Q2 2024 Fluent Inc Earnings Call

August 19, 2024

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Operator: Good afternoon and welcome.

Operator: Good afternoon, and welcome. Thank you for joining us to discuss our second quarter 2024 earnings results.

Operator: Thank you for joining us to discuss our second quarter 2024 earnings results.

Good afternoon and welcome.

Operator: With me, today I'll pronounce CEO, Don Patrick, and from CFO, Ryan Perfit, and Chief Strategy Officer, Ryan Shokie. Our call today will begin with comments from Don and Ryan Perfit, followed by a question and answer session. I would like to remind you that this call has been recorded, live recorded, and webcast. A replay of the event will be available following the call on our website. To access the website, please visit our Investor Relations page on our website at www.brointco.com.

Operator: With me today are Fluent CEO Don Patrick, interim CFO Ryan Perfit, and Chief Strategy Officer Ryan Sholke.

Operator: With me today are Fluent's CEO, Don Patrick, interim CFO, Ryan Perfit, and Chief Strategy Officer, Ryan Sholkin.

Operator: Our call today will begin with comments from Don and Ryan Perfit, followed by a question and answer session.

Operator: I would like to remind you that this call is being recorded, live recorded and webcast.

Operator: I would like to remind you that this call is being recorded, live recorded in webcast.

Operator: A replay of the event will be available following the call on our website.

Operator: A replay of the event will be available following the call on our website, to access the website, please visit our Investor Relations page on our website at www.fluentco.com.

A replay of the event will be available following the call on our website.

Operator: To access the website, please visit our investor relations page on our website at www.fluentco.com.

To access the website.

Speaker Change: Please visit our Investor Relations page on our website at Www Brightcove Dot com.

Operator: 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 speak only as of the date hereof. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company 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.

Operator: Before we begin, I would like to advise the 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 Security Litigation Reform Act of 1995.

Operator: Before we begin, I would like to advise the 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 Security Litigation Reform Act of 1995.

Speaker Change: Before we begin I would like to a batch 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.

Operator: Any forward-looking statements made during this call speak only as of the date hereof. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company business.

Speaker Change: Any forward looking statements made during this call speak only as of the date hereof.

Speaker Change: Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties associated with the company business.

Operator: These statements may be identified by words such as expect, plans, projects, could, will, estimates, and other words of similar meaning.

Speaker Change: These statements maybe identified by words, such as expects plans projects could will estimates and other words of similar meaning.

Operator: The company undertakes no obligation to update the information provided on this call.

Speaker Change: The company undertakes no obligation to update the information provided on this call.

Operator: For a discussion of the risks and uncertainties associated with Florence Business, we encourage you to review the company filing with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K and quarterly reports on Forms 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 our business on a variety of indicators, including these non-GAAP metrics.

Operator: For a discussion of the risks and uncertainties associated with Fluent's business, we encourage you to review the company 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.

For a discussion of the risks and uncertainties associated with fluids business. We encourage you to review the company's filings with the Securities and Exchange Commission, including the company's most recent annual report.

Speaker Change: <unk> 10-K, and quarterly reports on Form 10-Q.

Operator: During the call, management will also present certain non-GAAP financial information relating to median margin, adjusted EBITDA, and adjusted net income.

Speaker Change: During the call management will also present certain non-GAAP financial information relating to media margin adjusted EBITDA and adjusted net income.

Operator: Management evaluates the financial performance of our business on a variety of indicators, including these non-GAAP metrics. The definition of these metrics and reconciliations to the most directly comparable gap financial measures are provided in the earnings press release issued earlier today.

Speaker Change: Management evaluates the financial performance of our business on a variety of indicators, including these non-GAAP metrics.

Operator: The definition of these metrics and reconciliation to the most directly comparable gap financial measures are provided in the earnings press release issued earlier today.

Speaker Change: The definition of these metrics and reconciliations to the most directly comparable GAAP financial measures are provided in the earnings press release issued earlier today.

Operator: With that, I am pleased to introduce Florence CEO Don Patrick. You may begin.

Operator: With that, I am pleased to introduce Fluent's CEO, Don Patrick.

Speaker Change: With that I am pleased to introduce fluent CEO, Don Patrick you may begin.

Operator: You may begin.

Donald Patrick: Good afternoon. Thank you all for joining our call today. I'm here together with Ryan Scholke, our Chief Strategy Officer and company co-founder, and Ryan Perfit, our Interim Chief Financial Officer.

Operator: These statements may be identified by words such as expect, plans, projects, could, will, estimates, and other words of similar meaning.

Donald Patrick: Good afternoon.

Good afternoon.

Don Patrick: Thank you all for joining our call today.

Donald Patrick: Thank you all for joining our call today.

Operator: The company undertakes no obligation to update the information provided on this call.

Don Patrick: I'm here together with Ryan Schulke, our Chief strategy Officer and company cofounder.

Ryan: And Ryan perfect.

Speaker Change: Our interim Chief Financial Officer.

Donald Patrick: I'll start today with some brief comments regarding our strategic initiatives and progress in the second quarter. On the strategic front, we are highly energized by the progress we continue to make in our strategic growth plan, with the continued stabilization of our own and operated marketplace and business pivot to our new higher margin syndicated performance marketplaces. We believe we reached an inflection point in our transition, which is exciting as this progress provides the clear strategic and financial validation of our longer-term growth agenda with our early second half performance.

Donald Patrick: I'm here together with Ryan Shulke, our Chief Strategy Officer and Company Co-Founder, and Ryan Perfit, our Interim Chief Financial Officer.

Speaker Change: I'll start today with some brief comments regarding our strategic initiatives and progress in the second quarter.

Donald Patrick: I'll start today with some brief comments regarding our strategic initiatives and progress in the second quarter.

Operator: During the call, management will also present certain non-GAAP financial information relating to median margin, adjusted EBITDA, and adjusted net income.

Speaker Change: On the strategic front, we are highly energized by the progress we continue to make in our strategic growth plan.

Donald Patrick: On the strategic front, we are highly energized by the progress we continue to make in our strategic growth, with the continued stabilization of our own and operated marketplace, and Business Pivot to our new higher margin syndicated performance market.

Operator: Management evaluates the financial performance of our business on a variety of indicators, including these non-GAAP metrics. The definition of these metrics and reconciliations to the most directly comparable GAAP financial measures are provided in the earnings press release issued earlier today.

Speaker Change: With the continued stabilization of our owned and operated marketplace.

Speaker Change: And business pivot to our new higher margin syndicated performance marketplaces.

Donald Patrick: We believe we've reached an inflection point in our transition, which is exciting as this progress provides a clear strategic and financial validation of our longer term growth agenda with our early second half performance.

Operator: With that, I am pleased to introduce Fluent's CEO, Don Patrick.

Speaker Change: We believe we've reached an inflection point in our transition which is exciting as this progress provides a clear strategic and financial validation of our longer term growth agenda with our early second half performance metrics.

Donald Patrick: You may begin.

Donald Patrick: Metrics. Since the launch of our syndicated performance marketplace in late 2022, our strategy and investments have been focused on shifting our business mix into long-term growth markets, where a differentiated position will allow us to deliver fluent margins that are creative to the core. And we've successfully delivered sequential improvements in both revenue and growth profit in our performance marketplaces, each in every quarter since. Our momentum is accelerating, and we remain confident that we would reach the initial stage of fluent financial rebound. To that end, we expect to deliver single-digit consolidated year-over-year growth in Q3 and then accelerate with consolidated double-digit year-over-year growth in Q4.

Donald Patrick: Since the launch of our syndicated performance marketplace in late 2022, our strategy and investments have been focused on shifting our business mix into long term growth, where a differentiated position will allow us to deliver fluent margins that are creative to the core. And we've successfully delivered sequential improvements in both revenue and gross profit in our performance marketplaces each and every quarter.

Speaker Change: Since the launch of our syndicated performance marketplace in late 2022.

Donald Patrick: Good afternoon.

Speaker Change: Our strategy and investments have been focused on shifting our business mix into long term growth markets.

Speaker Change: Where our differentiated position will allow us to deliver fluids margins that are accretive to the core.

Speaker Change: And we've successfully delivered sequential improvements in both revenue and gross profit in our performance marketplaces, each and every quarter since.

Donald Patrick: Our momentum is accelerating, and we remain confident that we have reached the initial stage of Fluent's financial rebound.

Speaker Change: Our momentum is accelerating and we remain confident that we've reached the initial stage of fluids financial rebound.

Donald Patrick: To that end, we expect to deliver single-digit consolidated year-over-year growth in Q3, and then accelerate with consolidated double-digit year-over-year growth in Q4.

Speaker Change: To that end, we expect to deliver single digit consolidated year over year growth in Q3.

Speaker Change: And then accelerate with consolidated double digit year over year growth in Q4.

Donald Patrick: And in 2025, as our business mix continues to shift into the performance marketplaces, our momentum should build, and we anticipate a strong year of consolidated year-over-year double-digit growth. While we see our performance marketplace platform as stick-year, it tends to have longer and more sophisticated sales cycles than our own and our operated marketplace. But once we sign a new partner, there's a corresponding positive predictability of the business, as we can project the impact on our growth agenda and our financials with a higher level of certainty based on the mutually agreed-upon execution timelines.

Donald Patrick: And in 2025, as our business mix continues to shift into the performance marketplace.

And in 2025, as our business mix continues to shift into the performance marketplaces.

Donald Patrick: A momentum should build, and we anticipate a strong year of consolidated, year-over-year, double-digit growth.

Speaker Change: Our momentum should build and we anticipate a strong year of consolidated year over year double digit growth.

Donald Patrick: Well, we see your performance marketplace platform as sticky.

Speaker Change: While we see your performance marked based platform a stickier it tends to have longer and more sophisticated sales cycles that are owned and operated marketplace.

Donald Patrick: It tends to have longer and more sophisticated sales cycle than our own in our operated market.

Donald Patrick: But, once we sign a new part...

Speaker Change: But once we sign a new partner there is a corresponding positive predictability of the business.

Donald Patrick: There's a corresponding positive predictability of the business, as we can project the impact on our growth agenda and our financials with a higher level of service, based on the mutually agreed upon executional time.

Speaker Change: We can project the impact on our growth agenda, and our financials with a higher level of certainty based.

Speaker Change: Based on the mutually agreed upon execution timelines.

Donald Patrick: We'll detail this further next quarter when we're at liberty to speak more about the specific brand partners. Bottom line, we have major brands enthusiastically endorsing our performance marketplace strategies, and those new partnerships will go live and hit the stat page in subsequent quarters, Q3, Q4, and into fiscal year 2025, as we align against execution tactics and timelines.

Donald Patrick: We'll detail this further next quarter when we're at liberty to speak more about the specific brand part.

Speaker Change: We will detail this further.

Speaker Change: Next quarter, when we're at Liberty to speak more about the specific brand partners.

Donald Patrick: Bottom line, we have major brands enthusiastically endorsing our performance marketplace strategy, and those new partnerships will go live and hit the staff page in subsequent quarters.

Speaker Change: Bottom line, we have major brands enthusiastically endorsing our performance marketplace strategies and those new partnerships will go live and hit the stat pages subsequent quarters Q.

Donald Patrick: Q3, Q4, and into fiscal year 2025, as we align against executional tactics in time.

Speaker Change: Q3, Q4 and into fiscal year 2025, as we align against execution tactics and timelines.

Donald Patrick: So let's talk about the tough news regarding our Q2 financial performance. Revenue of 58.7 million represents an 11% decline versus Q1 2024. Our median margin of 15.7 million was a decrease of 29.3% versus Q1 2024. An adjusted evit of negative 4.5 million represents a negative 7.7% of revenue. Our lower than expected Q2 quarterly results were primarily driven by two underlying financial trends and an increase in unauthorized third-party activity in our ACA business that necessitated a Q2 adjustment. The results generated from our own and operated marketplace reflect the lingering impact of our post-FTC settlement transition, including our exiting businesses we felt were no longer strategically relevant.

Donald Patrick: Thank you all for joining our call today.

Donald Patrick: So let's talk about the tough news regarding our Q2 financial. Revenue of $58.7 million represents 11% decline versus Q1 2022.

Speaker Change: So let's talk about the tough news regarding our Q2 financial performance.

Speaker Change: Revenue of $58 7 million represents 11% decline versus Q1 2024.

Donald Patrick: Our median margin of $15.7 million was a decrease of 29.3% versus Q1 2020.

Speaker Change: Our media margin of $15 7 million was a decrease of 29, 3% versus Q1 2024.

Donald Patrick: An adjusted EVID of negative 4.5 million represents a negative 7.7% of revenue, are lower than expected Q2 quarterly results were primarily driven by two underlying financial trends, and an increase in unauthorized third-party activity in our ACA business that necessitated a Q2 adjustment.

Speaker Change: And adjusted EBIT of negative $4 5 million represent a negative seven 7% of revenue.

Donald Patrick: I'm here together with Ryan Schulke, our chief strategy officer and company co-founder, and Ryan Perfitt, our interim chief financial officer.

Speaker Change: Our lower than expected Q2 quarterly results were primarily driven by two underlying financial trends and an increase in authorized third party activity in our Acs business that necessitated a Q2 adjustments.

Speaker Change: Okay.

Donald Patrick: The results generated from our owned and operated marketplace reflect the lingering impact of our post FTC settlement transition, including our exiting businesses we felt were no longer strategically relevant.

Speaker Change: The results generated from our owned and operated marketplace reflect the lingering impact of our post FTC settlement transition, including our exiting businesses. We felt we're no longer strategically relevant.

Donald Patrick: Although Q2 results in our own and operated marketplaces showed continued revenue and margin declines. Importantly, we saw marketplace stabilization by the end of the second quarter that has continued into Q3.

Speaker Change: Although Q2 results at our owned and operated marketplaces showed continued revenue and margin declines importantly, we saw marketplace stabilization by the end of the second quarter that has continued into Q3.

Donald Patrick: I'll start today with some brief comments regarding our strategic initiatives and progress in the second quarter.

Donald Patrick: Indicated we are beginning to fully cycle the businesses we've exited and should have finalized this transition in the second, Owned and operated marketplace revenue and media margin declines were partially offset by the continued acceleration of our new syndicated performance market.

Donald Patrick: Indicated, we are beginning to fully cycle the businesses we've exited and should have finalized this transition in the and half. Owned and operated marketplace revenue and medium margin declines were partially offset by the continued acceleration of our new syndicated performance marketplaces. Performance market place growth year over year continues to shift the mix into our strategic growth agenda and establish a differentiated market position. A result for exacerbated by unauthorized third-party activity impacting our ACA vertical in our call solutions business. Recently, unauthorized switching of the agency of record (AOR) on insurance policies dramatically increases, adversely affecting the entire ACA industry.

Speaker Change: Indicated we are beginning to fully cycled the businesses we have exited.

Speaker Change: You should have finalized this transition in the second half.

Speaker Change: Owned and operated marketplace revenue and media margin declines were partially offset by the continued acceleration of our new syndicated performance marketplaces.

Donald Patrick: Performance Marketplace growth year-over-year continues to shift the mix into our strategic growth agenda, and Establish a Differentiated Market.

Speaker Change: Performance of our <unk> growth year over year continues to shift the mix into our strategic growth agenda.

Speaker Change: Establishing differentiated market position.

Donald Patrick: Our results were exasperated by unauthorized third-party activity impacting our ACA vertical in our call solutions business.

Speaker Change: Our results were exacerbated by unauthorized third party activity impacting our AC vertical in our call solutions business.

Donald Patrick: Recently, unauthorized switching of the agency of record, AOR, on insurance policies dramatically increased, adversely affecting the entire ACA industry. Once the Centers for Medicare and Medicaid Services, CMS, became aware, they changed their system for switching AORs, largely eliminating the practice.

Speaker Change: Recently unauthorized switching of the agency of record.

Speaker Change: Our insurance policies dramatically increase adversely affecting the entire ACA industry.

Donald Patrick: Once the Centers for Medicare and Medicaid Services, CMS, became aware, they changed their system for switching AORs, largely eliminating the practice. However, the new system did not penalize the prior unauthorized activity, hampering our ability to recover our losses or cost-effectively operate the business in the short term. This also necessitated a 3.1 million right down of accounts receivable with an equal offset to revenue, medium margin, and adjusted to divot dye and Q2.

Speaker Change: Once the centers for Medicare and Medicaid services CMS became aware they changed their system for switching <unk> largely eliminating the practice.

Donald Patrick: However, the new system did not penalize the prior unauthorized activity, hampering our ability to recover our losses or cost effectively operate the business in the short term.

Speaker Change: However, the new system did not penalize the prior unauthorized activity hampering our ability to recover our losses or cost effectively operate the business in the short term.

Donald Patrick: This also necessitated a $3.1 million write-down of accounts receivable with an equal offset, to Revenue, Median Margin, and Adjusted EBITDA in Q2, while this non-recurring write-down had negatively impacted our Q2 results.

Speaker Change: This also necessitated a $3 1 million write down of accounts receivable with an equal offset.

Speaker Change: Revenue media margin and adjusted EBITDA in Q2.

Donald Patrick: While this non-recurring right down had negatively impacted our Q2 results, we see this as having no additional negative impact to our financials or our future growth agenda. Absent the right down are overall financial performance reading consistent with the roadmap we've laid out in previous calls. However, somewhat masked in our financials is that we are on plan in growing our performance marketplaces. That momentum combined with the stabilization of our own and operated marketplaces is a reflection of our evolving market mix.

Speaker Change: While this nonrecurring write down had negatively impacted our Q2 results. We see this as having no additional negative impact to our financials or our future growth agenda.

Donald Patrick: We see this as having no additional negative impact to our financials or our future growth.

Donald Patrick: Absent the write-down, our overall financial performance ran consistent with the roadmap we've laid out in previous, However, somewhat masked in our finage, is that we are on plan in growing our performance market.

Speaker Change: Absent the write down.

Speaker Change: Our overall financial performance ring consistent with the roadmap we've laid out in previous calls.

Speaker Change: However, somewhat masked in our financials is that we are on plan and growing our performance marketplaces.

Donald Patrick: That momentum combined with the stabilization of our own and operated marketplace, is a reflection of our evolving market.

Speaker Change: That momentum combined with the stabilization of our owned and operated marketplaces.

Speaker Change: A reflection of our evolving market mix.

Donald Patrick: We remain confident in our ability to accelerate revenue and profit growth in the second half of 2024 when compared to last year's numbers.

Speaker Change: We remain confident in our ability to accelerate revenue and profit growth in the second half of 2024, when compared to last year's numbers.

Donald Patrick: On the strategic front, we are highly energized by the progress we continue to make in our strategic growth plan.

Donald Patrick: I'd like to now take the time to provide some deeper insight into our growth agenda. So you can get a clear picture on why we're so excited by the difference in market position we are creating. Our syndicated performance marketplaces represent the tip of the spear in our strategic growth agenda. As we accelerate the fluid brand into very large high growth dynamic markets where we can unleash our core owned and operated grounded capabilities, providing us with the unique competitive energy in the marketplace. Our performance marketplaces revenue growth is on plan, and as we continue to build on that momentum, we anticipate accelerating year-over-year growth to the end of 2024 and beyond.

Donald Patrick: I'd like to now take the time to provide some deeper insight into our growth agenda. So you can get a clear picture on why we're so excited by the differentiated market position we are creating.

Speaker Change: I'd like to now take the time to provide some deeper insight into our growth agenda.

Speaker Change: So you can get a clear picture on why we're so excited by the differentiate mark are busy we are creating.

Donald Patrick: With the continued stabilization of our own and operated marketplace and business pivot to our new higher margin syndicated performance marketplaces.

Donald Patrick: Our syndicated performance marketplaces represent the tip of the spear in our strategic growth agenda.

Speaker Change: Our syndicated performance marketplaces represent the tip of the spear in our strategic growth agenda as we accelerate the fluent brand into very large high growth dynamic markets, where we can unleash our core owned and operated grounded capabilities.

Donald Patrick: Metrics.

