Fluent, Inc. Aktie

Good afternoon, and welcome. Thank you for joining us to discuss Fluent's First Quarter 2026 Earnings Results. With me today are Fluent's Chief Executive Officer, Don Patrick; Chief Financial Officer, Ryan Perfit; and Chief Strategy Officer, Ryan Schulke.

Our call today will begin with comments from Don Patrick and Ryan Perfit, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded. Additionally, there is a slide presentation that accompanies today's remarks, which can be accessed via the webcast and is also available on Fluent's website. A replay of the event will also be made available following the call on Fluent's website. To access the webcast and slide presentation, please visit the Investor Relations page at www.fluentco.com.

Before we begin, I would like to advise listeners that certain information discussed by management during the conference call will contain forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements made during this call only speaks as of the date hereof. Actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with the company's business. These statements may be identified by words such as expects, plans, projects, could, will, estimates and other words of similar meaning. The company undertakes no obligation to update the information provided on this call. For a discussion of the risks and uncertainties associated with Fluent's business, we encourage you to review the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

During the call, management will also present certain non-GAAP financial information relating to media margins, adjusted EBITDA and adjusted net income. Management evaluates the financial performance of the company's business on a variety of indicators, including these non-GAAP metrics. The definitions of these metrics and reconciliations to the most directly comparable GAAP financial measures are provided in the earnings press release issued earlier today.

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

Good afternoon, and thank you all for joining our call today. I'm here with Ryan Schulke, our Chief Strategy Officer and Company Co-Founder; and Ryan Perfit, our Chief Financial Officer.

We entered 2026 with a clear strategy, strong momentum and a commitment to deliver. Our strategy is to aggressively invest in a high-growth, high-margin commerce media industry, leveraging the competitive advantages of our owned and operated marketplaces as our foundation. We've built a leading, highly differentiated Fluent brand with a clear and compelling purpose, delivering superior, measurable performance outcomes for our commerce partners and advertisers. We are establishing a leadership position in our industry, and we are just getting started. Q1 is proof that our strategy is winning.

Let me take you through the quarter. Commerce Media is the lead story of this company and where we will deliver shareholder value. And Q1 gave us another powerful and strategic validating chapter. The consumer and our partners are verifying that Fluent's Commerce Media Solutions is redefining the industry performance standard. That is the foundation we can and will build upon.

Commerce Media Solutions delivered revenue of $25.9 million, 104% growth year-over-year. Gross profit grew 78% Commerce Media now represents 58% of our total consolidated revenue, up from 23% just 4 quarters ago. This is especially encouraging, given that the first quarter is seasonally our slowest of the year. The first quarter marks our ninth consecutive quarter of strong double to triple-digit Commerce Media revenue growth in a market defined by an incumbent with a decade head start. Not an easy place to establish your equity, yet we are doing just that. The consistency of that track record is what gives us confidence and what should give you confidence that this is not just momentum, it is a trajectory.

Think about that for a moment. In 4 quarters, Commerce Media went from less than 1/4 of our business to more than half. That is not incremental progress. This represents strategic transformation. Moreover, this is just the ground floor. Our strategic plan is revealing business adjacencies that our partners are leaning into because we are solving for unmet consumer needs that sit at the top of their boardroom agendas. That is the road to long-term strategic partnerships.

During the quarter, we entered into partnerships with Wyndham Hotels and Squire, a barbershop booking platform, 2 new verticals that validate the breadth of demand for what we are building. The platform is working, the partners are growing, the numbers prove it. And now we own a differentiated leadership position in the commerce media space.

On a consolidated basis, our Q1 2026 results were as follows: Revenue of $44.9 million, that is down 19% versus Q1 2025, but that figure includes $10.9 million from Call Solutions in 2025, which we divested in January. Excluding the impact of the divestiture, revenue was down 3% year-over-year. Importantly, Commerce Media Solutions continued its strong revenue momentum in the first quarter with a 104% increase year-over-year, representing 58% of total consolidated revenue compared to 23% in the first quarter of 2025.

Gross profit of $10 million, a decrease of 12% compared to Q1 2025 and representing 22% of revenue. Our Commerce Media gross profit grew 78% year-over-year, and the growth engine of this company is performing. Gross profit on our aggregate continuing businesses declined 7% year-over-year.

Adjusted EBITDA of negative $3.6 million compared to a negative $3.1 million in Q1 2025. Our cost discipline is holding. Excluding a $2.4 million benefit from the divestiture, operating expenses are down over $1.4 million year-over-year.

Slide 4 helps to visualize the growth of Commerce Media Solutions revenue over the last 2 years. As you can see in the graphs on this slide, Commerce Media revenue in the first quarter of 2024, 1 year after its launch, accounted for just 10% of our total revenue during that period. Fast forward to the first quarter of 2025, and Commerce Media Solutions contribution to total consolidated revenue increased to 23%, representing an increase of 100% in Commerce Media Solutions revenue when compared to Q1 '24.

In the fourth quarter of 2025, Commerce Media Solutions broke the 50% threshold as the primary driver of total consolidated revenue in the quarter. And as of the first quarter of 2026, Commerce Media Solutions revenue accounted for 58% of the total consolidated revenue. Our Commerce Media growth has been encouraging to put it simply, and we expect this trend to continue as we scale.

I'd like to take a moment to reiterate the market opportunity that we're seeing for Commerce Media and why this offering is at the core of our business and growth strategy. The U.S. Commerce Media market is expected to reach $100 billion by 2027 and is expected to grow at a compound annual growth rate of 21% from 2023 to 2027. Our Commerce Media Solutions business demonstrated triple-digit growth in the first quarter and is currently operating at an annual revenue run rate of $110 million, positioning us well to capture new opportunities and market share as the Commerce Media market continues to expand.

At the core of our Commerce Media platform is our post-transaction solution, and Q1 demonstrated we are entering a new phase of maturity and scale. Post transaction is structurally one of the most valuable moments in the consumer journey. The consumer has just completed a purchase, they are engaged, their credit card is out and they are receptive to relevant offers. That moment is premium real estate for advertisers. And Fluent through our post-transaction platform has built meaningful scale at that moment across a growing network of commerce partners.

What makes our post-transaction solution increasingly powerful is the network effect at its core. More commerce partners means more consumer touch points. More touch points means more value for advertisers. More advertiser demand means stronger yields and performance for commerce partners. That flywheel is turning and each quarter, it turns faster, earning Fluent real market credibility.

Q1 Commerce Media performance is the financial proof that our post-transaction platform is scaling correctly. Revenue more than doubled, gross profit grew 78%. The trajectory into Q2, Q3 and Q4 and the second half is our strongest seasonal period gives us strong confidence in the full year outlook we have planned.

As our post-transaction platform continues to scale, we are making targeted investments outside of traditional retail and in the Commerce Media adjacencies that deepen our value to the partners who know us best as well as those potential partners that are seeking a differentiated outcome. During the first quarter, welcomed Wyndham and Squire as new commerce partners, 2 well-recognized brands that chose Fluent because of our proven performance and the quality of our platform. These partnerships are in line with our broader strategy to expand beyond traditional retail platforms, and we look forward to penetrating new verticals to expand our addressable market.

As demand for Commerce Media offerings grow, our commerce partners are asking us for more, and we are responding. We are currently developing and piloting adjacent opportunities that extend our Commerce Media Platform beyond the post-transaction moment and into new stages of the consumer journey. These are demand-driven extensions validated by our existing partner relationships, not speculative bets. Our pipeline is strong, and we look forward to updating you on the new opportunities and partnership wins in future quarters.

Before I turn the call over to our CFO, Ryan Perfit, I want to provide an update on our owned and operated business. Our owned and operated marketplace business has faced persistent headwinds, an uneven competitive landscape and inconsistent industry compliance standards that after 3 years, we are treating as a structural reality rather than a temporary condition. We are not managing to those headwinds. We are managing through them.

What I want to focus on is how we're responding strategically. We made a deliberate decision to reposition our owned and operated marketplace as the core enabler of our Commerce Media Platform. The first-party consumer data, intent signals and audience relationships that flow through our owned and operated properties are the exact assets that differentiate Fluent's Commerce Media offering in the market. That infrastructure takes years to build and it is proprietary. We have it, and we are putting it to work.

Our owned and operated marketplace is operating under 2 mandates. First, it is a disciplined gross profit contributor. We are managing it to margin. Second, it is a live test-and-learn engine that feeds consumer intelligence directly into Commerce Media, improving targeting, attribution and yield across the platform.

Bottom line, owned and operated is directly contributing to our aggressive Commerce Media growth. We are consciously redeployed owned and operated demand to Commerce Media. The growth we are driving in Commerce Media is not just expected to offset owned and operated pressure, is expected to more than replace it at better margins and with stronger long-term durability.

With that, I'll turn the call over to Ryan Perfit to take a deeper dive into our financial results in Q1.

Thank you, Don, and thanks to everyone for joining us today. I'll now provide a deeper review of our first quarter results.

Total consolidated revenue was $44.9 million in the first quarter of 2026 compared with $55.2 million in the prior year period. The year-over-year decline primarily reflects the January 2026 divestiture of our Call Solutions business. As Don noted, revenue from our aggregate continuing businesses declined approximately 3% year-over-year as Commerce Media Solutions growth largely offset the expected contraction in our owned and operated business.

As Don also noted, Commerce Media Solutions represented 58% of total consolidated revenue in the quarter compared with 23% in the first quarter of 2025 and above 50% for the second consecutive quarter. Commerce Media Solutions revenue of $25.9 million represents 104% growth compared with the first quarter of 2025.

Revenue from our owned and operated business continued to decline in the quarter, which was in line with our expectations as we continue to prioritize Commerce Media. In the first quarter, owned and operated revenue decreased 49% to $15.7 million compared to $31.1 million in the first quarter of 2025.

Media margin in the first quarter was $14 million, representing 31% of total consolidated revenue compared with $13.7 million or 25% of revenue in the prior year period. Commerce Media Solutions media margin in the first quarter of 2026 was $7.7 million or 30% of Commerce Media Solutions revenue compared with $3.1 million or 25% of revenue in the first quarter of 2025.

Commerce Media Solutions gross profit was $5 million in the first quarter of 2026, an increase of 78% compared to the first quarter of 2025 and representing 19% of revenue. As we said last quarter, we expect our gross margin on Commerce Media Solutions to return to the mid-20s over the course of 2026 as our newer partnerships and placements move beyond early term incentive periods.

Total operating expense in the first quarter of 2026 totaled $12.3 million compared with $16.1 million in the first quarter of 2025. The reduction in operating expenses benefited from a $2.4 million noncash gain on the sale of Call Solutions and a reduction of other operating expenses of $1.4 million, reflecting our continued cost discipline.

Interest expense in the first quarter decreased 31% to $605,000 from approximately $880,000 in Q1 2025, reflecting a lower daily average outstanding loan balance on the new facility with Bayview.

We reported a net loss of $5.4 million in the first quarter of 2026 compared with a net loss of $8.3 million in the prior year period. Adjusted net loss, a non-GAAP measure, was $5.9 million or a loss of $0.19 per share compared with an adjusted net loss of $6.7 million or a loss of $0.31 per share in the first quarter of 2025.

The acquisition-related line in our non-GAAP reconciliation reflects the $2.4 million noncash gain on the Call Solutions divestiture, which is excluded from adjusted net loss and adjusted EBITDA, another non-GAAP measure, as a nonrecurring item.

We recognized adjusted EBITDA loss of approximately $3.6 million in the quarter compared with a loss of $3.1 million in the first quarter of 2025. As we stated on our fourth quarter call, we believe that we are well-positioned to deliver double-digit consolidated revenue growth on aggregate continuing businesses and improved full year adjusted EBITDA in 2026, supported by the continued growth of our Commerce Media Solutions business.

Shifting now to our balance sheet and cash flow. We had $10.3 million in cash and cash equivalents at March 31, 2026, compared with $12.9 million at December 31, 2025. Accounts receivable declined from $46.7 million at the year-end to $31.8 million at March 31, reflecting normal Q1 seasonal collections and the divestiture of Call Solutions.

AR collections drove positive operating cash flow of $5.1 million in Q1 of 2026 compared with $2.1 million in Q1 of 2025, a $3 million improvement year-over-year. That operating cash flow funded a net $6.3 million paydown on our revolving facility, driving a reduction in net debt from $30.8 million at year-end to $23.5 million as of March 31, 2026.

To recap, our first quarter results were in line with expectations and continue to reflect the ongoing transformation of our business mix. Commerce Media Solutions grew 104% year-over-year and represented 58% of total consolidated revenue, up from 23% in the first quarter of 2025. Although Q1 is our seasonally softest quarter, operating cash flow was positive and the continued growth of Commerce Media Solutions, coupled with OpEx discipline, will drive adjusted EBITDA improvement as the year progresses.

With that, I'll turn it back over to Don.

Our view on 2026 has not changed. First quarter demonstrated strong execution against our plan, and it gives us confidence in what the rest of the year will deliver. We entered Q2 with Commerce Media at 58% of revenue and growing. And we see Q2 revenue similar to Q1 with improving margins. This will represent Fluent's returning to year-over-year revenue growth from aggregate continuing businesses in the quarter. And the strongest seasonal quarters of the year are ahead of us in the second half with an adjacent solution pipeline that is responding to real partner demand.

For full year 2026, we expect double-digit year-over-year consolidated revenue growth on our aggregate continuing businesses, driven by Commerce Media acceleration in the second half. We expect expanding gross margins as our highest margin business becomes an increasingly dominant share of the mix. And we expect an improvement in adjusted EBITDA as that revenue growth and margin expansion flow through the P&L.

Q1 is our seasonally softest quarter. The story of 2026 is written in Q2, Q3 and Q4. We are confident in what those quarters will show. Q1 delivered what we said it would. Commerce Media grew 104%. Revenue was nearly flat ex-Call Solutions. Cost discipline continued. We are planning conservatively around strategic repositioning of our owned and operated marketplaces while we focus our resources against our strategy and growth.

