Fluent, Inc.

Good afternoon and welcome. Thank you for joining us to discuss Fluent's first quarter 2026 earnings results. With me today are Fluent's Chief Executive Officer, Don Patrick, Chief Financial Officer, Ryan Perfit, and Chief Strategy Officer, Ryan Schulte. 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. Additionally, there is a slide presentation that accompanies today's remarks, which can be accessed via the webcast and is also available on Fluent's website. A replay of the event will also be made available following the call on Fluent's website. To access the webcast and slide presentation, please visit the Investors Relations page at www.fluentcall.com. Before we begin, I would like to advise listeners that certain information discussed by management during the 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 only speaks as of the date hereof. Actual results could differ materially from those stated or implied by such forward-looking statements due to risk 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 risk 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 margins, 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 measures are provided in the earnings press release issued earlier today. With that, I am pleased to introduce Fluent's CEO, Don Patrick.

Good afternoon. And thank you all for joining our call today. I'm here with Ryan Schuelke, our chief strategy officer and company co-founder, and Ryan Perfit, our chief financial officer. We entered 2026 with a clear strategy, strong momentum, and a commitment to deliver. Our strategy is to aggressively invest in a high growth, high margin commerce media industry, leveraging the competitive advantages of our owned and operated marketplaces as our foundation. We've built a leading, highly differentiated Fluent brand with a clear and compelling purpose, delivering superior, measurable performance outcomes for our commerce partners and advertisers. We are establishing a leadership position in our industry And we are just getting started. Q1 is proof that our strategy is winning. Let me take you through the quarter. Commerce Media is the lead story of this company in where we will deliver shareholder value. And Q1 gave us another powerful and strategic validating chapter. The consumer and our partners are verifying that Fluent's Commerce Media Solutions is redefining the industry performance standard. That is the foundation we can and will build upon. Commerce Media Solutions delivered revenue of $25.9 million, 104% growth year over year. Gross profit grew 78%. Commerce Media now represents 58% of our total consolidated revenue, up from 23% just four quarters ago. This is especially encouraging given that the first quarter is seasonally our slowest of the year. The first quarter marks our ninth consecutive quarter of strong double to triple digit Commerce Media revenue growth in a market defined by an incumbent with a decade head start. Not an easy place to establish your equity, yet we are doing just that. The consistency of that track record is what gives us confidence and what should give you confidence that this is not just momentum, it is the trajectory. Think about that for a moment. In four quarters, Commerce Media went from less than a quarter of our business to more than half. That is not incremental progress. This represents strategic transformation. Moreover, this is just the ground floor. Our strategic plan is revealing business adjacencies that our partners are leaning into because we are solving for unmet consumer needs that sit at the top of their boardroom agendas. That is the road to long-term strategic partnerships. During the quarter, we entered into partnerships with Wyndham Hotels and Squire a barbershop booking platform, two new verticals that validate the breadth of demand for what we are building. The platform is working, the partners are growing, the numbers prove it, and now we own a differentiated leadership position in the commerce media space. On a consolidated basis, our Q1 2026 results were as follows. Revenue of 44.9 million. That is down 19% versus Q1 2025. But that figure includes 10.9 million from call solutions in 2025, which we divested in January. Excluding the impact of the divestiture, revenue is down 3% year over year. Importantly, Commerce Media Solutions continued its strong revenue momentum in the first quarter with 104% increase year over year, representing 58% of total consolidated revenue compared to 23% in the first quarter of 2025. Gross profit of 10 million, a decrease of 12% compared to Q1 2025 and representing 22% of revenue. Our commerce media gross profit grew 78% year over year, and the growth engine of this company is performing. Gross profit on our aggregate continuing businesses declined 7% year over year. Adjusted EBITDA of negative 3.6 million compared to a negative 3.1 million in Q1 2025. Our cost discipline is holding. Excluding a $2.4 million benefit from the divestiture, operating expenses are down over $1.4 million year over year. Slide four helps to visualize the growth of Commerce Media Solutions revenue over the last two years. As you can see in the graphs on this slide, Commerce Media Revenue in the first quarter of 2024, one year after its launch, accounted for just 10% of our total revenue during that period. Fast forward to the first quarter of 2025, and