Q1 2025 Fluent Inc Earnings Call
Okay.
Speaker Change: Good afternoon and welcome. Thank you for joining us to discuss fluence first quarter 2025, earning results.
Speaker Change: With me today are fluids, Chief Executive Officer, Don Patrick and Chief Financial Officer, Ryan Burke.
Speaker Change: Our call today will begin with comments from Don and Bryan Perfect followed by a question and answer session I would like to remind you that this call is being webcast live and recorded a replay of the event will be available following the call on fluence website to access the website.
Speaker Change: Webcast. Please visit the Investor Relations page at Www Dot fluid co dot com before we begin I would like to advise listeners that certain information discussed by management. During this conference call will contain forward looking statements are covered under the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Speaker Change: 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 such forward looking statements due to risks and uncertainties associated with the company's business. These statements maybe identified by words, such as expects plans projects could.
Speaker Change: Well estimates and other words of similar meaning the company undertakes no obligation to update the information provided on this call for a discussion of the risks and uncertainties associated with fluids business. We encourage you to review the company's filings with the Securities and Exchange Commission, including the company's most re.
Speaker Change: <unk> annual report on Form 10-K, and quarterly reports on Form 10-Q.
Speaker Change: During the call management will also present certain non-GAAP financial information relating to media margin adjusted EBITDA and adjusted net income.
Speaker Change: Management evaluates the financial performance of the company's business on a variety of indicators, including these non-GAAP metrics.
Speaker Change: Definitions of these metrics and reconciliations to the most directly comparable GAAP financial measure are provided in the earnings press release issued earlier today with that I'm pleased to introduce fluent CEO Don Patrick.
Speaker Change: Good afternoon. Thank you all for joining our call today I'm here together with Ryan Schulke.
Speaker Change: Chief strategy Officer and company cofounder.
Speaker Change: And Ryan perfect.
Speaker Change: Our Chief Financial Officer.
Speaker Change: I'm going to make some brief comments about our first quarter results.
Speaker Change: That reflects our enthusiasm for the strategic pivot we are successfully orchestrating as.
Speaker Change: As we continue to shift our mix influence long term higher gross margin growth strategies.
Speaker Change: On the strategic front, our pivot to focus on growth opportunities around our commerce media solutions is well underway.
Speaker Change: By leveraging our leadership position and competitive advantages of our owned and operated marketplaces as a springboard into new.
Speaker Change: High volume high growth Commerce media marketplaces weird.
Speaker Change: We are driving strong year over year growth in this segment.
Speaker Change: As of March 31, 2025 or.
Speaker Change: Our commerce media business has surpassed an annual revenue run rate of over $65 million as we continue.
Speaker Change: To expand our model.
Speaker Change: And grow market share.
Speaker Change: The effectiveness of our Commerce media solution offering is further validated by the major brands that continue to join our roster of partners and advertisers.
Speaker Change: Last week.
Speaker Change: We announced a new strategic partnership with Rebuy engine.
Speaker Change: Leading ecommerce personalization platform for Shopify brands.
Speaker Change: We buy is growing rapidly and provides unparalleled scale and insights for shopify merchants.
Speaker Change: Generating over 1 billion in revenue for 12000, plus active e-commerce brands each year.
Speaker Change: Their expansive partner network and merchant first approach aligns seamlessly with fluids mission to deliver high impact Commerce media solutions at scale.
Speaker Change: We view this as a win win partnership that provides fluent with access to a large and growing shopify ecosystem as a new sales channel.
Speaker Change: And represents another big step forward as we continue to lean into our growth strategy.
Speaker Change: While our foundational owned and operated businesses represent strong brand equity we built in the marketplace over the last decade.
Speaker Change: The strategic and financial role of these businesses have meaningfully evolved.
Speaker Change: Put simply.
Speaker Change: Owned and operated provides essential operational and capability platform that actually the springboard for our marketplace expansion.
Speaker Change: And the cash flow in these businesses fuels, our long term growth strategies.
Speaker Change: However, our overall revenue mix continues to shift towards a rapidly growing commerce media solutions.
Speaker Change: Our gross profit margins are accretive to the core.
Speaker Change: Going forward our goal is to stabilize our owned and operated business as it becomes a lesser share of the total enterprise.
Speaker Change: This quarter owned and operated revenue was impacted by tightened supply in the social media channels, and we're working diligently to counter any longer term impacts.