9 consecutive quarters of strong double to triple-digit year-over-year Commerce Media growth, 58% of consolidated revenue and climbing, a post-transaction platform that is earning more partner trust every single quarter adjacent solutions being pulled by market demand and the strongest part of the year is still ahead.

The strategy is right. The platform is built. The numbers are beginning to show what this company is becoming. We are energized by what lies ahead, and we look forward to demonstrating it quarter-by-quarter.

With that, we can now open the call for questions.

[Operator Instructions] It comes from Maria Ripps with Canaccord.

I just wanted to ask about some of the pricing dynamics within your Commerce Media segment. I think you mentioned sort of extending price incentives to some of the newer clients. Can you maybe just talk about if those sort of incentives have been stabilizing as clients sort of mature on the platform? And is that one of the key variables for the segment to return to the mid-20s sort of gross margins? Or what are some other puts and takes for you to return to that level of gross margin?

Great. Thanks, Maria. Thanks for the question. So we did talk about that in the last earnings release. And the answer is, yes, we did put incentives in place early on as we were scaling the Commerce Media business and started -- once we built up our brand, we stopped using those as part of our sales initiatives. So they have stopped in terms of how we win business, but we are seeing them roll off and we'll see them roll off throughout 2026.

So what you're seeing as part of the margin is really 3 things. Some is some of the incentives that are left. You're also seeing some of the investments that we're making in those adjacent Commerce Media solutions that haven't scaled yet and obviously are at lower margin while we get to scale. And some of -- a very small amount are some of the new partners that are coming on that have come on later in the quarter that we hadn't yet brought to the projected yield yet. So those are the 3 pieces that are in play. But you're absolutely right. We use those incentives when we started launching in 2023, and they are not part of our sales strategy or portfolio right now.

Got it. That's very helpful. And then secondly, you mentioned several newer verticals in addition to retail. Can you maybe talk about sort of the time line of scaling those verticals? I know you mentioned that you added new clients across 2 different verticals here. I guess, is that largely a function of expanding your media partners or there are maybe other factors there? It just would be great to hear sort of your thoughts on how you see sort of that developing over the next couple of quarters.

Yes. Great. Thanks, Maria. So as you know, retail has been our primary focus, and that is where we obviously spent all -- most of our investment in terms of sales and marketing and winning those great partners. And you can see the proof points in how we've been able to scale that business. We've gotten into ticketing. We're in early stage of grocery. And with the Wyndham, that is our entry into travel and Squire, obviously, into more of a marketplace platform.

So we're excited specifically about Wyndham and Squire, not only because they get us into new verticals, but which is strategic and obviously proves that our platform can get outside of retail and start to scale. But equally important, these partners already were in post transaction, and they chose Fluent. So that was very much a performance story that them coming over to us.

So our strategy on the sales side is very similar on retail. We land a premier partner like Wyndham. We prove out and demonstrate that we can provide superior results that exist in the market. And then we leverage that into broader wins across that category. So you'll see us as we expand into 2026, you'll start to see the wins coming specifically around those other 2 verticals that we're in. You'll also see grocery starting to pick up also.

That will also diversify a little bit of the seasonality that we have. We'll still for the next couple of years, be heavily seasonal towards the second half. But as we expand out in other verticals, some of that seasonality will go away.

And our next question comes from Patrick Sholl with Barrington Research.

Just on some of the comments that you made around expanding the number of partners and how that kind of contributing to a flywheel on expanding, I guess, the roster of advertisers. Could you maybe like talk about the additional scale you need and like maybe about the categories of advertisers that are maybe not spending as much as you think would warrant for the type of inventory that you deliver?

Pat, thanks for the question. Heavily in the retail is obviously cash back, streaming services, things that we've talked about before, credit card offers, et cetera. As we start to expand in these other verticals, some of them are very much like retail, and they play into the retail bucket. Travel is not, which is one, obviously, we're very excited about. You're going to start to see different verticals based on that audience. And also, we'll have additional placements with Wyndham outside of the transaction. You'll also see us in other areas of their commerce platform. So that will also bring in diversification across that.

In -- on the Squire side, what's exciting about that is that it's very much of a very specific age and demographic audience, which will open up a number of different verticals that we are just really sort of testing and learning right now. So we've been -- as you know, our advertiser base is diversified across -- there's no one specific advertiser that has very -- that has a high concentration that we have to report against. But we do, from a retail perspective, heavily into cashback offers and into streaming that we'll start to diversify away from.

Okay. And then I guess just on the turnaround in the Commerce Media margins back into the mid-20s. I guess, are you kind of seeing that shift in strategy away from the promotional margin kind of affecting the, I guess, client acquisition? Or I guess -- I guess maybe just a general -- maybe any comments on the general competitive environment, customer acquisition?

Yes. Yes. Thanks. It's a great question, Pat. So specifically, and I think this is what we're most excited about, we -- and you see a little bit on our investor presentation. We have proven our ability to drive superior results for our partners and advertisers compared to the competition, right? So companies that have -- partners that have left our competitors that have come to us, we've been able to do head-to-head tests, and we've been able to prove not only do we provide superior revenue to the media partners we're working with, but we'll drive better quality audiences to those advertisers embedded return on ad spend, which in turn brings them back to buy more onto the platform.

So now that we've proven that out, we -- as you guys know, we started in 2023. We have great results around and case studies around proving that out, and that's how we lead. We lead specifically, we're looking -- we can drive the best results across the industry. And if you're looking for a commerce partner that can drive results and also help manage other places across your commerce sites and also drive -- help you drive the strategy, we are the right partner for you. If you're looking for more of a tech play or a with a SaaS tech play, then obviously, there are other competitors that are out there that are better in terms of how we position ourselves.

Regarding the competitive environment, and this is where I think the adjacent solutions play significantly, our partners are asking us to get -- and it's a demand-driven helping them get into other pieces and other adjacent sites. And the more we can get there, the stickier we are, and it becomes a much more strategic relationship. And that is why we keep talking about those adjacent solutions and the importance to that.

So we have a very big competitor that is very aggressive. We have smaller competitors that sort of compete on price. We feel great about our brand and how we compete on results and can win when we're on our playing field and we're with someone who matches up to our solutions and our capabilities.

[Operator Instructions] Our next question is from Eric Martinuzzi with Lake Street Capital Markets.

Congrats on that terrific triple-digit growth rate on CMS. That 104% was ahead of where I was modeling things. I wanted to ask a couple of questions on partners, in particular, to the extent you can talk about it. The Wyndham implementation, just wondering if you're -- any lessons learned sort of hot takes from your diving into travel/hospitality in helping that partner ramp up.

Eric, welcome. It's exciting to have you here. So thanks for the question. This is where I'm going to go back to our owned and operated strategy and why it's such a competitive advantage. So if we didn't have that owned and operated business, I think your answer, Eric, would be there'd be a learning curve to understand that audience, understand how they behave, understand how we build a meaningful relationship and be able to provide the right offer at the right time.

Having that owned and operated business and having 15 years of understanding how to curate audiences we were -- we assumed that Wyndham would take a little bit of a time to scale from a results perspective. And actually, it launched right out of the blocks very strong. So it is a different audience. It does react differently than a retail, but that's where the owned and operated comes to a huge competitive advantage to us.

I'm going to stay on this topic for a second because it's so relevant. If we start to work with a partner like Wyndham and say we want to start to do creative testing, we want to start to do different offers. It takes time, right? It takes time for approval, it takes time to get the offer in, it takes time to get the results back. On our owned and operated, we can test within hours, and we can have results in days, and we can use those results to inform how we how we move our Commerce Media strategy. So that has been a huge competitive advantage as we get into new verticals there.

Okay. And then penetrating a vertical, a lot of times, people in the industry in saying vertical know each other. What's the dynamic as far as maybe using one account as a reference to penetrate another account? Is that sort of, hey, these people don't talk to each other? Or is there a potential opportunity?

It is spot on there. That is our best sales strategy is to have our current partners talk to our prospects and partners. And that is absolutely why we like our land and expand. We make sure we get results. We make sure that partner is incredibly satisfied and then we use them. And they're actually sometimes they're willing to talk. So yes, they all talk to each other, CMO market retail media network heads of that, they can move around and they do move around, and it is a very tightened group in terms of how they talk.

Okay. And then you talked about some of the -- as far as the artificial -- not artificial, but the pressure on the current CMS gross margins. You talked about some incentives haven't run their course yet, some subscale adjacent solutions and then some new partners later in the quarter. I was wondering the Rebuy with somebody that just signed up in 2025, and they're more of a kind of a reseller type margin. I was wondering if that also is a factor in the pressure on CMS gross margin?

Yes. You're absolutely right, Eric, we do -- because of the partnership and strategic partnership, we do have a lower margin with the -- with what we're doing with Rebuy, but it hasn't been -- it's not a major factor. That -- we're very happy with that partnership. It continues to grow, and we think there's a lot of opportunity and road forward to continue to grow that relationship in revenue and both strategic position, but that is not a big factor on the margin.

The major factor in that margin was the fact that the incentives rolling off and the new adjacent solutions that we are getting -- we have a specific number of adjacent solutions that are in -- that are out there working with our partners. They're lower margin as we scale up the business, similar to the way post transaction was when we launched in 2023.

And as I see no further questions in the queue, I will conclude the Q&A session and conference for today. Thank you for participating, and you may now disconnect.

Good day, and welcome to the iAccess Alpha Virtual Best Ideas Spring Investment Conference 2026. Our next presenting company is Fluent, Inc. [Operator Instructions] I'd now like to turn the floor over to today's host, Mr. Don Patrick, CEO; and Mr. Ryan Perfit, CFO of Fluent, Inc. Gentlemen, please go ahead.

Thank you very much. We're excited to be here, and thank you for joining us today, where we will walk through a quick overview of Fluent and then look forward to any questions that you might have around our business. At the highest level, Fluent is a customer acquisition company that drives new consumers to world-class brands. We have a solution in the Commerce Media space that not only drives significant new consumers to our brands, but also unlocks a brand new incremental revenue stream for our partners.

Best way to give you an example of our solution is to just -- is walk through what one is. If you went on the DICK'S Sporting Goods site and you were purchasing -- if you're purchasing sneakers and you're checking out, you can see on the left-hand side of the slide, after you fill out your credit card information, after you fill out your shipping information, before you get the confirmation page from DICK's, there will be an ad that will overlay that will say congratulations because of this purchase and you are now eligible to win and sign up for Disney+, could be Hulu Streaming Services, could be free shipping, et cetera. And that would then connect you to Disney+ and then get you to sign up for that offer. I'm sure many people have seen that in their shopping experiences, especially around the holidays. So that is our solution. We have started that in -- really in the early part of 2023 and have been significantly growing that throughout the time frame.

I'll take a step back and just talk about Commerce Media specifically, and then I'll get into more detail of Fluent and why we are so excited about this opportunity and our differentiation in the marketplace. So Commerce Media is really bursted onto the digital advertising stream in the early 2020s. It is considered the third transformative way...

[Technical Difficulty]

Apologies, ladies and gentlemen. We appear to have lost our speakers momentarily. One moment please, where we'll try to reconnect. Once again, ladies and gentlemen, one moment please, while we reconnect our speakers.

Okay. We are back. Sorry for that mix up, but we got disconnected from the conference. I'm not sure where we got disconnected, but I was starting off that obviously Fluent is, at the highest level, a digital performance management company, focused on customer acquisition for world-class brands. Our new solution allows us to participate in the fastest-growing part of digital advertising called Commerce Media and unlocks brand new incremental revenue streams for our partners.

The slide we have up here, I'm going to get a little bit into Commerce Media first and why it's so exciting, and then I'll break it down into Fluent and where -- why Fluent is uniquely positioned to take advantage of this. So Commerce Media is considered the third transformative wave across digital advertising. The first was search with Google. Second was paid social with Meta. It really addresses 3 fundamental problems that exist in digital advertising that we've been chasing for close to 20 years. The first is what I'll call first-party data. If you're on a Meta site or if you're on Google, most of the targeting there is based on segmentation. They put you in between this age and that age, your income is estimated between this range, et cetera. So the targeting is based on the best information they have on a nondirect basis. On Commerce Media, the consumer is coming on to the website, and in that website you most likely have been there before, you're a rewards member. There's a lot more, what they call, first-party data specific to you, which allows us to get as close to one-to-one marketing that exist anywhere in digital advertising.

So if you are a -- if someone comes on and purchases those sneakers like I gave example, DICK'S Sporting Goods, where I purchase the sneakers, I will get a certain ad based on who I am...

[Technical Difficulty]

Apologies, ladies and gentlemen. One moment, please, we appear to have lost or speakers again. We shall try and reconnect. One moment, please.

Apologies. Ladies and gentlemen. Once again, we are trying to reconnect our speakers. Please have patience and we shall try and reconnect. Okay. Ladies and gentlemen, we appear to have our speakers back with us momentarily.

Okay. We're back for the third time. Sorry, so much for the technical difficulties here. We were talking about the advantages of Commerce Media compared to other digital advertising channels. The first is a more targeted one-to-one marketing, which is pretty much the nirvana that everyone has been running after for 20 years. How do I make sure that I get the right offer and the right -- with the right promotion to the right person at the right time.

Second is that there's headwinds in digital advertising around privacy, both from a data privacy perspective and consumer privacy. The consumer is willingly coming out of the commerce sites. You determine as a consumer where to go and what you're looking at. There's no enticement or incentive to do that. So it really avoids all of the digital headwinds around compliance and -- from both the data and a consumer privacy issue. And the third is probably the most important is that it's considered a plus and improves the consumer experience. So as you come on to DICK'S Sporting Goods, you buy those sneakers, as the example I gave you. We then sign up for Disney+. That's obviously a consumer experience that is positive and it enhances that relationship that you have with your commerce partner and makes you more likely to come back to those sites.