Commerce Media Solutions' contribution to total consolidated revenue increased to 23%, representing an increase of over 100% in Commerce Media Solutions' revenue when compared to Q1 24. In the fourth quarter of 2025, Commerce Media Solutions broke the 50% threshold as the primary driver of total consolidated revenue in the quarter. And as of the first quarter of 2026, Commerce Media Solutions revenue accounted for 58% of the total consolidated revenue. Our commerce media growth has been encouraging, to put it simply. And we expect this trend to continue as we scale. I'd like to take a moment to reiterate the market opportunity that we're seeing for commerce media and why this offering is at the core of our business and growth strategy. The US commerce media market is expected to reach 100 billion by 2027 and is expected to grow at a compound annual growth rate of 21% from 2023 to 2027. Our commerce media solutions business demonstrated triple-digit growth in the first quarter and is currently operating an annual revenue run rate of $110 million, positioning us well to capture new opportunities and market share as the commerce media market continues to expand. At the core of our commerce media platform is our post-transaction solution. In Q1 demonstrated, we are entering a new phase of maturity and scale. Post-transaction is structurally one of the most valuable moments in a consumer journey. The consumer has just completed a purchase, they're engaged, their credit card is out, and they are receptive to relevant offers. That moment is premium real estate for advertisers. And Fluent, through our post-transaction platform, has built meaningful scale at that moment across a growing network of commerce partners. What makes our post-transaction solution increasingly powerful is the network effect at its core. More commerce partners means more consumer touchpoints. More touchpoints means more value for advertisers. More advertiser demand means stronger yields and performance for commerce partners. That flywheel is turning, and each quarter it turns faster, earning fluent real market credibility. Q1 commerce media performance is the financial proof that our post-transaction platform is scaling correctly. Revenue more than doubled. Gross profit grew 78%. The trajectory into Q2, Q3, and Q4, and the second half is our strongest seasonal period, gives us strong confidence in the full-year outlook we have planned. As our post-transaction platform continues to scale, we are making targeted investments outside of traditional retail and in the commerce media adjacencies that deepen our value to the partners who know us best, as well as those potential partners that are seeking a differentiated outcome. During the first quarter, we welcome Wyndham and Squire as new commerce partners, two well-recognized brands that chose Fluent because of our proven performance and the quality of our platform. These partnerships are in line with our broader strategy to expand beyond traditional retail platforms, and we look forward to penetrating new verticals to expand our addressable market. As demand for commerce media offerings grow, our commerce partners are asking us for more, and we are responding. We are currently developing and piloting adjacent opportunities that extend our e-commerce media platform beyond the post-transaction moment and into new stages of the consumer journey. These are demand-driven extensions validated by our existing partner relationships, not speculative bets. Our pipeline is strong, and we look forward to updating you on the new opportunities and partnership wins in future quarters. Before I turn the call over to our CFO, Ryan Perfect, I want to provide an update on our owned and operated business. Our owned and operated marketplace business has faced persistent headwinds, an uneven competitive landscape, and inconsistent industry compliance standards that, after three years, we are treating as a structural reality rather than a temporary condition. We are not managing to those headwinds. We are managing through them. What I want to focus on is how we're responding strategically. We made a deliberate decision to reposition our owned and operated marketplace as the core enabler of our commerce media platform. The first party consumer data, intent signals, and audience relationships that flow through our owned and operated properties are the exact assets that differentiate Fluent's commerce media offering in the market. That infrastructure takes years to build and it is proprietary. We have it and we are putting it to work. Our owned and operating marketplace is operating under two mandates. First, it is a disciplined gross profit contributor. We are managing it to margin. Second, it is a live test and learn engine that feeds consumer intelligence directly into commerce media, improving targeting, attribution, and yield across the platform. Bottom line, owned and operated is directly contributing to our aggressive commerce media growth. We are consciously redeployed owned and operated demand to commerce media. The growth we are driving in commerce media is not just expected to offset owned and operated pressure, it's expected to more than replace it at better margins and with stronger long-term durability. With that, I'll turn the call over to Ryan Perfit to take a deeper dive into our financial results in Q1.

