Q3 2025 Fluent Inc Earnings Call
Speaker #1: Our call today will begin with comments from Don Patrick and Ryan Perfit, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded.
Speaker #1: A replay of the event will also be made available following the call on Fluent's website. To access the webcast, please visit the Investor Relations page at www.fluentco.com.
Speaker #1: advise listeners that certain Before we begin, I would like to information discussed by management during this conference call will contain under the Safe Harbor Provisions of the forward-looking statements, covered Reform Act of 1995.
Speaker #1: Only speak as of the date hereof. Actual results could differ materially from those stated or implied by any forward-looking statements made during this call.
Speaker #1: Due to risks and uncertainties business, these statements may be identified by words such as associated with the company's "projects," "could," "expects," "plans," "will," "estimates," and other words of similar meaning.
Speaker #1: update the information provided on The company undertakes no obligation to this call. For a discussion of the risks and uncertainties associated with to review the company's filings with the Securities and Exchange Fluent's business, we encourage you recent annual report on Form Commission.
Speaker #1: 10-K and quarterly reports on Form 10-Q. During the call, management will present non-GAAP financial information relating to media margin, including the company's most adjusted EBITDA and adjusted net income.
Speaker #1: Management evaluates the financial performance of the company's business on a variety of indicators, also present certain metrics. The definitions of most directly comparable GAAP financial measure are provided in the earnings press release that, I'm pleased to introduce Fluent's CEO, Don issued today.
Speaker #2: Good afternoon. Thank you all
Speaker #2: for joining our call today. I'm here together with Ryan Schulke, our Chief Strategy Officer and Company Co-Founder, and Ryan Perfit, our Chief Financial
Speaker #2: accelerate, and establishing an industry delays in onboarding the new partners leadership position in commerce With Patrick. transformative pivot into the rapidly media. industry. On a segment basis, commerce media solutions environment due to timing 80% year over growing commerce media year, while increasing its portion of revenue in the third quarter grew over contribution to consolidated enterprise 16% in Q3 2024 to 40% in Q3 2025.
Speaker #2: As Fluent expanded its position in the commerce media revenue from industry, as of September business surpassed an annual 30th, 2025, our revenue run rate of over 85 market share based on the consumer value we are creating for our partners in commerce media solutions advertisers.
Speaker #2: As Fluent expanded its position in the commerce media revenue from the industry, as of September, our business surpassed an annual run rate of over $85 million, with a 30% market share based on the consumer value we are creating for our partners in commerce media solutions. We grow our Q3 commerce media solutions financial quarter, if not affected by two outliers.
Speaker #2: Number one, some new partner wins launched on our platform later in the quarter than results would have been even more impressive in the factors I'd like to call on our revenue and gross profit for the quarter.
Speaker #2: These wins anticipated, and therefore had less impact forward. Number two, consistent with the advertiser pricing and budget pullback in the later part of industry, we saw some Q3.
Speaker #2: issues which you're seeing continuing in early positive commerce media solutions growth Q4. Our our owned and operated marketplaces' This appeared tied to decline. Which remain near year exacerbated by strong advertising and regulatory very pleased with the growth of the commerce 50% year over commerce media solutions becomes a bigger piece media solutions.
Speaker #2: issues which you're seeing continuing in early positive commerce media solutions growth Q4. Our our owned and operated marketplaces' This appeared tied to decline. Which remain near year exacerbated by strong advertising and regulatory very pleased with the growth of the commerce 50% year over commerce media solutions becomes a bigger piece media solutions. headwinds.
Speaker #2: pie, we expect enhanced closely And as follow. Contributing to our results and profitability to enthusiasm for commerce media solutions, we That being said, we are announced several new and expanding partnerships in the quarter with leading industry partners like Databricks, and top-tier brands including Authentic Brands Group, the world's leading sports, lifestyle, and entertainment brand owner.
Speaker #2: Partnerships like these are the cornerstone of our commerce media solutions growth. Our marketplace credentials continue to be validated by a stable of iconic global brands who are choosing to partner with us.
Speaker #2: Our growing list of world-class partners recognizes a fundamental value we are creating in building consumer loyalty, as we consistently exceed our partners' revenue and our advertisers' return on ad spend expectations.