So that's why commerce is growing so aggressively, right? Commerce Media is growing so aggressively right now. We have some stats later on that we'll talk about how dramatic that is and getting up to close to $100 billion in opportunity from a market perspective.

The benefits for Fluent as a business model are significant. It's -- our technology is integrated into our commerce partners. So it is a sticky relationship from a technology perspective. Contracts tend to be 2 to 5 years long. There's a favorable rev share. So it's a rev share model where we share the revenue with that partner. And it's very predictable. When we bring a new partner on, we know what sort of traffic they have to their commerce sites. We know the seasonality of that. We know when they run sales, et cetera. So we are able to be able to operate in a very efficient way.

If you go to the next slide, I'll just give you an example of how the model works. So the example I gave you in the beginning around DICK'S Sporting Goods, that would be the media partner on the left and the advertiser was Disney+, the example I gave you earlier. Our value proposition for the advertisers are quite significant for someone like Disney+. We are connecting them to the most valuable consumer that exists anywhere in digital advertising. You were not a consumer that's looking or searching for something or reacting to an ad. You have your credit card out, you're ready to purchase, and if we can make it a relevant offer to you personally, there is a highly likelihood that you'll consume and purchase something again, and you'll be a long-standing -- your lifetime value will be very high for that advertiser. So that's why advertisers are incredibly excited about this vertical or this channel.

And on the media side, it's even a better value proposition. So in the example of Disney, if they paid Fluent $100 to be connected to a consumer who clicks on their display ad in a commerce site, we typically will give $60 to the DICK's Sporting Goods, Fluent will take $40 so that margin is fixed throughout the time frame of our contract with them. And for an average retailer that does 15 million transactions a year, you can be bringing incrementally between $3 million to $6 million more to your bottom line as a retailer, and that is without any additional cost. You don't have shipping, you don't have cost of sales. It's a very incremental large revenue stream that is now available to those media partners. And our flywheel, as you can see here, is the more media partners we add on to our platform and our network, the more advertisers we bring on, which continues to drive that flywheel and our growth.

So now let's take a step a little bit deeper into why Fluent is positioned well in this marketplace, and why we feel so strongly about it. Fluent has been around for 15 years. We've started out by driving consumers to our own websites and then connecting those consumers off our website to the same world-class companies like Disney, Apple, AARP, Walmart, et cetera. We grew that business on a compounded average growth rate of double digits for 13 of those years, primarily by driving higher quality to those advertisers. So as consumers came on to our sites, we were able to collect first-party data on them, understand what was relevant to them and build a very proprietary first-party data asset. We have hundreds of millions of U.S. consumers, and we have billions of campaign information. So we know how people react to offers. We know the difference between a 35-year-old male that sits in Massachusetts versus a 35-year-old male that sits in Nebraska and how they will react differently to offers and to campaigns and to drive better conversions.

In early 2023, we pivoted our business aggressively. Our legacy business, we settled an FTC settlement without -- with a very small nominal fine, but they required us to have significant regulations that were beyond what the current industry has. So we were on an uncompetitive playing field. And what we did was we took all those core assets of that legacy business, that first-party data, the deep understanding of how to drive consumer experiences, and we drove that into the commerce business. That commerce was exploding at the time. We started up from scratch in early 2023. And and we are now at $105 million annual run rate business in less than 3 years -- or at 3 years, and we've also built a significant differentiated brand where we can see significant growth moving forward.

That new business, we doubled that commerce business from '25 to -- from '24 to '25. We continue to see high double digits growth going into '26 from 2025. And that will return Fluent to a double-digit growth -- consolidated growth company with improving margins and improving operating profit.

Ryan, do you want to give the next slide just on our financials?

Yes. We briefly touched on this here, talking about the consolidated revenue growth from 2016 through 2022, the FTC settlement and changed the way our O&O business, our legacy business operated at that point. That's when we got into Commerce Media Solutions. And it was growing in the background. So you don't see it in the numbers here where we've had a decline from '22 to '23, '23 to '24 and '24 to '25, but we were building the business in the background. So in 2025 is when Commerce Media Solutions became a meaningful part of our business and we'll show the data on the next slide, but it's grown at nearly triple digits from '23 to '24 and from '24 to '25 it grew at, I guess, the nearly triple digits there. It grew more than that in '24 and is now over 50% of our business in Q4, and we expect it to be over 50% of our business going forward.

We also -- we went through a process of kind of looking at our expense -- our operating expenses and looking for more efficiencies there, cut costs down from '23 to '24 and from '24 to '25 and find ourselves in a good position to make material improvements on our adjusted EBITDA in 2025 and expect that to take a significant jump up from where it was in 2025 to 2026.

This shows the growth of the Commerce Media business. So you can see here, it was not particularly meaningful in early 2023. We see -- there is seasonality in this. So when you get to Q4 of 2023, it took a very big jump up. And then as we head into the new year, it steps back down in Q1, but we saw growth continued kind of quarter-on-quarter until we get to Q4. Again, see a big jump in Q4 of '24 and following that up with huge growth again in Q4 of 2025, which is 101% growth on prior year. And you can see, as a percentage of total revenue, this has gone from -- this is just Q4 '23, '24, and '25, from 10% to 26% to 56%. So becoming the large part of our business. We'll -- as I mentioned before, we'll maintain above 50% going forward is our expectation.

This is strong, sustainable revenue growth. It just wasn't big enough as a percentage of our total revenue to make a difference. But as Don mentioned, we expect this to drive us back to double-digit growth if you look at continuing operations in 2026.

So we've talked about Commerce Media and how exciting it is. It really -- it's really -- just last year, it was $50 billion estimated and it's estimated from a market perspective to double by 2027. So there's a lot of great tailwinds in this business as we -- as people move, not only budgets from nondigital to commerce, but also budgets that are moving within digital platforms like search and display and paid social towards Commerce Media. So there is a lot of great headwinds that we position ourselves in.

I mentioned, in 3 short years, we've been able to build the business with $105 million annual run rate business, which we doubled last year, and we expect to have very high double-digit growth opportunities to grow again in 2026. So we are sitting in a great part of the market. We built a differentiated brand, and we expect this growth to continue to move forward aggressively.

Next slide really just gives you a highlight of some of the partners that we work with, that we're proud to be partners. We -- our opportunity and how we grow is that we enter into a vertical. We build out our case studies, which drives -- which is based on driving superior results than any of our competitors. And then we drive deep into that vertical. So we started in 2023 on the retail side. You can see great names like DICK'S Sporting Goods and Michaels and Belk and Barnes & Noble and Authentic. We've got into ticketing and grocery and also some restaurants, and we will do the same thing.

Our growth here is really about getting into a vertical, building out that case study and expertise and then driving the sales strategy into those verticals. So when we talk about our ability to tie -- to grow high double-digit growth, it's in the current verticals that we are in. There are significant opportunities beyond those verticals. We just got into travel with our first win, which is Wyndham Hotels in January this year. We will get into fintech and lifestyle and home services as we go. There's significant opportunity well beyond 2026 and 2027 to continue to grow this forward.

And if you take a step back across all of Commerce Media, this shows sort of a flow of a consumer coming onto a website. They come on to the website, they shop, they put things in the shopping cart, they check out then they post-checkout and then there's CRM after you purchase something. Our Fluent Commerce Media Solution, obviously, is in that dark blue box called post-checkout. It is the most relevant and most important piece of that piece because, as I mentioned, you're a consumer, your credit card is out and you purchased something. And obviously, you have to make sure that the consumer experience is relevant and meaningful. We've established our credibility there and our brand. We are now starting to look into other opportunities, specifically around CRM and loyalty and also in checkout. So we think that the growth within post-checkout is significant. And we think that as we start -- as our partners are starting to ask us to move into other areas, into CRM, into pre-checkout, there are significant growth opportunities to continue to grow well beyond '28 and '29 here.

And just a quick point on our -- and we'll get a little bit into why we're so excited around why we deliver superior results. But our secret sauce really comes down to that legacy owned and operated business that we built over 15 years. We've been working with consumers. We understand how to make it meaningful, how to connect them to the right brand at the right time. And as I mentioned, a very extremely valuable proprietary first-party data asset that we have. So when we come into -- when we work with our partners, obviously, we bring a wealth of experience around how to deal with consumer experience, how to make it meaningful and relevant to that consumer at that point in time and how to drive a more superior results, both for our partners and the consumer and for the advertisers. So that owned and operated business, although financially has been in decline because of the FTC settlement and the uncompetitive playing field that we're able to compete in, it is the reason why it's growing, why Commerce Media is growing so fast. And we are deemphasizing this as a financial play and more as an ability to continue to accelerate our competitive moat within Commerce Media.

And if you talk just specifically around AI, I know AI is an incredibly exciting opportunity for all companies right now. And the amount of acceleration that's going on, on pretty much a daily basis is opening up tremendous opportunities for cost efficiencies and growth and acceleration. We have had AI embedded into our Commerce Media Solutions since the beginning, both in terms of how do you identify the right consumer, how do you then determine their purchasing behavior? And then also, how do you help convert and serve the right ad at the right time to them? So we've been early adopter on the AI side in our solution. Obviously, the fuel of that AI is that proprietary first-party data. So having that -- all those models built off that first-party data is our competitive moat.

So I'll get into a couple of quick case studies here on why we're so excited about Commerce Media and why we think things work so well. The first one is just on the partner side, like what we talked about DICK'S Sporting Goods. This is a different company, a leading crafts retailer. It was coming from a competitor, the largest competitor in the market. They were making a number of changes to their business and wanted a more innovative and a more -- a company that would work with them. You can see the results on the right. Not only did we improve conversions for the consumer on both an app and a web basis, the biggest important thing is on the bottom line. There was 25% additional revenue per session. So compared to our competitor, for -- on an apples-to-apples basis, we were able to drive significant increased revenue to that partner because of our proprietary data, our proprietary ad serving and our approach to the consumer experience. So this is something why we feel so embolden on how fast we are growing and where we'll grow.

I think we're sort of running out of time here. This is a quick example of an advertiser side. This is a pet food company that was looking to scale aggressively. This tells you the power of this model in terms of ability to scale aggressively for an advertiser. So they came to us, they were looking for -- to grow their business, and in a very short time frame, we were able to have 500% conversion lift over 8 months, and more importantly, 10x the growth of the media investment by staying at their cost per acquisition target. So this model is not only relevant for that partner and the consumer, but we can scale aggressively for new advertisers coming into it.

So I'll wrap up real quickly and then hopefully to answer questions. We are at -- we made a strategic pivot. We've built a phenomenal differentiated brand in Commerce Media, which is around driving better results. We are now aggressively accelerating that, and we believe that the business will get back to double-digit revenue growth on a consolidated basis on aggregate continuing businesses. We will get -- our margins will be improving and we'll be improving profit along the way. So -- and this is really the beginning stages. We have phenomenal opportunity in front of us to not only move from -- and grow post transaction, but other things across the media -- Commerce Media landscape.

So I will answer any questions that you guys have now, but thank you for sticking through our technical difficulties here.

So one question here is what are the key drivers behind Commerce Media Solutions becoming the primary growth? And I think we touched on that a little bit. The key -- a, we're in a growth market, and it's accelerating aggressively. But for Fluent specifically, it's around that first-party data asset and our ability to better identify who that consumer is and make it a more relevant ad. So the consumer is more satisfied against a significant offer that they find valuable. And then on top of it, the advertiser is connected to a very valuable consumer that has higher lifetime value.

We talked about what KPIs investors should be looking for to confirm the demand. I think it's going to be around; a, we, on a quarterly basis, talk about annual revenue run rate for our new partners that are coming on, and it's also around that growth rate of the high double digits year-over-year, which will be driving that business. We have talked at a high level about other areas in which we're driving things outside the post transaction like loyalty, and we've also talked about precheck. You'll be hearing a lot more about that later on this year as we test and learn and scale those new solutions.

Another question around what types of enterprise or advertisers are adopting this platform the fastest, and which verticals are showing the strongest ROI? It's a great question. The earliest people that got into this, the Commerce Media from a vertical perspective, have been retail. If you think about Amazon and Walmart, those are the ones that really started this channel up in early 2020. And then a lot of enterprise clients have come on from a retail side. Ticketing has come on, restaurants, but you're starting to see -- it's still very early days. Most estimates is that post transaction has penetration of roughly 30%, and they obviously believe that other verticals will continue to get into Commerce Media and the exciting part of this.

I know we are out of time.

[indiscernible] we go a couple of minutes over to address the margin.

That would be great.

So the legacy O&O business, in that business, we buy media, and we take the risk on that media and then it's up to us to monetize that through our owned and operated properties. We've managed to margin, but that over time, the margin is compressed there. And ultimately, we're currently seeing in the low 20s in terms of the gross margin on the owned and operated business. Where Commerce Media differs is that we are not taking media risk on the media or we're not taking risk on the media inventory risk. We have a rev share with the partners there generally. So what we do is we kind of lock in a media margin of approximately 35% to 40% with those partners.

Now we may offer some early term incentives or make guarantees and that's why margins haven't been as high as 35%, 40% on that business. But because we can kind of lock in the margins there and not take the inventory risk, we do expect that business over time that the margins will trend up into the high 20s, potentially low 30s by the time we get to 2027.

So essentially, we do expect the differentiator there. It's not currently being seen because we're investing into new placements and into growth with new partners, but we do expect Commerce Media to operate at a higher margin over time.

Great. Any other questions here that...

I think that's it.

Yes. That's great. Thank you so much for attending here. Again, apologize for the technical snafus, but look forward to continuing the dialogue with you. Thank you for your time today.

Thank you. That concludes Fluent Inc.'s presentation, and you may now disconnect.