Thank you, Don, and thanks to everyone for joining us today. I'll now provide a deeper review of our first quarter results. Total consolidated revenue was $44.9 million in the first quarter of 2026, compared with $55.2 million in the prior year period. The year-over-year decline primarily reflects the January 2026 divestiture of our call solutions business. As Don noted, revenue from our aggregate continuing businesses declined approximately 3% year-over-year, as commerce media solutions growth largely offset the expected contraction in our owned and operated business. As Don also noted, Commerce Media Solutions represented 58% of total consolidated revenue in the quarter, compared with 23% in the first quarter of 2025, and above 50% for the second consecutive quarter. Commerce Media Solutions revenue of $25.9 million represents 104% growth compared with the first quarter of 2025. Revenue from our owned and operated business continued to decline in the quarter, which was in line with our expectations as we continued to prioritize commerce media. In the first quarter, owned and operated revenue decreased 49% to $15.7 million, compared to $31.1 million in the first quarter of 2025. Media margin in the first quarter was $14 million, representing 31% of total consolidated revenue, compared with $13.7 million, or 25% of revenue, in the prior year period. Commerce Media Solutions media margin in the first quarter of 2026 was $7.7 million, or 30% of Commerce Media Solutions revenue, compared with $3.1 million, or 25% of revenue, in the first quarter of 2025. Commerce Media Solutions gross profit was $5 million in the first quarter of 2026, an increase of 78% compared to the first quarter of 2025 and representing 19% of revenue. As we said last quarter, we expect our gross margin on commerce media solutions to return to the mid-20s over the course of 2026 as our newer partnerships and placements move beyond early-term incentive periods. Total operating expense in the first quarter of 2026 totaled $12.3 million, compared with $16.1 million in the first quarter of 2025. The reduction in operating expenses benefited from a $2.4 million non-cash gain on the sale of call solutions and a reduction of other operating expenses of $1.4 million, reflecting our continued cost discipline. Interest expense in the first quarter decreased 31% to $605,000 from approximately $880,000 in Q1 2025, reflecting a lower daily average outstanding loan balance on the new facility with Bayview. We reported a net loss of $5.4 million in the first quarter of 2026, compared with a net loss of $8.3 million in the prior year period. Adjusted net loss, a non-GAAP measure, was $5.9 million, or a loss of $0.19 per share. compared with an adjusted net loss of $6.7 million or a loss of $0.31 per share in the first quarter of 2025. The acquisition-related line in our non-GAAP reconciliation reflects the $2.4 million non-cash gain on the call solutions divestiture, which is excluded from adjusted net loss and adjusted EBITDA, another non-GAAP measure, as a non-recurring item. We recognized adjusted EBITDA loss of approximately 3.6 million in the quarter, compared with a loss of 3.1 million in the first quarter of 2025. As we stated on our fourth quarter call, we believe that we are well-positioned to deliver double-digit consolidated revenue growth on aggregate continuing businesses and improved full-year adjusted EBITDA in 2026, supported by the continued growth of our Commerce Media Solutions business. Shifting now to our balance sheet and cash flow, we had $10.3 million in cash and cash equivalents at March 31, 2026, compared with $12.9 million at December 31, 2025. Accounts receivable declined from $46.7 million at the year end to $31.8 million at March 31, reflecting normal Q1 seasonal collections and the divestiture of call solutions. AR collections drove positive operating cash flow of $5.1 million in Q1 of 2026, compared with $2.1 million in Q1 of 2025, a $3 million improvement year over year. That operating cash flow funded a net $6.3 million pay down on our revolving facility, driving a reduction in net debt from $30.8 million at year-end to $23.5 million as of March 31, 2026. To recap, our first quarter results were in line with expectations and continue to reflect the ongoing transformation of our business mix. Commerce Media Solutions grew 104% year-over-year and represented 58% of total consolidated revenue, up from 23% in the first quarter of 2025. Although Q1 is our seasonally softest quarter, operating cash flow was positive, and the continued growth of commerce media solutions, coupled with OPEX discipline, will drive adjusted EBITDA improvement as the year progresses. With that, I'll turn it back over to Don.