Speaker Change: Importantly, the owned and operated business remains a productive driver for a commerce media solutions growth strategy and is foundational linked to our momentum.
Speaker Change: Our owned and operated proprietary first party data and embedded AI powered technology is.
Speaker Change: Is leveraged by our Commerce media solutions to create a competitive moat.
Speaker Change: That allows us to establish mutually beneficial revenue share agreements.
Speaker Change: And longer term contracts, where their commerce media partners.
Speaker Change: As we scale Commerce media solutions, we're beginning to see the positive financial impact across the entire fluid enterprise.
Speaker Change: And as we continue to enhance our market position and move beyond the seasonality driven lower volume in the first half we.
Speaker Change: We are confident that fluid will return to year over year consolidated revenue growth and positive adjusted EBITDA.
Speaker Change: In keeping with our long term strategic growth plan. We expect this accelerating mix shift in our business will began expanding our margins across the entire fluid enterprise.
Speaker Change: Let me crystallize this for you.
Speaker Change: We are approaching 2025 with strategic clarity and momentum that is building in a transformative commerce media marketplace.
Speaker Change: We are confident that someone is well positioned with our commerce media solution strategy.
Speaker Change: Over the past two years, we have successfully proven that we can adapt to enable and empower our commerce brand partners to participate in this large and rapidly growing marketplace.
Speaker Change: Still in its embryonic stage as the advertising channel.
Speaker Change: According to Boston consulting group.
Speaker Change: Ecommerce medium market is expected to grow to 100 billion.
Speaker Change: In total size over the next five years and account for more than 25% of digital media spend by 2026.
Speaker Change: This is a very encouraging projection for the commerce media industry.
Speaker Change: And with our annual run rate currently exceeding $65 million, we are poised for significant additional growth.
Speaker Change: As I mentioned earlier following the close of the first quarter.
Speaker Change: We announced a strategic partnership with Rebuy engine to launch Rebuy ads powered by fluent to offer post purchase adds to merchants on the shopify platform.
Speaker Change: To reiterate we buy engine generated over $1 billion in revenue in 2024 for 12000, plus active E Commerce brands.
Speaker Change: By combining post transaction adds with revised E Commerce solutions for Shopify brands.
Speaker Change: We're significantly enhancing revenue per session for merchants on the ribeye platform.
Speaker Change: And gaining access to new audiences to revise extensive merchant network.
Speaker Change: We buy ads powered by fluent will leverage fluent AI powered advertising marketplace.
Speaker Change: Tensive industry experience and first party customer database spilt over 14 years as the leader in customer acquisition.
Speaker Change: Highly targeted ads to these merchant customers at the optimal post purchase moment.
Speaker Change: Creating additional buying opportunities and revenue.
Speaker Change: This partnership is a big step forward in our growth strategy as we prioritize commerce media in the affluent ecosystem.
Speaker Change: <unk> is the most used e-commerce platform in the United States and thousands of merchants and brands are currently leveraging rebuy engine to optimize their revenue and operations.
Speaker Change: With the combined expertise of both companies.
Speaker Change: You buy ads powered by fluent is set to redefine how shopify merchants engaged with performance driven advertising.
Speaker Change: Overall, we're pleased with the progress that we've achieved in Q1.
Speaker Change: As you can see Commerce media solutions revenue continues to become a larger portion of our overall revenue mix.
Speaker Change: Going to 23% of consolidated revenue in the first quarter of 2025.
Speaker Change: From 10% just a year ago.
Speaker Change: With our visibility today, we anticipate consolidated second quarter revenue will be consistent with first quarter of 2025.
Speaker Change: Mainly due to reductions in owned and operated revenue related to reduced supply from the social media channels.
Speaker Change: Additionally, we're currently navigating a market that's absorbing new cost pressure from international tariffs and broader retail inflation.
Speaker Change: These dynamics are creating industry uncertainty for many of our brand and retail partnerships.
Speaker Change: That said, we expect accelerated growth in the back half of the year supported by Triple digit growth in Commerce media solutions.
Speaker Change: Fortunately, our owned and operated and Commerce media marketplaces are built to drive results for partners and advertisers in these challenging macroeconomic environments.
Speaker Change: Historically, our owned and operated marketplaces tend to improve margin and economic headwinds as.
Speaker Change: As any potential pullback in advertisers return on ad spend.
Speaker Change: Really more than offset by lower media costs.
Speaker Change: And our Commerce media platform delivers attributable revenue and a margin conscious environment.