Donald Patrick: As we accelerate the Fluent brand into very large, high growth, dynamic markets where we can unleash our core owned and operated grounded capabilities, providing us with the unique competitive advantage in the market.

Speaker Change: Providing us with a unique competitive advantage in the marketplace.

Donald Patrick: Since the launch of our syndicated performance marketplace in late 2022, our strategy and investments have been focused on shifting our business mix into long-term growth markets, where our differentiated position will allow us to deliver Fluent margins that are accretive to the core. And we've successfully delivered sequential improvements in both revenue and gross profit in our performance marketplaces each and every quarter since.

Donald Patrick: A Performance Marketplace's revenue growth is on plan. And as we continue to build on that momentum, we anticipate accelerating year-over-year growth through the end of 2024 and beyond. Equally exciting is that our gross margin in that business is growing faster than revenue with ample room for additional improvement.

Speaker Change: Our performance marketplaces revenue growth is on plan.

Speaker Change: And as we continue to build on that momentum, we anticipate accelerating year over year growth through the end of 2024 and beyond.

Donald Patrick: Equally exciting is that our gross margin in that business is growing faster than revenue, with ample room for additional improvement. So you can see why we're so enthusiastic about our performance marketplace growth strategy as we lean into this opportunity and drive enhanced operating efficiencies across the fluid enterprise. In Q3, our focus is on expanding our market share through continued growth in our syndicated performance marketplaces while positioning the fluid enterprise to return consolidated year-over-year growth that we believe will accelerate sequentially through the back half of it. of the year.

Equally exciting is that our gross margin in that business is growing faster than revenue.

Speaker Change: With ample room for additional improvement.

Donald Patrick: So you can see why we're so enthusiastic about our performance marketplace growth strategy, as we lean into this opportunity and drive enhanced operating efficiencies across to Fluent.

Speaker Change: So you can see why we're so enthusiastic about our performance marketplace growth strategy as we lean into this opportunity and drive enhanced operating efficiencies across to throw in enterprise.

Donald Patrick: Our momentum is accelerating, and we remain confident that we've reached the initial stage, of Fluent's financial rebound. To that end, we expect to deliver single-digit consolidated year-over-year growth in Q3 and then accelerate with consolidated double-digit year-over-year growth in Q4.

Donald Patrick: In Q3, our focus is on expanding our market share through continued growth in our syndicated performance marketplace.

Speaker Change: In Q3, our focus is on expanding our market share through continued growth in our syndicated performance marketplaces, while positioning the fluent enterprise to returning consolidated year over year growth that we believe will accelerate sequentially through the back half of the year.

Donald Patrick: While positioning the Fluent enterprise to return consolidated year-over-year growth that we believe will accelerate sequentially through the back half of the year.

Donald Patrick: Now, some additional insight regarding our ad flow business: the anchors are syndicated performance marketplace platform, where proof of concept result leads us with even more strategic optimism. Ad flow is our media solution. We launched in the large and rapidly growing commerce media market. Market is currently valued at over $50 billion, expected to reach $150 billion by 2030. Presently, 43% of US brands have commerce media budgets, and that's expected to increase to 75% by 2025. Our foundational ad flow strategies continue to show year-over-year revenue growth as planned during by new partner wins, which are enabled by our leveraging our proprietary technology, machine learning, and data platform capabilities that have yielded excellent results.

Speaker Change: Now some additional insight regarding our AD flow business. The anchors are syndicated performance marketplace platform.

Who were proof of concept result leaves us with even more strategic optimism.

Donald Patrick: AdFlow is our media solution we launched in the large and rapidly growing commerce media market, market is currently valued at over 50 billion dollars expected to reach 150 billion dollars by 2030. Presently, 43% of U.S. brands have commerce media budgets, and that's expected to increase to 75% by 2025.

Speaker Change: As always our media solution, we launched in the large and rapidly growing commerce media market.

Market is currently valued at over $50 billion.

Speaker Change: Expected to reach $150 billion by 2030.

Speaker Change: Presently 43% of U S brands have commerce media budgets, and that's expected to increase to 75% by 2025.

Donald Patrick: Our foundational ad flow strategies continue to show year-over-year revenue growth as planned. Driven by new partner wins, which are enabled by our leveraging our proprietary technology, machine learning and data platform capabilities that have yielded excellent results.

Speaker Change: Our foundational add flow strategies continue to show year over year revenue growth as planned.

Speaker Change: Driven by new partner wins, which are enabled by our leveraging our proprietary technology machine learning and data platform capabilities that have yielded excellent results.

Donald Patrick: Furthermore, since May, we've added new brand partners that will increase growth trendline markedly, as we've expanding into very attractive, grocery, quick serve restaurant, and travel verticals. We are excited by these results, along with the increasing momentum. The ad flow platform represents a new growth opportunity for world-class brands to reach consumers seeking high-quality engagements at the optimal purchase moment.

Donald Patrick: Furthermore, since May, We've added new brand partners that will increase our growth trend line market, as we're expanding into very attractive grocery, quick-serve restaurant, and travel vertical.

Speaker Change: Furthermore, since may.

Speaker Change: We've added new brand partners that will increase our growth trend line markedly as.

Speaker Change: As we are expanding into very attractive grocery quick serve restaurant and travel verticals.

Donald Patrick: We are excited by these results, along with the increasing momentum as the Radflow platform represents a new growth opportunity for world-class brands to reach consumers seeking high-quality engagements at the optimal purchase.

Speaker Change: We are excited by these results along with the increasing momentum is Rad flow platform represents a new growth opportunity for world class brands to reach consumers seeking high quality engagements at the optimal purchase moment.

Donald Patrick: We'll speak more to this in future quarters, but we also see a significant leading edge loyalty-based opportunity to expand and enhance ad flow strategic impact in the adjacent marketplace that we believe will further differentiate Fluent from our competitive set. And our partners are already validating our unique market position based on their enthusiastic feedback. Headlining, we are now working with commerce partners beyond post-transactions to enhance consumer engagement, retention, and loyalty across our partners' commerce platforms. In Q2, we launched our innovative loyalty solution with select partners, leveraging our deep knowledge of our own and operating marketplaces and ad flows commerce media in order to provide next-generation loyalty solution with incomparable economic value proposition to advertisers and partners alike.

Donald Patrick: We'll speak more to this in future quarters, but we also see a significant leading edge loyalty-based opportunity to expand and enhance AdFlow's strategic impact in an adjacent marketplace that we believe will further differentiate Fluent from our competitors.

Speaker Change: We'll speak more to this in future quarters, but we also see a significant leading edge loyalty based opportunity to expand and enhance add close strategic impact and <unk>.

Speaker Change: Jason marketplace that we believe will further differentiate fluent from our competitive set.

Donald Patrick: And our partners are already validating our unique market position based on their enthusiastic, headlining, we are now working with commerce partners beyond post transaction, to enhance consumer engagement, retention, and loyalty across our partners' commerce platforms.

Speaker Change: And our partners are already validating our unique market position based on their enthusiastic feedback.

Speaker Change: Headlining we are now working with Commerce partners beyond post transaction to enhance consumer engagement retention and loyalty across our partners commerce platforms and.

Donald Patrick: In Q2, we launched our innovative loyalty solution with select partners, leveraging our deep knowledge of our owned and operated marketplaces and AdPlus Commerce Media in order to provide next generation loyalty solution with incomparable economic value proposition to advertisers and partners alike.

Speaker Change: In Q2, we launched our innovative loyalty solution with select partners leveraging our deep knowledge of our owned and operated marketplaces and outflows Commerce media in order to provide next generation loyalty solution within comparable economic value proposition to advertisers and partners alike.

Donald Patrick: This is a powerful and unique strategic combination. A marriage of our own and operated leadership position coupled with insights that are proprietary and fluent while leveraging our credibility we are earning with our ad flow platform as a launching point into a relevant really stage marketplace. Based on what our partners are sharing with us and as they aggressively lean in, we believe this is another large growth opportunity that is right in our sweet spot. Both ad flow and our loyalty retention solutions provide fluent a unique brand position and a significant growth opportunity in the large and growing commerce media industry.

Donald Patrick: This is a powerful and unique strategic combination, a marriage of our owned and operated leadership position coupled with insights that are proprietary from Fluent, while leveraging our credibility we are earning with our AdFlow platform, as a launching point into a relevant early stage market plan.

Speaker Change: This is a powerful and unique strategic combination a marriage of our owned and operated leadership position coupled with insights that are proprietary fluent.

Speaker Change: Leveraging our credibility, we are earning with our AD flow platform.

Speaker Change: As a launching point into a relevant early stage marketplace.

Donald Patrick: Based on what our partners are sharing with us and as they aggressively lean in.

Speaker Change: Based on what our partners are sharing with us and as they aggressively lean in.

Donald Patrick: We believe this is another large growth opportunity that is right in our sweets.

We believe this is another large growth opportunity that is right in our sweet spot.

Donald Patrick: Both AdFlow and our loyalty and retention solutions provide Fluent a unique brand position and a significant growth opportunity in the large and growing commerce media industry.

Speaker Change: Both add flow in our loyalty and retention solutions provide fluent a unique brand position and a significant growth opportunity in the large and growing commerce media industry more importantly, <unk>.

Donald Patrick: More importantly, expands our strategic value proposition to world-class partners beyond customer acquisition as we expand quality consumer engagements across the entire marketing funnel.

Donald Patrick: More importantly, it expands our strategic value proposition to world-class partners beyond customer acquisition, as we expand quality consumer engagement across the entire marketing funnel.

To expand our strategic value proposition to World class partners beyond customer acquisition, as we expand quality consumer engagements across the entire marketing funnel.

Donald Patrick: We are excited by our progress here, and we'll provide more detail in future earning.

Donald Patrick: We are excited by our progress here, and we'll provide more detail in future earnings releases.

We are excited by our progress here and we will provide more detail in future earning releases.

Donald Patrick: Services. In our call solution business, after consistent historical growth, our Q2 revenue declined year-over-year due mostly to current and future regulatory changes. By the end of Q2, we adjusted to the upcoming regulatory changes by proactively building the compliance solution that we believe offers better quality for our partners. We believe we are now positioned well for our partners' second half call solutions demand, and future growth remains on the horizon. In our ACA business, although it is a high sequential growth opportunity, we are closely evaluating the ongoing changes to the Centers for Medicaid and Medicare Services and pausing this initiative to ensure that Fluent can continue to differentiate ourselves within a highly fragmented market, more so given all the growth options available to us.

Donald Patrick: In our call solutions business, after consistent historical growth, our Q2 revenue declined year over year due mostly to current and future regulatory changes. By the end of Q2, we adjusted to the upcoming regulatory changes by proactively building a compliance solution that we believe offers better quality for our partners.

Speaker Change: And our call solutions business after consistent historical growth, our Q2 revenue declined year over year, due mostly to current and future regulatory changes.

Speaker Change: By the end of Q2, we adjusted to the upcoming regulatory changes by proactively building our compliance solution that we believe offers better quality for our partners.

Donald Patrick: We believe we are now positioned well for our partner's second half call solutions demand and future growth remains on the horizon.

Speaker Change: We believe we are now positioned well for our partners second half call solutions demand and future growth remains on the horizon.

Donald Patrick: In our ACA business, although it is a high sequential growth opportunity, we are closely evaluating the ongoing changes to the Centers of Medicaid and Medicare Services and pausing this initiative to ensure that Fluent can continue to differentiate ourselves within a highly fragmented market, more so given all the growth options available.

Speaker Change: In our Acs business, although it is the highest sequential growth opportunity. We are closely evaluating the ongoing changes to the centers of Medicaid and Medicare services and pausing. This initiative to ensure that flowing can continue to differentiate ourselves within a highly fragmented market.

Speaker Change: More so given all of the growth options available to us.

Donald Patrick: Despite headwinds and call solutions business during the quarter, our performance marketplace had a solid first half 2024, evidenced by ad flow, strategic and financial market acceptance and execution, and we anticipate revenue growth in this market and accelerating momentum heading into the later half of this year.

Donald Patrick: Despite headwinds in call solutions business during the quarter, our performance marketplaces had a solid first half 2024, evidenced by ad flow strategic and financial market acceptance and execution. And we anticipate revenue growth in this market and accelerating momentum heading into the later half.

Despite headwinds in call solutions business during the quarter, our performance marketplaces had a solid first half of 2024.

Speaker Change: Evidenced by AD flow strategic and financial market acceptance in execution.

Speaker Change: And we anticipate revenue growth in this market and accelerating momentum heading into the later half of this year.

Donald Patrick: By the end of Q2, we achieved two critically important milestones in our strategic pivot. First, we stabilized our own and operated marketplace. Second, stability in our own and operated marketplace provides the springboard into higher quality consumer engagement syndicated performance marketplaces, where we are building our competitive advantages and where we continue to accelerate based on the very positive results in this part of the business. We are quite enthusiastic regarding the strategic and financial roles that our performance marketplaces are playing in our long-term growth agenda. They already are delivering higher margins in our own and operated marketplaces.

Donald Patrick: By the end of Q2, we achieved two critically important milestones in our strategic pivot. First, we stabilized our own and operating market.

Speaker Change: By the end of Q2, we achieved two critically important milestones in our strategic pivot first we stabilized our owned and operated marketplace.

Donald Patrick: Second, stability in our owned and operated marketplace provides a springboard into higher quality, consumer engagement, syndicated performance marketplace, where we're building our competitive advantages and where we continue to accelerate based on the very positive results in this part of the business.

Speaker Change: Second stability in our owned and operated marketplace provides a springboard into higher quality consumer engagements syndicated performance marketplaces.

Speaker Change: We're building our competitive advantages and where we continue to accelerate based on the very positive results in these parts of the business.

Donald Patrick: We are quite enthusiastic regarding the strategic and financial roles that our performance marketplaces are playing in our long-term growth agenda.

Speaker Change: We are quite enthusiastic regarding the strategic and financial roles that are performance marketplaces theyre, playing in our long term growth agenda as they.

Donald Patrick: They already are delivering higher margins than are owned and operated.

Speaker Change: Already are delivering higher margins in our owned and operated marketplaces.

Donald Patrick: Moving forward, we are confident that we will continue to accelerate revenue growth from our performance marketplaces. We believe the corresponding impact should have fluent achieving year-over-year consolidated single-digit growth in Q3 and double-digit growth in Q4. Importantly and in parallel, as we enhance our market position, we are confident that we will be growing our total growth profit more rapidly than our revenue over time. And with the strategic and financial year-end momentum, we believe Fluent is well on course to deliver consolidated double-digit revenue in gross profit growth in fiscal year 2025.

Donald Patrick: Moving forward, we are confident that we will continue to accelerate revenue growth from our performance marketplace.

Speaker Change: Moving forward, we are confident that we will continue to accelerate revenue growth from our performance marketplaces.

Donald Patrick: We believe the corresponding impact should have Fluent achieving year-over-year consolidated single-digit growth in Q3 and double-digit growth in Q4.

Speaker Change: We believe the corresponding impact should have fluent achieving year over year consolidated single digit growth in Q3 and double digit growth in Q4.

Donald Patrick: Importantly, and in parallel, as we enhance our market position, we are confident that we'll be growing our total gross profit more rapidly than our revenue overall.

Speaker Change: Importantly, and in parallel as we enhance our market position. We are confident that will be being growing our total gross profit more rapidly than our revenue over time.

Donald Patrick: And with the strategic and financial year-end momentum, we believe Fluent is well on course to deliver consolidated double-digit revenue and gross profit growth in fiscal year 2025.

Speaker Change: And with the strategic and financial year end momentum, we believe fluent as well on course to deliver consolidated double digit revenue and gross profit growth in fiscal year 2025.

Ryan Perfit: And with that, I'll turn to Ryan Perfect to provide more detail on our financial results.

Donald Patrick: And with that.

Speaker Change: And with that.

Ryan Perfit: I'll turn to Ryan Perfit to provide more detail on our financial...

Speaker Change: I will turn to Ryan perfect to provide more detail on our financial results.

Ryan Perfit: Thank you, Don.

Ryan Perfit: Thank you, Don, and thanks to everyone for joining us today.

Donald Patrick: While we see our performance marketplace platform as stickier, it tends to have longer and more sophisticated sales cycles than are owned in our operated marketplace. But once we sign a new partner, there's a corresponding positive predictability of the business, as we can project the impact on our growth agenda and our financials with a higher level of certainty based on the mutually agreed-upon executional timelines.

Ryan Perfit: Thanks to everyone for joining us today. I'll now provide some additional color on our Q2 earnings. We generated revenue of 58.7 million in the second quarter of 2024. Down 28.5% from prior year and down 11.1% sequentially from Q1. While we had success driving key, long-term strategic initiatives during the quarter, macro headwinds and competitive challenges related to the FTC order continued to impact our performance of our own Places, contributing to decreased margin performance overall. Moreover, we chose to exit a non-strategic business during the quarter, and our call solutions business was faced with regulatory changes in Medicare and ACA marketplaces, and we took an accounts receivable write-down of ACA policies in the quarter, totaling approximately 3.1 million, with an equal offset to Q2 revenue, which equally affected media margin and adjusted EBITDA.

Ryan Schulke: Thank you, Dan and thanks to everyone for joining us today.

Ryan Perfit: I'll now provide some additional color on our Q2. We generated revenue of $58.7 million in the second quarter of 2024, down 28.5% from prior year and down 11.1% sequentially from Q1. While we had success driving key long-term strategic initiatives during the quarter, macro headwinds and competitive challenges related to the FTC order continued to impact our performance of our owned and operated markets, contributing to decreased margin performance overall. Moreover, we chose to exit a non-strategic business during the quarter, and our call solutions business was faced with regulatory changes in Medicare and ACA marketplaces, and we took an accounts receivable write-down of ACA policies in the quarter totaling approximately $3.1 million, with an equal offset to Q2 revenue, which equally affected media margin and adjusted eBit. Absent this write-down, our overall financial performance for the quarter was largely consistent with the roadmap we had laid out last quarter.

Donald Patrick: We'll detail this further next quarter when we're at liberty to speak more about the specific, brand partners. Bottom line, we have major brands enthusiastically endorsing our performance marketplace strategies, and those new partnerships will go live and hit the stat page in subsequent quarters, Q3, Q4, and into fiscal year 2025, as we align against executional tactics and timelines.

Ryan Schulke: I'll now provide some additional color on our Q2 earnings.

Donald Patrick: So, let's talk about the tough news regarding our Q2 financial performance.

Ryan Schulke: We generated revenue of $58 7 million in the second quarter of 2024.

Speaker Change: <unk> 28, 5% from prior year and down 11, 1% sequentially from Q1.

Donald Patrick: Revenue of $58.7 million represents 11 percent decline versus Q1 2024.

Donald Patrick: Our median margin of $15.7 million was a decrease of 29.3 percent versus Q1 2024.

Speaker Change: While we had success driving key long term strategic initiatives during the quarter macro headwinds and competitive challenges related to the FTC order continued to impact our performance of our owned and operated marketplaces contributing to decreased margin performance overall.

Speaker Change: Moreover, we chose to exit of non strategic business during the quarter and our call solutions business was faced with regulatory changes in Medicare and ACA marketplaces, and we took an accounts receivable write down of ACA policies in the quarter totaling approximately $3 $1 million with.

Speaker Change: With an equal offset to Q2 revenue, which equally affected media margin and adjusted EBITDA.

Ryan Perfit: Absent this write-down, our overall financial performance for the quarter was largely consistent with the roadmap we had laid out last quarter. We're optimistic about the growth of our syndicated marketplaces, and coupled with our continued expense discipline, we anticipate revenue growth and improved adjusted EBITDA performance in the back half of 2024, compared with the comparable quarters of 2023. Media margin in the second quarter was 15.7 million, which represented 26.7% of revenue compared with 25.9 million, or 31.5% of revenue last year. As we continue to scale our performance marketplaces, we expect media margin as a presenter of revenue to improve over time.

Speaker Change: Absent this write down our overall financial performance for the quarter was largely consistent with the roadmap we had laid out last quarter.