Speaker #2: Lastly, during the third quarter, we completed a $10.3 million equity raise that included new fundamental institutional investors and insiders, which significantly strengthened our balance sheet and provided us with additional capital to continue investing in the growth of our commerce media solutions.
Speaker #2: Slide four reiterates just how excited we are about the commerce media solutions and the tremendous upside that is presenting us for our business. Commerce media solutions has a current annual run rate of over 85 million, up from 80 million a quarter continue as we capture a larger share of the ago, and we expect this growth to moment, what's most important to the business and for our shareholders is ultimately having our financial scorecard reflect our strategic vision.
Speaker #2: As a core milestone in our strategic financial pivot will market. Taking a step back for a plan, we expect our deliver trendline shift in Q4.
Speaker #2: Where Fluent's gross profit is expected to grow by double digits 10 quarters, resulting in quarter over quarter for the first time in positive adjusted EBITDA.
Speaker #2: I want to re-emphasize that our enthusiasm for our commerce media leadership position is numbers-validated. Our current second-half momentum is expected to deliver triple-digit revenue growth year over year, a testament to our success, and as we have identified, our commerce media solutions platform capability is earning us world-class brand partnerships.
Speaker #2: We believe this will result in strong Fluent revenue growth in Enterprise and a double-digit year-over-year 2026, as our strategy begins to drive overarching shift the mix improved consolidated results.
Speaker #2: As you can see by the graphs on slide five, commerce media solutions made up 40% of our total revenue in the quarter. Up from 16% in third quarter and 4% in the third quarter of 2023.
Speaker #2: Looking leverage our owned and operated business and the strong brand equity we built in the marketplace over the last 2024 ahead, we see the opportunity to better decade, as the springboard for more aggressive growth for our commerce media solutions.
Speaker #2: More specifically, as the marketplace continues to evolve, we are beginning to see a convergence between our owned and operated in commerce media marketplace. Creating differentiated opportunities with our partners in advertisers that we are uniquely qualified to address.
Speaker #2: Commerce media solutions provides highly engaged and extremely advertisers, the convergence capabilities in the commerce media experiences, and commerce media is enabling us to build unique and proprietary demand for our partners, while enhancing our competitive convergence during Q3 is that we were advantage.
Speaker #2: unique supply and demand increases our valuable audiences for our able to deepen our penetration commerce media competitive moat and rationalizes the continuing value of our owned and operated marketplace.
Speaker #2: solutions revenue will surpass owned and operated in the fourth quarter of 2024, as the main driver of consolidated revenue, supported An example of this We expect that commerce media 40% of our commerce by increased activity in commerce media around the holiday and exciting partnerships in the quarter.
Speaker #2: Which will be key drivers both of our commerce media solutions and our consolidated revenue season growth. We entered several new partnerships with Databricks, which allows us to enhance and expand our data collaboration capabilities.
Speaker #2: Which we expect to significantly enhance the performance of our commerce media also welcome the board of key leadership solutions. As a part of this partnership, we joined Fluent as head of data and agencies to drive and support the ongoing growth of our data collaboration capabilities.
Speaker #2: Also in the quarter, we expanded our existing partnership with Authentic Brands Group, a leading sports, lifestyle, and entertainment brand owner generating over $32 billion in global annual retail sales.
Speaker #2: Through this broader agreement, Fluent will support post-purchase monetization for additional brands such as Reebok, Vince Camuto, Vulcom, Champion, RVCA, DC Shoes, and more. With the goal of adding millions of annual transactions to our growing commerce media partner network.
Speaker #2: Another one of our many successful partner integrations is our strategic partnership with Rebuy Engine, a leading e-commerce personalization platform for Shopify brands. This partnership opened an expansive network of over 12,000 active e-commerce brands on the Shopify ecosystem, which is a new channel and business opportunity for us.
Speaker #2: Our integrated solution Rebuy Monetize powered by Fluent continues to perform well as this partnership scales across the Shopify platform. In fact, we saw more than 1 million ad unit sessions in September alone, representing a 79% increase on a month-over-month basis.
Speaker #2: This channel provides a catalyst of upside, as we cultivate new business relationships where we didn't previously have access. Before turning the call over to Ryan, I would like to provide a quick update on our outlook as we move through the fourth quarter and close out 2025.
Speaker #2: Regarding our future, we believe this is just the beginning. As we aggressively scale our commerce media business, we see an exciting emerging market development before us.