Speaker Change: For many partners, where the only upside revenue later after the checkout.
Speaker Change: We believe any decline in consumer behavior, driven by tariffs and corresponding price increases will be offset by sales acceleration and the onboarding of new Commerce partners trying to mitigate the impact of a down market.
Speaker Change: Put simply when the market contracts related to reduced spending.
Speaker Change: This increases interest from Commerce partners.
Speaker Change: Therefore, offsetting the potential off in spending from advertisers.
While there is still little visibility on the potential impact on the consumer and the economy, We believe and are in a strong position to deliver on our growth.
Speaker Change: We remain bullish on our agenda and excited about the momentum we've generated.
Speaker Change: We continue to lean into the exciting and significant mega growth opportunity in the large and growing commerce media industry, where we can uniquely leverages, our competitive advantages of our owned and operated marketplace.
Speaker Change: Importantly, we are expanding our strategic value proposition to world class partners beyond customer acquisition.
Speaker Change: And delivering higher quality consumer engagements across the entire marketing funnel.
Speaker Change: And as our strategic trend line continues throughout 2025, we believe shareholder value will follow.
Speaker Change: And with that I'll turn the call over to Ryan perfect to provide more detail on our financial results.
Ryan: Thank you Dan and thanks to everyone for joining us today I'll now provide a review of our first quarter results.
Ryan: We generated total revenue of $55 2 million in the first quarter of 2025.
Ryan: Decrease of 16% from the prior year.
Ryan: 7% of that decrease or $5 2 million.
Ryan: Was due to businesses, we exited in 2024.
Commerce media solutions built on 2020 for momentum and achieved impressive growth in the first quarter of 2025.
Ryan: Revenue from this business increased 99% to $12 $7 million and we anticipate strong growth in this segment to continue through the balance of 2025.
Ryan: Commerce media is at the core of our evolving model.
Ryan: We expect commerce media solutions to be a key driver of consolidated revenue growth.
Ryan: <unk> margin enhancement going forward.
Ryan: Owned and operated revenue decreased 30% year over year to $31 1 million.
Don: As Don mentioned.
Don: This decrease is primarily related to ongoing challenges in acquiring media for the <unk> sites, specifically from social media channels.
Don: This trend has continued into the second quarter and given the revenue mix shift and strong growth in commerce media, we expect second quarter consolidated revenue to be relatively consistent with Q1.
Don: We are working to broaden our supply channels to counter long term impacts on the owned and operated business.
Don: Gross margins in the first quarter of 2025 decreased when compared to the prior year period related to continued media cost pressure on our core solutions business.
Don: Out of certain lower margin Commerce media placements.
Don: And the shift in revenue mix related to the strategic discontinuation of certain businesses in 2024.
Don: While these discontinued businesses contributed to the higher margin in Q1 of last year. They challenged operating cash flow and their discontinuation is part of our focus on more sustainable high growth long term opportunities for the business.
Don: We expect margins to improve over time as our Commerce media solutions business continues to scale.
Don: On a sequential basis gross margin, excluding depreciation and amortization remained at 21%.
Don: Media margin in the first quarter was $13 7 million, which represents 24, 9% of revenue compared to $22 1 million or 33, 6% of revenue last year.
Don: Media margin decreased slightly sequentially from 25, 3% in Q4 of last year.
Don: Our commerce media gross margin in the first quarter of 2025 was $3 1 million.
Don: Or 24, 6% of revenues compared with 2 million or 31, 3% of revenues in the first quarter of 2024, demonstrating strong growth in this business.
Don: On a GAAP basis total operating expense in the first quarter of 2025 totaled $16 1 million compared with $20 million in the first quarter of 2024.
Don: The decrease reflects reductions in head count has made over the prior 12 months to align the business with the transition to commerce media and reduced costs associated with the businesses we exited.
Don: Adjusted EBITDA in the first quarter of 2025 was a loss of $3 1 million compared with adjusted EBITDA of 700000 in the first quarter of 2024.
Don: As we continue to drive our shift in revenue mix to focus more on Commerce media solutions, we expect adjusted EBITDA margin to improve over time.
Don: The loss is a function of the decline in our owned and operated business coupled with the low seasonality related to Commerce media solutions, we anticipate that adjusted EBITDA will remain negative in the second quarter with projected revenue growth supporting a return to positive levels on a full year basis.
