Fluent, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• The company has invested over 30 months shifting to Commerce Media growth strategies, with Commerce Media expected to become the majority of revenue by 2026.
• Q2 consolidated revenue was $44.7 million, down 19% from Q1 2025. Adjusted EBITDA was negative $2.8 million, a $300,000 improvement from Q1 2025.
• Added 15 new partners to the Commerce Media platform since Q2 start, including expanded relationship with Authentic Brands and partnership with Rebuy Engine.
• Commerce Media margin compressed in Q2 due to early-stage scaling of new solutions, revenue share agreements, and lower margins from channel partnerships, but expected to improve as scaling continues.
• Development of post-event and loyalty solutions beyond post-transaction, leveraging first-party data for better consumer engagement.

Segment Performance

• Commerce Media Solutions: Q2 2025 revenue was $16.1 million, representing a 121% year-over-year growth and 36% of consolidated revenue. Media margin was $3.2 million, 20% of Commerce Media Solutions revenue. Annual revenue run rate surpassed $80 million, with triple-digit growth expected.
• Owned and Operated: Revenue declined 31% quarter-over-quarter. Negatively impacted by strong regulatory headwinds and media cost volatility on biddable platforms, leading to continued revenue and media margin declines.

Guidance

• Commerce Media Solutions is expected to continue triple-digit growth in 2025 and 2026.
• Anticipates adjusted EBITDA positive in Q4 2025 and full year 2026.
• Sees double-digit consolidated revenue growth in 2026.
• Media margin expected to return to high 20s as Commerce Media scales and new solutions mature.

Risks

• Strong regulatory headwinds continuing to impact the Owned and Operated segment.
• Volatility in media costs on biddable platforms negatively affecting Owned and Operated revenue and margins.
• Early-stage scaling of new Commerce Media solutions impacting short-term margins.

Question and Answer

Q: Can you expand on what drove steeper declines in the O&O segment in Q2 and thoughts on stabilizing it?

A: The FTC settlement restricted ability to buy in certain media channels profitably, especially on biddable platforms. Owned and operated has diversified media channels, but post-settlement, media supply is narrowed with more variability. Efforts are ongoing to manage margin while navigating regulatory challenges.

Q: On Commerce Media new agreements, are they revenue share or minimum guarantee, and when will margin pressures ease?

A: Agreements have elements of revenue share and short-term targeted splits. Margins improved in Q3 compared to Q2, with expectations of returning to historical levels by Q4 as new solutions scale and revenue mix shifts.

Q: Explain post-receipt and loyalty solutions?

A: Post-receipt is similar to post-transaction with targeted ads, though consumers are less engaged than post-transaction. Loyalty solutions use technology to offer rewards to retain customers, turning loyalty into a growth driver for partners.