Speaker #2: I'll provide a thumbnail sketch today that will further delineate in future earning releases in 2026. I referenced the industry-wide strategic convergence before us, where the commerce media and the rewarded owned and operated marketplaces continue to evolve and merge, and where our loyalty marketing strategy can create competitive advantage for Fluent.
Speaker #2: We believe we are uniquely differentiated in the space to win big. By leveraging what we've learned and perfected in our rewards-grounded owned and operated properties, premium pricing, high-intent audiences, and CRM-driven optimization.
Speaker #2: Although it's early, this converging marketplace has the potential to significantly accelerate Fluent's consolidated business growth. We look forward to updating you further as we progress.
Speaker #2: Thank you, Don. And thanks to everyone for joining us today. I'll now provide a review of our third quarter results. Total consolidated revenue was $47 million in the third quarter of 2025, compared with $64.5 million in the prior year.
Speaker #2: However, commerce media solutions grew 81% to $18.8 million compared with $10.4 million in the third quarter of 2024. Commerce media solutions has demonstrated continued momentum with the annual revenue run rate from this business now exceeding $85 million.
Speaker #2: And its revenue representing 40% of our total consolidated revenue in the third quarter of 2025, compared with just 16% in the third quarter last year and 4% in the third quarter of 2023.
Speaker #2: Commerce media solutions continues to grow at a rapid pace, which is our expectation as we invest in and scale this business. With the bump in consumer spending that we see around the holiday season, we expect CMS to overtake our owned and operated business in the fourth quarter of 2025 as the main driver of consolidated revenue.
Speaker #2: This will be a key inflection point for Fluent. Owned and operated revenue decreased 52% from the prior year. And we expect the year-over-year decline of roughly 50% to continue into Q4 as we focus more of our effort on capital on commerce media growth.
Speaker #2: Media margin in the third quarter was 12.8 million, which represents 27.2% of revenue compared to 18.2 million or 28.1% of revenue last year. Commerce media solutions media margin in the third quarter of 2025 was 4.6 million or 25% of the commerce media solutions revenue.
Speaker #2: Compared with $3.5 million, or 34% of revenue, in the third quarter of 2024. As we mentioned in our second quarter call, margins were compressed in Q2 due to a strategic choice to offer more flexible pricing structures to win new partners and penetrate into new placements beyond post-transaction.
Speaker #2: We saw this strategy start to pay off in the third quarter as commerce media solutions gross profit margins increased sequentially to 22% as compared to 18% in the second quarter of 2025.
Speaker #2: Or an increase of roughly 400 basis points. As we continue to monetize these new opportunities, we expect commerce media gross margin to return to the high 20s over time.
Speaker #2: On a gap basis, total operating expense in the third quarter of 2025 totaled $14.7 million, compared with $17.2 million in the third quarter of 2024.
Speaker #2: Interest expense in the third quarter decreased to $711,00 from $1.3 million in the prior year period, based on a lower outstanding loan balance and lower interest rates.
Speaker #2: We reported a net loss of $7.6 million in the third quarter, compared with the net loss of $7.9 million in the prior year period.
Speaker #2: Adjusted net loss, a non-gap measure, was $6.5 million, equivalent to a loss of $23 cents per share. Compared with an adjusted net loss of $3.7 million, or a loss of $22 cents per share in the third quarter of 2024.
Speaker #2: Adjusted EBITDA in the third quarter of 2025 was a loss of $3.4 million, compared with an adjusted EBITDA loss of $71,000 in the third quarter of 2024.
Speaker #2: We believe we're in a good position with the growth and seasonality of commerce media solutions to achieve adjusted EBITDA profitability in the fourth quarter of 2025.
Speaker #2: And as we continue to drive our shift in revenue mix to focus more on CMS, we expect adjusted EBITDA to be positive for full year 2026 as well.
Speaker #2: Shifting now to our balance sheet, we ended the quarter with $9.2 million in cash and cash equivalents, and an additional $710,000 in restricted cash.
Speaker #2: During the quarter, we successfully completed a private placement in excess of $10 million, including both fundamental institutional investors and insiders, representing shareholder confidence in our long-term strategy.
Speaker #2: This transaction provided us with the working capital to support the continued growth of our commerce media solutions business and our strategy to drive revenue growth and adjusted EBITDA profitability in 2026.