Ryan Perfit: We're optimistic about the growth of our syndicated marketplaces, and coupled with our continued expense discipline, we anticipate revenue growth and improved adjusted EBITDA performance in the back half of 2024 compared with the comparable quarters of 2021, media margin in the second quarter was $15.7 million, which represented 26.7% of revenue compared with $25.9 million or 31.5% of revenue last year.

Speaker Change: We are optimistic about the growth of our syndicated marketplaces and coupled with our continued expense discipline, we anticipate revenue growth and improved adjusted EBITDA performance in the back half of 2024 compared with the comparable quarters of 2023.

Speaker Change: Okay.

Speaker Change: Media margin in the second quarter was $15 7 million, which represented 26, 7% of revenue compared with $25 9 million or 31, 5% of revenue last year.

Operator: Good afternoon, and welcome.

Operator: Good afternoon, and welcome. Thank you for joining us to discuss our second quarter 2024 earnings results.

Operator: Thank you for joining us to discuss our second quarter 2024 earnings results.

Ryan Perfit: As we continue to scale our performance marketplaces, we expect media margin as a percentage of revenue to improve, On a gap basis, total operating expense in the second quarter of 2024 totaled $18.2 million, an increase of $5.4 million compared to the second quarter of 2020.

Speaker Change: As we continue to scale our performance marketplaces, we expect media margin as a percentage of revenue to improve over time.

Operator: With me, today I'll pronounce CEO, Don Patrick, and from CFO, Ryan Perfit and Chief Strategy Officer, Ryan Shokie.

Operator: With me, today I'll pronounce CEO, Don Patrick, and from CFO, Ryan Perfit and Chief Strategy Officer, Ryan Shokie. Our call today will begin with comments from Don and Ryan Perfit followed by a question and answer session. I would like to remind you that this call has been recorded, live recorded, and webcast. A replay of the event will be available following the call on our website. To access the website, please visit our investor relations page on our website at www.brointco.com.

Ryan Perfit: On a gap basis, total operating expense in the second quarter of 2024 totaled 18.2 million, an increase of 5.4 million compared to the second quarter of 2023. But of note, GNA during the quarter was 8.9 million, which was down sequentially from the first quarter GNA of 10.4 million. GNA in the second quarter of last year was only 3.9 million due primarily to net credits totaling 5.7 million related to the FTC settlement, including insurance reimbursements for previously incurred legal fees and a lower than expected regulatory settlement. Excluding these credits last year, GNA decreased by approximately 8% compared to Q2 2023.

Speaker Change: On a GAAP basis total operating expense in the second quarter of 2024 totaled $18 2 million, an increase of $5 4 million compared to the second quarter of 2023.

Operator: Our call today will begin with comments from Don and Ryan Perfit followed by a question and answer session.

Ryan Perfit: But of note, GNA during the quarter was 8.9 million, which was down sequentially from the first quarter GNA of 10.4.

Speaker Change: But of note G&A during the quarter was $8 9 million, which was down sequentially from the first quarter G&A of $10 4 million.

Operator: I would like to remind you that this call has been recorded, live recorded, and webcast.

Operator: A replay of the event will be available following the call on our website. To access the website, please visit our investor relations page on our website at www.brointco.com.

Ryan Perfit: GNA in the second quarter of last year was only $3.9 million, due primarily to net credits totaling $5.7 million related to the FTC settlement, including insurance reimbursements for previously incurred legal fees and a lower-than-expected regulatory settlement, excluding these credits last year. GNA decreased by approximately 8% compared to Q2 2020.

Speaker Change: G&A in the second quarter of last year was only $3 9 million due primarily to net credits totaling $5 7 million related to the FTC settlement, including insurance reimbursements for previously incurred legal fees and a lower than expected regulatory settlement.

Operator: 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 Security Litigation Reform Act of 1995. Any forward-looking statements made during this call speak only as of the date hereof. Actual results could differ materially from those stated or implied by our forward-looking statements due to risk and uncertainties associated with the company 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.

Excluding these credits last year Geo.

<unk> decreased by approximately 8% compared to Q2 2023.

Ryan Perfit: Also, during the quarter, we realized goodwill and intangible asset impairment of 2.2 million related to customer relationships in the Ad Parlor reporting unit and internally developed software related to a business unit that was exited subsequent to the close of the quarter. Notably, our operating expenses in Q2 2024 and Q2 2023 include restructuring and other severance costs of 661,000 and zero, respectively. For Q2 2024, this includes severance related to a reduction in force during the quarter to better align our cost structure. GNA in the quarter also includes accrued compensation expenses related to the Winopoli, Trunarth, and TAP acquisitions of 25,000 for the three months ended June 30th, 2024, and 562,000 for the three months ended June 30th, 2023.

Ryan Perfit: Also during the quarter, we realized goodwill and intangible asset impairment of $2.2 million related to customer relationships in the Ad Parlor Reporting Unit and internally developed software related to a business unit that was exited subsequent to the close of the quarter.

Operator: Any forward-looking statements made during this call speak only as of the date hereof.

Speaker Change: Also during the quarter, we realized goodwill and intangible asset impairment of $2 2 million related to customer relationships in the AG, partly reporting unit and internally develop software related to our business unit. There was exited subsequent to the close of the quarter.

Operator: Actual results could differ materially from those stated or implied by our forward-looking statements due to risk and uncertainties associated with the company business. These statements may be identified by words such as expects, plans, projects, could, will, estimates, and other words of similar meaning.

Ryan Perfit: Notably, our operating expenses in Q2 of 2024 and Q2 of 2023 include restructuring and other severance costs of $661,000 and $0,000 respectively. For Q2 2024, this includes severance related to a reduction in force during the quarter to better align our costs.

Speaker Change: Notably our operating expenses in Q2 of 2024 and Q2 of 2023 include restructuring and other severance costs.

Operator: The company undertakes no obligation to update the information provided on this call.

Speaker Change: 661, and zero respectively.

Operator: For a discussion of the risks and uncertainties associated with Florence Business, we encourage you to review the company filing with the Securities and Exchange Commission, including the company's most recent annual report on form 10K and quarterly reports on forms 10K. During the call, management will also present certain non-gap financial information relating to media margin, adjusted EBITDA, and adjusted net income. Management evaluates the financial performance of our business on a variety of indicators, including these non-gap metrics. The definition of these metrics and reconciliation to the most directly comparable gap financial measures are provided in the earnings press release issue earlier today.

Speaker Change: For Q2 2024. This includes severance related to a reduction in force during the quarter to better align our cost structure.

Ryan Perfit: GNA in the Quarter also includes accrued compensation expenses related to the Winopoly, True North, and TAP acquisitions of $25,000 for the three months ended June 30, 2024, and $562,000 for the three months ended June 30, 2022.

Speaker Change: G&A in the quarter also includes accrued compensation expenses related to the wind apply true north and tap acquisitions at 25000 for the three months ended June 32024, and 562000 for three months ended June 32023.

Operator: During the call, management will also present certain non-gap financial information relating to media margin, adjusted EBITDA, and adjusted net income. Management evaluates the financial performance of our business on a variety of indicators, including these non-gap metrics. The definition of these metrics and reconciliation to the most directly comparable gap financial measures are provided in the earnings press release issue earlier today.

Ryan Perfit: Q2 2023 also included the previously mentioned credit of 5.7 million of litigation and other related costs. All of these costs fall outside of the normal course of business and are thus excluded from our adjusted EBITDA calculation. Adjusted EBITDA in the second quarter of 2024 was negative 4.5 million, largely in effect of the previously mentioned 3.1 million dollar write down of ACA policies. As stated on our first quarter call, we expect revenue and medium margin growth in the second half, driven by our new performance marketplaces, to drive adjusted EBITDA as a percentage of revenue into low single digits in Q3 and high single digits in Q4.

Ryan Perfit: Q2 2023 also included the previously mentioned credit of $5.7 million of litigation and other related costs. All of these costs fall outside of the normal course of business and are thus excluded from our adjusted EBITDA calculator.

Speaker Change: Q2 2023 also included the previously mentioned credit of $5 7 million of litigation and other related costs.

Speaker Change: All of these costs fall outside of the normal course of business and are thus excluded from our adjusted EBITDA calculation.

Donald Patrick: An adjusted EBIT of negative $4.5 million represents a negative 7.7 percent of revenue.

Ryan Perfit: Adjusted EBITDA in the second quarter of 2024 was negative $4.5 million, largely in effect of the previously mentioned $3.1 million write down of ACA policy.

Operator: With that, I am pleased to introduce Florence CEO Don Patrick.

Donald Patrick: With that, I am pleased to introduce Florence CEO Don Patrick. You may begin. Good afternoon. Thank you all for joining our call today. I'm here together with Ryan Scholke, our chief strategy officer and company co-founder, and Ryan Perfit, our interim chief financial officer.

Speaker Change: Adjusted EBITDA in the second quarter of 2024 was negative $4 5 million.

Operator: You may begin.

Donald Patrick: Our lower-than-expected Q2 quarterly results were primarily driven by two underlying financial, trends and an increase in unauthorized third-party activity in our ACA business that necessitated a Q2 adjustment.

Donald Patrick: The results generated from our owned and operated marketplace reflect the lingering, impact of our post-FDC settlement transition, including our exiting businesses we felt were no longer strategically relevant.

Speaker Change: Largely in effect of the previously mentioned $3 $1 million write down of ACA policies.

Donald Patrick: Although Q2 results in our owned and operated marketplaces showed continued revenue and margin declines, importantly, we saw marketplace stabilization by the end of the second quarter that has continued into Q3, indicating we are beginning to fully cycle the businesses we've exited and should have finalized this transition in the second, Owned and operated marketplace revenue and media margin declines were partially offset by the continued acceleration of our new syndicated performance marketplaces.

Donald Patrick: Good afternoon.

Donald Patrick: Performance marketplace growth year-over-year continues to shift the mix into our strategic growth agenda and establish a differentiated market position.

Donald Patrick: Thank you all for joining our call today.

Donald Patrick: I'm here together with Ryan Scholke, our chief strategy officer and company co-founder, and Ryan Perfit, our interim chief financial officer.

Ryan Perfit: As stated on our first quarter call, we expect revenue and medium margin growth in the second half driven by our new performance marketplaces to drive adjusted EBITDA as a percentage of revenue into low single digits in Q3 and high single digits in Q4.

Speaker Change: As stated on our first quarter call, we expect revenue and media margin growth in the second half driven by our new performance marketplaces to drive adjusted EBITDA as a percentage of revenue into low single digits in Q3 and high single digits in Q4.

Donald Patrick: We believe we reached an inflection point in our transition, which is exciting as this progress provides the clear strategic and financial validation of our longer-term growth agenda with our early second half performance.

Ryan Perfit: The company cannot provide a reconciliation to expected net income or net loss as a percentage of revenue for 2024, due to the unknown effect, timing, and potential significance of certain operating costs and expenses, share-based compensation expense, and the provision for or benefit from income taxes. Interest expense in the second quarter increased to 1 million from 795,000, due to higher average interest rates on our SLR facility and as an effective increased amortization of debt financing costs related to the SLR facility. For the quarter, our income tax benefit was 775,000, an effective tax rate of 6.5%, which differed from the statutory federal income tax rate of 21%, primarily due to state and local tax expense and losses for which no tax benefit is recognized.

Speaker Change: Okay.

Ryan Perfit: The company cannot provide a reconciliation to expected net income or net loss as a percentage of revenue, for, due to the unknown effect, timing, and potential significance of certain operating costs and expenses, share-based compensation expense, and the provision for or benefit from income.

Speaker Change: The company cannot provide a reconciliation to expected net income or net loss as a percentage of revenue for 2024 due to the unknown effect timing and potential significance of certain operating costs and expenses share based compensation expense and the provision for or benefit from income taxes.

Donald Patrick: Metrics.

Ryan Perfit: Interest expense in the second quarter increased to $1 million from $795,000 due to higher average interest rates on our SLR facility, and as an effect of increased amortization of debt financing costs related to the SOR.

Speaker Change: Interest expense in the second quarter increased to $1 million from 795000 due to higher average interest rates on our SLR facility.

Donald Patrick: Metrics. Since the launch of our syndicated performance marketplace in late 2022, our strategy and investments have been focused on shifting our business mix into long-term growth markets, where a differentiated position will allow us to deliver fluent margins that are creative to the core. And we've successfully delivered sequential improvements in both revenue and growth profit in our performance marketplaces each in every quarter sense. Our momentum is accelerating and we remain confident that we would reach the initial stage of fluent financial rebound.

Speaker Change: And as an effective increased amortization of debt financing costs related to the SLR facility.

Ryan Perfit: For the quarter, our income tax benefit was $775,000, an effective tax rate of 6.5%, which differed from the statutory federal income tax rate of 21%, primarily due to state and local tax expense and losses for which no tax benefit is recognized.

Speaker Change: For the quarter, our income tax benefit was 775000 and effective tax rate of six 5%, which differed from the statutory federal income tax rate of 21%, primarily due to state and local tax expense and losses for which no tax benefit is recognized.

Donald Patrick: And we've successfully delivered sequential improvements in both revenue and growth profit in our performance marketplaces each in every quarter sense.

Ryan Perfit: This is compared to an income tax expense of 1.7 million and an effective tax rate of 29.2% in the second quarter of 2023. We reported a net loss of 11.6 million and an adjusted net loss, a non-GAAP measure, of 7.3 million, equivalent to a loss of 47 cents per share. Shifting now to our balance sheet, we ended the quarter with 6.4 million in cash and cash equivalents, including restricted cash. Total debt, as reflected on the balance sheet as of June 30, 2024, was 33.3 million, an increase of approximately 2.8 million from 30.5 million at December 31, 2023.

Ryan Perfit: This is compared to an income tax expense of $1.7 million and an effective tax rate of 29.2% in the second quarter, who reported a net loss of $11.6 million, and an adjusted net loss, a non-gap measure of $7.3 million, equivalent to a loss of $0.47 per share.

Speaker Change: This is compared to an income tax expense of $1 7 million and an effective tax rate of 29, 2% in the second quarter of 2023.

Donald Patrick: Our momentum is accelerating and we remain confident that we would reach the initial stage of fluent financial rebound.

Donald Patrick: To that end, we expect to deliver single-digit consolidated year-over-year growth in Q3 and then accelerate with consolidated double-digit year-over-year growth in Q4.

Donald Patrick: To that end, we expect to deliver single-digit consolidated year-over-year growth in Q3 and then accelerate with consolidated double-digit year-over-year growth in Q4. And in 2025, as our business mix continues to shift into the performance marketplaces, our momentum should build and we anticipate a strong year of consolidated year-over-year double-digit growth. While we see our performance marketplace platform as stick-year, it tends to have longer and more sophisticated sales cycles than our own and our operated marketplace.

Speaker Change: We reported a net loss of $11 $6 million and an adjusted net loss a non-GAAP measure of $7 3 million equivalent to a loss of <unk> 47 per share.

Ryan Perfit: Shifting now to our ballot.

Donald Patrick: And in 2025, as our business mix continues to shift into the performance marketplaces, our momentum should build and we anticipate a strong year of consolidated year-over-year double-digit growth.

Speaker Change: Shifting now to our balance sheet.

Ryan Perfit: We ended the quarter with $6.4 million in cash and cash equivalents, including restricted We ended the quarter with $6.4 million in cash and cash equivalents, including restricted, Total debt, as reflected on the balance sheet as of June 30th, 2024, was $33.3 million, an increase of approximately $2.8 million from $30.5 million at December 31st. As of June 30, 2024, we had an outstanding principal balance of $32.3 million on our credit facility with SLR Credit.

Speaker Change: We ended the quarter with $6 4 million in cash and cash equivalents, including restricted cash.

Speaker Change: Total debt as reflected on the balance sheet as of June 32020 core was $33 3 million an increase of approximately $2 8 million from $30 5 million at December 31, 2023.

Donald Patrick: While we see our performance marketplace platform as stick-year, it tends to have longer and more sophisticated sales cycles than our own and our operated marketplace.

Ryan Perfit: As of June 30, 2024, we had an outstanding principal balance of 32.3 million on our credit facility with SLR Credit Solutions. This facility provides us with a $20 million term loan and a revolving credit facility of up to $30 million that matures on April 2, 2020. In Q2, we invested 1.7 million in the capitalized product development and technology, largely to support the growth of our performance marketplaces. This compares to 1.2 million invested in Q2 2023.

Donald Patrick: But once we sign a new partner, there's a corresponding positive predictability of the business, as we can project the impact on our growth agenda and our financials with a higher level of certainty based on the mutually agreed-upon execution timelines.

Speaker Change: As of June 32024, we had an outstanding principal balance of $32 $3 million on our credit facility with SLR credit solutions.

Ryan Perfit: This facility provides us with a $20 million term loan and a revolving credit facility of up to $30 million that matures on April 2, 2020. In Q2, we invested $1.7 million into capitalized product development and technology largely to support the growth of our performance market.

Speaker Change: This facility provides us with a $20 million term loan and the revolving credit facility of up to $30 million debt matures on April 2029.

Donald Patrick: We'll detail this further next quarter when we're at liberty to speak more about the specific brand partners. Bottom line, we have major brands enthusiastically endorsing our performance marketplace strategies and those new partnerships will go live and hit the stat page in subsequent quarters, Q3, Q4, and into fiscal year 2025, as we align against execution tactics and timelines.

Speaker Change: Okay.

Speaker Change: In Q2, we invested $1 7 million of capitalized product development and technology largely to support the growth of our performance marketplaces. This compares to $1 2 million invested in Q2 2023.

Ryan Perfit: This compares to $1.2 million invested in Q2.

Ryan Perfit: Now, halfway through the third quarter of 2024, we believe that the company is well positioned for year-over-year and quarter-over-quarter revenue growth, as well as a return to positive adjusted EBITDA in the back half of the year. We remain focused on both the fortification of our legacy owned and operated products and the growth of our new syndicated performance marketplaces. Public places, which we expect will drive strength and margin profile as they scale. We would like to thank everyone for their continued support and look forward to driving enhanced results through the balance of 2024.

Donald Patrick: Our results were exacerbated by unauthorized third-party activity impacting our ACA vertical in our call solutions business.

Ryan Perfit: Now halfway through the third quarter of 2024. We believe that the company is well positioned for year over year and quarter over quarter revenue growth, as well as a return to positive adjusted EBITDA in the back half of the year. We remain focused on both the fortification of our legacy owned and operated products, and the growth of our new syndicated performance market, which we expect will drive strength and margin profile as they, We would like to thank everyone for their continued support and look forward to driving enhanced results through the balance of 2024.

Speaker Change: Now halfway through the third quarter of 2024.

Speaker Change: We believe that the company is well positioned for year over year and quarter over quarter revenue growth as well as a return to positive adjusted EBITDA in the back half of the year.

Donald Patrick: So let's talk about the tough news regarding our Q2 financial performance. Revenue of 58.7 million represents 11% decline versus Q1 2024. Our median margin of 15.7 million was a decrease of 29.3% versus Q1 2024. An adjusted evit of negative 4.5 million represents a negative 7.7% of revenue. Our lower than expected Q2 quarterly results were primarily driven by two underlying financial trends and an increase in unauthorized third-party activity in our ACA business that necessitated a Q2 adjustment.

We remain focused on both the fortification of our legacy owned and operated products and the growth of our new syndicated performance marketplaces, which we expect will drive strengthened margin profile as they scale.

Speaker Change: We would like to thank everyone for their continued support and look forward to driving enhanced results through the balance of 2024 will be happy to take questions at this time.

Operator: We'll be happy to take questions at this time.

Operator: Thank you.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, to ask the question, please first start 1-1 on your telephone, and then wait to hear your name announced. To withdraw your question, please start 1-1 again. Please stand by while we compile the Q&A roster.

Operator: Ladies and gentlemen, to ask a question, please press star 1-1 on your telephone and then wait to hear your name announced.

Donald Patrick: An adjusted evit of negative 4.5 million represents a negative 7.7% of revenue.

Speaker Change: Ladies and gentlemen to ask a question. Please press star one on your telephone and then wait to hear your name announced.

Operator: To withdraw your question, please press star 11 again.

