Thursday, January 26, 2017

Cogint CEO @ Red Chip Conference: "We're Firing on All Cylinders" $COGT

Cogint (ticker: COGT) CEO Derek Dubner presented at the Red Chip Online Growth Conference yesterday. Below is a full transcript (key points underlined):

"Thank you everybody for joining us for the Cogint presentation.

My name is Derek Dubner and I'm the CEO of Cogint.

Cogint trades on the nasdaq stock market under the symbol COGT.

These are forward looking statements that you should take time to review please.

Slide 3.

A bit about our company.

We are a data and analytics company and we provide cloud based mission critical information and performance marketing solutions to a wide variety of industries.

In Q3 we reported revenues in excess of $52 million with adjusted EBITDA of $3.2 million.

We have approximately 200 employees spread at 3 offices around the country. Most of them are in lower Manhattan where we have our marketing division.

As well, we have certain employees in south Florida and our technology team and our big data analytics department is based in Seattle.

We reported revenues in 2015 in excess of $140 million.

We have approximately 400+ owned media properties where we interact with consumers on a daily basis collecting self reported information which powers a segment of our technology platform.

In that platform, we house and fuse data on over 95% of the US consumer population.

Revenues reported in Q3 were greater than a 27% increase over Q2 and we have about 2000 clients to date.

Our management team has a proven growth track record in the data fusion space.

Data fusion is a subset of big data a term we all know very well.

With big data, we aggregate billions of records, structured and unstructured data sets often disparate data.

And we fuse that data together to create a comprehensive view of individuals, their businesses, and their assets.

And we deliver that to many markets, many industries in order to deliver a real time solution for such products as due diligence, managing risk, legislative compliance, asset recovery and gaining customers and increasing ROI.

This team has developed the two leading companies in the risk management space.

A division of our company where we compete today in risk management are two companies we created in the past we sold to very large companies for close to a billion dollars in aggregate.

Cogint is our reentry into the marketplace where with our IDI division, interactive date intelligence we compete in that risk management space.

As well, we have a marketing side of the business that I'll get to shortly.

We're in a massive high growth market catalyzed by sector tailwinds in data analytics across all of these industries.

We've built a transformative and innovative and highly scalable technology platform with which we aggregate this data we fuse with the proprietary algorithms, and we continue to fuel that platform with additional data so that we can build a holistic view of the consumer as we move forward.

As I just mentioned we have this massive proprietary database.

It is unique.

It's highly differentiated in the way that we marry transactional data meaning data that we all leave our digital footprint in society purchasing homes, renting homes, marrying, divorces, bankruptcies, liens, judgments purchasing and selling assets, planes, cars, boats.

And we marry that data with self-reported data where we have consumers as I mentioned engaging with our many owned media properties where they complete surveys and other ways of aggregating data where we dynamically and algorithmically populate these surveys whether we've seen the consumer once or we're seeing them for the first time or once again. And we want to learn more about that consumer.

And that data continues to be the lifeblood of our platform which powers our solutions -- its really our ability to build real time audiences for any company in any segment.

We have this people based platform which I've spoken about.

It's used in the advertising side of the business the marketing side of the business for omnichannel marketing -- really in any avenue in any way primarily mobile first which we know is a key differentiator the market.

We have a large install base of blue chip customers.

And, of course, we have an attractive financial profile with multiple levers of growth which we will get to.

Slide 5.

Our vision.

As I mentioned our vision is to take disparate data sources and we fuel our platform, a platform we have built, our Seattle team has built under Chief Science Officer Ole Poulsen.

He is one of the fathers of data fusion in big data. He built those two legacy platforms I spoke of that we sold to very large companies.

And he has built our next generation platform which we term "CORE".

That platform is data and industry agnostic.

So we can layer that platform over our own internal data or we can serve up solutions to various industries.

We can pull out very highly regulated federally regulated data from that platform so that we can go from a top tier bank which we serve all the way down to another industry that wouldn't have the permissible use of that data. And then we can also fuel that platform with marketing data where we can serve advertisers.

Slide 6.

