Fluent, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Commerce Media Growth: Achieved 139% Q4 2024 year-over-year growth and 284% full-year growth. The commerce media solutions business had an annual revenue run rate exceeding $60 million as of December 31, 2024, up from $50 million as of September 30, 2024. Confident in triple-digit growth continuing in 2025.
• Strategic Shift: Focused on shifting the business mix to commerce media solutions, investing financial and human resources in this area. Has multiple partnerships with leading brands in the pipeline for fiscal 2025.
• Challenges: Q4 2024 media margins were negatively impacted by significant increases in media costs due to the US presidential election advertising. The ACA portion of the call solutions business was discontinued, resulting in a $2.5 million nonrecurring write-down of revenue in Q4 2024.
• Market Opportunity: The commerce media industry is estimated at over $50 billion and expected to reach over $100 billion in the next five years, accounting for over 25% of digital media spending.

Segment Performance

• Commerce Media Solutions: In the fourth quarter of 2024, revenue was $17.2 million, representing a 139% year-over-year growth. For the full year 2024, revenue was $41.3 million, a 284% year-over-year increase. It contributed 26% to the consolidated revenue in Q4 and is projected to drive triple-digit growth throughout 2025.
• Owned and Operated: Q4 2024 owned and operated revenue decreased 23% year-over-year, and full-year 2024 owned and operated revenue decreased 29% year-over-year. Revenue from this segment is expected to continue decreasing as a percentage of the total revenue mix.

Guidance

• 2025 Outlook: Expect strong year-over-year triple-digit revenue growth in Commerce Media Solutions. Anticipate flat consolidated revenue in the first half of 2025 due to seasonality and discontinued/shifted businesses, but expect acceleration in the second half of 2025. Aim for double-digit consolidated revenue and profit growth, and enhance enterprise margins in 2025.

Risks

• Media Cost Volatility: Significant increases in media costs on biddable platforms, particularly driven by the US presidential election, impacted Q4 2024 margins.
• Insurance Industry Issues: ACA portion of the call solutions business was affected by fraudulent activity in the government ACA marketplace, leading to a $2.5 million nonrecurring write-down of revenue in Q4 2024.

Question and Answer

• Q: Scaling of CMS revenue and key drivers? A: Don Patrick stated that commerce media is a transformational growth area with triple-digit growth expected in 2025, leveraging data, technology, and partnerships from the owned and operated business.
• Q: Durability of owned and operated segment? A: Don Patrick mentioned that the owned and operated segment is a competitive advantage but not a growth engine. The focus is on stabilizing and leveraging assets, with revenue expected to decline as a percentage of total revenue.
• Q: Pipeline and transformative deals in Commerce Media Solutions? A: Don Patrick said the pipeline is growing, with transformative deals possible in 2025. Transformative deals would be multiple times current partner sizes, but not factored into the forecast.
• Q: Gross profit and seasonality in Commerce Media Solutions? **A: Don Patrick noted that Commerce Media Solutions' gross profit percentage is expected to increase as a percentage of Fluent, Inc.'s total business, though Q1 may see sequential decline due to seasonality, but the mix will continue to grow.