Speaker Change: To withdraw your question. Please press star one again.

Operator: Please stand by while we compile the Q&A roster.

Speaker Change: Please standby, while we compile the Q&A roster.

Donald Patrick: The results generated from our own and operated marketplace reflect the lingering impact of our post-FTC settlement transition, including our exiting businesses we felt were no longer strategically relevant. Although Q2 results in our own and operated marketplaces showed continued revenue and margin declines. Importantly, we saw marketplace stabilization by the end of the second quarter that has continued into Q3. Indicated, we are beginning to fully cycle the businesses we've exited and should have finalized this transition in the and half.

Maria Ripps: Our first question comes from the line of Maria Ripps with Canacore. The line is open.

Maria Ripps: Our first question comes from the line of Maria Ripps with CannaCorp.

Speaker Change: Our first question comes from the line of Maria <unk> with Canaccord. Your line is open.

Maria Ripps: Your line is open.

Maria Ripps: Great.

Maria Ripps: Good afternoon, and thanks for taking my questions. Can you give a talk a little bit more about the unauthorized activity for the ACA policies that impacted you? Was it something that impacted the industry more broadly, or your platform or so?

Maria <unk>: Great. Good afternoon, and thanks for taking my questions first can you maybe talk a little bit more about that.

Unauthorized activity for AC policies this quarter, so that impacted you.

Speaker Change: That something that sort of impacted the industry more broadly or sort of your platform Marcel and I guess, what are some measures or initiatives that you may have added to prevent Omega leamon is going forward.

Maria Ripps: I guess one of some measures or initiatives that you may have added to prevent or may believe that is going forward.

Donald Patrick: Owned and operated marketplace revenue and medium margin declines were partially offset by the continued acceleration of our new syndicated performance marketplaces. Performance market place growth year over year continues to shift the mix into our strategic growth agenda and establish a differentiated market position. A result for exacerbated by unauthorized third-party activity impacting our ACA vertical in our call solutions business. Recently, unauthorized switching of the agency of record AOR on insurance policies dramatically increase adversely affecting the entire ACA industry.

Donald Patrick: I'm Maria. Thanks for the question. I'll give a little bit of detail, but the short answer to you is it affected the entire industry; it affected everyone who's involved with ACA. So it wasn't specific to Fluent as industry wide. But if you remember in Q4 or 23, our car solutions business started the ACA agency where you know fluent license, agency sells ACA policies on the behalf of top health insurance companies. We were already in that business of providing quality ACA consumer prospects to partners, and we built the ACA agency as a natural performance market extension into that business with the ability to bring the consumer further down the funnel.

Maria Ripps: Great.

Speaker Change: Hi, Maria Thanks for the question.

I'll give a little bit of detail, but the short answer to you is it affected the entire industry affected everyone, who is involved with HCA. So it wasn't specific to Epsilon industrywide.

Maria Ripps: Good afternoon and thanks for taking my questions.

Speaker Change: But if you remember in Q4 'twenty three our Carson call solutions business started the ACA agency where fluent.

Donald Patrick: Our lower than expected Q2 quarterly results were primarily driven by two underlying financial trends and an increase in unauthorized third-party activity in our ACA business that necessitated a Q2 adjustment.

Speaker Change: Fluent license agent sells AC policies on the behalf of top health insurance companies.

Maria Ripps: First, can you maybe talk a little bit more about the unauthorized activity for the ACA policies this quarter that impacted you?

Speaker Change: We were already in that business of providing quality ICA consumer prospects to partners and we built the ACI agency is a natural performance market extension into that business with the ability to bring the consumer further down the funnel.

Maria Ripps: Was that something that sort of impacted the industry more broadly or sort of your platform more so?

Donald Patrick: So the economics of that business is when we sell an ACA policy to a qualified consumer, we become the agency of record and all relevant policy information, including agency record, is maintained in a government database that is run and controlled by the Centers for Medicare and Medicaid Services (CMS). So each ACA policy is in the name of the consumer, the designated healthcare, and as AOR, Fluent gets paid a monthly commission for each policy we are AOR for, for as long as that consumer has that policy. In the typical timeframe for that policy and the commissions is averaging somewhere between 17 and 24 months where we'd be getting those commissions.

Donald Patrick: Once the Centers for Medicare and Medicaid Services, CMS, became aware they changed their system for switching AORs largely eliminating the practice. However, the new system did not penalize the prior unauthorized activity, hampering our ability to recover our losses or cost effectively operate the business in the short term. This also necessitated a 3.1 million right down of accounts receivable with an equal offset to revenue, medium margin, and adjusted to divot dye and Q2.

Speaker Change: So the economics of that business is when we sell an ACA policy to qualified consumer we'd become the agency of record and all relevant policy information, including agency of record is maintained in a government database that is running controlled by the centers for Medicare and Medicaid services CMS.

Speaker Change: So each EAC policy is in the name of consumer the designated healthcare and as AOR fluid gets paid a monthly commission for each policy. We are AOR for for as long as that consumer has that policy and a typical timeframe for that.

Speaker Change: Our policy the commissions is averaging somewhere between 17, and 24 months, where where we'd be getting those commissions.

Maria Ripps: And I guess, what are some measures or initiatives that you may have added to prevent or maybe limit this going forward?

Donald Patrick: But during Q2, 20, only four became apparent that there was a lack in controls in the CMS's ACA database, which allowed other license agents to access the database and the ability to illegally change the AOR without any consumer approval. So fluid could sell the ACA policy to a consumer and on author of the agent would come into the government database, change the AOR from fluent to them, and with the illegal AOR switches, the healthcare insurance companies would then pay the illegal AOR on the ongoing commissions instead of fluent, getting it. A class action suit was filed in Q2 with a long list of companies around the illegal and unauthorized switching.

Donald Patrick: Hi, Maria.

Speaker Change: But during.

Donald Patrick: Thanks for the question.

Donald Patrick: I'll give a little bit of detail, but the short answer to you is it affected the entire industry, affected everyone who's involved with ACA.

Q2, 'twenty 'twenty four it became apparent that there was a lack in controls and the Cms's HCA database, which allowed other licensed agents to access the database and the ability to illegally changed the AOR without any consumer approval.

Donald Patrick: So it wasn't specific to Fluent, it was industry-wide.

Donald Patrick: But if you remember in Q4 of 23, our call solutions business started the ACA agency where, you know, Fluent licensed agents sells ACA policies on behalf of top health insurance companies. We were already in that business of providing quality ACA consumer prospects to partners, and we built the ACA agency as a natural performance market extension into that business with the ability to bring the consumer further down the funnel. So the economics of that business is when we sell an ACA policy to a qualified consumer, we become the agency of record, and all relevant policy information, including agency of record, is maintained in a government database that is run and controlled by the Centers for Medicare and Medicaid Services, CMS.

Speaker Change: So fluid could sell the AC policy to a consumer and an authorized agent would come into the government database change the AOR from fluid to them and.

Donald Patrick: So each ACA policy is in the name of consumer, the designated healthcare, and as AOR, Fluent gets paid a monthly commission for each policy we are AOR for, for as long as that consumer has that policy.

Donald Patrick: And the typical time frame for that policy, the commissions, is averaging somewhere between 17 and 24 months where we'd be getting those commissions.

Donald Patrick: We remain confident in our ability to accelerate revenue and profit growth in the second half of 2024 when compared to last year's numbers.

Speaker Change: And with the illegal ALR switches the health care insurance companies would then pay the illegal AOR on the ongoing commissions instead of fluent getting it.

Donald Patrick: But during Q2 2024, it became apparent that there was a lack in controls in the CMS's ACA database, which allowed other licensed agents to access the database and the ability to illegally change the AOR without any consumer approval. So Fluent could sell the ACA policy to a consumer, an unauthorized agent would come into the government database, change the AOR from Fluent to them. And with the illegal AOR switches, the healthcare insurance companies would then pay the illegal AOR on the ongoing commissions instead of Fluent getting it. A class action suit was filed in Q2 with a long list of companies around the illegal and unauthorized switching.

Donald Patrick: I'd like to now take the time to provide some deeper insight into our growth agenda. So you can get a clear picture on why we're so excited by the difference in market position we are creating. Our syndicated performance marketplaces represent the tip of the spear in our strategic growth agenda. As we accelerate the fluid brand into very large high growth dynamic markets where we can unleash our core owned and operated grounded capabilities providing us with the unique competitive energy in the marketplace.

Speaker Change: A class action suit was filed in Q2 with a long list of companies around the illegal unauthorized switching fluid was that in any mere involved the nest nor did we work any of those parties bricks. It really highlights the extent and dramatic.

Donald Patrick: Fluent was not in any manner involved in this, nor did we work with any of those parties, but it really highlights the extent and dramatic increase of this unauthorized and illegal activity that happened in accelerating in 2024. One CMS became aware of this unauthorized behavior in July. They changed the system and their process for AOR switching. They largely eliminated the practice. So the practice, the answer to question Brea, the government fixed it; the CMS fixed it by putting in strict rules. The challenge was that they basically did not penalize any prior unauthorized activity. So they locked down all the illegal, unauthorized changes and hampered fluid responsibility to recover our losses for those policies that were illegally switched.

Donald Patrick: Fluent was not in any manner involved in this, nor did we work any of those parties, but it really highlights the extent and dramatic increase of this unauthorized and illegal activity that happened and accelerated in 2024. Once CMS became aware of this unauthorized behavior in July, they changed the system and their process for AOR switching, and they largely eliminated the practice.

Speaker Change: Increase of this unauthorized and illegal activity activity that happened and accelerating in 2024.

Speaker Change: One CMS became aware of this.

Speaker Change: Unauthorized behavior in July they changed the system in their process for AOR switching and a largely eliminated the practice. So the practice to answer question Brea the government fixed it.

Donald Patrick: Our performance marketplaces revenue growth is on plan and as we continue to build on that momentum we anticipate accelerating year-over-year growth to the end of 2024 and beyond. Equally exciting is that our gross margin in that business is growing faster than revenue with ample room for additional improvement. So you can see why we're so enthusiastic about our performance marketplace growth strategy as we lean into this opportunity and drive enhanced operating efficiencies across the fluid enterprise.

Donald Patrick: So the practice, to answer your direct question, Maria, the government fixed it.

Donald Patrick: CMS fixed it by putting in strict rules.

Speaker Change: <unk> fixed it by putting in strict rules the challenge was.

Donald Patrick: However, the new system did not penalize the prior unauthorized activity, hampering our ability to recover our losses or cost-effectively operate the business in the short term. This also necessitated a 3.1 million write-down of accounts receivable with an equal offset to revenue, media margin, and adjusted EBITDA in Q2. While this non-recurring write-down had negatively impacted our Q2 results, we see this as having no additional negative impact to our financials or our future growth agenda.

Donald Patrick: The challenge was that they basically did not penalize any prior unauthorized activity.

Donald Patrick: Absent the write-down, our overall financial performance remained consistent with the roadmap we've laid out in previous calls.

Speaker Change: That they basically did not penalize any prior unauthorized activity. So they locked down all the illegal unauthorized changes and hampered fluids ability to recover our losses for those for those policies that were illegally switched so.

Donald Patrick: So they locked down all the illegal unauthorized changes and hampered Fluent's ability to recover our losses for those policies that were illegally switched. So, and that was what necessitated the $3.1 million write-down of receivables and the things that were illegally changed.

Donald Patrick: And that was what necessitated the $3.1 million write down or receivables or the things that were illegally changed. So the process is now in place for the government. In the monitoring that we have after July 19th, when they put the new regs in place, the switching is all authorized and illegal activity has dramatically gone down. However, as we outlined in the earnings script, we are pausing the scenario of making sure that we have the right internal processes, processes with externally with the various vendors and the government to make sure that this is a business that we can not only differentiate ourselves with but also make sure that we don't have this issue.

Speaker Change: It was what <unk>, the $3.1 million write down of receivables and things that were illegally changed so the process is now in place with the government.

Donald Patrick: Indicated, we are beginning to fully cycle the businesses we've exited and should have finalized this transition in the and half.

Donald Patrick: So the process is now in place for the government in the monitoring that we have after July 19th when they put the new regs in place, the switching is all authorized and the illegal activity has dramatically gone down.

And in the monitoring that we have after July 19th when they put the new regs in place the switching is.

Speaker Change: All authorized and illegal activity has dramatically gone down.

Donald Patrick: Now, some additional insight regarding our ad flow business, the anchors are syndicated performance marketplace platform, where proof of concept result leads us with even more strategic optimism. Ad flow is our media solution. We launched in the large and rapidly growing commerce media market. Market is currently valued at over $50 billion, expected to reach $150 billion by 2030. Presently, 43% of US brands have commerce media budgets, and that's expected to increase to 75% by 2025.

Donald Patrick: However, somewhat masked in our financials is that we are on plan in growing our performance marketplaces.

Donald Patrick: However, as we outlined in the earnings script, we are pausing the scenario of making sure that we have the right internal processes, processes externally with the various vendors and the government to make sure that this is a business that we can not only differentiate ourselves with, but also make sure that we don't have this issue again.

Donald Patrick: That momentum, combined with the stabilization of our own and operated marketplaces, is a reflection of our evolving market mix.

Speaker Change: However, as we outlined in the earnings script, we are.

Donald Patrick: We remain confident in our ability to accelerate revenue and profit growth in the second half of 2024 when compared to last year's numbers.

Speaker Change: <unk>, it's an issue of making sure that we have the right internal processes processes with them externally with the various vendors and the government to make sure that this is a business that we can not only differentiate ourselves with but also make sure that we don't have this issue again.

Donald Patrick: I'd like to now take the time to provide some deeper insight into our growth agenda so you can get a clearer picture on why we're so excited by the differentiated market position we are creating.

Donald Patrick: again. It's probably more detailed than you want, Maria. Hopefully, I answered your question.

Donald Patrick: It's probably more detailed than you want it, Maria, but hopefully that answers your question.

Speaker Change: It's probably more detailed than you added Maria.

Speaker Change: No.

Maria <unk>: Hope that answers your question.

Maria Ripps: No, that's, that's great.

Maria Ripps: No, that's great.

Ryan Perfit: Thank you so much for the call. And then maybe secondly, could you maybe talk about sort of any potential liquidity needs and maybe just sort of how should investors think about some of the options that are available to you on that phone? Yep. From liquidity. We have a very favorable credit facility with SLR. As you know, it's a receivables-based facility, and it continues to, as we grow, continue to provide the liquidity we need to move forward. We have put some, recently put a small amount of money in roughly $2 million to continue to provide enough liquidity for the company.

Maria <unk>: No that's good.

Speaker Change: Great. Thank you so much for the color and then maybe secondly could you maybe talk about sort of any potential liquidity needs and maybe just.

Donald Patrick: Our foundational ad flow strategies continue to show year-over-year revenue growth as planned during by new partner wins, which are enabled by our leveraging our proprietary technology, machine learning, and data platform capabilities that have yielded excellent results. Furthermore, since May, we've added new brand partners that will increase growth trendline marketly, as we've expanding into very attractive, grocery, quick serve restaurant, and travel verticals. We are excited by these results, along with the increasing momentum, the ad flow platform represents a new growth opportunity for world-class brands to reach consumers seeking high-quality engagements at the optimal purchase moment.

Speaker Change: How should investors think about some of the options that are available to you on that front.

Speaker Change: Yep Yep from liquidity.

We have a very favorable.

Speaker Change: Credit facility with SLR as you know its receivables base facility and it continues to as we grow continues to provide the liquidity we need.

Speaker Change: To move forward we have.

Speaker Change: <unk>.

Speaker Change: Put put some recently put a small amount of money in roughly $2 million to continue to provide enough liquidity for the company, but we feel with the SLR facility and the acceleration of the revenue that we talked about in our performance marketplaces that we have enough liquidity to not only execute on our business plan, but over deliver.

Ryan Perfit: But we feel with the SLR facility and the acceleration of the revenue that we talked about in our performance market places that we have enough liquidity to not only execute on our business plan, but over deliver.

Donald Patrick: We'll speak more to this in future quarters, but we also see a significant leading edge loyalty based opportunity to expand and enhance ad flow strategic impact in the adjacent marketplace that we believe will further differentiate fluent from our competitive set. And our partners are already validating our unique market position based on their enthusiastic feedback. Headlining, we are now working with commerce partners beyond post-transactions to enhance consumer engagement, retention, and loyalty across our partners commerce platforms.

Donald Patrick: Our syndicated performance marketplaces represent the tip of the spear in our strategic growth agenda.

Maria Ripps: That's very helpful.

Maria Ripps: Thank you so much for the call.

Speaker Change: Got it that's very helpful. Thank you so much thanks Maria.

Donald Patrick: As we accelerate the Fluent brand into very large, high-growth, dynamic markets where we can unleash our core owned and operated grounded capabilities, providing us with a unique competitive advantage in the marketplace.

Maria Ripps: Thank you so much.

Maria Ripps: Thanks, Maria.

Donald Patrick: Our performance marketplaces' revenue growth is on plan. And as we continue to build on that momentum, we anticipate accelerating year-over-year growth through the end of 2024 and beyond. Equally exciting is that our gross margin in that business is growing faster than revenue, with ample room for additional improvement.

Operator: Please stand by for our next question.

Speaker Change: Please standby for our next question.

James Goss: Our next question comes from Milan of James Goss with Burnton Research. Yalan is open.

Maria Ripps: And then maybe secondly, could you maybe talk about sort of any potential liquidity needs and maybe just sort of how should investors think about some of the options that are available to you on that?

Speaker Change: Our next question comes from the line of James Goss with Barrington Research. Your line is open.

James Goss: Okay. First, and maybe this falls up a little on the liquidity issue, you've had a couple of quarters now where there have been a couple of, I think there were mostly financially related issues, although perhaps this one was one of the KCA that have delayed your reporting. And I was wondering if there are any other specific issues you're aware of that we should be aware of, to be or be concerned of going into the next couple of quarters.

Donald Patrick: Yep, from liquidity.

Speaker Change: Okay.

Speaker Change: First.

Donald Patrick: In Q2, we launched our innovative loyalty solution with select partners, leveraging our deep knowledge of our own and operating marketplaces and ad flows commerce media in order to provide next-generation loyalty solution with incomparable economic value proposition to advertisers and partners alike. This is a powerful and unique strategic combination. A marriage of our own and operated leadership position coupled with insights that are proprietary and fluent while leveraging our credibility we are earning with our ad flow platform as a launching point into a relevant really stage marketplace.

James Goss: And maybe this follows up a little on the liquidity issue you had a couple of quarters now where there have been a couple of those.

Speaker Change: They were mostly financially related issues, although perhaps this one is one of our case.

Speaker Change: That have delayed your reporting.

Speaker Change: And I was wondering if there are any other.

Speaker Change: Specific issues Youre aware of that we should be aware of to be or be concerned of.

Speaker Change: Going into the next couple of quarters, Okay IGN.

Ryan Perfit: Yeah, hi, Jim.

Ryan Perfit: Thanks for the question. We do not have anything that we're aware of around our ability to execute on our plan and to grow. As I said, we have a very favorable facility with our debt partner that allows us to continue to access cash as we grow and against receivables.

Speaker Change: Hi, Jim Thanks for the question.

Speaker Change: Do not have any.

Speaker Change: Anything there.

As we were aware of around our ability to execute on our plan and to grow as I said, we have a very favorable.

Donald Patrick: We have a very favorable credit facility with SLR. As you know, it's a receivables-based facility, and it continues to, as we grow, continue to provide the liquidity we need to move forward.

Speaker Change: Facility with our with our debt partner that allows us to continue to access.

Donald Patrick: We have recently put a small amount of money in, roughly $2 million, to continue to provide enough liquidity for the company.

Cash as we grow and against receivables and I think that.

Ryan Perfit: And I think that that was put in place, as you know, back in April, and he's going to service well in the back half of '24 and into 2025. Okay.

That was put in place as you know back in April.

Donald Patrick: But we feel with the SLR facility and the acceleration of the revenue that we talked about in our performance marketplaces, that we have enough liquidity to not only execute on our business plan, but deliver.

