed, I wanted to highlight some 2016 financial metrics and what is just early stage of our incredible growth story. Looking back at the first quarter of 2016, the first four quarter post acquisition of our marketing services business improvement, we had revenues of 39.4 million and adjusted EBITDA of 2.4 million. With fourth quarter revenue of 54.2 million and adjusted EBITDA of 6.3 million, we drove revenue and adjusted EBITDA as a compound annual growth rate of over 50% and 250% respectively in just nine months. Our adjusted EBITDA margin grew to 12% in the fourth quarter, representing a 600 basis points increase from the first quarter 2016. Our gross profit margin was 33%, a 500 basis points increase from the first quarter 2016. Since this team embarked on this process a little over 24 months ago, we have transformed this company into a leading provider of information and data driven performance marketing solutions. Our 2016 results reaffirm the execution of our business model and the solid foundation we have created leading into 2017 to achieve Cogint of being a multibillion dollar company. Moving on to our results, I’ll be comparing fourth quarter of 2016 to the fourth quarter of 2015 and to the third quarter 2016, walking you through our results of operation including segment information and adjusted EBITDA. I’ll conclude with the balance sheet and cash flow statement. Fourth quarter revenues were 54.2 million, compared to 10.8 million for the fourth quarter 2015. Revenues grew 2 million, a 4% increase over the third quarter, driven primarily by our Information Services segment. Adjusted EBITDA was 6.3 million, compared to a loss of 2.2 million for the fourth quarter…

Certainly. [Operator Instructions] Our first question comes from the line of Jim Goss from Barrington, your question please.

Thanks, a couple of clarifications first. Dan, you just mentioned the 3.6 million write-off in Q1 that's related to Q Interactive, which I gather is separate from the 4.1 million write-off of intangible assets in the fourth quarter. I wondered what that related to.

Sure, Jim. Thanks for the question. As part of the integration of the Q Interactive business, when we acquired Q Interactive in the second quarter of this year, the purchase price allocation for certain intangible assets was booked to the balance sheet, two of those intangible assets, as we looked at the integration, the trade name and particularly the proprietary technology of Q Interactive. Since we have integrated and migrated that platform into the Fluent business, we will be taking a write-off as it relates to those assets acquired in the purchase of Q interactive.

Okay. And that's the 3.6 million in the first quarter, is that correct?

That is what we are expecting in the first quarter, correct.

And was the 4.1 million write-off of intangible assets in the fourth quarter, they just reported related to something else? Because it seemed like you actually - if we backed out that intangible asset, you actually did better than you just announced.

Yeah. So, just a clarifying point, there was no write-off of intangible assets in the fourth quarter. Going back to the prepared remarks, it was in reference to comparing to the third quarter where we had had the write-off related to intangible assets.

Okay. And then the 4.5 million saving is beginning in the second quarter. Is that an annual rate or is that a quarterly rate?

That is an annualized number, 4.5 million again in the second quarter.

Okay. The - I was wondering if you are developing any additional use cases as you're developing these new profiles. I know you need to spend money in order to get into other verticals and sort of strike a balance between what you're spending and what you're moving into and maybe you could talk about just how that process is working.

Sure, Jim. This is Derek, nice to hear from you. Thanks for the questions. Yes, I think we have reiterated it a couple of times. We are swimming in opportunities and we're having to devote resources to those that are the, I guess, the low-hanging fruit as we like to say over here and that would be going into the traditional risk management business that in the data fusion industry this team has built out over the last 16 years and with our marketing business there and the leaders on the Fluent side continuing to expand their household name within the top tier advertisers throughout this country. We have enormous opportunities that we continue to work on in technology and in data where we have services and solutions that complement each other in many places. We're talking to some large companies. We're building some of those things and we expect to see some of that fruits come about later in the year and definitely strongly into ‘18. But again we just have so much on the road map right here and on our plate so to speak that as you can see we had an excellent quarter and we're devoting resources where we know we get exponential return for our investment.

Okay. Maybe just one more and then I'll give up the phone. It seemed like there was very modest gain for performance marketing revenues quarter-to-quarter. I was wondering if you talk about that a little bit, why somewhat of a leveling.

Sure, Jim. One of the things that we talked about it in the third quarter is we were looking at those strategic growth verticals within the marketing business, those that are kind of within the gig economy, the emerging mediums, staying ahead of the curve, if you will, within the digital marketing space. And as we talked about that in third quarter, we spent into some of those initiatives and we saw a little bit of pressure at the margin level. But what we saw this quarter, especially on the performance marketing side is the uptick of profitability spending where it made sense, leveraging the optimization of that spend, so we were basically getting more bang for the dollar we were spending. So, although you don't see a tremendous growth at the top line, at the performance revenue side, the performance marketing side, you do see a tremendous amount of focus on margin and growing that side of the business.