A bit more of our platform -- where we say we combine the best of both worlds as I mentioned our platform "CORE" is our platform where we serve the risk management industry.

This is a solution that we present these real time views of consumers to the likes of banks, law enforcement and government, Insurance, Collections, Retail for POS verification at commerce sites, legal and others.

And on the right side of the platform, the acquisition engine. It's our very unique and proprietary engine where we drive consumers as I mentioned off of their internet connected devices and down into our funnel so to speak down to our media properties through various attractive offers -- maybe jobs in your local area or you with three friends to the Super Bowl that you may see on Facebook which would drive you down to one of our media properties, or savings or free offers, and many others -- where we interact with consumers, and we continue to learn about that consumer and then we drive all that data into our engine.

Slide 7 is a great illustration of the platform where you'll see on the left side of the funnel we collect and we aggregate public record data. That data may be collected from credit bureaus, departments of motor vehicles, other private data aggregators, court houses and the like.

We will get data such as as I mentioned bankruptcies, liens, judgments, criminal histories.

As well, we collect publicly available data -- might be any data on the Internet, social media data and other data from various websites.

And we create our own data by fusing data together with our proprietary algorithms where we create unique data.

We create connections that are otherwise unattainable from just a simple view of data.

For example, knowing that a purchaser within a large Fortune 500 company who spent a million dollars for that company in a given month. That purchaser acquired from a vendor where the purchaser had a brother in law as an officer of that vendor.

It is those connections that we seek to ferret out or deliver to our customers for anti fraud activities, anti money laundering activities, and various other fraud prevention, identity authentication and other uses.

Other data sets we collect on the marketing side of the business -- our behavioral data, demographic data, of course name, address, and other key personally identifiable information, ethnographic data, likes, dislikes, purchased behavior.

And, of course, metadata -- your device ID, your browser, who your carrier is -- all of these data points individually are interesting but when combined for a purpose are extremely intuitive, and we deliver better solutions at real time for all of our customers.

That data goes through the funnel where we assimilate it for modeling, where we have a data fusion layer, and that's really where the magic happens so to speak.

And then we have government, regulatory, and compliance controls as I spoke of where we would mask data so certain highly sensitive data would go out to a top tier banking customer and other data might not and instead go out to a top ride-sharing company that wouldn't need the most sensitive highly regulated data.

That data then powers those solutions I spoke of to the risk management industry, retail, healthcare -- just to name a few.

Slide 8 is the network effect.

Again, a bit about our unique proprietary model again driving that data into the funnel so to speak that I've spoken about where we build our profiles and we deliver to various industries powering these engines we have on both sides of our platform and delivering online sales to top tier customers such as BillDirect, Shoe Carnival, and others and also to drive certain activities sort of a call to action on the marketing side of our business -- whether that be downloading an app of a customer or filling out a survey or joining a newsletter wherever that call to action might be for the advertiser.

As I mentioned we're in very large and expanding markets. We know that the internet advertising market today is a $59 billion dollar-plus industry.

And we know today the risk and analytics space is in excess of $8 billion gives us a total service addressable market today of in excess of $67 billion dollars.

And when you account for the growth over the expected growth over the next few years we encounter a total addressable long term market of in excess of $655 billion with many great growth drivers to our business -- we all know online retail is a huge catalyst, return on spend, omnichannel consumers -- those individuals we live and die by our cell phones that we're on for everything we do, and the rapid adoption of these mobile devices that will only continue.

As well on the growth drivers on the risk space migration to the cloud is truly transformative.

The proliferation of data -- We know that from the early days when we created our first successful companies in this space -- the proliferation of data has changed the landscape from the expansion of mobile data, ecommerce data, social media data.

In the year 2000 your landline was an interesting data point. Today it's just about irrelevant as an example.

Today it's about your cell phone number. It's about your email address, and it's about who you associate with.

And, again, the need for actionable intelligence. In the big data space, we hear from time and time again, companies are swimming in data they're unable to glean intelligence from.