Good afternoon, and welcome. Thank you for joining us to discuss Fluent's Fourth Quarter and Year-End 2025 earnings results. With me today are Fluent's Chief Executive Officer; Don Patrick, Chief Financial Officer; Ryan Perfit; and Chief Strategy Officer, Ryan Schulke.

Our call today will begin with comments from Don and Ryan Perfit, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded. Additionally, there is a slide presentation that accompanies today's remarks, which can be accessed via the webcast and is also available on Fluent's website. A replay of the event will also be made available following the call on Fluent's website.

To access the webcast and slide presentation, please visit the Investor Relations page at www.fluentco.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call will contain forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any forward-looking statements made during this call only speak as of the date hereof. Actual results could differ materially from those stated and implied by such forward-looking statements due to risks and uncertainties associated with the company's business. These statements may be identified by words such as expects, plans, projects, could, will, estimates and other words of similar meaning. The company takes no obligation to update information provided on this call. For a discussion of the risks and uncertainties associated with Fluent's business, we encourage you to view the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

During the call, management will also present non-GAAP financial information relating to media margin, adjusted EBITDA and adjusted net income. Management evaluates the financial performance of the company's business on a variety of indicators, including these non-GAAP metrics. The definition of these metrics and reconciliations to the most directly comparable GAAP financial measures are provided in the earnings press release issued earlier today.

With that, I'm pleased to introduce Fluent's CEO, Don Patrick.

Good afternoon, and thank you all for joining us today. I'm here with Ryan Schulke, our Chief Strategy Officer and Company Co-Founder; and Ryan Perfit, our Chief Financial Officer.

Three years ago, we made a deliberate and decisive strategic choice to aggressively invest in pivoting our business into the high-growth commerce media industry, leveraging the competitive advantages of our owned and operated marketplaces as our foundation. We've made significant progress on this strategic pivot over the last 12 months, capped off by key milestones for this business.

Commerce Media Solutions contributed 56% of total Q4 revenue, more than doubling from 26% in Q4 2024. Building on this success, we entered 2026 with strong momentum that is accelerating. We have built a highly differentiated Fluent brand with a clear and compelling purpose delivering superior, measurable performance outcomes for our commerce partners and advertisers.

And in the process, we are being recognized as the market leader in our industry. We are no longer a company in transition. We are a company that has reached a transformative inflection point, and we are confident our best days are ahead of us. In today's earnings release, we reported Q4 and full year 2025 results that reflect significant progress in our Commerce Media transformation.

Commerce Media Solutions delivered nearly 2x revenue growth over 2024, a powerful demonstration of our market validation and competitive differentiation. A recap on Q4 2025 consolidated financial results were as follows: revenue of $61.8 million, an increase of 31% versus Q3 2025, media margin of $19.1 million, an increase of 49% versus Q3 2025 and adjusted EBITDA of $0.2 million an increase of $3.6 million from Q3 2025 and representing 0.3% of Q4 revenue.

Our Q4 performance achieved the road map we laid out in previous earnings releases. Commerce Media Solutions continued to accelerate, adding new commerce partners in the quarter and more than doubling revenue year-over-year, while also expanding our media margin on a sequential basis. That marks strong double- to triple-digit year-over-year revenue growth for Commerce Media Solutions for 8 consecutive quarters. That trend represents our strategic and financial trajectory, and we expect strong double-digit year-over-year growth to continue throughout 2026.

Full year 2025 financial results were as follows: Revenue of $208.8 million, reflecting a top line decline of 18% versus 2024, consistent with our deliberate managed transition away from our legacy revenue streams. Gross profit of $51.2 million, a decrease of 15.8% versus 2024, an adjusted EBITDA loss of $9 million, representing negative 4.3% of revenue.

The most powerful validation of the strategy is in the numbers. As I mentioned before, in Q4 2025, Commerce Media Solutions contributed 56% to total consolidated revenue, representing more than 50% of total company revenue for the first time since the launch of this business in the first quarter of 2023 compared to 26% in Q4 2024 and 10% in Q4 2023. And we expect that share to continue to grow in 2026.

In full year 2025, Commerce Media Solutions delivered revenue growth of 99% year-over-year and media margin growth of 48% year-over-year. These results confirm 3 things: first, we are establishing our brand equity and operating in a large, long-term growth market. Second, our differentiated approach is resonating with our commerce partners and advertisers who continue to join our proven business model. And third, the strong performance we deliver is real and repeatable as we continue to establish leadership credentials in our segment.

Industry growth projections position us favorably for growth in the U.S. market. According to a recent McKinsey study, the U.S. commerce media market is expected to grow a compounded average growth rate of 21% from 2023 to 2027 and reached a total market value of $100 billion by 2027. As of December 31, 2025, Commerce Media Solutions is operating at an annual run rate of $105 million. And as you can see, we believe there is significant opportunity to increase our market share as this high-growth industry continues to evolve, and we expand our geographical presence.

Putting it simply, media partners and advertisers want to work at Fluent, because Fluent delivers the best results. This is demonstrated by the impressive network of partners and advertisers that leverage our offerings. We continue to expand our relationships with leading names across diverse industries and market verticals. We delivered strategic validation by way of our financial performance, and we continue to look and plan forward as we do so. We are investing with discipline in Commerce Media strategic adjacencies that will further differentiate the Fluent brand, elevate our industry leadership position, earn us more partnerships, all while providing long-term margin accretion.

We've discussed on previous earning calls that we have existing partners who have a need to expand into loyalty and pre checkout. Although it is early stage, these adjacent solutions open additional large market opportunities to not only strengthen our existing relationships but meaningfully raises the bar for new partners evaluating who in the commerce media truly understands the full customer journey and where the market is headed.

In turn, we are making targeted purposeful investments designed to extend our competitive moat in Commerce Media for years to come. We are very excited about these opportunities on our road map. They represent significant upside to Fluent's strategic and financial growth plan, more to follow here in future investor updates.

On our owned and operated businesses, we are clear-eyed and deliberate. Given our commitment to play an industry leadership role in traffic quality, coupled with the inherent compliance headwinds in that segment, we are repositioning owned and operated with a focused 2-part mandate. Number one, gross profit generator, maintaining a profitable capital-efficient contribution to the enterprise and number two, a test-and-learn engine, a real-time proving ground that sharpens and feeds our Commerce Media strategy and product development.

Narrowing our focus reflects our conviction that the commerce media market represents an enormous multiyear strategic opportunity that concentrating our resources in our highest conviction business is the right decision for our shareholders. In doing so, we are also quite excited in validating that our owned and operated business is not only a core asset, but a competitive advantage in fueling our Commerce Media growth.

Our Commerce Media growth continues to be validated by the strength of our partnerships with premier brands and companies and the addition of key talent that has helped us to maximize performance and efficiency as we continue to scale. During 2025, we added several new partners across a variety of exciting verticals. Among the highlights, we partnered with a number of world-class brands, including Authentic Brands Group, DICK's Sporting Goods and Michaels. We also launched Rebuy Monetize powered by Fluent which brings Fluent's AI-powered advertiser marketplace and demand generation expertise to merchants on the Shopify platform. And our new business pipeline remains strong and growing.

We look forward to announcing additional partnerships throughout 2026. On the talent side, we have built a world-class product and tech team focused on accelerating AI innovation for our Commerce Media offerings. Adrian Stack, our Chief Product Officer, and his team bring years of experience as strategic product management to the Fluent team and are driving Fluent's investments in data infrastructure and product innovation. Virginia Marc joined Fluent in Q2 in conjunction with our partnership with Databricks to expand and enhance our data collaboration capabilities coming on as Head of Data and agencies to scale our data monetization and further support our overall growth.

These partnerships and additions to our team reflect our commitment to earning an industry-leading position with Commerce Media and allowed us to nearly double revenue and scale from $60 million annual run rate to $105 million annual run rate at year-end. A commitment that required significant investments to build something durable and sustainable in a high-growth marketplace. The 2026 outlook we're sharing today is a direct payoff of that discipline and our strategic and financial results.

With that, I'll turn it over to Ryan Perfit for a deeper look at our financials.

Thank you, Don, and thanks to everyone for joining us today. I'll now provide a review of our fourth quarter results, with some context on full year trends where relevant. Total consolidated revenue was $61.8 million in the fourth quarter of 2025, compared with $65.4 million in the prior year period.

Commerce Media Solutions delivered strong results. Revenue of $34.7 million represents 101% growth when compared with the fourth quarter of 2024, driven by continued strategic investments in the business and the industry expansion. The 85% sequential growth from the third quarter was heavily influenced by a seasonal increase related to consumer spending around the holidays.

CMS revenue contributed 56% of total consolidated revenue in the quarter, representing more than half of total consolidated revenue for the first time. In the fourth quarters of 2024 and 2023, Commerce Media Solutions represented 26% and 10% of total consolidated revenue, respectively. For the full year, Commerce Media Solutions revenue totaled $82.3 million, 99% growth over 2024 and as of year-end 2025 Commerce Media Solutions annual revenue run rate now exceeds $105 million, up from $85 million as of the end of the third quarter.

Looking ahead, we expect Q4 to be a tipping point as we anticipate Commerce Media Solutions will represent a majority of the consolidated revenue on a go-forward basis. As expected, revenue from our owned and operated business declined on a year-over-year basis as we continue to shift our focus towards scaling commerce media solutions. Media margin in the fourth quarter was $19.1 million, representing 31% of total consolidated revenue, compared with $16.5 million or 25% of revenue in the prior year period. Commerce Media & Solutions media margin in the fourth quarter of 2025 was $10.4 million or 30% of Commerce Media Solutions revenue compared with $6.8 million or 39% of revenue in the fourth quarter of 2024, but up sequentially from 25% in the third quarter of 2025.

Commerce Media Solutions gross profit margin of 33% was up from 22% in the third quarter and 18% in the second quarter of 2025, but included a $4.3 million onetime benefit related to an early termination settlement with a media partner. Of note, that benefit is excluded from media margin, so that non-GAAP measure is a more useful alternative for comparing operations in prior and future periods. We expect gross margin on Commerce Media Solutions to normalize in subsequent quarters and ultimately return to the mid-20s over the course of 2026 as our newer partnerships move beyond early term incentive periods.

On a GAAP basis, total operating expense in the fourth quarter of 2025 totaled $15.4 million compared with $16.9 million in the fourth quarter of 2024. For the full year, operating expense totaled $61 million compared with $72.3 million in 2024, a decrease of 16% year-over-year. Interest expense in the fourth quarter decreased to $781,000 from $1 million in the prior year period, reflecting a lower daily average outstanding loan balance. We reported a net loss of $4.1 million in the fourth quarter of 2025 compared with a net loss of $3.4 million in the fourth quarter of 2024.

Adjusted net loss, a non-GAAP measure was $2.8 million, equivalent to a loss of $0.09 per share compared with an adjusted net loss of $3.3 million or a loss of $0.18 per share in the fourth quarter of 2024. We achieved adjusted EBITDA of approximately $200,000 in the quarter compared with a loss of $1.7 million in the fourth quarter of 2024.

This is consistent with our outlook of positive adjusted EBITDA in the quarter and reflects the progress of our strategic shift towards Commerce Media Solutions and continued focus on expense discipline. As Don stated earlier on the call, with our current visibility, we believe that we are well positioned to deliver double-digit consolidated revenue growth on aggregate continuing businesses. And improved full year adjusted EBITDA in 2026, supported by the continued growth of our Commerce Media business.

Shifting now to our balance sheet. We ended 2025 with $12.9 million in cash and cash equivalents compared with $9.4 million at the year-end 2024, and total net debt of $30.8 million at year-end compared with $31.9 million at the end of 2024. Throughout 2025 and into 2026, we've made significant progress on strengthening our balance sheet and enhancing our liquidity. We've also taken a hard look at our portfolio to ensure we're allocating resources towards our strongest growth opportunities.

During 2025, we raised over $19 million in equity capital, including a $10.3 million placement in August that introduced several new institutional investors into our shareholder base. This capital supported our continued investment in the growth of our Commerce Media business. In November, we entered into a new financing agreement that replaced our previous credit agreement. The new facility carries no financial covenants and provides expanded borrowing availability, which both significantly improved our financial flexibility.

And most recently, in January 2026, we completed the sale of our Call Solutions business, a noncore subsidiary, which allows us to more effectively allocate our resources and invest further into the growth of Commerce Media Solutions. As noted previously, we are providing outlook on 2026 revenue from continuing businesses, which do not include the Call Solutions business.

As we move through 2026, we remain focused on maintaining financial flexibility and liquidity to support the continued growth of Commerce Media Solutions as we work towards improved profitability.

With that, I'll turn it back over to Don.

We believe 2026 marks the year over financial trend line will begin to shift, marked by double-digit growth on an aggregate continuing businesses. Our 2026 outlook reflects: one, return to year-over-year revenue growth driven by a strategic transition, validating our partners are recognizing our value and ending a multiyear period of managed top line decline. And two, we'll maintain gross margins in comparable periods increasing to the mid-20s over the course of 2026.

We believe these are financial signatures of a business that has fundamentally repositioned itself for durable, profitable growth as a lead brand in a high-growth, high-margin marketplace. Taking into account the divestiture of our Call Solutions unit, we expect relatively flat year-over-year total company revenue in Q1. From there, revenue will accelerate to double-digit year-over-year growth in the second half with aggregate revenue from continuing businesses achieving double-digit revenue growth for the full year 2026.

Concerning profitability, we made the strategic decision to focus on investing more capital into our growth in the near term. As such, we are revising our adjusted EBITDA target for the full year and while we no longer expect to be adjusted EBITDA positive in 2026, we do expect improved adjusted EBITDA when compared to 2025.

To summarize, we achieved a key milestone and surpassed the significant inflection point in 2025 for the growth of our Commerce Media Solutions business. We've built a highly differentiated brand and a platform that will deliver sustainable and measurable performance for our partners and for Fluent. And in 2026, with the continued strategic shift of our mix into Commerce Media, our financial results are beginning to reflect the potential of the strategy that we have been executing. The trend line has shifted. The momentum is real. We are energized by what lies ahead.