Speaker #2: Our total net long-term debt was $26 million, at September 30th, 2025, compared with $35.6 million at December 31st, 2024. We had an outstanding principal balance of $22.6 million on our credit facility with SLR Credit Solutions.
Speaker #2: This facility provides us with $20 million term loan and a revolving credit facility of up to $30 million, to mature on April 2nd, 2029.
Speaker #2: We will continue to strategically utilize debt as a source of capital as our business scales. This has been a very exciting year to date for Fluent, as it pertains to our commerce media solutions business.
Speaker #2: Looking ahead, we believe that we are ideally positioned with a clear and defined strategy, a proven growth catalyst, and the liquidity to continue investing in commerce media solutions to capture additional share of this rapidly growing market.
Speaker #2: In addition to the enhanced revenue, margin performance, and cash flow that we anticipate as commerce media solutions scales, we remain confident in our expectation that we will achieve positive adjusted EBITDA in the fourth quarter of 2025, as well as full year double-digit consolidated revenue growth and full year adjusted EBITDA profitability in 2026.
Speaker #2: With that, we will now open the call up for questions.
Speaker #1: Thank you. As a reminder, to ask a question, please press star 11 on your telephone. And wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker #1: Our first question comes from the line of Maria Rips from Canaccord Genuity.
Speaker #3: Hi. This is Matt Ong from Maria. Thanks for taking our questions. I just wanted to ask about the rebuy partnership. I mean, the momentum you're seeing in commerce media more broadly is encouraging, and then it seems like you're seeing some strong results early from rebuy.
Speaker #3: Don, I think you said $1 million ad unit sessions in September, I believe. Could you just expand upon some of the trends you're seeing with earlier client cohorts in terms of retention and walled share post-transaction inventory?
Speaker #3: And then, as we think about ad load on these sort of post-transaction pages, is there opportunity to expand that over time, or is it pretty static?
Speaker #3: And then I just have a quick follow-up
Speaker #3: next.
Speaker #4: Yeah. Hey, Matt. Thanks for
Speaker #4: your question. I'll hit rebuy first, and then we can go to your ad load questions. So what's really exciting is we're only five months into rebuy.
Speaker #4: We signed this in June. And a lot of the first part was around the tech integration, the market integration. So we're quite excited by the momentum that it has.
Speaker #4: And it is now one of our top five media partners across our entire network. So, it has been expanding, and it's been spanning aggressively.
Speaker #4: So we're quite excited about the opportunities. As you know, that also opens up the Shopify ecosystem to us. So that they are our main channel in which to get access to over 12,000 merchants that they work with on the Shopify ecosystem.
Speaker #4: So it's a phenomenal partnership, very early days. It is expanding rapidly as you talked about. And we see even deeper expansion in other solution expansion with these rebuy as we head into 2026.
Speaker #4: So I would tell you from a standpoint of where we're at, we're quite excited. And it's very early days and a very large market that we did not have access to previously.
Speaker #4: And the trends they have a lot of small merchants, small merchants that do less under a million transactions annually. Where our enterprise sales group goes after, obviously, a large enterprise brands that do millions of transactions annually.
Speaker #4: So us, for us to work through rebuy, it's a very efficient channel, and a very successful channel for us. Does that answer your question, Matt, around trends around
Speaker #4: rebuy? Yeah.
Speaker #3: Yes. Very helpful. Thanks.
Speaker #4: Yeah. And then I didn't understand, if you just expand a little bit, you had a question around ad load and expansion of ad load.
Speaker #4: So can you just expand on that?
Speaker #3: Yeah. I guess I was just, is there an opportunity to sort of add more ad impressions on the post-transaction page? Or are they pretty saturated already?
Speaker #3: With how you guys are approaching it now.
Speaker #4: Yeah. Yeah. I understand the question, Matt. It's a good one. So ultimately, it comes down to consumer experience. And each partner we have obviously has a different type of experience that gets to post-transaction.
Speaker #4: So for example, if you were a consumer on one of our media commerce partners and you already were served something around loyalty, you already were served a survey, etc., we will then tend to lower that, the number of impressions that we extend to them in a post-transaction spot if they're not served that.
