Cogt

From Q3 2017 Conference Call, CEO Derek Dubner:

Derek Dubner:

Thank you, and good afternoon to those joining us today to discuss our third quarter results. Cogint is pleased to report a very strong third quarter, with record revenues of $57.2 million, a 10% increase over the third quarter 2016. Gross profit margin increased 10 percentage points over prior year to 34%, and Adjusted EBITDA increased 84% to $5.8 million.

We experienced continued strong, broad-based customer demand from existing and new products across both our risk management and marketing services businesses. Our record revenues and achievements of our set goal of very significant gross profit margin expansion is despite the unique non-recurring challenges we experienced in the quarter. We were impacted by the hurricanes in Texas and Florida, as these events affected not only traffic acquisition, but key customers. Of note, our ability to target consumers in those key states was impacted by outages. As well, several key customers on the marketing services side of the business with reliance on large call centers were impacted by not only the reduction in work force in preparation for the storms, but also during and after the storms, which caused these customers to pull back, impacting revenue. As well, senior management across the businesses had to devote very significant time, effort and expense in negotiating and consummating an agreement with BlueFocus International in regard to our transformational transaction, which I will discuss in detail shortly. Notwithstanding these challenges, we still posted strong numbers and I am very encouraged by Q4 pacing to date.

Our Information Services segment revenue increased 54% to $22.8 million. Information Services gross profit increased 182% to $10.1 million, a 44% gross profit margin. Our Performance Marketing revenue decreased 8% to $34.4 million, as we focused on higher quality revenue which delivers greater margin. This is demonstrated by our Performance Marketing gross profit increase of 6% to $9.5 million, a 28% gross profit margin. Consolidated gross profit margin increased 10 percentage points to 34%.

Turning now to a few themes that we’ve discussed in the past. During our last earnings call, I reviewed our priorities for the second half of 2017, and beyond. Of those priorities, I detailed our goal of leveraging our unique technology platforms and differentiated ability to aggregate data through the creation of proprietary data both through analytics and real-time consumer interaction. I stated our goal of using our competitive advantages to seamlessly introduce new products and solutions to market that solve for the needs of our customers.

On the marketing side of the business, if you have listened to competitor earnings calls, you’ve heard a familiar mantra—success depends on knowing your customer and serving them intelligently. These themes focus on gathering insights on consumers in real time and at massive scale. When I hear this, it reinforces my confidence in our business as a whole and, specifically, our initiatives. Our marketing services business is unmatched in gathering real-time insights at massive scale.

A great example of the leveragability of our unique platforms is our just announced release of FOREWARN, powered by our CORE platform, which delivers real-time solutions, primarily via mobile application, to the real estate industry. With the advancement of technology over the years, the real estate industry has moved online, resulting in buyers relying less on agent representation and contacting agents directly to view properties. Our research indicated a glaring vulnerability in the industry. Agents have no idea who they are now alone with in a property. Agents have a right to know who they are doing business with, and brokers are now able to reduce liability by making FOREWARN available to their agents. With as little as single data point, for example, an incoming phone number, agents can verify identity, evaluate risk by viewing the criminal history of a subject, and validate financial and other information provided by the subject. In just 60 days, we developed and launched FOREWARN and the response has been nothing short of phenomenal, not only from agents, but also real estate associations and non-profit organizations, who have struggled for years to ensure agent safety. We’ve received quick praise in the form of coverage by the New York Post, CNBC, and other top media outlets.

This is but one example of our ability to develop and commercialize products derived from our technology platforms faster than others in the marketplace. We’re excited to execute upon our product line, delivering innovative solutions, such as FOREWARN, to address the needs of various industries and our customers.

As well, we are leveraging the cross-functionality of our intelligent platforms, CORE and Agile Audience Engine, to create comprehensive marketing services solutions for Fortune 500 consumer packaged goods companies. Today, we are increasing client ROI, while expanding our margins.

