Fluent, Inc.

With me today are Fluent's Chief Executive Officer, Don Patrick, Chief Financial Officer, Ryan Perfit, and Chief Strategy Officer, Ryan Shulke. Our call today will begin with comments from Don Patrick and Ryan Perfit, 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 also be made available following the call on Fluent's website. To access the webcast, please visit the Investor Relations page at www.fluentco.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call will contain forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements made during this call include only speak as of the date hereof. Actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with the company's business. These statements may be identified by words such as expects, plans, projects, could, will, estimates, and other words of similar meaning. The company undertakes no obligation to update the information provided on this call. For a discussion of the risks and uncertainties associated with Fluent's business, we encourage you to review the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q. During the call, management will also present certain non-GAAP financial information relating to media margin, adjusted EBITDA, and adjusted net income. Management evaluates the financial performance of the company's business on a variety of indicators, including these non-GAAP metrics. The definitions of these metrics and reconciliations to the most directly comparable GAAP financial measure are provided in the earnings press release issued today. With that, I'm pleased to introduce Fluent CEO, Don Patrick.

Good afternoon. Thank you all for joining our call today. I'm here together with Ryan Schuelke, our chief strategy officer and company co-founder, and Ryan Perfit, our chief financial officer. Our strategic momentum continues to accelerate in establishing an industry leadership position in commerce media. However, as we expected, our third quarter financial results demonstrate a challenging environment due to timing delays in onboarding the new partners who are fueling our transformative pivot into the rapidly growing commerce media industry. On a segment basis, commerce media solutions revenue in the third quarter grew over 80% year over year, while increasing its portion of contribution to consolidated enterprise revenue from 16% in Q3 2024 to 40% in Q3 2025, as Sloan expanded its position in the commerce media industry. As of September 30th, 2025, our Commerce Media Solutions business surpassed an annual revenue run rate of over 85 million as we grow our market share based on the consumer value we are creating for our partners and advertisers. Q3 Commerce Media Solutions financial results would have been even more impressive in the quarter if not affected by two factors I'd like to call out. Number one, Some new partner wins launched on our platform later in the quarter than anticipated and therefore had less impact on our revenue and gross profit for the quarter. These wins will impact full quarters moving forward. Number two, consistent with the industry, we saw some advertiser pricing and budget pullback in the later part of Q3. This appeared tied to advertiser specific issues which you're seeing continuing in early Q4. Our positive commerce media solutions growth trend was not enough to offset our owned and operated marketplaces decline, which remained near 50% year over year, exasperated by strong advertising and regulatory headwinds. That being said, We are very pleased with the growth of the Commerce Media Solutions, and as Commerce Media Solutions becomes a bigger piece of our consolidated revenue pie, we expect enhanced results and profitability to closely follow. Contributing to our enthusiasm for Commerce Media Solutions, we announced several new and expanding partnerships in the quarter with leading industry partners like Databricks and top-tier brands, including Authentic Brands Group. the world's leading sports, lifestyle, and entertainment brand owner. Partnerships like these are the cornerstone of our commerce media solutions growth. Our marketplace credentials continue to be validated by a stable of iconic global brands who are choosing to partner with us. Our growing list of world-class partners recognize the fundamental value we are creating in building consumer loyalty. as we consistently exceed our partners revenue and our advertisers return on ad spend expectations. Lastly, during the third quarter, we completed a 10.3 million equity raise that included new fundamental institutional investors and insiders, which significantly strengthened our balance sheet and provided us with additional capital to continue investing in the growth of our commerce media solutions. Slide four reiterates just how excited we are about the Commerce Media Solutions and the tremendous upside that is presenting us for our business. Commerce Media Solutions has a current annual run rate of over 85 million, up from 80 million a quarter ago. We expect this growth to continue as we capture a larger share of the market. Taking a step back for a moment, What's most important to the business and for our shareholders is ultimately having our financial scorecard reflect our strategic vision. As such, and as we have identified as a core milestone