We can now open the call for questions.

[Operator Instructions] Our first question of the day will be coming from the line of Maria Ripps of Canaccord.

You talked about sort of adding AI-based functionality to your rebar partnership. Can you talk a little bit about that? And sort of will that be rolled out by default to all the merchants that you work with currently? Or what sort of the rollout process look like? And how incremental can this be over time? And then maybe more broadly, can you talk about sort of this partnership for you and how sort of productive and successful has been for you since you started working together?

Great. Thanks for the question, Maria. So regarding AI, you -- we have had AI embedded into our solutions here, Fluent for a long time in terms of how does it continue to drive better performance for us.

Underlying all those AI models has been our proprietary first-party data asset. And that is really what I'll call our secret sauce to driving superior results. So the AI models, combined with that first-party data obviously, is what we believe is our competitive advantage and why we drive superior results.

So what we rolled out to rebuy with all the standard across all of our enterprise clients and also the Rebuy clients. So whatever we -- the great news is whatever we work on across the platform goes across all of our partners that we're working with. The one area that we have been working more diligently on is sort of embedding AI into all our workflows to create, obviously, competitive moat and drive more efficiency. It is -- I'm sure you read it and see it when you talk to all the companies you work with Maria, it is just dramatic how fast things are changing and how quickly you can make huge productivity improvements and huge speed to market on new capabilities. And with that has been sort of our focus on agentic AI with fast ROI making sure that's embedded into our processes. And so we can not only move faster and quicker and accelerate but also drive better operating leverage across our platform.

Does that -- and then you asked a question about Rebuy. Rebuy is -- was our first strategic partnership that got us into the Shopify ecosystem. Our traditional sales and traditional focus had been on what I'll call enterprise partners, things like direct big brands like DICK'S Sporting Goods, Bath & Body Works, et cetera. Rebuy was our way to go indirect with them into their clients that are on the Shopify platform. And we've integrated our technology -- we've worked really well together from a marketing perspective, and I think there's lots of opportunities to continue to grow that partnership.

So we're very pleased on the success that we've made there, and Rebuy has been a fantastic partner to work with in terms of both product and technology, but also in terms of evolving the strategic ability to drive better results for both our clients.

Got it. That's very helpful. And then, Don, I also wanted to follow up on your point about convergence between your O&O and Commerce Media capabilities. Can you maybe talk about that a little bit? I guess, what are some sort of capability functionality that would enable that? Is that sort of client driven? Or just sort of how are you thinking about that? And also how incremental can this be over time for you?

Yes, it's a great question, Maria, and it's obviously one that hopefully you heard a lot of excitement on this call about and also the previous call. So our legacy business, the owned and operated has been interacting with consumers in connecting the world-class brands for 15 years.

So that amount of data that we have, both on what I'll call first-party self-declared data but equally important, what I'll call second-party campaign data, things that happen after we connected as a world-class brand and how those audiences react and how they are best used and how to best provide the right offer at the right time to the right audience.

So it really enables and opens up our ability to drive unique, very valuable audience sets across different types of media partners. So we obviously seeing obviously, if you're DICK'S Sporting Goods, consumer buying something and then you're a bulk consumer on the website, still retail, but obviously very different audiences. And that skill set that we've honed over 15 years in owned and operated allows us to move quickly to understand that audience, work with the advertisers to bid so they get the right return on ad spend and then drive the health of that marketplace for both our partners and for our advertisers.

So it has come to be a huge competitive advantage to us as we scale our platform. We have to get new advertisers into our network. And that type of skill set has been an absolute competitive advantage this past year.

Our next question is coming from the line of Patrick Sholl of Banca Research.

Just maybe kind of a clarification on your expectations for 2026 on the Commerce Media side. I guess with the early contract termination that you called out in the release, I guess -- can you provide a little bit more color on expectations around churn and retention and maintaining margins on the Commerce Media side, just for the next few years, I guess.

Thanks, Pat. Thanks for the question. So where we've been very consistent is that we have said that from a consolidated revenue perspective that Fluent will return to double-digit growth on a aggregate continuing businesses, which means without Call Solutions, the sale of Call Solutions this year. So we have been very consistent over the past couple of quarters that we will return to double-digit growth on the top line. With that early termination the growth in commerce media is still expected to be significant and very strong double-digit growth, but we originally said we were going to double that and we brought that down because of that early termination.

We have a very strong pipeline. It's growing aggressively. Where we feel good that we can over deliver on that. But as the visibility we see today that's the expectations that we'll have very strong double-digit growth on Commerce Media year-over-year.

On the margin perspective, we have talked about these adjacent solutions, Pat, we mentioned loyalty. We've mentioned precheck. There's some significant bigger opportunities along with those that are existing partners and our new partners are asking us to get into.

So we are very diligently investing in those areas that will continue, that will bring significant growth towards -- it's going to be more into the 2027 time frame, but we'll have pilots going on, we'll have growth in scale and as we scale that, the margins will improve, but we'll see that in the 2027 time frame. But there's -- Commerce Media is evolving so fast. There's so many strategic and financial opportunities in front of us. And we are taking our -- what we believe is our leadership position in post transaction, which is the hardest area to get into and most important area in terms of the consumer transactional moment we're taking that and we're leveraging things in adjacent to continue to grow aggressively. We think the opportunity to build a very significant large companies beyond what we thought a year ago.

Okay. And then maybe just, I guess, more on the lines of like the macro environment. Can you maybe talk about like how any -- how that's sort of impacting the ability to bring in additional advertisers and any issues around like diversity of advertisers and frequency of on customers -- on consumer, I mean?

Yes. It's a good question, Pat. And obviously, given what's going on in the world with everything, there's a lot of change and a lot of things that are moving. Last year, we had a deal a lot with the tariffs. And obviously, with the war and the things like that, we obviously have a lot of changes.

On the -- I'll hit the partner side first on the partners you know the incremental benefit that this brings to a media partner. So for any retailer or any strong vertical like ticketing or groceries that are looking for incremental revenue, this remains to be -- remains our top priority. So that growth in the post transaction business, we think is just going to continue to accelerate.

On the advertiser side, we have not seen any pushback on pricing. We have -- we do see ROAs return on ad spend changes between different partners move at various points in time, but we have not yet seen anything even from our gaming advertisers that are in Israel. Any real pullback from a return on ad spend relative than what we saw in 2025.

Our next question is coming from the line of David Marsh of Single Research.

Congrats on the quarter. Good job here. Just wanted to start, I would say, a particularly great job on the SG&A side. Is this a good run rate going forward that we could kind of rely on what you were able to print this year?

David, this is Ryan Perfit. We did a lot of work on kind of reducing costs and being efficient in 2025. I think we're going to maintain that kind of outlook and perspective and try to minimize costs as much as possible. That said, as we expand Commerce Media solutions, we're necessarily going to need to invest into development of new products that Don has been talking about and the management of that business.

So we will expect costs to step up, but we've taken other steps such as divesting the call solutions business that will help us maintain kind of low OpEx over the year.

Al right. That's good -- good to hear. And then on the gross margin side, really great job in the quarter, and this is the highest gross margin you guys had in quite some time. When you look at where the business is now on the run rate and as it grows, I mean what do you think is a realistic kind of longer-term goal for gross margins for the business overall and, I guess, Commerce Media in particular.

I'll take this question, again, Dave. I want to point out that in Q4 per ASC 705, we booked the net settlement as a benefit to cost of revenue. So the gross margins are not necessarily representative of what they will be -- what they were in prior quarters or future quarters. But it was a good quarter for us overall. You can see media margin was up and that's another way to judge it because that does not include any onetime items because of non-GAAP measure.

So adjusted EBITDA and media margin are more representative. That said, I think Don was earlier mentioning that we do believe there will be some tightening as we kind of expand into different touch points in the Commerce Media environment. But we expect for it to expand over time. So I would expect us to get up into the mid-20s in gross margin towards the back half of the year and then further expansion in 2027.

Got it. Got it. And then just on the competitive landscape. I mean you guys have -- you've talked about this a good bit not really seeing a ton of major players in the space. And do you have a sense that there are people that are -- that do want to try to get into this space? And how heavy of a lift is it for someone to actually get into this space and compete with you guys?

It's a great question, Dave. So we have seen -- as we've talked in the past, there's us and one other competitor that obviously is really going after the enterprise clients, Right? Which is a traditional enterprise sales 6 to 12 months. You're selling into the Head of Retail Media Networks or CMO. It's a very strategic sale. And then you get the equivalent of 2- to 5-year contracts that are very predictable and very long standing. So the ones that have come in tend to be more on the, what I'll call, the Shopify ecosystem, the D2C, the smaller end range. So quite honestly, doesn't have the, what I'll call, the enterprise grade platform that you need. If you're going to be with these large clients, you need SOC 2 compliance, you need ISO compliance, you need all sorts of significant investments from a platform to get there.

So the ones that have been coming in have been less of a concern for us. They've been sort of on the smaller end of and really competing when we go, when we have the rebuy partnership and where we are. So -- but there are a lot of players out there. I'm sure you saw a little bit around trade desk possibly working with ChatGPT and there's people that are talking about how do you bring shopping into different environments and different surfaces. And that's sort of where we tend to that some of these investments that we're talking about and how do we continue to build our competitive moat around a solution that's not just post transaction. But also integrated across loyalty and other areas. And we think that's going to be our ability to not only enhance our competitive positioning, but also create a moat against anyone else that could come in.

The biggest thing right now in the market is that most of the big large ad tech companies want to come out of this in a I'll call programmatic way, meaning they want to buy advertisers on a demand platform that's all programmatic and you're not working directly with the advertisers. Our business model is very direct. We work hand-in-hand with the advertisers because they're paying up is significant, sometimes as much as 5 to 10x what they would pay in other digital advertising services because of the value of those consumers.

So proving out the value the ROAS has how to best position, how to drill the right audience right now has continued to be -- is one of our core competencies of that legacy business is why we think we are gathering market share and growth here.

And our next question will be coming from the line of Bill Dezellem with Tieton Capital Market.

Well, operator, I'll help you out here. That's Bill Dezellem with Tieton Capital Management. My first question, Don and Ryan, is tied to the Commerce Media business. And as you look out in 2026 versus 2025, what sort of revenue growth range are you thinking is reasonable at this point?

From a CMS -- from a Commerce Media built, we doubled the business from '24 to '25 and we are now saying that we are going to grow strong double digits from '25 to '26 for commerce media. That really comes down to the 2 things that we talked about. One, the difference between doubling it again this year in the strong double digits has been that early termination with that one media partner and I think that's the biggest impact that we see here in terms of what it could drive in.

It's also allowing us to some investments that we're making in some other adjacent areas that will certainly be creating longer-term opportunities, but it will take some of the growth away in 2026.

And strong double digits, would you like to bracket that with some numbers?

Greater than 50%, lower than 100%.

All right. That's certainly a number. That's fair. And equally importantly, tied to this, how would you characterize the pipeline of future opportunities versus a year ago? I know in general, you said it was strong, but would you compare versus a year ago, please?

Yes, great question, Bill. So we talk about having a differentiated brand, right? There's another big large company that's been in this industry for a long time, and we now have a differentiated position with clear competitive advantage around driving better results that we -- not only do we believe uniquely important, our partners believe in also our prospects believe. So that doesn't mean that we win every deal. Obviously, there's room -- there's lots of growth for -- the other company has a very strong tech play. It's a very good SaaS play. And if you're looking for that type of thing, there's room for them, and there's lots of growth for both sides.

So I would tell you, the big differentiated position is our brand and how our partners are looking at us. When we come in the room, they know what we're known for. They know how we can drive better performance, they know how we can expand beyond post transaction, where we've only started this business 3 years. The last year at this time, it still is proving out our results and how we perform.

So I think that's the biggest piece. I think the second is that we're -- a lot of our partners are now saying, "I need to continue to grow. Where else can you help me grow and where can you bring a broader result across all of my commerce media interaction with my consumer and how can I power that. So the ability to be much more strategic and to be much more relevant is the other big play. When you're selling post transaction, it's a great incremental, it's a very important incremental P&L for a company. But when we start to get into the other sites, we can start to give connections between how a consumer works on post-transaction versus loyalty versus other areas, that's when we start to become a much more strategic partner. So it's both our brand and also the strategic conversations and the opportunities that are in front of us.

And you had alluded to in response to a prior question that the market potential looks significantly greater to you today than what you were thinking a year ago. Is that specifically tied to these adjacent opportunities that you were just referencing? Or is there something else going on there?

I think it's a combination of both those adjacencies, but also how fast Commerce Media is evolving, Bill. So I think there's a it's still a relatively low penetrated market. So we have a lot of tailwinds coming from more penetration across that. And so that's number one. And then number two is you're starting to see these adjacencies that we can sell alongside of it, which obviously opens up our market share.

You alluded at a high level to these adjacent opportunities. would you like to take this opportunity to talk in more detail about those opportunities and which ones are larger than the others and why?

I would love to, Bill, but I think these are huge opportunities that will strengthen our strategic and our financial position. We're being deliberately quiet on the details here because for competitive reasons, simple foamers is that. And also, they're a couple of quarters away.

So we're going to take -- we're going to talk more about these things as we test and learn. We prove it out. It's a model that Fluent has done for 15 years. We understand, we test and learn, we understand how the consumer works. We figure out how the monetization and then we scale aggressively. And that's obviously where we're going to go. And we're very excited to talk about. And when we do bring those up, after the Q2, we'll have much more to say in terms of the opportunities and the strength where we think we can grow here.

Great. And then one additional question tied to that, if I may, please. When you think about the revenue potential from some of these different areas, some of these different adjacent opportunities, not in aggregate the adjacent opportunities, but individually, do you see any of them that on their own would be larger than the post sale as we know it today?