Don: The company cannot provide a reconciliation to expected net income or net loss as a percentage of revenue for 2025 due to the unknown effect timing and potential significance of certain operating costs and expenses share based compensation expense and for the provision or benefit from income taxes.
Don: Interest expense in the first quarter decreased to 880000 from one 4 million, reflecting a significant reduction of debt that I'll discuss in a moment.
Don: We reported a net loss of $8 3 million in the first quarter compared with a net loss of $6 3 million in the prior year and adjusted net loss a non-GAAP measure of $6 7 million equivalent to a loss of 31 per share compared with an adjusted net loss of $4 two.
Don: Or a loss of <unk> 30 per share in the first quarter of 2024.
Don: Shifting now to our balance sheet, we ended the quarter with $6 1 million in cash and cash equivalents, including restricted cash.
Don: We significantly reduced our total debt in the quarter to $25 6 million at March 31, compared with $35 6 million at December 31 2024.
Don: We will continue to strategically utilize that as a source of capital as our business scales.
Don: As of March 31, 2025, we had an outstanding principal balance of $21 $7 million on our credit facility with SLR credit solutions.
Don: This facility provides us with $20 million term loan and a revolving credit facility of up to $30 million that all matures on April 2nd.
Don: 2029.
Don: To conclude we have a long term view of our business and remain confident in our strategy and outlook for 2025 and beyond.
Don: We're successfully executing on our strategic pivot into commerce media and continuing to drive considerable year over year revenue growth in Commerce media solutions.
Don: This growth is supported by our deep industry experience and background, which allows us to differentiate ourselves in a competitive market environment and wind partnerships with leading brands as well as media partners and channel partners.
Speaker Change: As Don mentioned in his remarks. The most recent example of this is our partnership with Rebuy engine to launch rebate ads powered by fluid on the Shopify platform.
Speaker Change: This new offering allows shopify merchants to seamlessly leverage fluids extensive expertise first party data and AI powered advertiser marketplace to significantly enhance customer engagement and unlock additional revenue streams as well as giving fluid immediate access to hundreds of millions of post purchase e-commerce transactions.
Speaker Change: Yeah.
Speaker Change: With our visibility today, we're confident that <unk> is positioned for long term revenue growth margin expansion and enhanced profitability as we continue to grow our commerce media business.
Speaker Change: With that we will be happy to take questions at this time.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Enrollment for our questions.
Speaker Change: Our first question comes from Maria <unk> with Canaccord you May proceed.
Maria: Great. Good afternoon. Thanks for taking my questions can you maybe share a little bit more Carlo nearby engine partnership.
Maria: When do you expect it maybe to start contributing to your financials and then more broadly how should we think about sort of key contributors CMS revenue growth sort of accelerating back to the triple digit range.
Maria: Thanks, Thanks for your question Maria.
Maria: So obviously, we are thrilled to be partnering with re buy.
Maria: It is a major milestone for our business, but equally it's a strategic endorsement of our strategic and validation on our solution and technology. So.
Maria: From a strategic.
Maria: Position, obviously, it allows us to get access to a huge new sales channel and shopify and partner with re buy.
Maria: And not only helping their existing.
Maria: Partners that they work with the more importantly helped drive their business forward and driving more market share for them.
Maria: From a financial perspective.
Maria: Obviously this is a different sales channel than the enterprise sales channel that we built the commerce media business off.
Maria: So we're very disciplined in our approach around the partnership around integrating our sales and our and our technology offerings seamlessly.
Maria: Currently the team's every culture aligned and working together, we've already integrated our tech, although we just announced this last week.
Maria: Have initial revised partners that are live.
Maria: And unlike traditional product launches on a shop by shop platform that requires an investment for the merchants.
Maria: To sign up for post transaction through.
Maria: Fluent with re buy obviously does that cost anything we bring incremental new revenue stream. So we believe the adoption is going to be significant but.
Speaker Change: But having not been in a indirect sales channel before Maria we're really going to take a look at where we are we will know much. Moreover, when we get back together when we discuss Q2 Q2 results.
Speaker Change: There's two pieces that I mentioned around the size of this and why were so excited first you guys know the addressable market opportunity of Shopify ecosystem is enormous.
Speaker Change: And then secondly is that.
Speaker Change: Post transaction sessions with revised current partners are a multiple of what our current sections are within our own platform. So there is a huge opportunity for us not only to capture market share with revised current partner has been more importantly, help rebuy grow and us to grow also together across the whole shopify.
