Fluent, Inc.

Good afternoon and welcome. Thank you for joining us to discuss Fluent's second 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 Schulke. 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 be also available following the call on Fluent's website. To access the webcast and slide presentation, please follow the investor relations page at 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 only speak 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 earlier today. With that, I'm pleased to introduce Fluent's CEO, Don Patrick.

Good afternoon, and thank you for joining us today. I'm here with Ryan Schulke. our chief strategy officer and company co-founder, and Ryan Perfit, our chief financial officer. Our Q2 financial results marked an important milestone in the execution of our business strategy, fluent return to year-over-year revenue growth. On an aggregate continuing business basis, revenue grew 25% year-over-year in the second quarter, and even on a reported basis, Inclusive of the call solutions divestiture, total revenue grew 8%. This is not an isolated data point. As we discussed in previous earning calls, this is part of our strategic plan that we have been aggressively investing to capture the significant opportunity in front of us in commerce media. We are solidly positioned to accelerate as we become a recognized brand in the industry based on the results we provide our partners. This quarter is the proof. Revenue growth paired with improving margins, the signature of a sustainable business strategy, showing up on a consolidated level, not just within a single business line. Looking ahead, we believe that we are well positioned to drive double-digit growth in revenue on an aggregate continuing business for full year 2026. Q2 was also a quarter where we leveraged our credentials and extended our platform into new adjacent commerce media markets with innovative first mover advantage. In June, we announced our in-store partnership with Built, extending commerce media beyond digital post-transaction moments and into physical checkouts. More than 80% of retail transactions still happen in the physical store, and this gives us a way to engage our partners' most valuable customers wherever they shop, online or in person. I'll go deeper on this in a few minutes. Let me take you through the quarter, starting with the financial results, and then spend time on where Fluent will continue to innovate in leading commerce media. Q2, 2026 results were as follows and consistent with what we advised last quarter. Revenue of 48.4 million, up 25% year over year on an aggregate continuing businesses, excluding the impact of the call solutions divestiture and other divested and runoff revenue. Year over year revenue was up 8% on a reported basis. Our Commerce Media Solutions business again led that growth with revenue up 90% year-over-year. Gross profit of $14 million, up 36% year-over-year and representing 28.9% of revenue, a 650 basis point improvement from Q1, 2026, driven directly by improved monetization with certain key Commerce Media Solutions partners and those partnerships becoming a larger share of our business. Adjusted EBITDA of negative 1.8 million, a margin of negative 4%, a sequential improvement of 1.8 million from Q1 of 2026. Commerce Media continues to be the lead story of our company. It's where we will deliver shareholder value by expanding our footprint in the rapidly growing marketplace. What gives us increasing conviction isn't just the growth rate, it's the momentum we're building with world-class brands combined with new innovative adjacent solutions we're beginning to build in loyalty and in store. The marketplace continues to expand and we're leading in meeting our partners' current and future needs. That strategic combination A growing roster of premier partners plus real future product innovation beyond our core is what positions Fluent to be a market leader in the commerce media industry. Commerce media solutions revenue grew 90% year-over-year in the second quarter, our 10th consecutive quarter of high double-digit to triple-digit growth. That growth in Q2 was driven by continued momentum in online post-transaction as we ended the quarter with an annual revenue run rate of over $125 million. A second strategic breakthrough with in-store lays the foundational platform for additional future growth. And it's not part of our successful Q2 financial performance. In-store represents a large market opportunity we're moving decisively to prove out in the second half of this year with material revenue impact beginning in 2027. Let me walk you through both. Our core online post-transaction business remains the largest and most mature piece of our commerce media solutions, and it continues to do the heavy lifting. This isn't a new thesis. It is validated based on the continued superior execution by our team and built on our ability to deliver superior results through our data and performance marketing industry leadership. Our foundation is uniquely grounded in our owned and operated marketplace. which our competitors simply cannot replicate given our