And we have the ability to take our platform and layer it over end users data -- those large fortune 500 where they can layer our platform will build intelligent applications for them to look into their data and will fuse their disparate data so they can glean answers to solve their complex problems.

A bit of the product overview which I've already referenced that's slide 10.

We break out our business into two segments -- information services and performance marketing.

On the information services side of the business, it is our primary investigative system which we call "idiCORE" for Interactive data Intelligence -- where we deliver our risk solutions to those markets that I spoke of.

As well, on the marketing side of the business a segment of information services are data acquisition solutions.

Much about what I talked about about where we drive consumers down into our funnel.

Nobody could drive real time consumers to an advertiser at scale the way our marketing business can.

Our primary brand there is Fluent, a well known, performance based, data-driven marketing company.

And on the performance marketing side of the business that we spoke earlier on these are performance based parts of the marketing side of the business where there's some call to action. So our advertisers pay us to drive consumers that are looking for their products to them directly.

So we might deliver a customer over who might download an app, sign up for that newsletter, and they only pay for measurable results -- those conversions that we know we get them customers.

Moving to slide 11.

Our differentiated mobile first approach in our marketing business -- 80% of consumers who interact with us interact through mobile.

We know that to be a game changer when you look at the leading companies in the space including Facebook --just driving down any street today looking around and you can see consumers are constantly staring down at their mobile devices and with that we are interacting with them delivering that consumer to those top tier advertisers.

We're generating 700,000 plus survey respondents on a daily basis to our owned media properties -- that is generating 5 million plus compiled responses every single day.

We now have a massive database of consumers, of self reported data of over 120 million consumers including 150 million unique email addresses across 63 million households.

Moving to Slide 12.

Our large global Fortune 500 client base.

Cheap Flights, Western Union, Finish Line.

Of course, Shoe Carnival and others that I mentioned earlier.

Western Union is a perfect example of a company that could utilize both of our solutions and other solutions on that side of the business -- for compliance with know your customer regulations under the Patriot Act, for identity authentication, and for other solutions in both in all of their collections markets and their legal departments, in their finance arms and others while also a top tier advertiser for the marketing side of the business.

Slide 13.

Just a couple of examples of success stories about Western Union that I spoke of.

They needed to drive more consumer engagement or awareness of their money transmission services for Western Union.

And so as we drive those consumers through our funnel we can simply ask various questions where we know they would be an interested customer.

For example, do they have a bank account? Relatives overseas? Have they ever used money transmission services before?

We had 8x the improvement in open rates in other engagements for Western Union and that was a very successful campaign and a relationship that we have going.

Same is true for Birdy Energy and others.

They key differentiator that I mentioned briefly in our marketing business is that we're performance based.

Measurability is a key to that market.

Advertisers know they must spend in the digital marketplace and if they're going to spend in either a strong economy or a weak economy they're going to spend dollars where they know they'll get a return on their investment.

So much so that many of our advertisers have no budget with us -- it's an uncapped budget.

They've told us unequivocally -- deliver me more of those consumers that you've given me that I know convert and I will pay for them as many as you can get me.

So we've had tremendous success especially in the gig economy -- in Ride sharing, in food delivery and other services. We're not only finding consumers to download those apps and become customers but we're also having tremendous success finding drivers for those various services.

We know who those consumers are. We know that they own their own car. We know they love to make their own hours because they engage with us and they're key conversions for our top tier advertisers.

Slide 14.

Since 2014, we get customers in the door -- these are our top 20 customers and what this demonstrates is that once they spend with us they realize they're getting results and they continue to spend with us. We have in excess of 90% customer retention. And we're very proud of that.

Slide 15.

Our leadership position.

As I mentioned, we have many differentiators.

We're pioneers in the data fusion industry.

We've done this before.

It's a business model that's proven -- and all we have to do is execute it -- which we are doing.

We have a massive data repository, extremely unique, highly valuable and highly differentiated.

We house that data within our cloud environment along with a massive unique first party data set of self reported data from consumers. When we marry that data we have better intelligence on consumers than we believe any company out there in our space.

We layer proprietary machine learning algorithms across our data.