Yes. Yes. The ones we're going after, Bill, some of them are equal to the size of post transaction from a total available market in the U.S. and a couple of them are a magnitude of that.

Then does the implication of that, that every one of these opportunities are at minimum as large as the post transaction as we know it today?

I think it's -- I think generally, yes, there's a couple. There's maybe one that's a little bit smaller, but where we're putting these together, Bill, is from the strategic perspective of the consumer and how can we inform our partners on the consumer experience across important parts of their Commerce Media where the moment is the most important. And we believe we've been able to -- we believe that we will be able to do that in a way that's incredibly meaningful for the partner and create significant value for them and at the same time, create significant growth opportunities for Fluent.

Okay. I'm really intrigued here. So my apologies for squeaking in another question. When you look at the sales cycle for these adjacent opportunities, are -- do you anticipate it to be similar? Or is it going to take longer than the post sale? Or is the benefit so obvious? And the trust that you're generating with the post sale that it will be a much faster cycle?

Great question, Bill, and I'd be disappointed if you didn't sneak another question. So number 1 is, obviously, we have a growing and large list of existing partners. So cross-selling our existing post transaction into these other adjacent solutions are -- it does not take as long, right? It's not a long sales cycle and we have built up a brand relationship and results with them.

So that from existing partners, we think that we'll be able -- we'll get a much shorter sales cycle. And then with our new partners that we're obviously bringing on and we anticipate bringing on a lot of new parters in 2026. We've already brought on to already that we announced in Q1. One was Wyndham, which was our first entrance into travel, other one with Squire, which is a -- it's a commercial marketplace. But we'll -- as we bring on more, what we're finding is that we're obviously talking about the broader vision and where our solutions fit. And so the conversation then gets into where do I start? What's the best way to start up and how do I build this over time. So there will be ability to -- we're now when we win a post-transaction client for the most part, we get 100% of the market that they have immediately. What we're hoping is that with these additional solutions, we'll still get 100% of a post transaction, but then we'll be able to provide significant growth amongst our existing partners beyond that post transaction.

That's very helpful. And then relative to the owned and operated revenues were flat to slightly up this quarter versus the third quarter. What is that signaling to us?

Bill, I think as we mentioned, and I hope everybody hears this, that owned and operated is our competitive advantage, right? That's how we win. That's how we drive better performance. That's how we enable our Commerce Media to be differentiated. And as Maria said, there's a convergence happening around how you -- how we can bring that rewarded infrastructure and thought process into the Commerce Media.

So I would take nothing away from it being flat, Bill. We obviously continue to bring those resources into commerce to help drive the bigger, larger market that we're going after and quite honestly, a much more valuable market, right? So if we got -- we divested Call Solutions for the exact same challenge, which is we really needed to focus on this opportunity in front of us and on the owned and operated we're not asking them to grow that business, and we expect it to continue to decline. But what you'll see is that asset being really brought into the Commerce Media to be a competitive advantage for us.

Great. Congratulations on a solid quarter and for allowing all the questions.

Thank you. And this does conclude the Q&A session. I would like to turn the call over to Don Patrick for closing remarks. Please go ahead.

Okay. Thank you for joining the call today. As we discussed, we achieved a key milestone and surpassed a significant inflection point in 2025 with the growth of the Commerce Media Solutions being greater than 50%. And in 3 short years, we built a highly differentiated brand and a platform that delivers sustainable and measurable performance for our partners and Fluent. And we're very excited for 2026 and look forward to updating everyone after Q1. Thank you for joining.

This concludes today's program. Thank you all for joining. You may now disconnect.

Good afternoon, and welcome. Thank you for joining us to discuss Fluent's Third Quarter 2025 Earnings Results. With me today are Fluent's Chief Executive Officer, Don Patrick; Chief Financial Officer, Ryan Perfit, and Chief Strategy Officer, Ryan Schulke. Our call today will begin with comments from Don Patrick and Ryan Perfit, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded. 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. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call will contain forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements made during this call only speak 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 may be identified by words such as expects, plans, projects, could, will, estimates and other words of similar meaning. The company undertakes no obligation to update the information provided on this call.

For a discussion of the risks and uncertainties associated with Fluent's business, we encourage you to review the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

During the call, management will also present certain non-GAAP financial information relating to media margin, adjusted EBITDA and adjusted net income. Management evaluates the financial performance of the company's business on a variety of indicators, including these non-GAAP metrics. The definitions of these metrics and reconciliations to the most directly comparable GAAP financial measure are provided in the earnings press release issued today.

With that, I'm pleased to introduce Fluent's CEO, Don Patrick.

Good afternoon. Thank you all 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 Officer. Our strategic momentum continues to accelerate in establishing an industry leadership position in Commerce Media. However, as we expected, our third quarter financial results demonstrated a challenging environment due to timing delays in onboarding the new partners who are fueling our transformative pivot into the rapidly growing Commerce Media industry.

On a segment basis, Commerce Media Solutions revenue in the third quarter grew over 80% year-over-year while increasing its portion of contribution to consolidated enterprise revenue from 16% in Q3 2024 to 40% in Q3 2025, as Fluent expanded its position in the Commerce Media industry. As of September 30, 2025, our Commerce Media Solutions business surpassed an annual revenue run rate of over $85 million as we grow our market share based on the consumer value we are creating for our partners and advertisers.

Q3 Commerce Media Solutions' financial results would have been even more impressive in the quarter, if not affected by 2 factors I'd like to call out: Number one, some new partner wins launched on our platform later in the quarter than anticipated, and therefore, had less impact on our revenue and gross profit for the quarter. These wins will impact full quarters moving forward. Number two, consistent with the industry, we saw some advertiser pricing and budget pullback in the later part of Q3. This appeared tied to advertiser-specific issues which you're seeing continuing in early Q4.

Our positive Commerce Media Solutions growth trend was not enough to offset our owned and operated marketplaces decline, which remain near 50% year-over-year exasperated by strong advertising and regulatory headwinds. That being said, we are very pleased with the growth of the Commerce Media Solutions. And as Commerce Media Solutions becomes a bigger piece of our consolidated revenue pie, we expect enhanced results and profitability to closely follow.

Contributing to our enthusiasm for our Commerce Media Solutions, we 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. 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. Our growing list of world-class partners recognize the fundamental value we are creating in building consumer loyalty as we consistently exceed our partners' revenue and our advertisers' return on ad spend expectations.

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 provides us with additional capital to continue investing in the growth of our Commerce Media Solutions.

Slide 4 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 ago. We expect this growth to continue as we capture a larger share of the market. Taking a step back for a moment, what's most important to the business and for our shareholders is ultimately having our financial scorecard reflect our strategic vision. As such, and as we have identified as the core milestone in our strategic plan, we expect our financial pivot will deliver trend line shift in Q4 where Fluent's gross profit is expected to grow by double digits quarter-over-quarter for the first time in 10 quarters, resulting in positive adjusted EBITDA.

I want to reemphasize that our enthusiasm for our Commerce Media Solutions 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 Commerce Media Solutions platform capability that is earning us world-class brand partnerships. We believe this will result in strong Fluent enterprise and a double-digit year-over-year revenue growth in 2026 as our overarching shift to mix strategy begins to drive improved consolidated results.

As you can see by the graph on Slide 5, Commerce Media Solutions made up 40% of our total revenue in the quarter, up from 16% in third quarter 2024 and 4% in the third quarter of 2023. Looking ahead, we see the opportunity to better leverage our owned and operated business and the strong brand equity we built in the marketplace over the last decade as a springboard for more aggressive growth for our Commerce Media Solutions. More specifically, as the marketplace continues to evolve, we are beginning to see a convergence between our owned and operated and Commerce Media capabilities in the Commerce Media marketplace, creating differentiated opportunities with our partners and advertisers that we are uniquely qualified to address. Commerce Media Solutions provides highly engaged and extremely valuable audiences for our advertisers, the convergence of owned and operated rewarded experiences and Commerce Media is enabling us to build unique proprietary demand for our partners while enhancing our competitive advantage.

An example of this convergence during Q3 is that we were able to deepen our penetration with 2 existing owned and operated advertising verticals into the Commerce Media marketplace, which quickly grew past 40% of our commerce revenue. Building unique supply and demand increases our Commerce Media competitive moat and rationalizes the continuing value of our owned and operating marketplace. We expect that Commerce Media Solutions revenue will surpass owned and operated in the fourth quarter of 2024 as the main driver of consolidated revenue, supported by increased activity in Commerce Media around the holiday season. We entered several new and exciting partnerships in the quarter, which will be key drivers both of our Commerce Media Solutions and our consolidated revenue growth. Our partnership with Databricks allows us to enhance and expand our data collaboration capabilities, which we expect to significantly enhance the performance of our Commerce Media Solutions.

As a part of this partnership, we also welcome the Board a key leadership hire in Virginia Marsh, who joined Fluent as Head of Data & Agencies to drive and support the ongoing growth of our data collaboration capabilities.

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. Through this broader agreement, Fluent will support post-purchase monetization for additional brands such as Reebok, Vince Camuto, Volcom, Champion, RVCA, DT shoes and more with the goal of adding millions of annual transactions to our growing Commerce Media partner network.

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.

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. 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. 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. I'll provide some nail sketch today that will further delineate in future earnings 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. 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. 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.

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. 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 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. 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. 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 and capital on Commerce Media growth. 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 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. 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 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. On a GAAP 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. Interest expense in the third quarter decreased to $711,000 from $1.3 million in the prior year period based on a lower outstanding loan balance and lower interest rates.

We reported a net loss of $7.6 million in the third quarter compared with a net loss of $7.9 million in the prior year period. Adjusted net loss, a non-GAAP measure, was $6.5 million, equivalent to a loss of $0.23 per share compared with an adjusted net loss of $3.7 million or a loss of $0.22 per share in the third quarter of 2024. 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. 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 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.

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. 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. This transaction provided us with the working capital to support the continued growth of our Commerce Media Solutions business and a strategy to drive revenue growth and adjusted EBITDA profitability in 2026. Our total net long-term debt was $26 million at September 30, 2025, compared with $35.6 million at December 31, 2024.

We had an outstanding principal balance of $22.6 million on our credit facility with SLR Credit Solutions. This facility provides us with $20 million term loan and the revolving credit facility of up to $30 million that matures on April 2, 2029. 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. 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. 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. With that, we will now open the call up for questions.

[Operator Instructions]

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

This is Matt on for Maria. 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. 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 wallet share post-transaction inventory.

And then as we think about like ad load on these sort of post-transaction pages, is there an opportunity to expand that over time? Or is it pretty static? And I just have a quick follow-up.

Matt, thanks for your question. I'll hit Rebuy first, and then we can get to your ad load question. So what's really exciting is really 5 months into Rebuy. We signed this in June. And we -- 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, and it is now one of our top media partners across our entire network. So it has been expanding and it's been expanding aggressively. So we're quite excited about the opportunities.

As you know, that also opens up the Shopify ecosystem to us. So they are our main channel in which to get access to over 12,000 merchants that they work with on the Shopify ecosystem. So it's a phenomenal partnership, very early days. It is expanding rapidly, as you talked about. And we see even deeper expansion and other solution expansion with these with Rebuy as we head into 2026. So I would tell you from a standpoint of where we're at, we're quite excited, and it's very early days in a very large market that we did not have access to previously. And the trends, they have a lot of small merchants, small merchants that do less under 1 million transactions annually, where our enterprise sales group goes after obviously, large enterprise brands that do millions of transactions annually. So 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 or in Rebuy.

Yes, yes, very helpful.

Yes. And then I didn't understand if you just expand a little bit -- you had a question around ad load and expansion of ad loads. So can you just expand on that?

Yes. I guess I was just -- is there an opportunity to sort of add more like ad impressions on the post-transaction page? Or are they pretty saturated already with how you guys are approaching it now.

I understand the question. 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. So for example, if your consumer on one of our media commerce partners, and you already were served something around loyalty, you already were served a survey, et cetera. 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 we might serve 2 or 3 type of impressions. So it really comes down to the consumer experience on our partner's site and I think it's one of our competitive advantages where we're really -- we really understand how to curate a consumer experience that's meaningful and effective that long term drives loyalty for that for that consumer on that property.

So it's very, very partner specific. Where we are making -- expanding our ad serving is outside of the post transaction. So we are doing things around pre-checkout areas, 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 -- a very adjacent solution set in the commerce market as we get into 2026.

Got it. Looking forward to that. That was very helpful. And then just really quick on the Authentic Brands partnership. Is this like a greenfield win net new for Fluent or does scaling this relationship essentially mean that you'll be taking share from other providers?

Yes. We -- another great question, Matt. We had a number of authentic brands originally in a number of the other -- they have obviously a portfolio of brands. 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.

Our next question comes from the line of Patrick Sholl from Barrington Research.

I just wondered if you could talk a little bit about the ad pullbacks you talked about in the prepared remarks. Was that specific to the Commerce Media segment or more broadly? And then like, could you just maybe talk about like some of the industries affected and what is that macro driven or what could be driving that?

Yes. Pat, thanks for the question. So I'll start at the highest level, and then I'll kind of narrow down deeper. For the most part, for all of 2025, our partners have been what I'll call more conservative and more short term in sort of their thinking process. 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. So for the most part of 2025, we saw a very -- more of a shorter-term thinking around budgets and moving things around in terms of where the efficiency of that channel existed. So we've seen that repeatedly in -- and -- with our partners, they quite honestly said if they had 1 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 we -- in general, that's what we've seen throughout the course of the year.

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 the strategic path here is there's been some traditional advertisers that have been in Commerce Media for a while and there 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.

So it was very specific to their business and the industry that they existed in. One of the things we've talked about and 1 of the things we're really excited about, Pat, is the word convergence and how we're kind of looking at that business. So we launched Commerce Media knowing that our owned and operated properties provided us a 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. 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. So not -- and we've been able to teach them how to buy, show them how the ROAS works and really get them to scale.