Donald Patrick: Based on what our partners are sharing with us and as they aggressively lean in, we believe this is another large growth opportunity that is right in our sweet spot. Both ad flow and our loyalty retention solutions provide fluent a unique brand position and a significant growth opportunity in the large and growing commerce media industry. More importantly, expands our strategic value proposition to world-class partners beyond customer acquisition as we expand quality consumer engagements across the entire marketing funnel.

Speaker Change: He is going to serve us well in the back half of 'twenty forward into 2025.

Donald Patrick: That's very helpful.

Donald Patrick: In Q3, our focus is on expanding our market share through continued growth in our syndicated performance marketplaces, while positioning the Fluent enterprise to return consolidated year-over-year growth that we believe will accelerate sequentially through the back half of 2024. Now, some additional insight regarding our AdFlow business, the anchors are syndicated performance marketplace platform, where proof of concept result leaves us with even more strategic optimism. AdFlow is our media solution we launched in the large and rapidly growing commerce media market, market that is currently valued at over $50 billion, expected to reach $150 billion by 2030.

Speaker Change: Okay.

Donald Patrick: Another question you mentioned the syndicated access performing marketplaces were the tip of the spear and that Adflow platform was of your way to enable access. I wonder if you could talk a little more about exactly how that works. And also if you could talk about the mix of the syndicated platforms versus here on an upgraded places. Right. Good. So I'll touch specifically on adflow about the syndicated marketplaces are basically post-event monetization in a commerce media spot. But Adflow is a module our own proprietary platform that sits in between a post transaction environment. So if you're purchasing something on a ticketing site before you get the confirmation page, there is an additional ad that is served up based on who you are, what your purchase behavior is, you know, what your interests are, which again are things that we access both with our partners' approved data, but more importantly, the fluent data in the first-party data that we built over the years.

Donald Patrick: Presently, 43% of U.S. brands have commerce media budgets, and that's expected to increase to 75% by 2025.

Speaker Change: Another question you mentioned.

Maria Ripps: Thank you so much.

Speaker Change: The syndicated.

Speaker Change: Access.

Speaker Change: Performance marketing marketplaces, where the tip of the spear in that AD flow platform was the.

Donald Patrick: Our foundational AdFlow strategies continue to show year-over-year revenue growth as planned, driven by new partner wins, which are enabled by our leveraging our proprietary technology, machine learning, and data platform capabilities that have yielded excellent results.

We're gonna enable access I wonder if you could talk a little more about exactly how that works and also if you could talk about the mix of the syndicated.

Donald Patrick: We are excited by our progress here and we'll provide more detail in future earning.

Speaker Change: Uh huh.

Speaker Change: Platforms versus here on an operated places right.

Donald Patrick: Services. In our call solution business, after consistent historical growth, our Q2 revenue declined year-over-year due mostly to current and future regulatory changes. By the end of Q2, we adjusted to the upcoming regulatory changes by proactively building the compliance solution that we believe offers better quality for our partners. We believe we are now positioned well for our partners' second half call solutions demand and future growth remains on the horizon. In our ACA business, although it is a high sequential growth opportunity, we are closely evaluating the ongoing changes to the centers of Medicaid and Medicare services and pausing this initiative to ensure that Fluent can continue to differentiate ourselves within a highly fragmented market, more so given all the growth options available to us.

Speaker Change: Alright good.

Speaker Change: So.

Speaker Change: Touch specifically on AD flow about the syndicated market places are basically post event monetization and a commerce media spot, but add slow is a module our own.

Speaker Change: Proprietary platform that sits in between.

Speaker Change: Post transaction environment, So if you're purchasing something on its ticketing site before you get the confirmation page. There is a there's a additional add that is served up based on who you are what your purchase behavior is.

Speaker Change: What your interests are which again are things that we access both with our partners.

Speaker Change: Approved data, but more importantly, the fluent data in the <unk> and the first party data that we've built over.

Donald Patrick: And then we'll serve you a relevant ad that's most in the purchase moment; allows us to monetize you and improve the consumer engagement. So that money is a revenue share between us and the commerce partner. It's a very strategic business for us both from the standpoint of increasing monetization for a commerce media, but equally important. It also allows us to continue to help with consumer engagement with them. We've shown a very significant growth and acceleration in that business, Jim, in Q2. We don't break that out from a segment perspective, but we talked about the new verticals.

Speaker Change: Over the years and then will serve you a relevant AD that's most.

Speaker Change: In the purchase moment allows us to monetize U and improve the consumer engagement so that money.

Is the revenue share between us and they've got Commerce Park.

Donald Patrick: Despite headwinds and call solutions business during the quarter, our performance marketplace had a solid first half 2024 evidence by ad flow strategic and financial market acceptance and execution, and we anticipate revenue growth in this market and accelerating momentum heading into the later half of this year.

It's a very strategic.

Speaker Change: Business for us both from a standpoint of increasing monetization for our commerce media, but equally important. It also allows us to continue to help with consumer engagement with them.

Speaker Change: We've we've shown.

Speaker Change: Very significant growth and acceleration in that business. Jim in Q2, we don't break that out from a segment perspective, but we talked about the new verticals, we got into grocery quick serve restaurants, we werent ticketing, but we also know in travel.

Donald Patrick: Furthermore, since May, we've added new brand partners that will increase our growth trend line markedly, as we're expanding into very attractive grocery, quick-serve restaurant, and travel verticals.

Donald Patrick: We are excited by these results, along with the increasing momentum that the AdFlow platform represents a new growth opportunity for world-class brands to reach consumers seeking high-quality engagements at the optimal purchase moment.

Donald Patrick: We'll speak more to this in future quarters, but we also see a significant leading-edge loyalty-based opportunity to expand and enhance AdFlow's strategic impact in an adjacent marketplace that we believe will further differentiate Fluent from our competitive set.

Donald Patrick: We got into grocery quick serve restaurants. Now we were in ticketing, but we also now in travel. And that growth, what is unique about it compared to the core owned and operated marketplace business, is that we it's very predictable. It might take a while for it to come on from a technical standpoint and an ability to onboard it. But once it's on, we're getting predictable sessions, a predictor revenue. We have a lot more ability to forecast what we see in Q3 and Q4, and a significant number of partners are coming on. Have come on since June.

Speaker Change: And that growth what is unique about it compared to the core.

Speaker Change: Owned and operated marketplace business is that.

It's very predictable it might take a while for it to come on from a technical standpoint, and the ability to onboard it but once it's on we're getting predictable sessions petco revenue, we have a lot more ability to forecast what you see in Q3, and Q4 and a significant number of partners are coming on.

Donald Patrick: They already are delivering higher margins in our own and operated marketplaces. Moving forward, we are confident that we will continue to accelerate revenue growth from our performance marketplaces. We believe the corresponding impact should have fluent achieving year-over-year consolidated single-digit growth in Q3 and double-digit growth in Q4. Importantly and in parallel, as we enhance our market position, we are confident that we will be being growing our total growth profit more rapidly than our revenue over time. And with the strategic and financial year-end momentum, we believe fluent is well on course to deliver consolidated double-digit revenue in gross profit growth in fiscal year 2025.

Speaker Change: Have come on since June.

Donald Patrick: They're going to come on through September, October; that puts us in a position to be able to say that we're going to return to single digits in Q3 and show double-digit total consolidated growth in Q4 and in the queue into 2025. Docs.

Speaker Change: Come on through.

Speaker Change: September October that puts us in a position to be able to say that we're going to return to single digits in Q3 and showed double digit total consolidated growth in Q4 and into Q into 2025.

Donald Patrick: One last thing, I believe media and entertainment was, say, a primary vertical in the underrated area, if I'm not mistaken. Is that being minimized at all, or is that being supplemented by the ad flow incursion into retail and ticketing verticals and travel, some of the other things you mentioned? It's being supplemented, Jim. You know, it's always been a strong vertical of us, and it remains a very strong vertical in the undenapprated. Obviously, we're looking to grow that media and entertainment and grow it consistently, but we're also bringing on other verticals with the new solutions that we have and our ability to drive more solutions for our partners.

Speaker Change: Okay, and one last thing.

Speaker Change: Believe me.

Speaker Change: Media and entertainment was.

Speaker Change: <unk> primary vertical in the on the non traded area.

Speaker Change: Mistaken.

Speaker Change: Is that is that being minimized at all or is that being supplemented by the <unk>.

Ed flow incursion into retail and ticketing verticals travel some of the other things you mentioned, it's being supplemented Jim you know, it's always been a strong vertical for us and it remains a very strong vertical in the owned and operated obviously, we're looking to we were looking to grow that media and entertainment.

Ryan Perfit: And with that, I'll turn to Ryan Perfect to provide more detail on our financial results. Thank you, Don. Thanks to everyone for joining us today.

Ryan Perfit: I'll now provide some additional color on our Q2 earnings. We generated revenue of 58.7 million in the second quarter of 2024. Down 28.5% from prior year and down 11.1% sequentially from Q1. While we had success driving key, long-term strategic initiatives during the quarter, macro headwinds and competitive challenges related to the FTC order continued to impact our performance of our own Places, contributing to decreased margin performance overall. Moreover, we chose to exit a non-strategic business during the quarter, and our call solutions business was faced with regulatory changes in Medicare and ACA marketplaces, and we took an accounts receivable write-down of ACA policies in the quarter, totaling approximately 3.1 million with an equal offset to Q2 revenue, which equally affected media margin and adjusted EBITDA.

Speaker Change: And grow it consistently but we're also bringing on other verticals with the new solutions that we have.

Speaker Change: And our ability to drive more solutions for our partners.

Donald Patrick: So, would you try to find underrated platforms to serve the new verticals serving through the syndicated access right now? No, I mean, we've described in the past, Jim, is the underrated marketplaces are a real competitive advantage to us. As you know, it's the one that has had the most challenges over the last couple of years as we've shifted to quality and really enhancing the quality of those sites along with settlement the FTC, but their advantages around our ability by media, knowing consumer engagement and being able to interact with consumers in lifetime value. And that performance marking pedigree really allows us to launch and do things like ad flow and syndicated marketplaces with that expertise and our proprietary first-party data to really provide a competitive advantage again for competition in that market.

Speaker Change: So would you try to fund owned and operated platforms to serve the new one.

Speaker Change: New very closure serving two syndicated.

Speaker Change: Yes, right now.

Speaker Change: No I mean, we've described in the past Jim is the owned and operated marketplaces are a real competitive advantage to us.

Donald Patrick: A result for exacerbated by unauthorized third-party activity impacting our ACA vertical in our call solutions business.

Speaker Change: As you know it's.

Speaker Change: It's the one that has had the most challenges over the last couple of years as we've shifted to quality.

Speaker Change: And really enhancing the quality of those of those sites along with the settlement of the FTC.

Speaker Change: But their advantages around our ability to buy media, knowing consumer engagement and being able to interact with consumers and lifetime value.

Speaker Change: That performance marketing pedigree really allows us to launch and do things like add flow and syndicated marketplaces with that expertise.

Speaker Change: And our proprietary first party data to really provide a competitive advantage against the competition in that market. So we look to keep that business stable, we'd like to keep continue to keep us healthy and the big the Big news last in the financial numbers here clearly is that we achieved we believe we've achieved stability in later part of Q2 and continued in <unk>.

Donald Patrick: So, we look to keep that business stable. We look to continue to keep it healthy, and the big news lost in the financial numbers here clearly that we believe we've achieved stability in the later part of Q2 and continued in Q3 in that business. Keeping that stable and leveraging those assets into the higher growth businesses with higher margins is going to continue to be our strategy. So, we will not look to continue to grow out the owner operating in different verticals.

Speaker Change: Q3 in that business.

Speaker Change: And keeping that stable and leveraging those assets into the higher growth businesses with higher margins is going to be continue to be our strategy. So we will not look to continue to.

Ryan Perfit: As we continue to scale our performance marketplaces, we expect media margin as a presenter of revenue to improve over time. On a gap basis, total operating expense in the second quarter of 2024 totaled 18.2 million, an increase of 5.4 million compared to the second quarter of 2023. But of note, GNA during the quarter was 8.9 million, which was down sequentially from the first quarter GNA of 10.4 million. GNA in the second quarter of last year was only 3.9 million due primarily to net credits totaling 5.7 million related to the FTC settlement, including insurance reimbursements for previously incurred legal fees and a lower than expected regulatory settlement.

Speaker Change: Grow at the owned and operated in different verticals.

James Goss: All right, thanks very much.

Speaker Change: Alright, thanks, very much thanks, Jim.

James Goss: Thanks, Jim.

Operator: Ladies and gentlemen, as a reminder to ask the question, please first start one on your telephone. Please stand by for our next question.

Speaker Change: Ladies and gentlemen, as a reminder to ask a question. Please first star one on your telephone.

Please standby for our next question.

Bill DeZellam: Our next question comes from the line of Bill DeZellam with Titan Capital Management.

Speaker Change: Our next question comes from the line of Bill <unk> with Titan Capital Management. Your line is open.

Bill DeZellam: Yalan is Dalton.

Bill DeZellam: Thank you. Relative to ad flow and the addition of grocery, QSR, travel, these businesses sound less cyclical to us.

Speaker Change: Thank you relative to add flow and the addition of grocery <unk> travel these businesses down less cyclical.

Speaker Change: To us so is that the correct way to look at this and that strong.

Bill DeZellam: So, is that the correct way to look at this, and that strong cyclicality that this business has had should be mitigated to some degree with some of these new partners coming on?

Speaker Change: Cyclicality that this business has had should be mitigated to some degree with some of these new.

Ryan Perfit: Excluding these credits last year, GNA decreased by approximately 8% compared to Q2 2023. Also, during the quarter, we realized goodwill and intangible asset impairment of 2.2 million related to customer relationships in the ad parlor reporting unit and internally developed software related to a business unit that was exited subsequent to the close of the quarter. Notably, our operating expenses in Q2 2024 and Q2 2023 include restructuring and other severance costs of 661,000 and zero respectively.

Donald Patrick: Yes, hi, Bill. Thanks for the question. Absolutely. We launched Ad flow. We got heavily into retail and ticketing, especially around sports and some things that were more seasonal. These, the QSR, the grocery, the travel, tend to have different cycles with themselves and will help bring more balance to the course of the year. We still will be very you know, we still will be Q for heavy, but based on us adding these verticals will be less so than we were last quarter one of our two. Talk of you. That's helpful.

Speaker Change: New partners coming on yes.

Speaker Change: Yes, Hi, Bill. Thanks for the question, absolutely, we launched AD flow, we got heavily into retail and ticketing, especially around.

Speaker Change: Sports and and.

Speaker Change: And some things that were more seasonal these the <unk> the grocery the travel tend to have different cycles of themselves and will help.

Speaker Change: Help.

Speaker Change: Will help bring more balance to the to the course of year, we still will be very we still will be Q4 heavy.

Speaker Change: But based on us, adding these verticals will be less so than we were last quarter. When we were talking to you.

Speaker Change: That's helpful. And then would you anticipate that the.

Bill DeZellam: And then would you anticipate that the absolute rate of growth in Q1 will be greater than Q4 and the rate of growth in Q2, then greater than Q1. So basically, we now have four quarters coming where the rate of growth will be accelerating. Yeah, it's a great question. The way there is still some fall off from Q4 in our core business, our own cooperative business, and in ad flow bill. So we will continue to see double digits. There might be, you know, slight dipping Q1, but we as a, we will be able to continue so sequential growth after that.

Ryan Perfit: For Q2 2024, this includes severance related to a reduction in force during the quarter to better align our cost structure. GNA in the quarter also includes accrued compensation expenses related to the Winopoli, Trunarth, and TAP acquisitions of 25,000 for the three months ended June 30th, 2024, and 562,000 for the three months ended June 30th, 2023. Q2 2023 also included the previously mentioned credit of 5.7 million of litigation and other related costs.

Speaker Change: Absolute rate of growth in Q1 will be greater than Q4, and the rate of growth in Q Q2, then greater than Q1. So basically we now have four quarters coming where the rate of growth will be accelerating.

Speaker Change: Accelerating.

Speaker Change: Yes, it's a great question way, where there is still some falloff from Q4.

Speaker Change: In our core business are owned or operated business and in AD flow Bill. So we will continue to see double digits there might be.

Speaker Change: Slight dip in Q1, but we will be able to continue so sequential growth after that.

Ryan Perfit: All of these costs fall outside of the normal course of business and are thus excluded from our adjusted EBITDA calculation. Adjusted EBITDA in the second quarter of 2024 was negative 4.5 million, largely in effect of the previously mentioned 3.1 million dollar write down of ACA policies. As stated on our first quarter call, we expect revenue and medium margin growth in the second half, driven by our new performance marketplaces, to drive adjusted EBITDA as a percentage of revenue into low single digits in Q3 and high single digits in Q4.

Bill DeZellam: Yes, I'm sorry, Don. I wasn't actually thinking about the absolute revenue number as much as I was the percentage rate of growth and whether in Q1 that rate of growth would end up being higher than the double-digit rate of growth that you guided for the Q4. Yeah, we will see a small drop in percentage, but we'll continue to double digit Q1. Okay, that's helpful.

Speaker Change: Yes, I am sorry, Don I wasn't actually thinking about the absolute revenue number as much as I was the percentage rate of growth and weather.

Donald Patrick: Recently, unauthorized switching of the agency of record AOR on insurance policies dramatically increase adversely affecting the entire ACA industry. Once the Centers for Medicare and Medicaid Services, CMS, became aware they changed their system for switching AORs largely eliminating the practice.

Speaker Change: In Q1 that rate of growth would end up being higher.

Speaker Change: And a double digit rate of growth that you guided or guidance for the Q4, yes, we will see a small drop in percentage, but we'll continue to see double digit in Q1.

Donald Patrick: However, the new system did not penalize the prior unauthorized activity, hampering our ability to recover our losses or cost effectively operate the business in the short term.

Bill DeZellam: Thank you.

Okay. That's helpful. Thank you.

Operator: Thank you, Bill. Thank you.

Bill: Thank you Bill.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, I'm sure I know further questions in the queue.

Speaker Change: Ladies and gentlemen, im showing no further questions in the queue.

Donald Patrick: I would now like to turn the call back over to Don for closing remarks. Thank you for joining our Q2 2024 earnings. We believe we've reached an inflection point on our strategic pivot, which is exciting, in this progress provides clear strategic and financial validation. Of our long term growth agenda with our early second half performance metrics. We are very focused on returning to consolidate growth in Q3 and accelerating Q4 and in the 2025 and delivering on our numbers. Thank you for your continued support. We look forward to updating you on our progress after Q3.

Speaker Change: I would now like to turn the call back over to Don for closing remarks.

Donald Patrick: This also necessitated a 3.1 million right down of accounts receivable with an equal offset to revenue, medium margin, and adjusted to divot dye and Q2.

Ryan Perfit: The company cannot provide a reconciliation to expected net income or net loss as a percentage of revenue for 2024, due to the unknown effect timing and potential significance of certain operating costs and expenses, share based compensation expense and the provision for or benefit from income taxes. Interest expense in the second quarter increased to 1 million from 795,000, due to higher average interest rates on our SLR facility and as an effective increased amortization of debt financing costs related to the SLR facility.

Maria Ripps: Thanks, Maria.

Donald Patrick: And our partners are already validating our unique market position based on their enthusiastic feedback.

Don Patrick: Thank you for joining our Q2 2024 earnings we believe we've reached an inflection point on our strategic pivot, which is exciting and this progress provides clear strategic and financial validation.

Donald Patrick: Headlining, we are now working with commerce partners beyond post-transaction to enhance consumer engagement, retention, and loyalty across our partners' commerce platforms.

Donald Patrick: In Q2, we launched our innovative loyalty solution with select partners, leveraging our deep knowledge of our owned and operated marketplaces and AdFlow's commerce media in order to provide next-generation loyalty solution with incomparable economic value proposition to advertisers and partners alike. This is a powerful and unique strategic combination, a marriage of our owned and operated leadership position coupled with insights that are proprietary from Fluent while leveraging our credibility we are earning with our AdFlow platform as a launching point into a relevant early-stage marketplace.