Speaker Change: Ecosystem. So we expect it to be a major contributor we will have a lot more visibility at.
Speaker Change: At the end of this quarter.
Speaker Change: But I think it's very important when we say that we are going to double the business. Each of the next two years at least.
Speaker Change: Within the Commerce meeting that was without the rebuy opportunity. So we obviously see that as additional upside in our good growth.
Maria: Does that answer your question around me by Maria or anything you wanted to dig into more.
Speaker Change: No.
Speaker Change: Very helpful. And then just maybe in terms of growth accelerating growth acceleration in the second half I guess back to the triple digit range.
Speaker Change: Sure.
Speaker Change: It really comes down to acquiring new <unk>.
Speaker Change: Partners Commerce partners and adding them on.
Speaker Change: The technology as you know we've been investing aggressively last two years.
Speaker Change: And building out that platform. We're at the point now where we believe we have significant operating leverage in which to drive that business going forward based on the critical mass that we're in so it's really about driving and getting more.
Commerce partners onto our platform our pipeline has grown significantly.
Speaker Change: And things like working where you buy obviously is going to it's going to accelerate that significantly.
Speaker Change: Got it that's very helpful. Dan and then on the <unk> side can you maybe talk a little bit about your efforts to expand your supply channels. There I guess what are some of the newer channels. If you can if you can share that and when do you anticipate sort of this efforts to sort of start impacting or contributing to you.
Speaker Change: Segment stabilization yet.
Gary: Thank you Gary good question so.
Maria: I know you know this is Maria I'll, just take a step back.
Maria: It's a performance marketplace with both supply and demand the important thing to know is that within the owned and operated.
Maria: Our demand has has always been strong and continues to be strong so our verticals of gaming and subscription services and financial services et cetera continue to lean in and work with us hand in hand to drive better ROE as in better quality and our quality is unmatched by our competitor.
Maria: <unk>.
Maria: <unk> is really around the supply issue and it was greatly affected by the FTC settlement.
Maria: And the requirements that they made us take that our competitors do not have so it makes us difficult.
Maria: It makes it difficult for us to buy media on certain channels. So over the last couple of years.
Maria: Our media channel has been very concentrated around the biddable platforms, which as you know are very variable right.
Maria: The pricing is down obviously, we do very well when the pricing increases.
Maria: Obviously, we pull back and manage to margins so that variability has and that concentrating our supplies obviously has compounded that.
Maria: That decline in that business, so around new channels, we're obviously looking at.
Maria: Two things one is we're working aggressively with our demand partners to understand where the best consumers are and how do we move that back in a row as environment all the way back to immediate determine where can we build up on the media side.
Maria: And that's been a very big.
Maria: Exciting opportunity for us to drive better transparency, all the way from our buying the media to connecting the consumers and their best consumers. The second is that we have been looking at.
Maria: Other non traditional platforms around DSP in other biddable areas that can grow the business, we don't in our projections and in our financial numbers that we gave.
Maria: Guidance too we continue to forecast that the owned and operated business will decline so.
Maria: It's not like we look at it to be to be.
Maria: To be growing, but we do obviously internally expect to stabilize that.
Maria: In later part of 2025.
Speaker Change: That's all right that's very helpful. Thank you Tom.
Tom: Thank you Maria.
Speaker Change: Thank you.
Speaker Change: Next question comes from Patrick <unk> with Barrington Research you May proceed.
Speaker Change: Hi.
Speaker Change: Okay.
Speaker Change: See if you can provide a little bit more color on like the.
Speaker Change: Uh huh.
Speaker Change: The O&M trends you, Kevin there's a level of.
Speaker Change: Stabilization that you feel you need in order to to get to positive EBITDA for the year.
Speaker Change: Yep.
Speaker Change: Great. Good question, so couple of things that.
Speaker Change: Again add on that I didn't say number one is this business is profitable the owned and operated business is profitable.
Speaker Change: It always has been Pat.
Speaker Change: It continues to be obviously, the declining that means there is less cash flow, which to reinvest back into the business or across to pay for the SG&A line. So that business is profitable. It always has been and we anticipate it will continue to be so.
Speaker Change: Regarding your question I went to drive when it will drive consolidated revenue growth. We are continuing to forecast the decline in that business. The key driver to bring us back to top line consolidated revenue growth and profitability is the commerce media business.
Speaker Change: We have the pipeline, we have the new clients coming on.