And the number we gave in the earnings was over 40% of our monetization in Q3 was tied to these new proprietary advertisers that we're bringing on to our network. So we're quite excited by that. Obviously, the supply of our media is proprietary, the 3-year contracts, and we provide a unique proprietary supply for advertisers.

Now we're able to provide -- go to our media partners and say, we now have a unique and competitive and differentiated audience to connect and making a more meaningful experience to you. 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 premium -- and quite honestly, a premium pricing way to drive a differentiated marketplace for ourselves.

Okay. And then on the 2026 outlook, could you maybe sort of talk about like what you're seeing in terms of like -- or what you feel needs to happened within the O&O segment, assuming that you're continuing to grow at a really solid clip within Commerce Media, what needs to happen within the O&O segment to hit the profit trends and perhaps also the revenue growth? So I guess, double digits is a wide range.

Yes. Yes. So we've stated -- we've grown Commerce Media obviously doubled it from '24 to '25. We believe we will double it again in -- 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. So that -- as 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, both consolidated 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. It was negative 3% when you look 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. But for the forecast and the guidance that we're giving you, we continue to project that, that owned and operated business will decline.

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 like achieving that type of level? I mean, can you bring on new partners and you might have like a minimum guarantee or a lower initial margin, but I guess, yes, just over the longer term, how does that sort of blend higher.

Yes. 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. The margins have been -- lower margin drivers have than what we talked about new solutions that we brought on that we're 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.

And then the last piece that's affecting that is, what I'll call, the mix of, what I'll call, enterprise channel, which is working directly with these brands. And then also like the Rebuy is a channel partnership, and we obviously have lower margins in that because, obviously, they're sharing those margins with us as a channel partner. So some of it is mix, but a lot of it has to do with that scaling that we have around those new solutions and eliminate -- the short-term incentives start to wear off. So we see us getting into -- in the late 20s and continue to incrementally increase on a quarter-by-quarter basis.

Our next question comes from the line of Bill Dezellem from Tieton Capital Management.

When one goes on the Dick's Sporting Goods website, it -- and you complete the purchase, it references powered by Fluent. So my question for you is, did we read that correctly? First of all, is Dick's Sporting Goods now a client that you've not referenced in your release here. And secondarily, if that's accurate, when did that relationship begin?

Yes. 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 that we brought on to our platform in Q3. And as you know, Dick's and the other ones that we brought on, they are iconic world-class brands. We're really proud to work with them. And I also want to thank you for supporting Dick's Sporting Goods and Fluent at the same time. So Dick's specifically is a really exciting win for us back in '24, they ran an RFP and they did not select Fluent. They selected the largest competitor in the market in '24. In '25, they came back to us and said they weren't happy. They weren't getting the results or partnership they wanted and they came to us in less -- in a very short time.

So getting that type of win back and having proved out our value proposition with that is in a very -- obviously, a very exciting opportunity for us and one we can continue to leverage with our brand.

We are working with some of the largest and most sophisticated brands in the world. And we're quite proud that like a validation of 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. Have you been on any other websites for us, Bill?

Possibly a few, but let's stick with this one for a moment if I may. So when did this actually convert over? It sounds like it converted from your largest competitor to you all, when did that conversion take place?

It took place in September. So it came on the very end of Q3.

So that did not have a great influence on the third quarter results then?

That's right. I mean most of the Commerce Media business did grow 80%. As you know, we've clearly, 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. There are some fluctuations quarter-over-quarter, and that's a good example of a fluctuation. They came -- if they came out in July or August, it would have a bigger impact on our financials, 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 road map getting live in September was certainly affected Q3. But going forward for the life of the contract, now we have them every single quarter.

That's helpful, Don. 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. 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?

Yes, it's a good question. There'll be a top 5 partner for us from a session standpoint. So between Rebuy and Dick's, we've added two top 5 partners in that -- in the quarter, scaling. Rebuy obviously came on in June but really scaled throughout the -- throughout the third quarter.

Okay. That's helpful. And then 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? And did you essentially just say that was simply a timing of not having a couple of clients come on as quickly as you had anticipated?

Yes. if you take a step back, quarter-by-quarter will fluctuate based on the timing of when things go live on our platform. And we anticipate as being continuing to double from '24 to '25. And as I said, we feel very good about doubling again in '26.

That's helpful. And then the 400 basis point sequential gross margin improvement in that business, that was simply tied to the roll-off of some initial incentives with some larger customers? Is that what we understood your earlier comments to explain?

Yes. It came from what I'll call all 3, Bill. The first is, obviously, we had some other Commerce Media Solutions that we're investing in and scaling. 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. Some of it was with some of these incentives that we put in place.

And then even though Rebuy has grown significantly as a top 5, overall, the mix of what I'll call channel partnerships versus enterprise, the enterprise mix was larger in Q3.

And then given that some of these new CMS solutions or 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 are doing on the front end was enough to influence the margin negatively in Q2 and then swing more favorably in Q3. Is that correct? Or are we reading too much into that?

You're right. You're right about your assumption, though. We can -- again, we continue to see -- we look at the margins overall, but we also look at the margins when they need a solution in terms of what's the target, if it's below.

It's an investment.

If it's -- we have very strict margin restrictions in terms of how we look at the businesses and scale the businesses. 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 -- and leverage to get more business from.

Okay. 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?

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, 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 and better margins. So we're going to balance those two as we go in -- we balance them in 2025, we'll balance them again in 2026.

So Don, and 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. 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?

Yes, it's absolutely right. Bill, it's a broader opportunity and a much larger share of the market. We post transactions where we got in, it was -- quite honestly, is the hardest place to get access to because it's the most valuable place for e-commerce partner when consumer has their credit card out and buying. 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. So it will allow us to be stickier with our partners and also more valuable and strategic.

Great. 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, and that sounds like it's continued in the fourth quarter. What are the dynamics that are leading to this positive change?

Yes. 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 -- the diversified media platforms are very concentrated. Number one was 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. 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'll be able to bring them in, and that also allows us to leverage our relationship across both owned and operated and Commerce Media with these advertisers.

So -- and that is -- that clearly allows us to be looked upon as a more strategic partner for them, which allows us to manage across those 2 different platforms more effectively. 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. 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. 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.

Congratulations on that. One additional question, please. So the 9 months adjusted EBITDA, as listed in the release, is a negative $9 million. But you've said that the full year is going to be positive. So the implication -- are we doing this right, the implication is that the fourth quarter adjusted EBITDA needs to be at least $9 million plus?

Yes. Bill, I think you read it wrong. We said that our Q4 adjusted EBITDA will be positive.

Okay. You've not said that the full year will be positive. Next year, full year will be positive?

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 and that Commerce Media growth will now start to drive the consolidated results of the company.

Great. Thank you for clarifying my air and congratulations on the turn that's happening.

Thank you. At this time, I would now like to turn the conference back over to Don Patrick for closing remarks.

Thank you. 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. 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. Thank you for joining our call today. We look forward to updating you on our progress in the next earnings release.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good afternoon, and welcome. Thank you for joining us to discuss Fluent's second quarter 2025 earnings results. With me today are Fluent's Chief Executive Officer, Don Patrick; Chief Financial Officer, Ryan Perfit; and Chief Strategy Officer, Ryan Schulke. Our call today will begin with the comments from Don 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. A replay of the event will be available following the call on Fluent's website. To access the webcast, please visit the Investor Relations page at www.fluentco.com.

Before we begin, I would like to advise listeners that certain information discussed by management during this conference call will contain forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements made during this call 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 may be identified by words such as expects, plans, projects, could, will, estimates and other words of similar meaning. The company undertakes no obligation to update the information provided on this call.

For a discussion of the risks and uncertainties associated with Fluent's website -- Fluent's business, we encourage you to review the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K and quarterly reports on Form 10-Q.

During the call, management will also present certain non-GAAP financial information relating to media margin, adjusted EBITDA and adjusted net income. Management evaluates the financial performance of the company's business on a variety of indicators, including these non-GAAP metrics. The definitions of these metrics and reconciliations to the most directly comparable GAAP financial measures are provided in the earnings press release issued earlier today.

With that, I'm pleased to introduce Fluent's CEO, Don Patrick. Please go ahead.

Good afternoon. Thank you all 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 Officer. As we projected during our last earnings call, our second quarter consolidated financial results continue to reflect the investment we've made over the last 30 months to shift our mix into the commerce media growth strategies. While this has created expected difficult consolidated comps for our business as expected, we are executing a very intentional strategy that we are confident will build a more valuable business. We are approaching a tipping point where in the second half of 2025, we believe we will begin seeing the financial impact of our Commerce Media Solutions business as the revenue and gross profit mix shift begins to show in the consolidated Fluent financials.

Our Q2 consolidated financial results were as follows. Revenue of $44.7 million, representing a 19% decline versus Q1 of 2025. Our media margin of $11.9 million was a decrease of 13% versus Q1 2025. And adjusted EBITDA of negative $2.8 million, representing a $300,000 improvement versus Q1 2025. Our positive commerce media revenue growth trend in the quarter was not yet enough to offset our owned and operated marketplace decline of 31% quarter-over-quarter, exacerbated by strong regulatory headwinds, one of our key strategic motivators behind our shift to mix strategy. We expect commerce media to become the majority of our revenue as we move into 2026.

To be clear, owned and operated remains core to our long-term growth strategy, albeit with a much tighter nucleus. And while we continue to reduce our strategic reliance on owned and operated, it represents the strong brand equity we built in the marketplace over the last decade that is still highly leverageable by our commerce media business. Put simply, owned and operated provides an essential operational and capability platform that our competitors can't rival, which acts as a springboard for our commerce media marketplace expansion. And the cash flow our owned and operated business generates fuels our long-term growth strategies. That said, the key driver to our business trajectory right now is the growth in Commerce Media Solutions. We fundamentally believe we are creating a differentiated commerce media business that represents a transformational pivot for Fluent while delivering a competitive advantage in a rapidly growing higher gross profit marketplace.

As of June 30, 2025, our commerce media revenue grew 121% compared to the prior year, representing 36% of our consolidated revenue and has surpassed an annual revenue run rate of $80 million, over 20% sequential increase from Q1 as we continue to expand our model and grow market share based on the consumer value we are creating for our clients and advertisers. We are on a decided path to deliver sustainable growth with margins that are accretive to our core business. To support the strategic pivot we are executing, today, we announced over $10 million equity financing with high-quality and diversified group of fundamental investors who are also joined by insiders. This financing bolsters our balance sheet and will fuel the growth to profitability. And we appreciate the support of such a solid group of investors who got to know us, became confident in our strategy and growth trajectory.

I just want to take a minute to stand back and remind everyone the market opportunity that we are going after. Commerce media is projected to grow over $100 billion over the next 5 years and is expected to account for 25% of all digital media spend in 2026. This is a considerably larger market opportunity than our legacy owned and operated business, and the growth we are seeing in the commerce media segment reflects how we are squarely positioned as a leader in this quickly growing marketplace.

In Q2, Commerce Media Solutions revenue grew 121% year-over-year while increasing its percent of consolidated enterprise revenue from virtually 0, 2 years ago to now account for 36% of our consolidated revenue as we aggressively establish Fluent's equity in the commerce media marketplace. Its impact on Fluent's consolidated annual financials was actually partially masked by the seasonality-driven lower marketplace volume that is reflective of the retail vertical. As such, its growth was not yet enough to offset the decline in our still larger owned and operated marketplace where revenue and media margins continue to be negatively impacted by the volatility in media costs on the biddable platforms, which affect our ability to buy media at scale at acceptable margins.

We will more aggressively shift the mix to commerce media in the second half as we onboard new partners and continue to scale our marketplace. In turn, our shareholders will begin to see the financial momentum behind our strategic pivot, and that momentum will carry into fiscal year 2026.

Importantly, our strategic premise continues to be validated by the staple of iconic brands who are choosing to partner with us. We are energized by the world-class brands that continue to engage us in partnership as we added 15 new partners to our commerce media platform since the beginning of Q2 that will provide long-term dividends.

This growing list of partners recognizes the fundamental value we are creating in building consumer loyalty as we are consistently exceeding their revenue and advertiser return on ad spend expectations. As one example, subsequent to the quarter, we expanded our relationship with Authentic Brands, a leading sports, lifestyle and entertainment brand owner generating more than $32 billion in global retail sales. This expanded relationship supports additional brands like Reebok, Champion and more. Also, our recently announced strategic partnership with Rebuy Engine, a leading e-commerce personalization platform for Shopify brands, has opened an expansive network of over 12,000-plus active e-commerce brands on the Shopify ecosystem, which is a new channel for us. That execution is progressing as planned, but the strategic partnership also creates an oasis of upside as we cultivate new business relationships.

What's most important to the business and our shareholders is ultimately having our financial scorecard reflect our strategic wisdom. We expect to see strong momentum in the second half of the year and into 2026. Specifically, we expect the Commerce Media Solutions will continue to grow at a triple-digit rate this year and next. These results are a testament to the investment we've made in the marketplace platform the Fluent team has built, which is validated by the world-class brand partnerships we are establishing and that trend is accelerating. As commerce media scales, we expect to be adjusted EBITDA positive in Q4 and achieve positive adjusted EBITDA for the full year 2026 and beyond.

I will now turn the call over to Ryan to review the financial results.

Thank you, Don, and thanks to everyone for joining us today. I'll now provide a review of our second quarter results. While total revenue of $44.7 million in the second quarter of 2025 reflects a decrease of 24% from the prior year, as Don just mentioned, Commerce Media Solutions revenue grew 121% to $16.1 million, consistent with our expectation of triple-digit growth of this business for 2025.

Commerce Media Solutions represents 36% of our total consolidated revenue in the second quarter of 2025 compared with just 12% in the second quarter last year. We're optimistic about the growth we're seeing in Commerce Media Solutions and believe this segment is positioned to displace our owned and operated business as the main component of our consolidated revenues before the end of the year. Owned and operated revenue decreased approximately 49% in the quarter as our long-term strategy has shifted to focus on commerce media.