So we can identify and segment not only those best customers for our advertisers but we can uncover fraud and abuse and reduce the cost of doing business on the risk management side of our business.

These are solutions that are tried and true. They're tested.

We know that our insurance companies, our banks, our collection firms throughout our past LOVE our products and are very excited about what we've built today.

Omnichannel campaign execution and that mobile first approach.

Again, very unique. And mobile is what drives the marketing side of our business.

And the ability to deliver holistic and comprehensive views of consumers.

As to the competitive landscape, our competitors in the risk management side of the business are Reed Elsevier Group or RELX Group.

We sold our first company to RELX for $775 million.

Also, a competitor in the risk management space: Thomson Reuters.

Purely in the marketing side of the business a pure play marketing competitor for its attributes wold be Criteo (CRTO).

When you look at us as a data and analytics company in a comprehensive way then competitors in our space are Acxiom (ACXM) and Alliance Data (ADS).

Slide 16.

A bit about some of the attributes of our company.

We're cloud based.

We're payment card industry compliant with extraordinary speed.

We have a sub 250 millisecond search.

6 data centers across the country.

Proprietary algorithms as mentioned.

And over 5 million consumer responses every day as we said we fuel this platform.

Slide 17.

We built out our inside sales environment where we're going to do all of our verticals and delivering our solutions as we have in the past.

We know these customers. We've been dealing with them for 17 years now and they know us. They're very excited about what we've built and what we continue to build.

This is an evolution of our solutions. They continue to get better and better. And we get further ingrained in the workflow of our customers on a daily basis.

We use strategic sales, we have distributors ,resellers and other strategic partnerships and, of course our marketing efforts as we've done in the past where at all the collections and other vertical trade shows we are in their blogs and we meet and greet. We know our customers on a regular basis.

Slide 18.

Our growth strategy going forward will continue to execute as we are.

We're firing on all cylinders.

We just executed our strongest quarter the 4th quarter, 4th and 1st quarters are seasonally our best quarters on the marketing side of the business.

Very excited about where the business is going right now.

We're adding new customers in new verticals.

We're upselling within those.

We're increasing our channels.

On the marketing side of the business we've proven the model and it's growing.

We have in our road map to expand internationally. It's probably a late 2017 initiative for us.

We'll make selective acquisitions from time to time as we have in the past -- but only where it makes sense from shareholder value perspective.

Of course we have various industry specific initiatives.

This is the leadership team -- particularly proud of various parties.

I'veI mentioned Ole Poulsen our chief science officer someone I go back to 1999 with in developing these companies along with our Chairman Mr Brauser -- also a founder of these companies.

An excellent team -- Ryan and Matt run the marketing business and recently added
Harry Jordan COO of the company. He left the previous company Reed Elsevier Lexis Nexus -- as I mentioned they acquired our first company -- Harry ran that acquisition of our company and then ran the company.

So we're thrilled he's joined us as our COO.

I should also mention that Dr Philip Frost Chairman and CEO of Opko Health (OPK) is a founder of our company and our largest shareholder.

Financial highlights.

Strong existing revenue streams -- as I mentioned 95% of our revenue is from existing customers.

We have over 90%, 92% revenue retention.

So long term customer loyalty.

Highly scalable business model with annualized revenue of approximately $1 million per employee.

Today, the marketing side of the business with margins in the range of 28%-32%.

However the information services side of the business in our risk management space -- we left our development mode in 2015 and are now in our sales driven mode and are very excited.

That is a fixed cost model. We have fixed costs on the data we aggregate and technology we build.

At the 2 previous companies we built at maturity have margins in excess of 70%-80% at maturity.

So you can expect as the risk management side of our business grows from here, you will see our gross profit margins increasing significantly on a consolidated basis.

That is the attractive margin profile at low capital intensity -- as we've left our fixed cost portion of the business and now we're running fast.

We have a strong balance sheet.

Capital efficient business model.

We have adequate cash reserves to continue to fund the business and operate.

Well capitalized and effective working capital management.

Slide 21.

Thank you for your time and we will now turn it over to Q&A.

