Fluent, Inc. (FLNT) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights a strategic shift towards Commerce Media Solutions, with significant revenue growth and improved margins anticipated. Despite a current negative EBITDA, the reduction in net loss and strategic debt management are positives. The partnership with Rebuy shows potential for future growth, and the company expects strong revenue growth in upcoming years. While there are concerns about O&O segment declines and unclear timelines, the overall sentiment is optimistic, driven by strategic initiatives and market expansion.

Key Financial Performance

Revenue $44.7 million, representing a 24% decrease year-over-year. The decline is attributed to a strategic shift in focus towards Commerce Media Solutions and a decrease in the owned and operated marketplace.

Commerce Media Solutions Revenue $16.1 million, a 121% increase year-over-year. This growth is due to the expansion of the Commerce Media Solutions segment, which now represents 36% of total revenue compared to 12% last year.

Owned and Operated Revenue Decreased approximately 49% year-over-year. The decline is due to the company's strategic pivot away from this segment to focus on Commerce Media Solutions.

Media Margin $11.9 million, representing 26.7% of revenue, compared to $15.7 million or 26.7% of revenue last year. The decline in absolute value is due to the shift in revenue mix and pricing flexibility in Commerce Media Solutions.

Commerce Media Margin $3.2 million or 20% of Commerce Media Solutions revenue, compared to $2.2 million or 30.4% of revenue last year. The margin compression is due to pricing flexibility to remain competitive and gain traction in new verticals.

Net Loss $7.2 million, compared to $11.6 million in the prior year period. The improvement is attributed to reduced operating expenses and interest expenses.

Adjusted Net Loss $5.9 million or $0.24 per share, compared to $7.3 million or $0.47 per share in the prior year period. The improvement is due to the strategic shift and cost management.

Adjusted EBITDA Loss of $2.8 million, compared to a loss of $4.5 million in the prior year period. The improvement is due to the shift in revenue mix towards Commerce Media Solutions.

Cash and Cash Equivalents $4.9 million, with an additional $2.4 million in restricted cash. The company also raised over $10 million in equity financing to support growth.

Net Long-Term Debt $19.9 million, compared to $31.9 million at the end of 2024. The reduction is due to strategic debt management.

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Operating Highlights

Commerce Media Solutions: Revenue grew 121% year-over-year, now representing 36% of consolidated revenue. Annual revenue run rate surpassed $80 million, with a 20% sequential increase from Q1 2025.

Market Opportunity: Commerce media is projected to grow over $100 billion in the next 5 years, expected to account for 25% of all digital media spend by 2026.

New Partnerships: Added 15 new partners in Q2, including an expanded relationship with Authentic Brands and a strategic partnership with Rebuy Engine, opening access to over 12,000 Shopify brands.

Revenue Decline: Total revenue of $44.7 million, a 19% decline from Q1 2025 and a 24% decline year-over-year.

Media Margin: Media margin of $11.9 million, a 13% decrease from Q1 2025, but consistent at 26.7% of revenue year-over-year.

Adjusted EBITDA: Negative $2.8 million, a $300,000 improvement from Q1 2025.

Shift to Commerce Media: Strategic pivot to Commerce Media Solutions, expected to become the majority of revenue by 2026, displacing the owned and operated business.

Equity Financing: Secured over $10 million in equity financing to support growth and profitability goals.

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Risk or Challenges

Regulatory Headwinds: The company faces strong regulatory challenges, which have negatively impacted the owned and operated marketplace, contributing to a 31% quarter-over-quarter decline in this segment.

Media Cost Volatility: Volatility in media costs on biddable platforms has affected the company's ability to buy media at scale with acceptable margins, impacting the owned and operated business.

Revenue Decline: Total revenue decreased by 24% year-over-year, with a 19% decline compared to Q1 2025, reflecting challenges in offsetting declines in the owned and operated segment.

Commerce Media Margin Compression: Margins in the Commerce Media Solutions segment were compressed due to pricing flexibility aimed at winning long-term partners and gaining traction in new verticals, which may impact short-term profitability.

Debt Levels: The company has $19.9 million in net long-term debt and continues to rely on debt as a source of capital, which could pose financial risks if growth projections are not met.

Seasonality and Retail Vertical Dependence: Seasonality-driven lower marketplace volume in the retail vertical has partially masked the growth in Commerce Media Solutions, creating challenges in achieving consistent revenue growth.

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Guidance & Outlook

Commerce Media Solutions Growth: Commerce Media Solutions revenue grew 121% year-over-year in Q2 2025 and is expected to continue growing at a triple-digit rate in 2025 and 2026. This segment is projected to become the majority of Fluent's revenue by the end of 2025.

Revenue Mix Shift: The company is aggressively shifting its revenue mix towards Commerce Media Solutions, which is expected to displace the owned and operated business as the main revenue contributor before the end of 2025.

Market Opportunity: Commerce media is projected to grow over $100 billion in the next 5 years and account for 25% of all digital media spend by 2026. Fluent aims to capitalize on this growth as a leader in the commerce media marketplace.

Adjusted EBITDA: Fluent expects to achieve positive adjusted EBITDA in Q4 2025 and for the full year 2026.