decade-plus of industry experience. The first-party data, performance marketing expertise, and consumer and advertising relationships we've built there are the competitive advantages we're now leveraging to deliver superior, measurable results for our commerce partners. That foundation is driving our growth and has established a competitive moat. We continue to add world-class partners to our commerce media network in Q2. We believe we are a reflection of the partners we do business with, and our partner pipeline has grown significantly in both size and quality. Given the seasonality of the retail partner sales cycle, we expect that pipeline to convert and accelerate in the second half, and we'll take that redefined baseline into fiscal year 2027. As validation of our business and brand momentum, one of the largest retail pharmacy chains in the country, CVS, has chosen us to partner with Fluent, and they came online in Q3. We are excited to enrich the checkout experience for the customers with an eye towards deeper loyalty and integration over time, which will add value to an already best-in-class experience. A meaningful trend that we're seeing in our online post-transaction business is bringing non-endemic advertising demand into traditional captive retail media networks. As those networks continue to look for new growth opportunities, they're beginning to turn to partners like Fluent for non-endemic demand. Our partners understand that their customers enjoy products and services that they don't directly sell, and our post-transaction business enables them to do so successfully on their behalf. These captive network relationships are more bespoke compared to our traditional enterprise partnerships, but they are meaningfully expand our addressable market and further validate Fluent's competitive position in commerce media. We're already delivering non-endemic demand into one of the largest retail media networks in the world, a proof point of how we expand these captive networks addressable market. and our partner sales pipeline is expanding with other retail media networks. Importantly, working directly with captive retail media networks gives us a differentiated avenue to unlock massive new audiences for advertisers. During the second quarter of 2026, We introduced in-store, a strategic marketplace opportunity that will lean on loyalty for success. Loyalty data is what lets us recognize the same shopper, whether they're checking in online or standing at the physical register. And this is the connective tissue between the two moments. That matters because we're not building two separate online and in-store businesses. We're building one commerce platform that follows the shopper wherever they transact and that makes both sides of the marketplace more valuable to the shopper and to our retail partners. Our first proof point here is our expansion into in-store commerce media through a partnership with Built Technologies, a nationwide commerce and loyalty network that offers in-store point-of-sale systems for retailers. In an estimated 140 billion commerce media industry, in-store remains the hardest segment to measure, and this partnership is built to close that gap. The in-store offering is a first mover position for Fluent, and we're deliberate about how we're going to build it. The partnership launches later this year with Beyond, Inc., operator of Bed Bath & Beyond, Bye Bye Baby, and The Container Store. We've developed a strong pipeline of potential additional partners for onboarding in early 2027. In the second half of 2026, we are committed to testing and learning, proving out the consumer experience, the measurement, and the advertiser return on ad spend. We are not expecting any meaningful financial contribution from in-store this year. We expect that in 2027, once we validated the model at scale. To put this in perspective, Online post-transaction is driving our results today. In-store is what we're building for tomorrow. A vast market that allows us and commerce partners to tap into 83% of transactions that do not happen online, which represents an additional 70 to 80 billion annual transactions in the US. This is a 5x unlock across commerce. and for media partners in pharmacy, grocery and home improvement retail sectors, this could mean a 10x increase over monetizable transactions. In short, this is a huge market opportunity and one where being first matters. Returning to year-over-year growth this quarter, layered on top of accelerating and now two-pronged commerce media business strategy gives us more visibility than at any other point since we've completed our strategic pivot. We remain confident in our stated financial targets for the full year. We expect continued double-digit consolidated revenue growth on aggregate continuing businesses and to maintain the gross margin expansion reflected in Q2 as our higher margin business becomes an increasingly dominant share of the mix. We also expect continued improvement in adjusted EBITDA as that revenue growth and margin expansion flow through the P&L. And with that, I'll turn it over to Ryan Perfit for a deeper look at the financials.