Speaker #4: We might serve two or three types of impressions. So it really comes down to the consumer experience on our partners' site. And I think it's one of our competitive advantages where we're really understand how to curate a consumer experience that's meaningful and effective, that's long-term drives loyalty for that consumer on that property.
Speaker #4: So it's very, very partner-specific. Where we are making expanding our ad serving is outside of post-transaction. So we are doing things around pre-checkout areas.
Speaker #4: We're starting to put some we have a number of different solutions that are going out before that post-transaction. And you'll hear us talk a lot more about that expansion of our very adjacent solution set in the commerce market as we get into 2026.
Speaker #3: Got it. Thanks. I'm looking forward to that. That was very helpful. And then just really quick on the Authentic Brands partnership. Is this a greenfield win, net new for Fluent?
Speaker #3: Or does scaling this relationship essentially mean that you'll be taking share from other providers?
Speaker #4: Yeah. Another great question, Matt. We had a number of authentic brands originally. And a number of the other they have obviously a portfolio of brands.
Speaker #4: Some of their other brands were with the largest competitor. So in this specific example, winning the authentic brands was a conquest over the largest competitor in the marketplace.
Speaker #4: Some of their other brands were with the largest competitor. So in this specific example, winning the authentic brands was a conquest over the largest competitor in the
Speaker #3: Got it. Got it. That's good to hear. Thanks very much, guys. I'll jump back into the.
Speaker #3: queue.
Speaker #4: Thanks, Matt.
Speaker #1: Thank you. One moment for our next question. Our next question comes from the line of Patrick Scholl from Barrington Research.
Speaker #5: Hi. Thanks for taking the questions. I just wonder if you could talk a little bit about the ad pullbacks that you talked about in the prepared remarks.
Speaker #5: Was that specific to the commerce media segment or more broadly? And then could you just maybe talk about some of the industries affected and if that's macro-driven or what could be driving that?
Speaker #4: Yeah. Hey, Pat. Thanks for the question. So I'll start at the highest level, and then I'll kind of narrow it down deeper. For the most part, for all of 2025, our partners have been what I'll call more short-term in sort of their thinking process.
Speaker #4: conservative and more Obviously, we've all had to deal with tariffs, the impact of tariffs, the lack of visibility in their businesses. And what would really come?
Speaker #4: So for the most part of 2025, we saw a very more of a shorter-term thinking around budgets and moving things around in order in terms of where the efficiency of that channel existed.
Speaker #4: So, we've seen that repeatedly. And with our partners, they quite honestly said if they had one strategy and then new tariffs came in at a different country that they were involved in, obviously, they had to sort of pivot and move. And so, in general, that's what we've seen throughout the course of the year.
Speaker #4: Specific to my comment on the earnings script, and this kind of led us to a different a very what we're really excited about on a strategic path here is there's been some traditional advertisers that have been in commerce media for a while.
Speaker #4: And they were specific things that were going on in their industry and that basically had them pull back some budgets or lower pricing as we saw in the later part of Q3 and early part of Q4.
Speaker #4: So, it was very specific to their business and the industry in which they existed. One of the things we've talked about, and one of the things we're really excited by, Pat, is the word "convergence" and how we're kind of looking at that business.
Speaker #4: So we launched commerce media knowing that our owned and operated properties provided us great competitive advantage with that first-party data asset and our performance marketing expertise of curating audiences and building those audiences in a meaningful and effective way.
Speaker #4: Because of some of this pullback, we have now started bringing our owned and operated advertisers who have not advertised before on commerce media into commerce media.
Speaker #4: So now we've been able to teach them how to buy, show them how their ROAS works, and really get them to scale. The number we gave in the earnings was that over 40% of our monetization in Q3 was tied to these new proprietary advertisers that we're bringing onto our network.
Speaker #4: So we're quite excited by that. Obviously, the supply of our media is proprietary. The three-year contracts, and we provide a unique proprietary supply for advertisers.
Speaker #4: Now we're able to provide to our media partners and say we now have a unique, competitive, and differentiated audience to connect with and make it a more meaningful experience for you.
Speaker #4: So it's still very early days around that, but we're very excited about how that owned and operated advertisers can start to purchase in a meaningful way in a pre and quite honestly, a premium pricing way to drive a differentiated marketplace for
Speaker #4: ourselves. Okay.