Speaker Change: We also have the seasonality coming back in the second half based on the retail verticals that we're in so with even without owned and operated.
Speaker Change: Stabilizing we will be back to revenue growth and EBITDA positive in second half of this year, which will drive us to be profitable for the full year.
Speaker Change: Okay and then.
Speaker Change: The commerce side I guess do you have.
Speaker Change: Much of a sense of like how.
Speaker Change: That that type of media would perform in kind of a maybe a softer consumer environment.
Speaker Change: And then just a second.
Speaker Change: Alright, Yes go ahead.
Speaker Change: Good question, Pat and obviously.
Speaker Change: The big issue, obviously is tariffs and the fluidity of that situation and where we are so.
Speaker Change: One of the benefits of our marketplace.
Speaker Change: Both of these are both the owned and operated in and the Commerce media as a marketplace is that we can manage both sides to make it work.
Speaker Change: On the <unk> side traditionally in economic headwinds any decrease in demand from our advertiser, usually its corresponding by having a decrease in media pricing, which allows us to manage the margins. So over that for 15 years, we've been in business, we've been able to manage downturn successfully we will decrease.
Speaker Change: <unk> revenue in the owned and operated but the margins.
Speaker Change: And margin dollars tend to stay stable on the Commerce media side, obviously, we're heavily into retail.
Speaker Change: And that's going to come down to the consumers the consumer behavior their ability to buy and continue to buy in debt and spend at the levels that they're currently at.
Speaker Change: One of the things that we're seeing here is when we're talking to our partners. There obviously is a very little level of visibility of what.
Speaker Change: Economic downturn or terrorists can mean to them, but what we're seeing is that any we believe any decline that we see from the consumers with our existing partners will be made up at least by new partners coming on so new Commerce partners will be looking for a revenue and profit and our and our post transaction business.
Speaker Change: Is a fantastic.
Speaker Change: A fantastic offer for any new commerce partners to come on and add incremental profit in their downturn. So we're going to see if we see any decline on the retail side with our commerce partners with less consumer spending will see a corresponding increase in conversions of new clients coming on which we think will be a net par.
Speaker Change: <unk> to us.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks Pat.
Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone. Our next question comes from Bill <unk> with Titan Capital Management you May proceed.
Bill: Thank you I have a group of questions here, so continuing on that last on that last question.
Bill: Does economic uncertainty slow or accelerate the commerce media signage.
Speaker Change: Yeah, Hey, Bill Thanks for the question.
Bill: What we're seeing is an acceleration of the pipeline.
Bill: Through the various stages of our pipeline compared to where they were last year. So this is a traditional enterprise sale.
Bill: In terms of bringing somebody on through the pipeline to close sale, we're seeing acceleration through those traditional sales phases. So in this time of economic uncertainty given the value proposition of our post transaction business, we're seeing things move faster through the through the pipeline.
Bill: And faster to conversion.
Bill: Okay.
Bill: Congratulations.
Bill: Yes.
Bill: Fascinating and so in the Commerce media a couple of years that you have been in this business.
Bill: Now you've probably learned enough to have an idea how the business model ultimately luck. So how do you see the business model playing out for this for this business.
Yes, thanks, Phil.
Brian: Started and then I'll, let turn it over to Brian to give a little bit more detail, but as I mentioned to <unk> question, we've been in the business a little over two years now to you. The first two years were heavily investment around around the technology and building out the sales and client operational teams.
Brian: And we have a efficiently leverage the tech and the advertisers and the team on the owned and operated side, we believe in a very efficient way.
Brian: But at the scale that we're getting the business to now.
Brian: We believe theres very strong operating leverage moving forward in terms of flow through from new revenue and new incremental revenue that comes into the platform to driving through to profit to the business. So.
Brian: So fundamentally we.
Brian: Believe that the operating leverage.
Brian: You'll see it in Q in the second half of this year and continued into 2026, and then equally important as you know.
Brian: This business the <unk> business is fundamentally different than the owned and operated.
Brian: It's on Rev share its long term contracts, it's much more predictable, which allows us to better operate the business. Both in terms of investments and also in terms of.
Brian: Managing to gross margins and profit so.
Speaker Change: That's sort of where we sit and where we believe we are at that inflection point, but I know Brian do you have any other thoughts yes, Bill this is Ryan perfect.
Ryan: I'll just kind of reiterate that we do we measure.
Our profitability by contribution margin on the business unit level.