Thank you, Don, and thanks to everyone for joining us today. I'll now provide a deeper review of our second quarter financials with commentary on year-to-date results were relevant. Total consolidated revenue was $48.4 million in the second quarter of 2026, compared with $44.7 million in the prior year period. Notably, total consolidated revenue increased by 8% compared to the second quarter of 2025, and revenue from our aggregate continuing businesses increased 25% when compared to the second quarter of 2025. As Don mentioned, we view this as a key milestone that demonstrates the impact Commerce Media Solutions is having on the overall business. And accordingly, we expect to continue to drive double-digit growth in revenue from aggregate continuing businesses through the balance of the year. Commerce Media Solutions revenue grew 90% to $30.5 million in the quarter when compared to Q2 2025 and represented 63% of total consolidated revenue compared with 36% in the prior year period. Demand is strong and we're very encouraged by the interest we're seeing from leading brands across diverse industries, including some of the largest retail chains in the United States. As we continue to strategically invest in our growth, specifically in the launch of our new in-store offering that we expect to significantly expand our addressable market. Commerce Media Solutions is now firmly established as the main driver of total consolidated revenue across our business. And with our visibility today, we expect CMS to continue to grow at high double digits and increase as a percentage of total revenue going forward. As expected, owned and operated revenue decreased 24% to 16.3 million compared to 21.4 million in the second quarter of 2025. Media Margin in the second quarter was $17.5 million representing 36% of total consolidated revenue compared with $11.9 million or 26.7% of revenue in the prior year period. Commerce Media Solutions Media Margin in the second quarter of 2026 was $10.5 million or 34% of Commerce Media Solutions revenue compared with $3.2 million or 20% of revenue in the second quarter of 2025. Commerce Media Solutions gross profit was $8.2 million in the second quarter of 2026, an increase of 186% compared to the second quarter of 2025 and representing 27% of revenue. This is especially encouraging given our stated expectation that CMS margins would return to the mid-20s range over the course of 2026 as we continued to scale and grow this business as a percentage of total revenue and newer partnerships and placements moved beyond early term incentive periods. The major driver of the increased media margin and gross margin was improved monetization and scale of certain media partners that do not operate on rev share agreements. Total operating expense in the second quarter of 2026 totaled $17.3 million, compared with $14.9 million in the second quarter of 2025. The year-over-year increase was driven largely by higher incentive-based compensation, which scales with our results and steps back if performance moderates rather than adding to our fixed cost base. Interest expense in the second quarter decreased 9% to $637,000, down from approximately $702,000 in Q2 2025. This decrease continues to reflect the lower average daily outstanding loan balance and lower amortization of debt costs under the new Bayview facility. We reported the net loss of $6.2 million in the second quarter of 2026, compared with the net loss of $7.2 million in the prior year period. Adjusted net loss, a non-GAAP measure, was $4.2 million, or a loss of $0.13 per share, compared with adjusted net loss of $5.8 million or a loss of $0.24 per share in the second quarter of 2025. We reported an adjusted EBITDA loss of approximately $1.8 million in the quarter, compared with a loss of $2.8 million in the second quarter of 2025, reflecting our ongoing commitment to improved adjusted EBITDA throughout 2026. Shifting now to our balance sheet and cash flow. We had 6.9 million cash in cash equivalents at June 30th, 2026, compared with 12.9 million at December 31st, 2025. Counts receivable was 39.4 million compared with 48.7 million at year-end 2025, contributing to total assets of 75.1 million. We also drove operating cash flow of approximately 300,000 in the first half of 2026, and reduced short-term debt from $30.8 million at year-end to $26.8 million as of June 30, 2026. Our liquidity continues to be supported by our accounts receivable financing facility, and we remain focused on improving free cash flow and liquidity as Commerce Media Solutions scales. Overall, we're very pleased with our results this quarter and the progress that we've made year-to-date. Commerce Media Solutions continues to grow at high double-digit rate on a year-on-year basis, and we're validating the Fluent brand with interest from Tier 1 media partners and advertisers across diverse market verticals and now with our in-store offering. Our execution has been strong, and with our visibility today, we remain confident in our stated goals for 2026 to deliver double-digit consolidated revenue growth on aggregate continuing businesses and improved full-year adjusted EBITDA supported by continued growth in Commerce Media Solutions. With that, I'll turn it back over to Don.