We launched new technology to deliver content to audiences via push notifications, which generated revenue of $586,000 this quarter. As well, we are now implementing several new content marketing strategies to deploy across multiple addressable channels, including Facebook, Google and ad-supported apps. Our team is dedicated to developing highly targeted and refined original content to drive consumer interaction and to optimize ROI for our advertisers. Both video content and voice ads are on our roadmap to be launched in Q1 of 2018.

We continue to scale our Custom Audience Identity Graph, enabling more intelligent execution of our marketing solutions across a variety of verticals. We are now generating, on average, over 850,000 consumer registrations and over 8.8 million compiled survey responses daily, with a recent record high of over 1 million registrations and over 10.3 million compiled survey responses in a single day.

Turning back to the risk management side of the business, we continue to execute on our robust product roadmap. As we have stated in the past, and as we will continue to do so, idiCORE continues to evolve with new data sets fused during the quarter and new functionality. We recently announced the release of our Comprehensive Report, an idiCORE offering, and an essential tool in the Risk management arsenal for our customers. We are receiving great feedback. As with many of our offerings, this release was essential to further penetrate our markets and to get ourselves further ingrained in the daily workflow of our customers. While I’m excited about this release, I’m even more excited about the plan for this offering going forward. This offering alone has a dedicated product roadmap, where we plan to transform this solution into a report the market has never seen. At a more mature state, expect to see novel data points and data visualization unlike anything the competition is offering today.

On our last call, we discussed the formation of several strategic relationships with leading mobile identity authentication and background screening solutions providers. As a reminder, our optimism was premised upon the expansive markets that these providers serve, including banking, financial services, insurance, healthcare and technology, and that we won these relationships from larger, more established competitors. I am pleased to report that we have concluded testing and that these integrations are now revenue generating, with great prospects for growth.

Also, on our last earnings call, I emphasized a key primary initiative of increasing demand for our custom data products, as these products generate our most profitable dollars, providing margin expansion and little to no additional traffic acquisition costs, or TAC. We did exactly what we set out to do this quarter. Despite leaders in the digital marketing space suffering higher TAC this quarter, we delivered lower TAC as a percentage of gross revenue, as we continued to leverage our Custom Audience Identity Graph more intelligently for the purposes of executing performance marketing and consumer acquisition campaigns across a variety of verticals. In sum, we are highly focused on the highest quality revenues, which delivers us greater margin. That is one reason you see 44% margins in our Information Services segment.

Notwithstanding our valiant performance since we started this Company, and the incredible Company we built in just over two year’s time, there are some who do not entirely understand the combined assets of our Company, our innovative technology, the product suite, the product roadmap driven by our unique and differentiated technology platforms, and the synergies that exist. As well, we believe there to be certain investment mandates that impair an investor’s ability to invest in one or the other type of companies, whether the risk management business or digital marketing business.

As a result, in September, we announced a transformative transaction, a business combination with Silicon Valley-headquartered BlueFocus International. BlueFocus will contribute to cogint $100 million in cash, and its largest international assets, Canadian-based marketing communications company, Vision 7 International, and U.K.-based, global, socially-led creative agency, We are Social, with BlueFocus paying or refinancing cogint’s existing debt upon closing. The transaction values Fluent alone at $415 million, a significant premium.

Immediately prior to the closing, cogint will spin off its data and analytics operations and assets into a new public company, expected to be listed on Nasdaq, named Red Violet. The shares of Red Violet will be distributed to cogint shareholders as of a record to be determined as a stock dividend upon closing of the transaction. The arrangements will result in Red Violet launching with cash of a minimum of $20 million and no debt.

The current Management Team of cogint will be the Management Team of Red Violet, and Ryan Schulke and Matt Conlin, current CEO and President of Fluent, respectively, will continue in those roles at Fluent.

Upon the closing, BlueFocus International will own 63% of the combined company on a fully diluted basis and cogint shareholders of record will own 37% of the combined company. Cogint shareholders of record will own 100% of the Red Violet. This transaction creates tremendous shareholder value, in our view, as cogint shareholders of record will, upon closing, own shares in two publicly traded companies and will receive a cash dividend of approximately $1.00 per share.