Ryan: And obviously there is seasonality to that especially in the commerce media business that makes.
Ryan: Quarterly measurement less meaningful.
Speaker Change: But on an annual basis, we have been investing into commerce media solutions to date, but we expect that to shift in 2025, as Don said, where we will be contribution margin positive and then we expect further expansion in 2026 as we tap into the operating leverage.
Speaker Change: And relative to that operating leverage do you have a.
Speaker Change: And target to share I'm thinking, maybe let's say three or five years from now longer term, how you're thinking about that business.
Speaker Change: Yes.
Speaker Change: Obviously builds incredibly exciting.
Speaker Change: Growth of Commerce media in itself is phenomenal right. So we have a great tailwind as we believe this is a $1 billion opportunity for us.
Speaker Change: Post transaction post.
Speaker Change: That business has.
Speaker Change: When we say we're going to exit each of the next two years, it's just staying within that.
Speaker Change: Solution set.
Speaker Change: There are there are solutions Commerce media solutions that we have adjacent to that that we have started we've talked a little bit about loyalty post event and some other things that we've actually launched.
Speaker Change: Launched this year that we are very early stages, but we believe we will continue to have significant growth opportunities for us and what's great as to what's best about it is our partners are the ones that are asking us right. They're the ones that are saying okay great.
Speaker Change: Here is what youre driving for as Youre driving great results.
Speaker Change: I need help pushing how do we how can you help us in this area or that area to help drive incremental commerce media revenue for them. So.
Speaker Change: From a three to five year timeframe, obviously, we think it's a fantastic billion dollar opportunity for us in the short term, which is sort of 25% to 26.
Speaker Change: We see very significant growth before re buy and we will be able to know we believe <unk> will be an impact for 2025 and definitely for 2026, we'll have better visibility on that and over the next couple of months.
Speaker Change: Great. Thank you. So I do have a couple of questions relative to rebuy.
Speaker Change: So if there are other questioners in line.
Speaker Change: Feel free to cut me off and move on.
Speaker Change: But relative to re buy they have something I think you said like 12000.
Speaker Change: Customers that they work with.
Speaker Change: With that in mind, what's needed by fluent employees to turn to turn rebuy customers onto the rebuy powered by fluid.
Bill: Yeah. Good question Bill so.
Bill: Specific what's really great about and we've been working with re buy obviously for a while now so I think the announcement was made with a tech and everything was integrated so from a from a operational perspective, it's very seamless if you're a if you're a partner with three by you will see a basically the ability to.
Bill: Click on a click on the icon that says I want to put post transaction into our flow into flow when we get to integrate that with them through our through the integrated technology. So it's a very low lift.
Bill: On the enterprise side, obviously, it's a little bit longer you have to work through getting onto the commerce media sites et cetera revise already on their sites, they're already integrated so it's a much easier operational risks are big play with them quite honestly is going to be around.
Bill: It's going to be around the relationship right. So how do we understand what's driving their success.
Bill: This is the first this is an important step in it it's a great partnership but like any partnership we have to make sure that we're driving results for them and we continue to integrate our or iterate our solutions in order to help them move their business forward.
Bill: We see a great short term opportunity of helping their clients. They are partners be successful.
Bill: But obviously the bigger play for them is how it is fluent in rebuy combined go after that larger shopify opportunity right. So that's that's how it's going to sort of play out it's going to be a relationship play out of our teams integrate together how do we make it easy to work with.
Bill: And then make sure how do we how do we continue to make sure our results are superior than anyone else in the market.
Speaker Change: So Don did I understand you to say that there is no work.
Speaker Change: Like fluent employees there as there are no buttons for them to quick no anything to be done that's all done.
Speaker Change: Already taken care of in terms of the integration that you did it sounds like prior to the announcement with revised so it is simply an icon that revised customers quick and everything else takes care of itself.
Speaker Change: Yes, yes.
Speaker Change: It's a very easy lift because re buy has done all of those integrations already through shopify and through their partners. So our take our solution integrates through refi.
Speaker Change: Well congratulations.
Speaker Change: Fascinating.
Speaker Change: And relative to this relationship.
Speaker Change: Levi relationship what does it mean to you all financially I mean, how do you how do you think about the.
Speaker Change: <unk> that could come about from this from this.
Speaker Change: This single press release, which I know, it's a lot more than that.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Again, Bill you were.
Speaker Change: Specifically not trying to put a number on it yet because again it's a.