Media margin in the second quarter was $11.9 million, which represented 26.7% of revenue compared to $15.7 million or 26.7% of revenue last year. Our commerce media margin in the second quarter of 2025 was $3.2 million or 20% of Commerce Media Solutions revenue compared with $2.2 million or 30.4% of revenues in the second quarter of 2024. Second quarter commerce media margin was compressed related to flexibility around our pricing structure to remain competitive and win long-term partners and gain traction in new verticals. As we improve monetization in those new verticals and move past short-term pricing incentives, we expect media margin to return to the high 20s.

On a GAAP basis, total operating expense in the second quarter of 2025 totaled $14.9 million compared with $18.2 million in the second quarter of 2024. Interest expense in the second quarter decreased to $702,000 from $1 million in the prior year period. We reported a net loss of $7.2 million in the second quarter compared with a net loss of $11.6 million in the prior year period. Net loss also improved on a sequential basis compared to $8.3 million in the first quarter of 2025. Adjusted net loss, a non-GAAP measure, was $5.9 million, equivalent to a loss of $0.24 per share compared with an adjusted net loss of $7.3 million or a loss of $0.47 per share in the second quarter of 2024. Adjusted EBITDA in the second quarter of 2025 was a loss of $2.8 million compared with an adjusted EBITDA loss of $4.5 million in the second quarter of 2024. 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.

Now shifting to our balance sheet. We ended the quarter with $4.9 million in cash and cash equivalents and an additional $2.4 million of restricted cash. We also announced today a private placement in excess of $10 million with multiple quality new investors as well as participation from insiders. This private placement gives us the working capital to support the continued growth of our commerce media business and gives us sufficient capital to reach adjusted EBITDA profitability in Q4 and for the full year of 2026 and beyond.

Our total net long-term debt was $19.9 million at June 30, 2025, compared with $31.9 million at December 31, 2024. We had an outstanding principal balance of $20 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. We will continue to strategically utilize debt as a source of capital as our business scales.

We're encouraged by the progress we've made so far this year, and we believe that we're well positioned for success as we move through the back half of 2025. Commerce Media Solutions has consistently grown at triple-digit pace, and we're approaching a key inflection point where revenue from this segment is set to surpass owned and operated revenue as the main contributor to consolidated revenue. With that shift, we expect to deliver increased revenue, enhanced margin performance, positive adjusted EBITDA and positive cash flow for our business. With our current visibility, we expect 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.

With that, we'll be happy to take questions at this time.

[Operator Instructions] Our first question will come from the line of Maria Ripps from Canaccord.

Can you maybe expand a little bit more on what drove some sort of steeper declines in your O&O segment here in Q2? And just given sort of the run rate of the business now, what are your thoughts on sort of stabilizing that segment from here?

Thanks, Maria. Thanks for your question. So I'll unpack it a little bit. You guys know that the owned and operated business, we've been operating for 15 years now. The first 12, we were able to drive it and grow it on a compounded average growth rate of double digits until the FTC settlement. We had very diversified media channels across a very wide group. So as media moved up and down in pricing, we were able to obviously adjust that and be much more adept in terms of managing across the media channels.

The FTC settlement really restricted our ability to buy in certain media channels profitably, and it was primarily on the biddable platforms. And those biddable platforms are even more volatile than the other channels that we're on. So if you think about it, the owned and operated, the advertiser side, the demand has stayed very, very strong. The media supply is now very, very much narrowed in terms of our diversification, and there's a lot more variability in that. So we had a steep increase in pricing on those biddable platforms that happened in the later part of Q1 and launched, continued into Q2, and we managed the margin. So that business has always managed the margin. We've obviously lowered the revenue but kept the margin percentage in line as we manage it. So it's a combination of, obviously, the volatility of those biddable platforms. But equally important, it's obviously our lack of diversification in those media channels right now, Maria.

Got it. That's very helpful. And then on your Commerce Media Solutions, can you maybe talk about sort of how your partnership with Rebuy is progressing? And are you fully sort of engaged with the majority of brands on the platform -- on the Rebuy platform? Or maybe talk about sort of the pace of them adopting your offerings?

Sure. And we are -- obviously, it's still very young. We announced it in June. We're 2 months in, but we're very, very happy with the progress that we have there with the partnership. The teams are working well and have great cultural fit. I'd say, we are ahead on the product and operational side of the partnership. And we've started the partnership. It had no meaningful effect in Q2 obviously if it started in June. We're starting to see it show up on our stack page. It's still less than 10% of our commerce media volume, but there's good momentum with onboarding their merchant partners. So there's a lot of acceleration in that piece.

It's still very early days. We see tremendous upside in terms of accessing all of their 12,000 merchants and equally important, their large sort of top 50 that they go after. So we're very early stage here. We think this is something that will drive not only our growth in the second half of 2025, but significantly in 2026 also.

Our next question will come from the line of Patrick Sholl from Barrington Research.

I just wanted to follow up on the commerce media side. So on the new agreements that you're reaching with firms, are those mostly revenue share in nature? Or are they more like minimum guarantee? I'm just kind of curious like how long should we think of like these margin pressures easing? Is that kind of just improved monetization helping and automatically lift that? Or is that -- I guess what are some of the dynamics there that should improve the margin profile?

Yes, Pat, thanks for the question. And obviously, our margin did decline as you saw in Q2 on the commerce media side. There's really three things that are driving that. The first is that we have launched into some adjacent Commerce Media Solutions that are very early stage that we are starting to scale. So much like when we got first into the post-transaction side, margins were lower. But as we scaled up, those margins came back in line to where the industry is at. So the first piece has been some additional solutions that we're working with existing partners on to establish and continue to build our strategic relationship. In Q3, we've already seen those margins increase significantly compared to Q2, close to doubling that. So we see that opportunity, the margins improving from Q2 over the new solutions that we're scaling.

The second piece is, as you talked about, depending on how competitive the sales process is, we will provide some different revenue splits in a very short-term targeted way to encourage them to come on to our platform faster or some guarantees to get them to move. They hit harder in Q1 and Q2 because of the lower volume. Those are fixed dollars that obviously, over the course of the year will equal out. But when they're lower volume and lower margins, they have a bigger impact into that. So that obviously is going to continue to trend.

And then the third one is there is tremendous upside in the Rebuy and the other channel partnerships that we are working on, but they tend to have slightly lower margins than the enterprise side. So those are the three moving pieces in there. As we head into the second half here, Pat, we have significant new enterprise clients coming on. The new enterprise solutions that we're excited about, and we'll talk more about later this year, obviously, is starting to scale back up to the margins. So we see us getting back to historical margins in the Q4 time frame.

Okay. And then just on the new solutions. Does that change sort of like the, I guess, advertiser relationships that you've had -- that you have? Or have you had to find additional advertising partners to digest that inventory?

For the most part, it's the same advertising group. There might be a different concentration or mix depending on the solution. But obviously one of the benefits of the owned and operated business is we used a lot of the advertiser relationships to launch into commerce media. And then we've been able to use those advertisers from both to launch and continue to have that strong demand in our newer solutions also.

[Operator Instructions] Our next question will come from the line of Bill Dezellem from Tieton Capital Management.

I have a group of questions. First of all, would you please discuss the new placements beyond post transactions that you referenced in the press release?

Bill, thanks for the question. We've talked about this in other earnings releases, and we've sort of hinted at exciting opportunities that we're being asked to move into it with our partners that we have now. We've talked about a loyalty play, which allows us to really bring our commerce media post-transaction technology and solution into a loyalty play to help retain existing customers of our partners. We have a couple of opportunities there that we're building. And then in general, what I'll call post event. So other things like post receipt or post registration, we're helping our commerce partners monetize within those other consumer experiences. So it is still pretty early days on those. But obviously, they are big, very large, big opportunities beyond post transaction that we think is a very strong road map for continued growth.

Don, would you like to expand on the post receipt and how that might work and practically kind of how we could envision that?

Yes. The post receipt is much like the post-transaction bill. So there's obviously, as the consumer goes in and is going through the flow of getting a receipt, there's -- like in the post transaction, there's an ad module that will pop up that will be very targeted based on our data and our one-to-one marketing of what the next most relevant ad is. So from that perspective, it's very similar to the consumer flow and the consumer experience that we have now.

The only difference, obviously, is in the post transaction, that consumer has its credit card out, they're purchasing and they are obviously a much more engaged consumer than if it's a post receipt or post registration or things like that. They're still -- you have to get -- they're not as intended as a post-transaction consumer.

On the loyalty side that we talked about, it's actually quite exciting where instead of serving up an ad for, for example, Hulu's streaming services to one of the consumers, we will bring offers to them to bring loyalty currency, whatever that partner is to allow them to win currency coins or points or scorecard points, et cetera. It allows them to obviously use that back into the loyalty program of our partners.

So it does two things. One is it turns loyalty into a weapon rather than like a loss statement for our partners, and it allows us to really help them drive consumer engagement and higher loyalty throughout that. So these are still very early stages. We have obviously not a -- we have a small handful of clients that we're scaling with. But from an external perspective, we know the demand and the need is there, and our solution can drive that pretty successfully and move this to scale.

Great. And then I believe in prior press releases, you may have also alluded to this, but you explicitly stated it here in this release that your first-party data differentiates you from competitors in this market. Would you please discuss how that becomes important and the implications from, I guess, a winning of business perspective and as a shareholder, the shareholders' benefit. So I guess, really, the question is what's the benefit to your customer? What's the benefit to your bottom line?

Right. Got it, Bill. So we announced, obviously, Authentic Brands Group, we announced Rebuy. We will announce a number of other very large partnerships that we -- that are coming on to our platform over the next sort of 4 to 6 weeks. So we continue to win and win aggressively. The core -- at the very core of it, Bill, it comes down to very simple is that we drive better results than our competitors, right? At the end of the day, it's does the consumer experience meaningful and additive to our partners; and number two, how does it monetize and how do the results come from a financial perspective.

So we've been -- in the 2 short years, we've been able to really build up a very strong brand around driving results. And underneath that results, there's really two things that drive that significantly. The first, as you mentioned, is our first-party data asset that we've built over 15 years. So if you were on a website, you're purchasing sneakers, we -- as you know, we have milliseconds to determine who you are, what your purchasing behavior has been and will be, and how do we serve the next most relevant ad to you that whatever amount of data that gets passed from our partner to us then goes against our Fluent identity graph. So that first-party data asset allows us to better identify who you are, better understand your purchasing history and your needs and then serve the most relevant ad to you.

So that, along with the second piece, which is our DNA of 15 years from our owned and operated being a performance marketer. We know how to work with our advertisers. We know how to understand audiences, what audiences monetize better versus others versus different offers and et cetera, that -- those are the two things that allow us to drive better results. So that first-party data asset is proprietary. Nobody else has a first-party data asset in the post-transaction space that we're working on, and we believe that is our competitive advantage and competitive moat to driving better results.

And so you said very directly that first-party data allows you to essentially have more of your customers' consumer convert over and take one of your ads. That means your customer makes more money. And when they make more money, so do you since it's a revenue or profit split?

Yes. Basically, that's right, Bill.

Okay. That's helpful. And if you'll allow me a couple of more, I realize I'm taking more than my share of time here. The commerce media second quarter revenues, you stated were $16.1 million annualized -- at $16.1 million. If you annualize that, that's $64 million. The press release says that your run rate exceeds $80 million. So that implies to me that there's been new business won just in the last 6 weeks. Is that the right way to read that? Or am I somehow comparing apples and oranges?

Bill, this is Ryan. The annual revenue run rate, we use that metric because we believe that it better references kind of what the next 12 months would look like if we didn't grow from there. It takes into account seasonality that you wouldn't see there, but it doesn't take into account anything that happened after the end of the quarter. So as of 6/30, that would count all of the media partners that we had brought on through that point and take into account their annual sessions. We then take what we earn per session and kind of annualize that over a full 12-month period. So any new partners that we add in Q3 will add to that number additionally on top of that. But the difference you're seeing between Q2 and that annual number is seasonality, generally speaking.

That's really helpful. And then maybe you can help me make sure I'm doing some math correctly here. You said that you anticipate having double-digit revenue growth in 2025. Last year, you had $255 million of revenues. So if we take the very lowest possible double-digit number is 10%. 10% growth on $255 million is $280 million. And if we remove what you have had for revenues in the first half, that would imply that you need another $180 million in the second half or to split evenly, which I understand it won't be. But if it were, that would be $90 million a quarter between Q3 and Q4. So Q3 will be something less than $90 million and Q4 something greater than $90 million to hit your target. Is that the correct math in the way you're thinking about that? Those are really massive numbers.

Sorry, Bill, I think you misunderstood the -- we've been doing triple-digit growth in commerce media. And what we said on the call is that we expect to have double-digit growth in 2026 from a consolidated basis. So that's 2026 over 2025.

It's '26, not 2025?

Correct.

So basically, the math that I did will work in 6 months when we know what the 2025 revenues are?

Yes.

I'm not showing any further questions at this time. I would now like to turn it back over to Don Patrick for closing remarks.

Thank you. This month marks an incredible milestone. It's the 15th anniversary of Fluent. And I just want to extend a heartfelt thank you to every team member, every partner and every shareholder for your invaluable contributions to this journey. Over the last 15 years, we've had incredible growth and have witnessed great milestones achieved, all thanks to your dedication and your support.

We remain very bullish on our agenda and excited about our momentum we've generated. We continue to lean into the significant mega opportunity in the rapidly growing commerce media industry, where we're expanding our strategic value proposition to world-class partners beyond customer acquisition and delivering higher-quality consumer engagement across the entire marketing funnel. As our strategic trend line continues throughout the second half of 2025, we believe shareholder value will follow.

Thanks, everyone, and we look forward to speaking to you again next quarter.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.