As further benefits of this transaction:

First, as mentioned, the transaction delivers a significant and immediate premium to our shareholders, not only with the immediate value assigned to Fluent, but with greater value certainty resulting from the combination of our digital marketing business with BlueFocus’ marketing services companies, as compared to Fluent’s standalone prospects.

We believe this transaction will bring greater clarity to the marketplace as to each company’s core competencies, allowing each to compete more effectively within their respective markets.

As our risk management and digital marketing businesses have distinct financial and operating characteristics, the separation of the businesses will allow each to adopt strategies and pursue objectives appropriate to their respective needs, to focus more exclusively on improving each company’s operations, and to enable the optimization of capital deployment and investment strategies necessary to advance their respective compelling innovation roadmaps.

This business combination creates a world-class global marketing services company. Our combination with Vision 7 and We are Social is a transformative event for our digital marketing business, which as been steadfastly focused on developing mobile-first, data-driven performance marketing solutions for brands and marketers across a variety of verticals. Our new partner agencies, Vision 7 and We are Social, create a framework to deliver a more holistic offering to the market, combining best-in-class creative, brand strategy and global communications with Fluent’s unique custom audience development and performance-based marketing model.

Prior to entering into this deal, it was on our 2018 roadmap to establish an international presence for Fluent. This expansion would take significant time and resources. This transaction provides Fluent the access to Chief Marketing Officers of leading brands around the world. The combined businesses create a unique marketing services company delivering end-to-end solutions to the world’s leading brands, from creative to digital to performance marketing, key attributes of which many leading companies possess one or the other, but none possessing all.

Red Violet will be a pure-play data and analytics company, continuing its expansion within the risk management industry. As I mentioned, it will have a minimum of $20 million in cash and no debt.

Thus, again, upon the closing of the transaction, our shareholders of record will be owners of two public traded companies and will receive a cash dividend of approximately $1.00 per share.

We are working through the various closing conditions. We have already secured majority shareholder approval, and recently announced that the Federal Trade Commission granted early termination of the waiting period under Hart-Scott-Rodino. We expect to file our Information Statement by November 28, 2017. We are in the CFIUS process and will set a record date once that process is cleared. We expect the transaction to close in the first quarter of 2018.

seekingalpha.com/filing/3767771

The Committee on Foreign Investment in the United States (CFUIS) Process

Prior to filing a voluntary notice, parties may consult with CFIUS or submit a draft notice, as described in the Filing Instructions section of this website, to ensure that the review will proceed as efficiently as possible. The CFIUS process generally begins formally when parties to a proposed or pending transaction jointly file a voluntary notice with CFIUS containing information required by § 800.402 of the regulations. Upon receiving the notice, the Staff Chairperson will promptly determine whether the notice is complete and satisfies the requirements stated in the regulations. If the notice is complete, the Staff Chairperson will circulate the notice to all CFIUS members. A review period of up to 30 days begins on the next business day.

www.treasury.gov/resource-center/international/foreign-investment/Pages/cfius-overview.aspx


CFIUS Filing Under Review: BlueFocus International Limited and Cogint
By Trade Practitioner on December 19, 2017 Posted in CFIUS, CFIUS Filing, Information Technology, Network and Data Solutions, Review
Status: Review

Acquirer: BlueFocus International Limited (Hong Kong SAR, China)
Acquired: Cogint, Inc. (US)
Value: Approx. US$100 million and non-cash consideration
Industry: Information Technology; Network and Data Solutions

UPDATE: According to Cogint, Inc., in relation to the pending acquisition by BlueFocus International Limited, the parties’ pending notice was “accepted for review on December 6, 2017” by CFIUS. (Cogint, Inc., Schedule 14C, Dec. 18, 2017, SEC Filing.)

www.tradepractitioner.com/2017/12/upcomingnew-cfius-filing-bluefocus-international-limited-and-cogint/

30 days from 12/7/17, CFIUS should render their opinion. And this would appear to be the last hurdle. A closing could be as early as mid-late January 2018.