Donald Patrick: Based on what our partners are sharing with us and as they aggressively lean in, we believe this is another large growth opportunity that is right in our sweet spot.

Operator: Will you stand by for our next question?

Donald Patrick: Both AdFlow and our loyalty and retention solutions provide Fluent a unique brand position and a significant growth opportunity in the large and growing commerce media industry.

Donald Patrick: More importantly, it expands our strategic value proposition to world-class partners beyond customer acquisition as we expand quality consumer engagement across the entire marketing funnel.

Donald Patrick: We are excited by our progress here and will provide more detail in future earnings releases.

Operator: Our next question comes from a line of James Goss with Barrington Research.

Donald Patrick: In our call solutions business, after consistent historical growth, our Q2 revenue declined, year over year due mostly to current and future regulatory changes. By the end of Q2, we adjusted to the upcoming regulatory changes by proactively building, a compliance solution that we believe offers better quality for our partners. We believe we are now positioned well for our partner's second half call solutions demand, and future growth remains on the horizon.

Donald Patrick: In our ACA business, although it is a high sequential growth opportunity, we are closely, evaluating the ongoing changes to the centers of Medicaid and Medicare services and pausing this initiative to ensure that Fluent can continue to differentiate ourselves within a highly fragmented market.

Donald Patrick: More so given all the growth options available to us.

Donald Patrick: Despite headwinds in call solutions business during the quarter, our performance marketplaces, had a solid first half 2024, evidenced by ad flow strategic and financial market acceptance and execution, and we anticipate revenue growth in this market and accelerating momentum heading into the later half of this year.

Donald Patrick: By the end of Q2, we achieved two critically important milestones in our strategic pivot. First, we stabilized our own and operating marketplace.

Donald Patrick: Second, stability in our own and operating marketplace provides a springboard into higher, quality consumer engagement syndicated performance marketplaces, where we're building our competitive advantages and where we continue to accelerate based on the very positive results in this part of the business.

Donald Patrick: We are quite enthusiastic regarding the strategic and financial roles that our performance marketplaces, are playing in our long-term growth agenda. They already are delivering higher margins than our own and operating marketplaces.

Don Patrick: Of our long term growth agenda with our early second half performance metrics. We are very focused on returning to consolidated growth in Q3, and accelerating in Q4 and into 2025 and delivering on our numbers. Thank you for your continued support.

Donald Patrick: Moving forward, we are confident that we will continue to accelerate revenue growth from, our performance marketplaces.

Donald Patrick: We believe the corresponding impact should have Fluent achieving year-over-year consolidated, single-digit growth in Q3 and double-digit growth in Q4.

Donald Patrick: Importantly, and in parallel, as we enhance our market position, we are confident that, we'll be growing our total gross profit more rapidly than our revenue over time.

James Goss: Your line is open.

Donald Patrick: And with the strategic and financial year-end momentum, we believe Fluent is well on course, to deliver consolidated double-digit revenue and gross profit growth in fiscal year 2025.

James Goss: Okay, first, and maybe this follows up a little on the liquidity issue.

Ryan Perfit: And with that, I'll turn to Ryan Perfit to provide more detail on our financial results.

James Goss: You've had a couple of quarters now where there have been a couple of, I think they were mostly financially related issues, although perhaps this one was more with ACA, that have delayed your reporting, and I was wondering if there are any other, specific issues you're aware of that we should be aware of to be or be concerned of going into the next couple of quarters?

Ryan Perfit: Thank you, Don, and thanks to everyone for joining us today.

Donald Patrick: Hi, Jim.

Ryan Perfit: I'll now provide some additional color on our Q2 earnings. We generated revenue of $58.7 million in the second quarter of 2024, down 28.5% from prior, year and down 11.1% sequentially from Q1.

Donald Patrick: Thanks for the question.

Ryan Perfit: While we had success driving key long-term strategic initiatives during the quarter, macro headwinds and competitive challenges related to the FTC order continued to impact our performance of our owned and operated markets.

Donald Patrick: We do not have anything that we're aware of around our ability to execute on our plan and to grow.

Ryan Perfit: Margins, and Aca Marketplaces, contributing to decreased margin performance overall. Moreover, we chose to exit a non-strategic business during the quarter, and our call, solutions business was faced with regulatory changes in Medicare and Aca Marketplaces, and we took an accounts receivable write-down of Aca policies in the quarter, totaling approximately $3.1 million, with an equal offset to Q2 revenue, which equally affected media margin, and adjusted EBITDA.

Donald Patrick: As I said, we have a very favorable facility with our debt partner that allows us to continue to access cash as we grow and against receivables.

Ryan Perfit: Absent this write-down, our overall financial performance for the quarter was largely consistent, with the roadmap we had laid out last quarter. We're optimistic about the growth of our syndicated marketplaces, and coupled with our continued, expense discipline, we anticipate revenue growth and improved adjusted EBITDA performance in the back half of 2024, compared with the comparable quarters of 2023. Media margin in the second quarter was $15.7 million, which represented 26.7% of revenue, compared with $25.9 million, or 31.5% of revenue last year. As we continue to scale our performance marketplaces, we expect media margin as a percentage of, revenue to improve over time.

Donald Patrick: And I think that was put in place, as you know, back in April and is going to serve us well in the back half of 24 and into 2024.

Ryan Perfit: On a gap basis, total operating expense in the second quarter of 2024 totaled $18.2 million, an increase of $5.4 million, compared to the second quarter of 2023.

James Goss: Okay, another question, you mentioned, The syndicated access performance marketplaces were the tip of the spear and the AdFlow platform was your way to enable access.

Ryan Perfit: But of note, G&A during the quarter was $8.9 million, which was down sequentially from, the first quarter G&A of $10.4 million. G&A in the second quarter of last year was only $3.9 million, due primarily to net credits, totaling $5.7 million, related to the FTC settlement, including insurance reimbursements for previously incurred legal fees, and a lower than expected regulatory settlement.

James Goss: I wonder if you could talk a little more about exactly how that works.

Ryan Perfit: Excluding these credits last year, G&A decreased by approximately 8%, compared to Q2 2023. Also during the quarter, we realized goodwill and intangible asset impairment of $2.2 million, related to customer relationships in the Ad Parlor Reporting Unit, and internally developed software related to a business unit that was exited subsequent to the close of the quarter.

James Goss: And also, if you could talk about the mix of the syndicated, Platforms versus your own and operated place, Good.

Ryan Perfit: Notably, our operating expenses in Q2 of 2024 and Q2 of 2023 include restructuring and other, severance costs of $661,000 and zero, respectively. For Q2 2024, this includes severance related to a reduction in force during the quarter, to better align our cost structure.

Donald Patrick: So I'll touch specifically on AdSlow about the syndicated marketplaces are basically post event monetization in a commerce media spot.

Ryan Perfit: G&A in the quarter also includes accrued compensation expenses related to the Winopoly, TrueNorth, and TAP acquisitions of $25,000 for the three months ended June 30, 2024, and $562,000 for the three months ended June 30, 2023.

Donald Patrick: But AdSlow is a module, our own proprietary platform that sits in between a post transaction environment.

Ryan Perfit: Q2 2023 also included the previously mentioned credit of $5.7 million of litigation and other, related costs. All of these costs fall outside of the normal course of business, and are thus excluded from our adjusted EBITDA calculation.

Donald Patrick: So if you're purchasing something on a ticketing site, before you get the confirmation page, there's an additional ad that is served up based on who you are, what your purchase behavior is, what your interests are, which again, are things that we access both with our partners approved data, but more importantly, the fluent data and the first party data that we built, over the years.

Look forward to being you on our progress after Q3.

Ryan Perfit: Adjusted EBITDA in the second quarter of 2024 was negative $4.5 million, largely in effect of the previously mentioned $3.1 million write-down of ACA policies.

Donald Patrick: And then we'll serve you a relevant ad that's most in the purchase moment and allows us to monetize you and improve the consumer engagement.

Ryan Perfit: As stated on our first quarter call, we expect revenue and median margin growth in the second, driven by our new performance marketplaces to drive adjusted EBITDA as a percentage of revenue into low single digits in Q3 and high single digits in Q4.

Donald Patrick: So that money is a revenue share between us and the Commerce Partners.

Operator: Ladies and gentlemen, to ask a question, please press star 11 on your telephone and then wait, to hear your name announced.

Ryan Perfit: The company cannot provide a reconciliation to expected net income or net loss as a percentage, of revenue for 2024 due to the unknown effect, timing, and potential significance of certain operating costs and expenses, share-based compensation expense, and the provision for or benefit from income taxes.

Donald Patrick: It's a very strategic business for us, both from the standpoint of increasing monetization for our commerce media, but equally important, it also allows us to continue to help with consumer engagement with them.

Operator: To withdraw your question, please press star 11 again.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Good bye.

Ryan Perfit: Interest expense in the second quarter increased to $1 million from $795,000 due to higher average interest rates on our SLR facility and as an effect of increased amortization of debt financing costs related to the SLR facility.

Operator: Ladies and gentlemen, as a reminder to ask the question, please press star 11 on your telephone.

Donald Patrick: We've shown very significant growth and acceleration in that business, Jim, in Q2.

Operator: Please stand by while we compile the Q&A roster.

Ryan Perfit: For the quarter, our income tax benefit was $775,000, an effective tax rate of 6.5 percent, which differed from the statutory federal income tax rate of 21 percent, primarily due to state and local tax expense and losses for which no tax benefit is recognized. This is compared to an income tax expense of $1.7 million and an effective tax rate of 29.2 percent in the second quarter of 2023.

Operator: Please stand by for our next question.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Donald Patrick: We don't break that out from a segment perspective, but we talked about the new verticals we got into, grocery, quick-serve restaurants.

Maria Ripps: Our first question comes from the line of Maria Ripps with Canaccord.

Ryan Perfit: For the quarter, our income tax benefit was 775,000, an effective tax rate of 6.5%, which differed from the statutory federal income tax rate of 21%, primarily due to state and local tax expense and losses for which no tax benefit is recognized. This is compared to an income tax expense of 1.7 million and an effective tax rate of 29.2% in the second quarter of 2023. We reported a net loss of 11.6 million and an adjusted net loss, a non-gap measure of 7.3 million equivalent to a loss of 47 cents per share.

Ryan Perfit: We reported a net loss of $11.6 million and an adjusted net loss, a non-GAAP measure, of $7.3 million, equivalent to a loss of $0.47 per share. Shifting now to our balance sheet, we ended the quarter with $6.4 million in cash and cash equivalents, including restricted cash. Total debt, as reflected on the balance sheet as of June 30, 2024, was $33.3 million, an increase of approximately $2.8 million from $30.5 million at December 31, 2023.

Bill Dezellem: Our next question comes from the line of Bill Dezellem with Titan Capital Management.

Donald Patrick: We were in ticketing, but we're also now in travel.

Maria Ripps: Your line is open.

Ryan Perfit: As of June 30, 2024, we had an outstanding principal balance of $32.3 million on our, credit facility with SLR Credit Solutions. This facility provides us with a $20 million term loan and a revolving credit facility of up to $30 million that matures on April 2, 2029.

Bill Dezellem: Your line is open.

Donald Patrick: And that growth, what is unique about it compared to the core owned and operated marketplace business is that it's very predictable. It might take a while for it to come on from a technical standpoint and an ability to onboard it, but once it's on, we're getting predictable sessions, predictable revenue.

Maria Ripps: Great.

Ryan Perfit: In Q2, we invested $1.7 million into capitalized product development and technology, largely to support the growth of our performance marketplaces. This compares to $1.2 million invested in Q2, 2023.

Bill Dezellem: Thank you.

Donald Patrick: We have a lot more ability to forecast what we see in Q3 and Q4, and a significant number of partners are coming on, have come on since June. They're going to come on through September, October. That puts us in a position to be able to say that we're going to return to single digits in Q3 and show double digit total consolidated growth in Q4 and into 2025.

Maria Ripps: Good afternoon.

Operator: You may now disconnect.

Ryan Perfit: Now, halfway through the third quarter of 2024, we believe that the company is well-positioned, for year-over-year and quarter-over-quarter revenue growth, as well as a return to positive adjusted EBITDA in the back half of the year.

Bill Dezellem: Relative to Adflow and the addition of grocery, QSR, travel, these businesses sound less cyclical to us.

James Goss: Okay, one last thing.

Maria Ripps: And thanks for taking my questions.

Ryan Perfit: We remain focused on both the fortification of our legacy owned and operated products and the growth of our new syndicated performance market.

Bill Dezellem: So is that the correct way to look at this?

James Goss: I believe media and entertainment was, say, a primary vertical in the owned and operated area, if I'm not mistaken.

Maria Ripps: First, can you maybe talk a little bit more about the unauthorized activity for the ACA, policies this quarter that impacted you?

Ryan Perfit: Marketplaces, which we expect will drive strength and margin profile as they scale.

Bill Dezellem: And that strong cyclicality that this business has had should be mitigated to some degree with some of these new partners coming on? Yes.

James Goss: And is that being minimized at all, or is that being supplemented by the ad flow incursion into retail and ticketing verticals and travel, some of the other things you mentioned?

Maria Ripps: Was it something that sort of impacted the industry more broadly or sort of your platform, also?

Operator: Goodbye.

Ryan Perfit: We would like to thank everyone for their continued support and look forward to driving, enhanced results through the balance of 2024.

Donald Patrick: Hi Bill.

James Goss: It's being supplemented, Jim.

Maria Ripps: And I guess, what are some measures or initiatives that you may have added to prevent or maybe, limit this going forward?

Operator: We'll be happy to take questions at this time.

Donald Patrick: Thanks for the question.

Donald Patrick: You know, it's always been a strong vertical for us, and it remains a very strong vertical in the owned and operated.

Maria Ripps: Hi, Maria.

Operator: Goodbye.

Operator: Thank you.

Donald Patrick: Absolutely.

Donald Patrick: Obviously, we're looking to grow that media and entertainment and grow it consistently, but we're also bringing on other verticals with the new solutions that we have and our ability to drive more solutions for our partners.

Maria Ripps: Thanks for the question.

Speaker Change: Goodbye.

Donald Patrick: We launched Adflow.

James Goss: So would you try to find owned and operated platforms?

Maria Ripps: I'll give a little bit of detail.

Donald Patrick: We got heavily into retail and ticketing, especially around sports and some things that were more seasonal.

James Goss: to serve the new verticals you're serving through the syndicated access right now.

Maria Ripps: But the short answer to you is it affected the entire industry, affected everyone who's, involved with ACA. So it wasn't specific to Fluent, it was industry-wide.

Donald Patrick: The QSR, the grocery, the travel tend to have different cycles of themselves and will help bring more balance to the course of the year.

Donald Patrick: No, I mean, the way we've described in the past, Jim, is the owned and operated marketplaces are a real competitive advantage to us.

Maria Ripps: But if you remember in Q4 of 23, our call solutions business started the ACA agency, where Fluent license agent sells ACA policies on the behalf of top health insurance companies.

Donald Patrick: We still will be Q4 heavy, but based on us adding these verticals will be less so than we were last quarter when we were talking.

Donald Patrick: As you know, it's the one that has had the most challenges over the last couple years as we've shifted to quality and really enhancing the quality of those sites along with the settlement of the FTC.

Maria Ripps: We were already in that business of providing quality ACA consumer prospects to partners. And we built the ACA agency as a natural performance market extension into that business with the, ability to bring the consumer further down the funnel. So the economics of that business is when we sell an ACA policy to a qualified consumer, we become the agency of record.

Bill Dezellem: That's helpful.

Donald Patrick: But there are advantages around our ability to buy media, knowing consumer engagement and being able to interact with consumers and lifetime value.

Maria Ripps: And all relevant policy information, including agency of record, is maintained in a government, database that is run and controlled by the Centers for Medicare and Medicaid Services, CMS.

Bill Dezellem: And then would you anticipate that the, Absolute rate of growth in Q1 will be greater than Q4, and the rate of growth in Q2 then greater than Q1. So basically we now have four quarters coming where the rate of growth will be accelerating.

Donald Patrick: And that performance marketing pedigree really allows us to launch into things like ad flow and syndicated marketplaces with that expertise and our proprietary first party data to really provide a competitive advantage against the competition in that market.

Maria Ripps: So each ACA policy is in the name of consumer, the designated healthcare.

Operator: Thanks for watching!

Donald Patrick: Yeah, it's a great question.

Donald Patrick: So we look to keep that business stable.

Maria Ripps: And as AOR, Fluent gets paid a monthly commission for each policy we are AOR for for as long, as that consumer has that policy. And the typical timeframe for that policy and the commissions is averaging somewhere, between 17 and 24 months where we'd be getting those commissions.

Speaker Change: Okay.

Donald Patrick: There is still some fall off from Q4 in our core business or owner operated business and in ad flow bill.

Donald Patrick: We look to continue to keep it healthy. And the big news lost in the financial numbers here clearly is that we believe we've achieved stability in the later part of Q2 and continued in Q3 in that business.

Maria Ripps: But during Q2 of 2024, it became apparent that there was a lack in controls in the CMS's, ACA database, which allowed other licensed agents to access the database and the ability to illegally change the AOR without any consumer approval. So Fluent could sell the ACA policy to a consumer. An unauthorized agent would come into the government database, change the AOR from Fluent, to them. And with the illegal AOR switches, the healthcare insurance companies would then pay the illegal, AOR on the ongoing commissions instead of Fluent getting it. A class action suit was filed in Q2 with a long list of companies around the illegal, and unauthorized switching.

Bill Dezellem: So we will continue to see double digits, there might be, you know, slight dip in Q1, but we will be able to continue to show sequential growth.

Donald Patrick: And keeping that stable and leveraging those assets into the higher growth businesses with higher margins is going to continue to be our strategy.

Maria Ripps: Fluent was not in any manner involved in this, nor did we work any of those parties.

[music].

Bill Dezellem: Yes, I'm sorry Don, I wasn't actually thinking about the absolute revenue number as much as I was the percentage rate of growth and whether in Q1 that rate of growth would end up being higher than the double digit rate of growth that you guided for the Q4.

Donald Patrick: So we will not look to continue to grow out the owned and operated in different versions.

Maria Ripps: But it really highlights the extent and dramatic increase of this unauthorized and illegal, activity that happened and accelerated in 2024.

Donald Patrick: Yeah, we will see a small drop in percentage, but we'll continue to see double digit in Q1.

James Goss: Alright, thanks very much.

Maria Ripps: Once CMS became aware of this unauthorized behavior in July, they changed the system, and their process for AOR switching, and they largely eliminated the practice. So the practice, to answer your direct question, Maria, the government fixed it. The CMS fixed it by putting in strict rules.

Donald Patrick: Okay, that's helpful.

James Goss: Thanks, Jim.

Maria Ripps: The challenge was that they basically did not penalize any prior unauthorized activity.

Bill Dezellem: Thank you.

Maria Ripps: So they locked down all the illegal unauthorized changes and hampered Fluent's ability to, recover our losses for those policies that were illegally switched. And that was what necessitated the $3.1 million write-down and receivables, the things that, were illegally changed.

Bill Dezellem: Thank you Bill.

Maria Ripps: So the process is now in place for the government.

Speaker Change: Okay.

Bill Dezellem: Thank you.

Maria Ripps: In the monitoring that we have after July 19th, when they put the new regs in place, the switching is all authorized, and the illegal activity has dramatically gone down.

Operator: Ladies and gentlemen, I'm showing no further questions in the queue.

Maria Ripps: However, as we outlined in the earnings script, we are pausing the scenario of making sure, that we have the right internal processes, processes externally with the various vendors and the government to make sure that this is a business that we can not only differentiate ourselves with, but also make sure that we don't have this issue again.

Speaker Change: Yeah.

Donald Patrick: I would now like to turn the call back over to Don for closing remarks.

Maria Ripps: It's probably more detailed than you want it, Maria, but hopefully that answers your question.

Donald Patrick: Thank you for joining our Q2 2024 earnings.

Speaker Change: Yes.

Maria Ripps: No, that's that's great.