Q&A

Market size.

We presently serve various markets in 2 industries. One is big data analytics and the other is the consumer marketing space.

Our serviceable addressable market on the risk and analytics space is approximately $8 billion.

On the consumer marketing side of the business is approximately $59 billion.

So you can tell that we have a total serviceable market that's very significant.

We started this company in 2014. This management team has created the leaders in the big data analytics space over the last 15 years and we're very successful at selling those to very large data and analytics companies.

Today, we're running very quickly in serving that data and analytics space.

The larger part of our business is clearly in the consumer marketing side today. But as we continue to evolve you will see the risk and analytics side of the business grow significantly as we turn from the last 1.5 years of being a more development stage analytics company to a services driven business. And we expect to take significant market share.

If you look at the trends of the compound annual growth rate over the next several years you'll see through 2020 a total addressable market of approximately $650 billion. So we have an ENORMOUS OPPORTUNITY that lies ahead.

Competitive advantages.

Today we have a very unique and differentiated platform that we have built.

This team including our Chief Science Officer who's a brilliant programmer responsible for being the systems architect of the 2 legacy platforms that we created and sold to those data companies that I mentioned for close to $1 billion in the aggregate.

He and our Seattle based tech team embarked on building our platform for this company -- we term that platform "CORE" -- along with another part of our platform which is the Agile Acquisition Engine on the marketing side of the business.

This is a cloud based platform driven by machine learning. We aggregate billions and billions of records, disparate, structured and unstructured data sets from many sources. We have coverage within our database on over 95% of the US population. But a very unique attribute of this platform is our interactions with consumers off of their connected devices, down to our owned media properties where consumers engage with us and provide self reported information -- anywhere from their identifying information all the way to survey questions about their likes and dislikes, things they like to purchase, medical conditions, and other attributes that are key data points that we fuse together.

So we have a very unique asset in our platform.

And our ability to build custom audiences for advertisers in the Fortune 500 and around the country is not only unique but it's also one we believe can't be duplicated. Nobody can drive consumers in the market at massive scale to an advertiser the way we can as well as the ability to deliver solutions in real time off of our platform to many industries -- banking, legal, collections, law enforcement, and government -- and the ability for them to solve their complex problems by knowing all they have to about a consumer, their businesses, and their assets in real time fashion.

Thank you.

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More on Cogint HERE.

Disclosure: Long

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This website is published for informational purposes only and does not provide investment advice, nor is it an offer or solicitation of any kind to buy or sell any securities and/or investment products. In the event I invested in a featured security or investment product, an acknowledgment will be made. All opinions expressed are my own.

2 comments:

KQforever said...

Sounds like Uber or Lyft are one of our clients. Thanks for the ongoing due diligence on Cogint.

Milton Heath said...

I've read just about all your Cogint info. Great work.

I'm a shareholder and fascinated and shocked that the stock is trading at $3.65/sh the day after 4Q16 earnings report. They beat on gross margins, 4Q16 revs, and the 2017 revenue guidance is pretty killer. If Cogint was a private, VC funded company it would have a Unicorn valuation level today. No question.

My interpretation of a key thing Cogint is providing is that digital/Internet advertising wants to have personalized information as an input to matching the ad to the end user. In other words, bring to the non-Facebook part of the Internet, end user info to the advertiser.

After listening and reading the 4Q16 CC, I'm wondering about two main things:

1. Which margin was Jim McIlree referring to in the Q&A? 10% to 15% is not anything close to the Gross Margins discussed in the 3Q16 CC nor in this 4Q16 CC:
Jim McIlree

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%?

Dan MacLachlan

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.


2. How long will the $7 million in share-based compensation be paid? Mr. MacLachlan said, "In making strategic acquisitions, we often use equity grants to secure smooth integration and retention of thought leadership." As a shareholder I'd like to know for certain that such high levels of share-based compensation per quarter was only because it was part of the plan in purchasing companies and achieving integration and adaptation milestones of the of purchased companies and technology. And if there are no purchases of another company, the non-share based compensation would therefore go down substantially.