Speaker #3: And then on the 2026 outlook, could you maybe sort of talk about what you're seeing in terms of or what you feel needs to happen within the O&O segment, assuming that you're continuing to grow at a really solid clip within commerce media, but what needs to happen within the O&O segment to hit the profit trends and perhaps also the revenue growth?
Speaker #3: Though I guess double digits is a wide range.
Speaker #4: Yeah. Yeah. So we've stated we've grown commerce media obviously doubled it from 24 to 25. We believe we will double it again from 25 to 26 based on the wins that we've had in '25 and our pipeline and things that are coming on board early 2026.
Speaker #4: So that is Ryan talked about in his comments. That shifting of the mix and being the majority of our business is the core driver to our consolidated earnings.
Speaker #4: Both because all the revenue growth and back-to-profitability. The owned and operated business has declined significantly 50% year over year and we in our forecast anticipated to continue to decline although we are seeing we're starting to see some it exhibits some stability.
Speaker #4: It was negative 3% when you looked at Q2 to Q3. We've seen similar type of trends so far in Q4. And we think this convergence that we've talked about where we can bring our advertisers' unique advertisers on will help provide some of that stabilization.
Speaker #4: But for the forecast and the guidance that we're giving you, we continue to project that that owned and operated business will decline.
Speaker #3: Okay. And then back to the commerce media side, you talked about the high 20% margin range. From its current level, I guess how quickly do you sort of do you anticipate achieving that type of level?
Speaker #3: I mean, if you bring on new partners and you might have a minimum guarantee or a lower initial margin, but I guess, yeah, just over the longer term, how does that sort of lend higher?
Speaker #4: Yeah. From a macro perspective, Pat, we obviously you've seen an increase from Q2 to Q3. We anticipate and we are seeing an increase a similar increase from Q3 to Q4.
Speaker #4: The margins have been lower. Margin drivers have been what we talked about: new solutions that we brought on that were scaling. We also have provided some short-term incentives to get some partners onto our platform in terms of implementing different revenue splits or bonuses.
Speaker #4: And then the call the mix of what I'll call enterprise channel, which is last piece that's affecting that is what I'll working directly with these brands.
Speaker #4: And then also the rebuy is a channel partnership and we because obviously obviously have lower margins in that they're sharing those margins with us as a channel partner.
Speaker #4: of it's mix, but a lot of it So some has to do with that scaling that we have around those new solutions and eliminate and the short-term incentives start to wear off.
Speaker #4: So we see us getting into 20 in the late 20s and continue to incrementally increase on a quarter-by-quarter
Speaker #4: basis. All right. Thanks, Pat.
Speaker #3: Okay.
Speaker #1: Thank All you. One moment for our next
Speaker #1: question. Our next question comes from the line of Bill Desolen from Management. Tiredon Capital
Speaker #3: Thank Goods website goes on the Dick's Sporting it and you complete the purchase, Thank you. you. When one Fluent. So my question for you is did we read that correctly?
Speaker #3: First of all, is Dick's Sporting Goods now a client that you've not referenced in your release? It references powered by HERE. And secondarily, if that's accurate, when did that relationship begin?
Speaker #3: begin? Yep.
Speaker #4: Thanks, Bill. Thanks for the question. So we're often not allowed to disclose our partners without their approval from a marketing perspective, but you are absolutely right, Dick's was one of the large enterprise clients platform in Q3.
Speaker #4: And as you know, Dick's and the other ones that world-class brands. We're really proud to work with also want to thank you for supporting them.
Speaker #4: And as you know, Dick's and the other ones that world-class brands. We're really proud to work with also want to thank you for supporting them. that we brought onto our we brought on, they're iconic really exciting win for us.
Speaker #4: And I Back in short time. So getting that us in a very having proved out our value type of win back and proposition with that is a very obviously a very exciting opportunity for us and one we can continue brand.
Speaker #4: We are working with some of the largest and most sophisticated brands in the world. And we're quite proud that a validation of a to leverage with our Dick's coming after choosing someone else coming back to us really reinforces our leadership position in Fluent and also the leadership position we have in commerce media that we built in a very, very short time frame.
Speaker #4: Have you been on any other
Speaker #4: websites for us, And.
Speaker #4: Bill? Possibly a few,
Speaker #3: but let's stick with this one for a Okay.