All right, thanks very much.

Thanks, Jim.

Thank you. Our next question comes from the line of Jim McIlree from Chardan Capital, your question please.

So, thanks a lot and good evening, good evening guys. Hey, I missed the first part of the call. So, if I'm just asking you to repeat your script and tell me and I'll just go listen to it later. The SG&A increase for the quarter versus Q3; did you talk about that in the script?

Yeah, it was really related to the uptick in our sales and marketing expenses. We did talk a little bit about that in the script.

And that's something that will continue or that was more one-time-ish.

Well, as you can see, we extracted a tremendous amount of operating leverage and profitability on both the information services and performance marketing side. We spent into that in third quarter and as a result in fourth quarter we really saw some uptick kick in those initiatives. As we roll forward into quarter one, quarter two, you can expect kind of a consistent level of SG&A of where it was that in fourth quarter as we continue to expand both top line and both our performance marketing and information services segment, but you will see SG&A remain relatively consistent over the next few quarters.

Okay. And did you talk about the split in the revenue guidance that you gave between information services and performance marketing? Is there one expected - so I'm assuming that information services is going to have a much higher growth rate, but should I be assuming that?

S:

Okay. I'm not exactly sure what that means. So, let me try some different margins in 2017. Are we expecting margins to maintain at current levels, let's call it, 10% to 15%, or is there room for improvement from that 10% to 15%?

We haven't given any specific guidance regarding margins in 2017, but the goal and the path is to extract profitability and grow top line as we move through 2017 and into 2018 with the expectation of being able to accomplish that in short order.

Okay. And any seasonality I should be aware of as we go through this year? Is there any patterns that might be different than they have been in the past?

Yeah. When you look at the marketing services side of the business, you do tend to see their best quarters to be quarter four and quarter one. As our risk management side of the business continues to scale, the best quarters for risk management tend to be quarter one through quarter three. So, as that side of the business scales, you'll see less seasonality in the consolidated business, but right now you’ll see a little bit of that seasonal hit if you will in second and third quarter.

Okay, great. And just lastly on the balance sheet, when is this term loan due, I know it’s classified as current, is that due this year or is that due early next year?

Approximately four years from today, from this time.

Okay, but you have 4 million of it classified as current, so how is that reconciled?

A portion of an excess cash flow payment, which is due at the end of March, will be paid, so that portion along with the regular amortization will be paid within the first quarter, so that’s why the uptick in the current portion.

Okay, great. Thanks a lot. I appreciate it.

Thanks, Jim.

Thank you. Your next question comes from the line of William Gibson from Roth Capital Partners, your question please.

Yeah, related to idiCORE, was that responsible for most of the sequential growth in Information Services?

Hey, Bill. It’s Derek, how are you, nice to hear from you.

Hi, Derek.

As you may know Bill, we don’t break out idiCORE within Information Services and we did not have, so we did not give any view into idiCORE’s growth in that segment. It’s an extraordinarily competitive market, we built the two leading companies out there and there’s a lot of - and attempt to protect their marketplace and they don’t break out their matching products with idiCORE in their financials and neither do we.

No, understood. How many third party data providers are you using now and where do you expect that to be in 12 to 18 months?

Again Bill, I’d love to answer the question. I didn’t tell you that it’s in the order of 100s and the approach is many more, but that’s about all I’d say.

Okay and if you expand into beyond the low hanging fruit, what are some of the new markets you’re going after?

Sure, so we’ll expand and are expanding today in financial services, we will move up the ladder, so to speak, in larger more established organizations for a wider array of the used cases within those organizations. Same with law enforcement and government as well as larger players in collections that we’re currently servicing, we will also grow into those national legal and accounting firms, just to give you an example of some of those type of verticals.

Good and then just one bookkeeping thing for Dan, what was the fourth quarter sharecount?

So for the reported share count was 53.7 million.

Good, thank you.

Thanks, Bill.

Thank you. And this does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Derek Dubner, CEO for closing remarks.

Great, thanks again for joining us today. We’re very excited about the future here at Cogint and we very much look forward to updating you on our progress on our next quarterly call. So thank you again and have a nice afternoon and evening.

Thank you, ladies and gentlemen for your participation in today’s conference. This does conclude the program, you may now disconnect. Good day.