Donald Patrick: We believe we've reached an inflection point on our strategic pivot, which is exciting.

Maria Ripps: Thank you so much for the call.

Donald Patrick: And this progress provides clear strategic and financial validation of our long term growth agenda with our early second half performance.

Donald Patrick: We are very focused on returning to consolidated growth in Q3 and accelerating Q4 and into 2025 in delivering on our numbers.

Maria Ripps: Yep, yep.

Donald Patrick: Thank you for your continued support.

Maria Ripps: From liquidity, we have a very favorable credit facility with SLR. As you know, it's a receivables-based facility and it continues to, as we grow, continues to provide the liquidity we need to move forward.

Donald Patrick: We look forward to updating you on our progress after Q3.

Maria Ripps: We have recently put a small amount of money in, roughly $2 million, to continue to provide enough liquidity for the company. But we feel with the SLR facility and the acceleration of the revenue that we talked about in our performance marketplaces, that we have enough liquidity to not only execute on our business plan, but over-deliver.

Operator: Ladies and gentlemen this concludes today's conference call.

Maria Ripps: Got it.

Operator: Thank you for your participation.

Maria Ripps: That's very helpful.

Operator: You may now disconnect.

Maria Ripps: Thank you so much.

Maria Ripps: Thanks, Maria.

Operator: Please stand by for our next question.

James Goss: Our next question comes from Elan of James Goss with Barrington Research.

James Goss: Elan, it's open.

James Goss: Okay.

James Goss: First, and maybe this follows up a little on the liquidity issue, you've had a couple of quarters now where there have been a couple of, I think they were mostly financially related issues, although perhaps this one was more of a KCA, that have delayed your reporting.

Ryan Perfit: Shifting now to our balance sheet, we ended the quarter with 6.4 million in cash and cash equivalence, including restricted cash. Total debt, as reflected on the balance sheet as of June 30, 2024, was 33.3 million, an increase of approximately 2.8 million from 30.5 million at December 31, 2023. As of June 30, 2024, we had an outstanding principal balance of 32.3 million on our credit facility with SLR credit solutions. This facility provides us with a $20 million term loan and a revolving credit facility of up to 30 million that matures on April 2, 2020. In Q2, we invested 1.7 million in the capitalized product development and technology, largely to support the growth of our performance marketplaces. This compares to 1.2 million invested in Q2 2023.

James Goss: And I was wondering if there are any other specific issues you're aware of that we should be aware of to be or be concerned of going into the next couple of quarters?

James Goss: Hi, Jim.

James Goss: Thanks for the question.

James Goss: We do not have anything that we're aware of around our ability to execute on our plan and to grow. As I said, we have a very favorable facility with our debt partner that allows us to continue to access cash as we grow against receivables.

James Goss: And I think that was put in place, as you know, back in April and is going to serve us well in the back half of 2024 and into 2025.

James Goss: Okay.

James Goss: Another question, you mentioned the syndicated access performance marketplaces were the tip of the spear and that AdFlow platform was your way to enable access.

James Goss: I wonder if you could talk a little more about exactly how that works and also if you could talk about the mix of the syndicated platforms versus your own and operated places.

James Goss: Right.

James Goss: Good.

James Goss: So I'll touch specifically on AdFlow about the syndicated marketplaces are basically post event monetization in a commerce media spot.

James Goss: But AdFlow is a module, our own proprietary platform that sits in between a post transaction environment.

James Goss: So if you're purchasing something on a ticketing site before you get the confirmation page, there is a there's an additional ad that is served up based on who you are, what your purchase behavior is, you know, what your interests are, which, again, are things that we access both with our partners approved data.

James Goss: But more importantly, the fluent data in the in the first party data we built over the years and then we'll serve you a relevant ad that's most in the purchase moment allows us to monetize you and improve the consumer engagement.

James Goss: So that money is a revenue share between us and the commerce partner.

James Goss: It's a very strategic business for us, both from the standpoint of increasing monetization for our commerce media, but equally important, it also allows us to continue to help with consumer engagement with them.

James Goss: We've we've shown very significant growth and acceleration in that business, Jim, in Q2.

James Goss: We don't break that out from a segment perspective, but we talked about the new verticals we got into grocery, quick serve restaurants.

James Goss: We were in ticketing, but we also now in travel and that growth.

James Goss: What is unique about it compared to the core owned and operated marketplace business is that we it's very predictable.

James Goss: It might take a while for it to come on from a technical standpoint and ability to onboard it.

James Goss: But once it's on, we're getting predictable sessions, a particular revenue.

James Goss: We have a lot more ability to forecast what we see in Q3 and Q4 in a significant number of partners are coming on, have come on since June. They're going to come on through September, October.

James Goss: They put this in a position to be able to say that we're going to return to single digits in Q3 and show double digit total consolidated growth in Q4 and into Q into 2025.

James Goss: Okay, one last thing.

James Goss: I believe media and entertainment was, say, a primary vertical, in the owned and operated area, if I'm not mistaken.

James Goss: And is that being minimized at all, or is that being supplemented by the ad flow incursion into retail and ticketing verticals and travel, some of the other things you mentioned?

James Goss: It's being supplemented, Jim.

James Goss: You know, it's always been a strong vertical for us, and it remains a very strong vertical in the owned and operated.

James Goss: Obviously, we're looking to grow that media and entertainment and grow it consistently, but we're also bringing on other verticals with the new solutions that we have and our ability to drive more solutions for our partners.

James Goss: So, would you try to find owned and operated platforms to serve the new verticals you're serving through the syndicated access right now?

James Goss: No.

James Goss: I mean, the way we've described in the past, Jim, is the owned and operated marketplaces are, a real competitive advantage to us.

James Goss: As you know, it's the one that has had the most challenges over the last couple of years as we've shifted to quality and really enhancing the quality of those sites along with the settlement of the FTC, but there are advantages around our ability to buy media, knowing consumer engagement and being able to interact with consumers and lifetime value, and that performance marketing pedigree really allows us to launch into things like ad flow and syndicated marketplaces with that expertise and our proprietary first-party data to really provide a competitive advantage against the competition in that market.

James Goss: So, we look to keep that business stable. We look to continue to keep it healthy, and the big news lost in the financial numbers here clearly is that we believe we've achieved stability in the later part of Q2 and continued in Q3 in that business, and keeping that stable and leveraging those assets into the higher growth businesses with higher margins is going to continue to be our strategy.

James Goss: So, we will not look to continue to grow at the own and operating in different verticals.

James Goss: All right.

James Goss: Thanks very much.

James Goss: Thanks, Jim.

Operator: Ladies and gentlemen, as a reminder to ask the question, please press star 11 on your telephone.

Operator: Please stand by for our next question.

William DeZellum: Our next question comes from the line of Bill DeZellum with Titan Capital Management.

William DeZellum: Your line is open.

William DeZellum: Thank you.

William DeZellum: Relative to ad flow and the addition of grocery, QSR, travel, these businesses sound less cyclical to us.

William DeZellum: So, is that the correct way to look at this and that strong cyclicality that this business has had should be mitigated to some degree with some of these new partners coming on?

William DeZellum: Yes.

William DeZellum: Hi, Bill.

Donald Patrick: However, somewhat masked in our financials is that we are on plan in growing our performance marketplaces. That momentum combined with the stabilization of our own and operated marketplaces is a reflection of our evolving market mix.

William DeZellum: Thanks for the question.

William DeZellum: Absolutely.

William DeZellum: We launched ad flow.

William DeZellum: We got heavily into retail and ticketing, especially around, sports and some things that were more seasonal.

William DeZellum: The QSR, the grocery, the travel tend to have different cycles of themselves and will help bring more balance to the course of the year.

William DeZellum: Still, we will be Q4 heavy.

William DeZellum: But based on us adding these verticals, it will be less so than we were last quarter when we were That's helpful.

William DeZellum: And then, would you anticipate that the absolute rate of growth in Q1 will, be greater than Q4, and the rate of growth in Q2 then greater than Q1? So basically we now have four quarters coming where the rate of growth will be accelerating?

William DeZellum: Yeah, it's a great question.

William DeZellum: There is still some fall off from Q4 in our core business, or owner-operated business and in ad flow, Bill.

William DeZellum: So we will continue to see double digits.

William DeZellum: There might be a slight dip in Q1, but we will be able to continue to show sequential, growth after that.

William DeZellum: Yes.

William DeZellum: I'm sorry, Don.

William DeZellum: I wasn't actually thinking about the absolute revenue number as much, as I was, the percentage rate of growth, and whether in Q1 that rate of growth would end up being higher than the double-digit rate of growth that you guided for the Q4.

Donald Patrick: We remain confident in our ability to accelerate revenue and profit growth in the second half of 2024 when compared to last year's numbers.

Ryan Perfit: Now, halfway through the third quarter of 2024, we believe that the company is well positioned for year-over-year and quarter-over-quarter revenue growth, as well as a return to positive adjusted EBITDA in the back half of the year. We remain focused on both the fortification of our legacy owned and operated products and the growth of our new syndicated performance marketplaces. Public Places, which we expect will drive strength and margin profile as they scale. We would like to thank everyone for their continued support and look forward to driving enhanced results through the balance of 2024.

William DeZellum: Yeah, we will see a small drop in percentage, but we'll continue to see double-digit in, Q1.

William DeZellum: Okay, that's helpful.

William DeZellum: Thank you.

William DeZellum: Thank you, Bill.

William DeZellum: Thank you.

Operator: Ladies and gentlemen, I'm showing no further questions in the queue.

Donald Patrick: I will

Donald Patrick: now like to turn the call back over to Don for closing remarks.

Donald Patrick: Thank you for joining our Q2 2024 earnings. We believe we've reached an inflection point, on our strategic pivot, which is exciting, and this progress provides clear strategic and financial validation of our long-term growth agenda with our early second-half performance metrics.

Donald Patrick: We are very focused on returning to consolidated growth in Q3 and accelerating in Q4 and into 2025 in delivering on our numbers.

Donald Patrick: Thank you for your continued support.

Donald Patrick: We look forward to updating you on our progress after Q3.

Operator: Ladies and gentlemen, this concludes today's conference call.

Operator: Thank you for your participation.

Donald Patrick: I'd like to now take the time to provide some deeper insight into our growth agenda.

Donald Patrick: So you can get a clear picture on why we're so excited by the difference in market position we are creating.

Donald Patrick: Our syndicated performance marketplaces represent the tip of the spear in our strategic growth agenda.

Donald Patrick: As we accelerate the fluid brand into very large high growth dynamic markets where we can unleash our core owned and operated grounded capabilities providing us with the unique competitive energy in the marketplace.

Operator: We'll be happy to take questions at this time.

Operator: Thank you. Ladies and gentlemen, to ask the question, please first start 1-1 on your telephone, and then wait to hear your name announce. To withdraw your question, please start 1-1 again.

Donald Patrick: So you can see why we're so enthusiastic about our performance marketplace growth strategy as we lean into this opportunity and drive enhanced operating efficiencies across the fluid enterprise.

Donald Patrick: In Q3, our focus is on expanding our market share through continued growth in our syndicated performance marketplaces while position the fluid enterprise to return consolidated year-over-year growth that we believe will accelerate sequentially through the back half of it, of the year. Now, some additional insight regarding our ad flow business, the anchors are syndicated performance marketplace platform, where proof of concept result leads us with even more strategic optimism. Ad flow is our media solution. We launched in the large and rapidly growing commerce media market.

Donald Patrick: Market is currently valued at over $50 billion, expected to reach $150 billion by 2030.

Operator: Please stand by while we compile the Q&A roster.

Donald Patrick: Presently, 43% of US brands have commerce media budgets, and that's expected to increase to 75% by 2025.

Maria Ripps: Our first question comes from the line of Maria Ripps with Canacore. The line is open. Great.

Donald Patrick: Good afternoon and thanks for taking my questions. Can you give a talk a little bit more about the on authorized activity for the ACA policies that impacted you? Was it something that impacted the industry more broadly, or your platform or so? I guess one of some measures or initiatives that you may have added to prevent or may believe that is going forward. I'm Maria. Thanks for the question. I'll give a little bit of detail, but the short answer to you is it affected the entire industry, it affected everyone who's involved with ACA.

Donald Patrick: Furthermore, since May, we've added new brand partners that will increase growth trendline marketly, as we've expanding into very attractive, grocery, quick serve restaurant, and travel verticals.

Donald Patrick: We are excited by these results, along with the increasing momentum, the ad flow platform represents a new growth opportunity for world-class brands to reach consumers seeking high-quality engagements at the optimal purchase moment.

Donald Patrick: And our partners are already validating our unique market position based on their enthusiastic feedback.

Donald Patrick: Headlining, we are now working with commerce partners beyond post-transactions to enhance consumer engagement, retention, and loyalty across our partners commerce platforms.

Donald Patrick: A marriage of our own and operated leadership position coupled with insights that are proprietary and fluent while leveraging our credibility we are earning with our ad flow platform as a launching point into a relevant really stage marketplace.

Donald Patrick: So it wasn't specific to fluent as industry wide. But if you remember in Q4 or 23, our car solutions business started the ACA agency where you know fluent license, agency sells ACA policies and the behalf of top health insurance companies. We were already in that business of providing quality ACA consumer prospects to partners, and we built the ACA agency as a natural performance market extension into that business with the ability to bring the consumer further down the funnel.

Donald Patrick: Based on what our partners are sharing with us and as they aggressively lean in, we believe this is another large growth opportunity that is right in our sweet spot.

Donald Patrick: Both ad flow and our loyalty retention solutions provide fluent a unique brand position and a significant growth opportunity in the large and growing commerce media industry.

Donald Patrick: So the economics of that business is when we sell an ACA policy to a qualified consumer, we become the agency of record and all relevant policy information, including agency record is maintained in a government database that is run and controlled by the Centers for Medicare and Medicaid Services CMS. So each AACA policy is in the name of consumer, the designated healthcare, and as AOR, fluent gets paid a monthly commission for each policy we are AOR for, for as long as that consumer has that policy.

Donald Patrick: We are excited by our progress here and we'll provide more detail in future earning.

Donald Patrick: In the typical timeframe for that policy and the commissions is averaging somewhere between 17 and 24 months where we'd be getting those commissions. But during Q2, 20 and only four became apparent that there was a lack in controls in the CMS's ACA database, which allowed other license agents to access the database and the ability to illegally change the AOR without any consumer approval. So fluid could sell the ACA policy to a consumer and on author of the agent would come into the government database, change the AOR from fluent to them, and with the illegal AOR switches, the healthcare insurance companies would then pay the illegal AOR on the ongoing commissions instead of fluent, getting it.

Donald Patrick: Services.

Donald Patrick: In our call solution business, after consistent historical growth, our Q2 revenue declined year-over-year due mostly to current and future regulatory changes. By the end of Q2, we adjusted to the upcoming regulatory changes by proactively building the compliance solution that we believe offers better quality for our partners.

Donald Patrick: We believe we are now positioned well for our partners' second half call solutions demand and future growth remains on the horizon.

Donald Patrick: A class action suit was filed in Q2 with a long list of companies around the illegal and unauthorized switching. Fluent was not in any manner involved in this nor did we work any of those parties, but it really highlights the extent and dramatic increase of this unauthorized and illegal activity that happened in accelerating in 2024. One CMS became aware of this unauthorized behavior in July. They changed the system and their process for AOR switching.

Donald Patrick: They largely eliminated the practice. So the practice, the answer to question Brea, the government fixed it, the CMS fixed it by putting in strict rules. The challenge was that they basically did not penalize any prior unauthorized activity. So they locked down all the illegal unauthorized changes and hampered fluid responsibility to recover our losses for those policies that were illegally switched. And that was what necessitated the $3.1 million write down or receivables or the things that were illegally changed.

Donald Patrick: So the process is now in place for the government. In the monitoring that we have after July 19th, when they put the new regs in place, the switching is all authorized and illegal activity has dramatically gone down. However, as we outlined in the earnings script, we are pausing the scenario of making sure that we have the right internal processes, processes with externally with the various vendors and the government to make sure that this is a business that we can not only differentiate ourselves with but also make sure that we don't have this issue, again. It's probably more detailed than you want, Maria. Hopefully I answered your question. No, that's great.

Donald Patrick: In our ACA business, although it is a high sequential growth opportunity, we are closely evaluating the ongoing changes to the centers of Medicaid and Medicare services and pausing this initiative to ensure that Fluent can continue to differentiate ourselves within a highly fragmented market, more so given all the growth options available to us.

Maria Ripps: Thank you so much for the call.

Ryan Perfit: And then maybe secondly, could you maybe talk about sort of any potential liquidity needs and maybe just sort of how should investors think about some of the options that are available to you on that phone? Yep. From liquidity. We have a very favorable credit facility with SLR. As you know, it's a receivables-based facility and it continues to, as we grow, continues to provide the liquidity we need to move forward. We have put some, recently put a small amount of money in roughly $2 million to continue to provide enough liquidity for the company.

Operator: Please stand by for our next question.

James Goss: Our next question comes from Milan of James Goss with Burnton Research. Yalan is open. Okay.

Donald Patrick: By the end of Q2, we achieved two critically important milestones in our strategic pivot. First, we stabilized our own and operated marketplace.

Ryan Perfit: First, and maybe this falls up a little on the liquidity issue, you've had a couple of quarters now where there have been a couple of, I think there were mostly financially related issues, although perhaps this one was one of the KCA that have delayed your reporting. And I was wondering if there are any other specific issues you're aware of that we should be aware of, to be or be concerned of going into the next couple of quarters.

Ryan Perfit: Yeah, hi, Jim. Thanks for the question. We do not have anything that we're aware of around our ability to execute on our plan and to grow. As I said, we have a very favorable facility with our debt partner that allows us to continue to access cash as we grow and against receivables. And I think that that was put in place, as you know, back in April, and he's going to service well in the back half of 24 and into 2025.

Donald Patrick: Second, stability in our own and operated marketplace provides the springboard into higher quality consumer engagement syndicated performance marketplaces, where we are building our competitive advantages and where we continue to accelerate based on the very positive results in this part of the business.

Ryan Perfit: Okay. Another question you mentioned the syndicated access performing marketplaces were the tip of the spear and that adflow platform was of your way to enable access. I wonder if you could talk a little more about exactly how that works. And also if you could talk about the mix of the syndicated platforms versus here on an upgraded places. Right. Good. So I'll touch specifically on adflow about the syndicated marketplaces are basically post event monetization in a in a commerce media spot.

Donald Patrick: We are quite enthusiastic regarding the strategic and financial roles that our performance marketplaces are playing in our long-term growth agenda. They already are delivering higher margins in our own and operated marketplaces. Moving forward, we are confident that we will continue to accelerate revenue growth from our performance marketplaces.

Ryan Perfit: But adflow is a module our own proprietary platform that sits in between a post transaction environment. So if you're purchasing something on a ticketing site before you get the confirmation page, there is a there's an additional ad that is served up based on who you are, what your purchase behavior is, you know, what your interests are, which again are things that we access both with our partners approved data, but more importantly, the fluent data in the in the first party data that we built over the years.

Ryan Perfit: And then we'll serve you a relevant ad that's most in the purchase moment allows us to monetize you and improve the consumer engagement. So that money is a revenue share between us and the commerce partner. It's a very strategic business for us both from the standpoint of increasing monetization for a commerce media, but equally important. It also allows us to continue to help with consumer engagement with them. We've we've shown a very significant growth and acceleration in that business, Jim in Q2.

Ryan Perfit: We don't break that out from a segment perspective, but we talked about the new verticals. We got into grocery quick serve restaurants. Now we were in ticketing, but we also now in travel. And that growth, what is unique about it compared to the core owned and operated marketplace business is that we it's very predictable. It might take a while for it to come on from a technical standpoint and a ability to onboard it.

Ryan Perfit: But once it's on, we're getting predictable sessions, a predictor revenue. We have a lot more ability to forecast what we see in Q3 and Q4 and a significant number of partners are coming on. Have come on since June. They're going to come on through September, October that puts us in a position to be able to say that we're going to return to single digits in Q3 and show double digit total consolidated growth in Q4 and in the queue into 2025.