Speaker #3: moment if I may. So when
Speaker #4: Good.
Speaker #3: convert over? It did this actually sounds like it converted from your largest competitor to you all. When did that conversion take place?
Speaker #4: September. So it came on the very end of Q3. It took place in
Speaker #3: So that did not have a great influence on the third quarter results
Speaker #3: then?
Speaker #4: That's right. I mean, most
Speaker #4: of the commerce 80%. As you know, we've clearly signaled that we expect it to grow over 100% for the year and we believe we are still expected to get there.
Speaker #4: There's some fluctuations quarter by quarter and that's a good example of a fluctuation they came on. If they came on in July or August, it would have had a bigger impact on our financials.
Speaker #4: A delay that is primarily again, we have to match up to what our partners need and their timing around how they can implement in their tech roadmap getting live in September was certainly affected Q3, but going forward for the life of the contract, now we have them every single
Speaker #4: quarter.
Speaker #3: That's helpful, Don.
Speaker #3: And clearly, Dick's is a high-volume retailer. But we don't have an understanding or a perspective of how their volume would match up relative to the rest of your business.
Speaker #3: So maybe just taking what they did in the last year, with the competitor, if they were to repeat that in the next 12 months, what proportion of your commerce media solutions business would they represent?
Speaker #4: Yeah. It's a good question, but there'll be a top five partner for us from a session standpoint. So between rebuy, and Dick's, we've added two top five partners in that quarter scaling.
Speaker #4: Rebuy obviously came on in June, but really scaled throughout the third
Speaker #4: quarter. Okay.
Speaker #3: That's helpful. And you kind of addressed this, I think, but the 80% growth that you had in the third quarter in Commerce Media Solutions didn't match with the triple digits that you've talked about.
Speaker #3: And did you essentially just say that it was simply a timing issue of not having a couple of clients come on as quickly as you had anticipated?
Speaker #4: Yes. Take a step back and we'll quarter by quarter we'll fluctuate based on the timing of when things go live on our platform. And we anticipate us being continuing to double from 24 to 25.
Speaker #4: And as I said, we feel very good about doubling again in 26.
Speaker #3: That's helpful. And then the 400 basis points sequential gross margin improvement in that business, that was simply tied to the rolloff of some initial incentives with some larger customers.
Speaker #3: Is that what we understood your earlier comments to
Speaker #3: explain? Yeah.
Speaker #4: It came from what I'll call all three bills. The first is obviously we had some other commerce media solutions that were investing in scaling.
Speaker #4: And obviously, much like the post-transaction business when we started it, the margin was lower and as we scaled, it got to higher margins. So some of that was new solutions that started to show better margins.
Speaker #4: Some of it was some of these incentives that we put in place. And then even though rebuy has grown significantly and is a top five, overall the mix of what I'll call channel partnerships versus enterprise, the enterprise mix was larger, in Q3.
Speaker #3: And then given that some of these new CMS solutions that you're ramping kind of not in the post-transaction arena, you must have some pretty meaningfully frankly pretty exciting expectations for those if what you were doing on the front end was enough to influence the margin negatively in Q2.
Speaker #3: And then swing more favorably in Q3. Is that correct or are we reading too much into
Speaker #3: that? You're right.
Speaker #4: You're right about your assumption, Bill. Again, we continue to see that we look at the margins overall, but we also look at the margins within each solution.
Speaker #4: In terms of what's the target? If it's below, it's an investment. If it's that, we have very strict margin restrictions in terms of how we look at the businesses and scale the businesses.
Speaker #4: So we consciously make investments in certain areas either to get to critical mass or win a large brand that we know we can leverage to get more business from.
Speaker #3: Okay. And I realize I'm taking probably more time than I should here, but if that's the case and you're able to scale that quickly here from Q2 to Q3, would the implication be that in '26 these new solutions that hopefully you'll be talking more about in future quarters, that those will be needle movers in '26?
Speaker #4: Yes, but we also will add other adjacent solutions also, Bill. So the answer is yes. The ones that we've started that we're scaling will be needle movers in 2026.
Speaker #4: Absolutely. But we'll also we are in a fortunate position that as we've talked about, commerce media is exploding in growth. So there's lots of tailwinds and our ability to drive superior results compared to our competitors with our partners obviously we're able to start to move into other solutions for them and help them, which makes us more strategic and also obviously allows us to drive better revenue, better margins.