Margin Performance: Commerce Media Solutions margins are expected to return to the high 20% range as pricing incentives are phased out and monetization improves in new verticals.

Capital and Financing: The company secured over $10 million in equity financing to support growth and expects this capital to enable adjusted EBITDA profitability in Q4 2025 and beyond.

Strategic Partnerships: Fluent has added 15 new partners to its Commerce Media platform since Q2 2025, including expanded relationships with Authentic Brands and a strategic partnership with Rebuy Engine, opening access to over 12,000 Shopify brands.

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Shareholder Return Plan

Long-term dividends from partnerships: Fluent has added 15 new partners to its commerce media platform since the beginning of Q2, which will provide long-term dividends.

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Key Q&A

Q:What drove the steeper declines in the O&O segment in Q2, and what are the thoughts on stabilizing it?

A:The decline was driven by the FTC settlement, which restricted the ability to buy in certain media channels profitably, particularly on biddable platforms. These platforms are more volatile, and there was a steep increase in pricing in late Q1 and Q2. The lack of diversification in media channels also contributed. The company managed margins by lowering revenue but maintaining margin percentages.

Q:How is the partnership with Rebuy progressing, and what is the pace of adoption by brands on the platform?

A:The partnership is progressing well, with good cultural fit and operational progress. It started in June and had no meaningful effect in Q2. Currently, it accounts for less than 10% of commerce media volume, but there is momentum in onboarding merchant partners. The company sees significant upside in accessing Rebuy's 12,000 merchants and top 50 brands, with growth expected in the second half of 2025 and 2026.

Q:Are the new agreements in commerce media mostly revenue share or minimum guarantee, and how will margin pressures ease?

A:The agreements are a mix of revenue share and minimum guarantees. Margin pressures are expected to ease due to scaling new solutions, improved monetization, and higher volumes. Margins have already improved significantly in Q3 compared to Q2. The company expects to return to historical margins by Q4.

Q:Do the new solutions change advertiser relationships, or are additional advertising partners needed?

A:The new solutions mostly use the same advertising group, with some changes in concentration or mix depending on the solution. Existing advertiser relationships from the owned and operated business have been leveraged to launch and sustain demand for new solutions.

Q:What are the new placements beyond post transactions, and how do they work?

A:The new placements include loyalty plays and post-event opportunities like post-receipt or post-registration. These placements use ad modules to target consumers based on data. Loyalty plays involve offering loyalty currency to retain customers, turning loyalty into a strategic advantage. These are early-stage opportunities with significant growth potential.

Q:How does first-party data differentiate the company from competitors, and what are the benefits?

A:First-party data allows better identification of consumers, understanding of purchasing behavior, and serving relevant ads. This drives better results for partners, leading to more revenue and profit sharing. The proprietary first-party data asset and performance marketing expertise are competitive advantages.

Q:What explains the difference between Q2 commerce media revenues and the $80 million annual revenue run rate?

A:The difference is due to seasonality. The annual revenue run rate reflects the next 12 months' expected performance, accounting for seasonality but not new partners added after Q2.

Q:What is the expected revenue growth for 2025 and 2026?

A:The company expects triple-digit growth in commerce media and double-digit consolidated revenue growth in 2026 over 2025.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the exact timeline for stabilizing the O&O segment or the precise impact of new partnerships on revenue. Additionally, while they mentioned significant growth potential in new placements and loyalty plays, they did not provide concrete data or timelines for scaling these initiatives.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

FLNT Transcript

Fluent, Inc. (FLNT) Q3 2025 Earnings Call Transcript

Positive11-14

Despite some uncertainties in management's responses, the earnings call highlights strong growth in Commerce Media Solutions, strategic partnerships, and improved financial health. The company's shift towards high-margin segments and reduced debt are promising. While there are challenges in Owned and Operated segments, the overall outlook is optimistic with positive EBITDA expected. The market is likely to react positively, with a potential stock price increase of 2% to 8% over the next two weeks.

Fluent, Inc. (FLNT) Q2 2025 Earnings Call Transcript

Positive8-19

Fluent, Inc. (NASDAQ:FLNT) Q1 2025 Earnings Call Transcript

Unknown5-17

The earnings call reveals several concerns: a 16% revenue decline, increased net loss, and reduced gross margins. While Commerce Media Solutions shows growth, other segments like Owned and Operated are struggling. The lack of a shareholder return plan and unclear guidance on new partnerships further contribute to uncertainty. Despite some positive elements, such as reduced debt and potential from the Rebuy partnership, the overall sentiment leans negative due to financial underperformance and economic uncertainties.

Fluent, Inc. (FLNT) Q1 2025 Earnings Conference Call Transcript

Unknown5-15

The earnings call reveals several negative indicators: a significant decrease in total revenue and owned and operated revenue, an adjusted EBITDA loss, and increased net loss. Despite strong growth in Commerce Media Solutions, the gross margin decline and lack of shareholder return plans are concerning. The Q&A section highlights uncertainties, especially regarding the Rebuy partnership's financial impact and O&O segment stabilization. While new partnerships and debt reduction are positive, the overall sentiment leans negative due to financial performance and market uncertainties.

FLNT Report

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