Donald Patrick: We believe the corresponding impact should have fluent achieving year-over-year consolidated single-digit growth in Q3 and double-digit growth in Q4.

Donald Patrick: Importantly and in parallel, as we enhance our market position, we are confident that we will be being growing our total growth profit more rapidly than our revenue over time.

Ryan Perfit: Docs. One last thing, I believe media and entertainment was, say, a primary vertical in the undenapprated area, if I'm not mistaken. Is that being minimized at all, or is that being supplemented by the ad flow incursion into retail and ticketing verticals and travel some of the other things you mentioned? It's being supplemented, Jim. You know, it's always been a strong vertical of us and it remains a very strong vertical in the undenapprated.

Ryan Perfit: Obviously, we're looking to grow that media and entertainment and grow it consistently, but we're also bringing on other verticals with the new solutions that we have and our ability to drive more solutions for our partners. So, would you try to find undenapprated platforms to serve the new verticals serving through the syndicated access right now? No, I mean, we've described in the past, Jim, is the undenapprated marketplaces are a real competitive advantage to us.

Ryan Perfit: As you know, it's the one that has had the most challenges over the last couple of years as we've shifted to quality and really enhancing the quality of those sites along with settlement the FTC, but their advantages around our ability by media, knowing consumer engagement and being able to interact with consumers in lifetime value. And that performance marking pedigree really allows us to launch and do things like ad flow and syndicated marketplaces with that expertise and our proprietary first-party data to really provide a competitive advantage again for competition in that market.

Ryan Perfit: So, we look to keep that business stable. We look to continue to keep it healthy and the big news lost in the financial numbers here clearly that we believe we've achieved stability and later part of Q2 and continued in Q3 in that business and keeping that stable and leveraging those assets into the higher growth businesses with higher margins is going to continue to be our strategy. So, we will not look to continue to grow out the owner operating in different verticals.

James Goss: All right, thanks very much. Thanks, Jim.

Operator: Ladies and gentlemen, as a reminder to ask the question, please first start one one on your telephone. Please stand by for our next question.

Bill DeZellam: Our next question comes from the line of Bill DeZellam with Titan Capital Management. Yalan is Dalton. Thank you. Relative to ad flow and the addition of grocery, QSR, travel, these businesses sound less cyclical to us. So, is that the correct way to look at this and that strong cyclicality that this business has had should be mitigated to some degree with some of these new new partners coming on? Yes, hi, Bill. Thanks for the question.

Donald Patrick: And with the strategic and financial year-end momentum, we believe fluent is well on course to deliver consolidated double-digit revenue in gross profit growth in fiscal year 2025.

Ryan Perfit: And with that, I'll turn to Ryan Perfect to provide more detail on our financial results.

Ryan Perfit: Thank you, Don.

Ryan Perfit: Thanks to everyone for joining us today.

Bill DeZellam: Absolutely. We launched ad flow. We got heavily into retail and ticketing, especially around sports and some things that were more seasonal. These, the QSR, the grocery, the travel tend to have different cycles with themselves and will help bring more balance to the to the course of year. We still will be very you know, we still will be Q for heavy, but based on us adding these verticals will be less so than we were last quarter one of our two.

Bill DeZellam: Talk of you. That's helpful. And then would you anticipate that the absolute rate of growth in Q1 will be greater than Q4 and the rate of growth in Q2, then greater than Q1. So basically, we now have four quarters coming where the rate of growth will be accelerating. Yeah, it's a great question. The way there is still some fall off from Q4 in our core business, our own cooperative business and in ad flow bill.

Bill DeZellam: So we will continue to see double digits. There might be, you know, slight dipping Q1, but we as a, we will be able to continue so sequential growth after that. Yes, I'm sorry, Don, I wasn't actually thinking about the absolute revenue number as much as I was the percentage rate of growth and whether in Q1 that rate of growth would end up being higher than the double digit rate of growth that you guided for the Q4. Yeah, we will see a small drop in percentage, but we'll continue to double digit Q1. Okay, that's helpful. Thank you. Thank you, Bill. Thank you.

Operator: Ladies and gentlemen, I'm sure I know further questions in the queue.

Donald Patrick: I would now like to turn the call back over to Don for closing remarks. Thank you for joining our Q2 2024 earnings. We believe we've reached an inflection point on our strategic pivot, which is exciting in this progress provides clear strategic and financial validation. Of our long term growth agenda with our early second half performance metrics. We are very focused on returning to consolidate growth in Q3 and accelerating Q4 and in the 2025 and delivering on our numbers. Thank you for your continued support. We look forward to updating you on our progress after Q3.

Ryan Perfit: Moreover, we chose to exit a non-strategic business during the quarter, and our call solutions business was faced with regulatory changes in Medicare and ACA marketplaces, and we took an accounts receivable write-down of ACA policies in the quarter, totaling approximately 3.1 million with an equal offset to Q2 revenue, which equally affected media margin and adjusted EBITDA.

Ryan Perfit: Absent this write-down, our overall financial performance for the quarter was largely consistent with the roadmap we had laid out last quarter. We're optimistic about the growth of our syndicated marketplaces, and coupled with our continued expense discipline, we anticipate revenue growth and improved adjusted EBITDA performance in the back half of 2024, compared with the comparable quarters of 2023. Media margin in the second quarter was 15.7 million, which represented 26.7% of revenue compared with 25.9 million or 31.5% of revenue last year. As we continue to scale our performance marketplaces, we expect media margin as a presenter of revenue to improve over time.

Ryan Perfit: On a gap basis, total operating expense in the second quarter of 2024 totaled 18.2 million, an increase of 5.4 million compared to the second quarter of 2023.

Ryan Perfit: But of note, GNA during the quarter was 8.9 million, which was down sequentially from the first quarter GNA of 10.4 million.

Ryan Perfit: GNA in the second quarter of last year was only 3.9 million due primarily to net credits totaling 5.7 million related to the FTC settlement, including insurance reimbursements for previously incurred legal fees and a lower than expected regulatory settlement. Excluding these credits last year, GNA decreased by approximately 8% compared to Q2 2023. Also, during the quarter, we realized goodwill and intangible asset impairment of 2.2 million related to customer relationships in the ad parlor reporting unit and internally developed software related to a business unit that was exited subsequent to the close of the quarter.

Ryan Perfit: Notably, our operating expenses in Q2 2024 and Q2 2023 include restructuring and other severance costs of 661,000 and zero respectively. For Q2 2024, this includes severance related to a reduction in force during the quarter to better align our cost structure.

Ryan Perfit: GNA in the quarter also includes accrued compensation expenses related to the Winopoli, Trunarth, and TAP acquisitions of 25,000 for the three months ended June 30th, 2024, and 562,000 for the three months ended June 30th, 2023.

Ryan Perfit: Adjusted EBITDA in the second quarter of 2024 was negative 4.5 million, largely in effect of the previously mentioned 3.1 million dollar write down of ACA policies. As stated on our first quarter call, we expect revenue and medium margin growth in the second half, driven by our new performance marketplaces, to drive adjusted EBITDA as a percentage of revenue into low single digits in Q3 and high single digits in Q4.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Ryan Perfit: Interest expense in the second quarter increased to 1 million from 795,000, due to higher average interest rates on our SLR facility and as an effective increased amortization of debt financing costs related to the SLR facility.

Ryan Perfit: We reported a net loss of 11.6 million and an adjusted net loss, a non-gap measure of 7.3 million equivalent to a loss of 47 cents per share.

Ryan Perfit: This facility provides us with a $20 million term loan and a revolving credit facility of up to 30 million that matures on April 2, 2020.

Ryan Perfit: In Q2, we invested 1.7 million in the capitalized product development and technology, largely to support the growth of our performance marketplaces. This compares to 1.2 million invested in Q2 2023.

Ryan Perfit: We remain focused on both the fortification of our legacy owned and operated products and the growth of our new syndicated performance marketplaces.

Operator: Good bye.

Ryan Perfit: Public Places, which we expect will drive strength and margin profile as they scale.

Ryan Perfit: We would like to thank everyone for their continued support and look forward to driving enhanced results through the balance of 2024.

Operator: We'll be happy to take questions at this time.

Operator: Thank you.

Operator: Ladies and gentlemen, to ask the question, please first start 1-1 on your telephone, and then wait to hear your name announce.

Operator: To withdraw your question, please start 1-1 again.

Operator: Please stand by while we compile the Q&A roster.

Maria Ripps: Our first question comes from the line of Maria Ripps with Canacore.

Maria Ripps: The line is open.

Maria Ripps: Great.

Maria Ripps: Good afternoon and thanks for taking my questions.

Donald Patrick: Can you give a talk a little bit more about the on authorized activity for the ACA policies that impacted you?

Donald Patrick: Was it something that impacted the industry more broadly, or your platform or so?

Donald Patrick: I guess one of some measures or initiatives that you may have added to prevent or may believe that is going forward.

Maria Ripps: I'm Maria.

Donald Patrick: Thanks for the question.

Donald Patrick: I'll give a little bit of detail, but the short answer to you is it affected the entire industry, it affected everyone who's involved with ACA.

Donald Patrick: So it wasn't specific to fluent as industry wide.

Donald Patrick: But if you remember in Q4 or 23, our car solutions business started the ACA agency where you know fluent license, agency sells ACA policies and the behalf of top health insurance companies.

Donald Patrick: We were already in that business of providing quality ACA consumer prospects to partners, and we built the ACA agency as a natural performance market extension into that business with the ability to bring the consumer further down the funnel. So the economics of that business is when we sell an ACA policy to a qualified consumer, we become the agency of record and all relevant policy information, including agency record is maintained in a government database that is run and controlled by the Centers for Medicare and Medicaid Services CMS.

Donald Patrick: So each AACA policy is in the name of consumer, the designated healthcare, and as AOR, fluent gets paid a monthly commission for each policy we are AOR for, for as long as that consumer has that policy.

Donald Patrick: In the typical timeframe for that policy and the commissions is averaging somewhere between 17 and 24 months where we'd be getting those commissions.

Donald Patrick: But during Q2, 20 and only four became apparent that there was a lack in controls in the CMS's ACA database, which allowed other license agents to access the database and the ability to illegally change the AOR without any consumer approval.

Donald Patrick: So fluid could sell the ACA policy to a consumer and on author of the agent would come into the government database, change the AOR from fluent to them, and with the illegal AOR switches, the healthcare insurance companies would then pay the illegal AOR on the ongoing commissions instead of fluent, getting it.

Donald Patrick: A class action suit was filed in Q2 with a long list of companies around the illegal and unauthorized switching.

Donald Patrick: Fluent was not in any manner involved in this nor did we work any of those parties, but it really highlights the extent and dramatic increase of this unauthorized and illegal activity that happened in accelerating in 2024.

Donald Patrick: One CMS became aware of this unauthorized behavior in July.

Donald Patrick: They changed the system and their process for AOR switching.

Donald Patrick: They largely eliminated the practice. So the practice, the answer to question Brea, the government fixed it, the CMS fixed it by putting in strict rules.

Donald Patrick: The challenge was that they basically did not penalize any prior unauthorized activity.

Donald Patrick: So they locked down all the illegal unauthorized changes and hampered fluid responsibility to recover our losses for those policies that were illegally switched.

Donald Patrick: And that was what necessitated the $3.1 million write down or receivables or the things that were illegally changed.

Donald Patrick: So the process is now in place for the government.

Donald Patrick: In the monitoring that we have after July 19th, when they put the new regs in place, the switching is all authorized and illegal activity has dramatically gone down.

Donald Patrick: However, as we outlined in the earnings script, we are pausing the scenario of making sure that we have the right internal processes, processes with externally with the various vendors and the government to make sure that this is a business that we can not only differentiate ourselves with but also make sure that we don't have this issue, again.

Donald Patrick: It's probably more detailed than you want, Maria.

Maria Ripps: Hopefully I answered your question.

Maria Ripps: No, that's great.

Maria Ripps: Thank you so much for the call.

Ryan Perfit: Yep.

Ryan Perfit: From liquidity.

Ryan Perfit: We have a very favorable credit facility with SLR. As you know, it's a receivables-based facility and it continues to, as we grow, continues to provide the liquidity we need to move forward.

Ryan Perfit: We have put some, recently put a small amount of money in roughly $2 million to continue to provide enough liquidity for the company.

Maria Ripps: That's very helpful.

Maria Ripps: Thank you so much.

Maria Ripps: Thanks, Maria.

Operator: Please stand by for our next question.

James Goss: Our next question comes from Milan of James Goss with Burnton Research.

James Goss: Yalan is open.

James Goss: Okay.

James Goss: First, and maybe this falls up a little on the liquidity issue, you've had a couple of quarters now where there have been a couple of, I think there were mostly financially related issues, although perhaps this one was one of the KCA that have delayed your reporting.

James Goss: And I was wondering if there are any other specific issues you're aware of that we should be aware of, to be or be concerned of going into the next couple of quarters.

Ryan Perfit: Yeah, hi, Jim.

Ryan Perfit: Thanks for the question.

Ryan Perfit: We do not have anything that we're aware of around our ability to execute on our plan and to grow. As I said, we have a very favorable facility with our debt partner that allows us to continue to access cash as we grow and against receivables.

Ryan Perfit: And I think that that was put in place, as you know, back in April, and he's going to service well in the back half of 24 and into 2025.

James Goss: Okay.

James Goss: Another question you mentioned the syndicated access performing marketplaces were the tip of the spear and that adflow platform was of your way to enable access.

Donald Patrick: I wonder if you could talk a little more about exactly how that works.

Donald Patrick: And also if you could talk about the mix of the syndicated platforms versus here on an upgraded places.

Donald Patrick: Right.

Donald Patrick: Good.

Donald Patrick: So I'll touch specifically on adflow about the syndicated marketplaces are basically post event monetization in a in a commerce media spot.

Donald Patrick: But adflow is a module our own proprietary platform that sits in between a post transaction environment.

Donald Patrick: So if you're purchasing something on a ticketing site before you get the confirmation page, there is a there's an additional ad that is served up based on who you are, what your purchase behavior is, you know, what your interests are, which again are things that we access both with our partners approved data, but more importantly, the fluent data in the in the first party data that we built over the years.

Donald Patrick: And then we'll serve you a relevant ad that's most in the purchase moment allows us to monetize you and improve the consumer engagement.

Donald Patrick: So that money is a revenue share between us and the commerce partner.

Donald Patrick: It's a very strategic business for us both from the standpoint of increasing monetization for a commerce media, but equally important.

Donald Patrick: It also allows us to continue to help with consumer engagement with them.

Donald Patrick: We've we've shown a very significant growth and acceleration in that business, Jim in Q2.

Donald Patrick: We don't break that out from a segment perspective, but we talked about the new verticals.

Donald Patrick: We got into grocery quick serve restaurants.

Donald Patrick: Now we were in ticketing, but we also now in travel.

Donald Patrick: And that growth, what is unique about it compared to the core owned and operated marketplace business is that we it's very predictable.

Donald Patrick: It might take a while for it to come on from a technical standpoint and a ability to onboard it.

Donald Patrick: But once it's on, we're getting predictable sessions, a predictor revenue.

Donald Patrick: We have a lot more ability to forecast what we see in Q3 and Q4 and a significant number of partners are coming on.

Donald Patrick: Have come on since June.

Donald Patrick: They're going to come on through September, October that puts us in a position to be able to say that we're going to return to single digits in Q3 and show double digit total consolidated growth in Q4 and in the queue into 2025.

Donald Patrick: Docs.

James Goss: One last thing, I believe media and entertainment was, say, a primary vertical in the undenapprated area, if I'm not mistaken.

James Goss: Is that being minimized at all, or is that being supplemented by the ad flow incursion into retail and ticketing verticals and travel some of the other things you mentioned?

Donald Patrick: It's being supplemented, Jim.

Donald Patrick: You know, it's always been a strong vertical of us and it remains a very strong vertical in the undenapprated.

Donald Patrick: So, would you try to find undenapprated platforms to serve the new verticals serving through the syndicated access right now?

Donald Patrick: No, I mean, we've described in the past, Jim, is the undenapprated marketplaces are a real competitive advantage to us.

Donald Patrick: As you know, it's the one that has had the most challenges over the last couple of years as we've shifted to quality and really enhancing the quality of those sites along with settlement the FTC, but their advantages around our ability by media, knowing consumer engagement and being able to interact with consumers in lifetime value.

Donald Patrick: And that performance marking pedigree really allows us to launch and do things like ad flow and syndicated marketplaces with that expertise and our proprietary first-party data to really provide a competitive advantage again for competition in that market.

Donald Patrick: So, we look to keep that business stable. We look to continue to keep it healthy and the big news lost in the financial numbers here clearly that we believe we've achieved stability and later part of Q2 and continued in Q3 in that business and keeping that stable and leveraging those assets into the higher growth businesses with higher margins is going to continue to be our strategy.

Donald Patrick: So, we will not look to continue to grow out the owner operating in different verticals.

James Goss: All right, thanks very much.

James Goss: Thanks, Jim.

Operator: Ladies and gentlemen, as a reminder to ask the question, please first start one one on your telephone.

Operator: Please stand by for our next question.

Bill Dezellem: Our next question comes from the line of Bill DeZellam with Titan Capital Management.

Bill Dezellem: Yalan is Dalton.

Bill Dezellem: Thank you.

Bill Dezellem: Relative to ad flow and the addition of grocery, QSR, travel, these businesses sound less cyclical to us.

Donald Patrick: So, is that the correct way to look at this and that strong cyclicality that this business has had should be mitigated to some degree with some of these new new partners coming on?

Bill Dezellem: Yes, hi, Bill.

Donald Patrick: Thanks for the question.

Donald Patrick: Absolutely.

Donald Patrick: We launched ad flow.

Donald Patrick: We got heavily into retail and ticketing, especially around sports and some things that were more seasonal.

Donald Patrick: These, the QSR, the grocery, the travel tend to have different cycles with themselves and will help bring more balance to the to the course of year.

Donald Patrick: We still will be very you know, we still will be Q for heavy, but based on us adding these verticals will be less so than we were last quarter one of our two.

Bill Dezellem: Talk of you.

Bill Dezellem: That's helpful.

Bill Dezellem: And then would you anticipate that the absolute rate of growth in Q1 will be greater than Q4 and the rate of growth in Q2, then greater than Q1. So basically, we now have four quarters coming where the rate of growth will be accelerating.

Donald Patrick: Yeah, it's a great question.

Donald Patrick: The way there is still some fall off from Q4 in our core business, our own cooperative business and in ad flow bill.

Donald Patrick: So we will continue to see double digits.

Donald Patrick: There might be, you know, slight dipping Q1, but we as a, we will be able to continue so sequential growth after that.

Donald Patrick: Yes, I'm sorry, Don, I wasn't actually thinking about the absolute revenue number as much as I was the percentage rate of growth and whether in Q1 that rate of growth would end up being higher than the double digit rate of growth that you guided for the Q4.

Donald Patrick: Yeah, we will see a small drop in percentage, but we'll continue to double digit Q1.

Bill Dezellem: Okay, that's helpful.

Bill Dezellem: Thank you.

Bill Dezellem: Thank you, Bill.

Operator: Thank you.

Operator: Ladies and gentlemen, I'm sure I know further questions in the queue.

Donald Patrick: I would now like to turn the call back over to Don for closing remarks.

Donald Patrick: Thank you for joining our Q2 2024 earnings. We believe we've reached an inflection point on our strategic pivot, which is exciting in this progress provides clear strategic and financial validation.

Donald Patrick: Of our long term growth agenda with our early second half performance metrics.

Donald Patrick: We are very focused on returning to consolidate growth in Q3 and accelerating Q4 and in the 2025 and delivering on our numbers.

Donald Patrick: Thank you for your continued support.

Donald Patrick: We look forward to updating you on our progress after Q3.

Operator: Ladies and gentlemen, this concludes today's conference call.

Operator: Thank you for your participation.

Operator: You may now disconnect.

Operator: Good bye.

Q2 2024 Fluent Inc Earnings Call

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