Speaker #4: So we're going to balance those two as we go and we balanced them in 2025. We'll balance them again in 2026.
Speaker #3: So So Don, then if we read that forward, that we would be we need to expand our horizon and not be so narrow-minded as thinking that commerce media solutions is really primarily or totally a post-transaction business.
Speaker #3: You're building a lot around that is what you're saying and that this is going to we need to be broader in our thinking in terms of what you're going to be doing for your customers in that division.
Speaker #4: Yeah. Absolutely. Right. Bill, it's a broader opportunity and a much larger share of the market. Post-transaction is where we got in. It quite honestly is the hardest place to get access to because it's the most valuable place for a commerce partner when a consumer has their credit card out and buying.
Speaker #4: It's also the most valuable piece for our advertisers. So we got into the right spot. We've been able to prove our results and get our brands and we are going to now leverage that into adjacent solutions by leveraging the technology investment and the data investment that we've already built up over the years.
Speaker #4: So it will allow us to be stickier with our partners and also more valuable and
Speaker #4: strategic. Great.
Speaker #3: Thank you. I have a couple of more questions if I may. First of all, that the owned and operated essentially stabilized as you pointed out this quarter sequentially.
Speaker #3: And that sounds like it's continued in the fourth quarter. What are the dynamics that are leading to this positive change?
Speaker #4: Yeah. Yeah. It's always a number of factors, Bill. That business has obviously been hampered by the FTC settlement and our limited ability to get to the media or diversified media platforms were very concentrated.
Speaker #4: Number one was that those platforms have been relatively stable, which has helped us. But I think the more important play here in the strategic play is the convergence that we've been talking about.
Speaker #4: We've been able to bring we've been able to help bring our owned and operated advertisers that have not previously been an advertiser in commerce media we've been able to bring them in.
Speaker #4: And that also allows us to leverage our relationship across both owned and operated and commerce media with these advertisers. So, that clearly allows us to be looked upon as a more strategic partner for them, which allows us to manage across those two different platforms more effectively.
Speaker #4: So I think a lot of it has to do with obviously the platforms but more importantly we're able to now provide proprietary demand for our and exclusive demand to our media partners at the same time having that media partners and providing exclusive supply to these advertisers.
Speaker #4: So it's that flywheel that we believe is the core of the assets of the owned and operated business that we've leveraged to get into it.
Speaker #4: We've said it's a huge competitive advantage to us. It has proven out so far from us being able to deliver better results. And now we're starting to see the flywheel around how we can provide even more differentiated solution and marketplace.
Speaker #3: Congratulations on that. One additional question, please. So the nine-month adjusted EBITDA is listed in the release as a negative $9 million. But you've said that the full year is going to be positive.
Speaker #3: So the implication is that we are doing this right? The implication is that the fourth quarter adjusted EBITDA needs to be at least $9 million plus.
Speaker #4: Yeah. Bill, I think you read it wrong. We said that our Q4 adjusted EBITDA will be
Speaker #4: positive. Okay.
Speaker #3: You've not said that the full year will be positive. Next year, the full year will be positive.
Speaker #4: Yes. We said in 2026 the full year. That will be positive. Yes. Driven by triple-digit growth in commerce media. And really shifting we're at the point where it's going to be greater than 50% of our business.
Speaker #4: And that commerce media growth will now start to drive the consolidated results of the company.
Speaker #3: Great. Thank you for clarifying my error. And congratulations on the turn that's happening.
Speaker #4: Yeah. Thank you,
Speaker #4: Bill. Thank you.
Speaker #1: At this time, I would now like to turn the conference back over to Don Patrick for closing
Speaker #1: remarks. Thank you.
Speaker #4: We remain bullish about our prospects and are very excited about the momentum we're generating as we lean into a significant and what we believe is a mega growth opportunity in commerce media.
Speaker #4: As for the numbers we want to emphasize for clarity, we expect fluent to achieve consolidated double-digit revenue growth in 2026 driven by triple-digit growth in commerce media solutions, as well as adjusted EBITDA profitability in Q4 2025 and full year adjusted EBITDA profitability in 2026.
Speaker #4: Thank you for joining our call today. We look forward to updating you on our progress in the next earnings release.