in our strategic plan, we expect our financial pivot will deliver trendline shift in Q4, where Fluent's gross profit is expected to grow by double digits quarter over quarter for the first time in 10 quarters, resulting in positive adjusted EBITDA. I want to reemphasize that our enthusiasm for commerce media leadership position is numbers validated. Our current second half momentum is expected to deliver triple digit revenue growth year over year, a testament to our commerce media solutions platform capability that is earning us world class brand partnerships. We believe this will result in strong, fluent enterprise and a double digit year over year revenue growth in 2026, as our overarching shift-the-mix strategy begins to drive improved consolidated results. As you can see by the graphs on slide five, Commerce Media Solutions made up 40% of our total revenue in the quarter, up from 16% in third quarter 2024 and 4% in the third quarter of 2023. Looking ahead, We see the opportunity to better leverage our owned and operated business and the strong brand equity we built in the marketplace over the last decade as a springboard for more aggressive growth for our commerce media solutions. More specifically, as the marketplace continues to evolve, we are beginning to see a convergence between our owned and operated and commerce media capabilities in the commerce media marketplace. creating differentiated opportunities with our partners and advertisers that we are uniquely qualified to address. Commerce Media Solutions provides highly engaged and extremely valuable audiences for advertisers. The convergence of owned and operated rewarded experiences and commerce media is enabling us to build unique proprietary demand for our partners while enhancing our competitive advantage. An example of this convergence during Q3 is that we were able to deepen our penetration with two existing owned and operated advertising verticals into the commerce media marketplace, which quickly grew past 40% of our commerce revenue. Building unique supply and demand increases our commerce media competitive moat and rationalizes the continuing value of our owned and operated marketplace. We expect that Commerce Media Solutions revenue will surpass owned and operated in the fourth quarter of 2024 as the main driver of consolidated revenue, supported by increased activity in Commerce Media around the holiday season. We entered several new and exciting partnerships in the quarter, which will be key drivers both of our Commerce Media Solutions and our consolidated revenue growth. Our partnership with Databricks allows us to enhance and expand our data collaboration capabilities, which we expect to significantly enhance the performance of our commerce media solutions. As a part of this partnership, we also welcome to board a key leadership hire in Virginia Marsh, who joined Fluent as head of data and agencies to drive and support the ongoing growth of our data collaboration capabilities. Also in the quarter, We expanded our existing partnership with Authentic Brands Group, a leading sports, lifestyle, and entertainment brand owner, generating over $32 billion in global annual retail sales. Through this broader agreement, Fluent will support post-purchase monetization for additional brands such as Reebok, Vince Camuto, Volcom, Champion, RVCA, DC Shoes, and more, with the goal of adding millions of annual transactions to our growing commerce media partner network. Another one of our many successful partner integrations is our strategic partnership with Rebuy Engine, a leading e-commerce personalization platform for Shopify brands. This partnership opened an expansive network of over 12,000 active e-commerce brands on the Shopify ecosystem, which is a new channel and business opportunity for us. Our integrated solution, rebuy monetized, powered by Fluent, continues to perform well as this partnership scales across the Shopify platform. In fact, we saw more than 1 million ad unit sessions in September alone, representing a 79% increase on a month-over-month basis. This channel provides a catalyst of upside as we cultivate new business relationships where we didn't previously have access. Before turning the call over to Ryan, I would like to provide a quick update on our outlook as we move through the fourth quarter and close out 2025. Regarding our future, we believe this is just the beginning as we aggressively scale our commerce media business we see an exciting emerging market development before us. I'll provide a thumbnail sketch today that will further delineate in future learning releases in 2026. I reference the industry-wide strategic convergence before us where the commerce media and the rewarded owned and operated marketplaces continue to evolve and merge and where our loyalty marketing strategy can create competitive advantage for Fluent. We believe we are uniquely differentiated in the space to win big by leveraging what we've learned and perfected in our rewards-grounded owned and operated properties, premium pricing, high-intent audiences, and CRM-driven optimization. Although it's early, this converging marketplace has the potential to significantly accelerate Fluent's consolidated business growth. We look forward to updating you further as we progress.