Speaker Change: It's a indirect sales channel, which we are working through if this was a direct sales channel where we are directly working directly with the clients will be able to be very very specific to you.
Speaker Change: But obviously.
Speaker Change: I'll just tell you we had the launch on Thursday, we have clients that re by clients already.
Speaker Change: Lives on our platform and working and Thats.
Speaker Change: Before any major push with re buy on the lines. So.
Speaker Change: We've been told by Shopify that if you add a new solution to you.
Speaker Change: Shopify existing solution that tends to be a 10% adoption rate.
Speaker Change: We look at that as a very low bar.
Speaker Change: Because most as we talked about most things that if you are adding on a new solution within shopify you have to pay for it and get the return on it when you buy re buy ads.
Speaker Change: Bye bye fluent obviously there is no additional out over money you were actually giving you money in terms of making sure that we.
Speaker Change: <unk> transaction and the revenue share. So we think that there is significant upside to that to that number. The one thing we will see growth on the revenue side accelerate faster than margin.
Speaker Change: Because we believe that the margin in the March.
Speaker Change: <unk> deal that we have with re buy obviously is not it is not as lucrative as we have directly with with our enterprise clients. So we'll have we'll have strong growth our margins will be slightly lower than what they are now for that channel only.
Speaker Change: Okay, and I know youre not wanting to give specific guidance, but didn't you say in your opening remarks that the.
Speaker Change: Ecosystem.
Speaker Change: Is.
Speaker Change: Either as large or larger than.
Speaker Change: Your entire commerce media business.
Speaker Change: Well the re by current partners are larger than the than the current <unk>.
Speaker Change: Ecosystem of our E Commerce media marketplaces slowed yes.
Speaker Change: Okay.
Speaker Change: I guess I'll have to leave that there was this included the re buy relationship included in your initial guidance.
Speaker Change: No no when we say we're doubling each in the next two years Bill that was that was without.
Speaker Change: Without consideration around refi, where you buy is upside.
Speaker Change: Okay, great well that's it.
Speaker Change: Fantastic Alright, a couple more questions. Please.
Speaker Change: A pipeline.
Speaker Change: Maybe I should say the enterprise pipeline and E Commerce media, what does that look like today and would you frame up the size relative to where it's been in the past. So we can have some.
Speaker Change: Uh huh.
Speaker Change: Kind of.
Speaker Change: Visual graphic in our mind, what's happening with that pipeline sure.
Speaker Change: I would say the pipeline there's two major.
Speaker Change: Changes in the pipeline obviously the size of it it's a lot larger we've <unk> the business and our pipeline has.
Speaker Change: Obviously been a corresponding the same the same size.
Speaker Change: The second piece is that we're seeing larger opportunities than we saw last year and I think that has to do specifically with the brand that we're building and the results that we're driving for our partners and our partners being great references to us so.
Speaker Change: The pipeline has grown as large pipelines going forward, a correspondingly along with the growth of the business.
Speaker Change: And the quality of that pipeline is.
Speaker Change: Is higher.
Speaker Change: Great.
Speaker Change: And let.
Speaker Change: Let me, let me talk financials for a moment here you've raised money in the past from some very deep pocketed investors.
Speaker Change: While youre going through this transition is that process near done now.
Yeah, Hey, Bill this is Ryan.
Speaker Change: We continue to focus on driving the business to positive free cash flow and.
Speaker Change: And we believe we're on the trajectory to get there the board sensitive to protecting the cap structure and minimizing dilution.
Speaker Change: So we will continue to prioritize that throughout the year.
Speaker Change: That said as you mentioned, our current shareholders have been very supportive of the business.
Speaker Change: As we continue to progress through the pivot because they recognize the enterprise value of Commerce media solutions.
Speaker Change: Notably similar companies, including our competitors have raised capital at 3% to seven X multiples of revenue so.
Speaker Change: No.
Speaker Change: We will we will raise capital as needed.
Speaker Change: And we have that support.
Great. Thank you for taking all the questions.
Bill: Thank you Bill.
Speaker Change: Thank you I would now like to turn the call back over to Don Patrick for any closing remarks.
Speaker Change: Thank you for joining our call today, we're excited by our momentum and our strategic pivot into the Commerce media, where we can leverage the competitive advantage of our owned and operated marketplaces. Thank you for your continued support and we look forward to updating you on our progress after Q2.
Speaker Change: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
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