Thank you, Don, and thanks to everyone for joining us today. I'll now provide a review of our third quarter results. Total consolidated revenue was $47 million in the third quarter of 2025, compared with $64.5 million in the prior year. However, Commerce Media Solutions grew 81% to $18.8 million, compared with $10.4 million in the third quarter of 2024. Commerce Media Solutions has demonstrated continued momentum with the annual revenue run rate from this business now exceeding $85 million, and its revenue representing 40% of our total consolidated revenue in the third quarter of 2025, compared with just 16% in the third quarter last year and 4% in the third quarter of 2023. Commerce Media Solutions continues to grow at a rapid pace, which is our expectation as we invest in and scale this business. With the bump in consumer spending that we see around the holiday season, we expect CMS to overtake our owned and operated business in the fourth quarter of 2025 as the main driver of consolidated revenue. This will be a key inflection point for Fluid. Owned and operated revenue decreased 52% from the prior year, and we expect the year-over-year decline of roughly 50% to continue into Q4 as we focus more of our effort and capital on commerce media growth. Media margin in the third quarter was $12.8 million, which represents 27.2% of revenue compared to $18.2 million or 28.1% of revenue last year. Commerce Media Solutions media margin in the third quarter of 2025 was $4.6 million or 25% of the Commerce Media Solutions revenue compared with $3.5 million or 34% of revenue in the third quarter of 2024. As we mentioned in our second quarter call, margins were compressed in Q2 due to a strategic choice to offer more flexible pricing structures to win new partners and penetrate into new placements beyond post-transaction. We saw this strategy start to pay off in the third quarter as Commerce Media Solutions' gross profit margins increased sequentially to 22% as compared to 18% in the second quarter of 2025, or an increase of roughly 400 basis points. As we continue to monetize these new opportunities, we expect commerce media gross margin to return to the high 20s over time. On a gap basis, total operating expense in the third quarter of 2025 totaled $14.7 million, compared with $17.2 million in the third quarter of 2024. Interest expense in the third quarter decreased to $711,000 from $1.3 million in the prior year period, based on a lower outstanding loan balance and lower interest rates. We reported a net loss of $7.6 million in the third quarter, compared with a net loss of $7.9 million in the prior year period. Adjusted net loss, a non-GAAP measure, was $6.5 million, equivalent to a loss of $0.23 per share, compared with an adjusted net loss of $3.7 million or a loss of $0.22 per share in the third quarter of 2024. Adjusted EBITDA in the third quarter of 2025 was a loss of $3.4 million compared with an adjusted EBITDA loss of $71,000 in the third quarter of 2024. We believe we're in a good position with the growth and seasonality of commerce media solutions to achieve adjusted EBITDA profitability in the fourth quarter of 2025. And as we continue to drive our shift in revenue mix to focus more on CMS, We expect adjusted EBITDA to be positive for full year 2026 as well. Shifting now to our balance sheet, we ended the quarter with $9.2 million in cash and cash equivalents and an additional $710,000 in restricted cash. During the quarter, we successfully completed a private placement in excess of $10 million, including both fundamental institutional investors and insiders, representing shareholder competence in our long-term strategy. This transaction provided us with the working capital to support the continued growth of our commerce media solutions business and our strategy to drive revenue growth and adjust profitability in 2026. Our total net long-term debt was $26 million at September 30th, 2025, compared with $35.6 million at December 31st, 2024. We had an outstanding principal balance of $22.6 million on our credit facility with SLR Credit Solutions. This facility provides us with $20 million term loan and a revolving credit facility of up to $30 million that matures on April 2, 2029. We will continue to strategically utilize debt as a source of capital as our business scales. This has been a very exciting year to date for Fluent as it pertains to our Commerce Media Solutions business. Looking ahead, we believe that we are ideally positioned with a clear and defined strategy, a proven growth catalyst, and the liquidity to continue investing in commerce media solutions to capture additional share of this rapidly growing market. In addition to the enhanced revenue, margin performance, and cash flow that we anticipate as commerce media solutions scales, We remain confident in our expectation that we will achieve positive adjusted EBITDA in the fourth quarter of 2025, as well as full-year double-digit consolidated revenue growth and full-year adjusted EBITDA profitability in 2026. With that, we will now open the call up for questions.