Fluent, Inc. (FLNT) Earnings Call Transcript & Summary

Good afternoon, and thanks for joining us. With me are Ryan Schulke, our co-founder and Chief Strategy Officer, along with Ryan Perfit, our Chief Financial Officer. Our Q3 results demonstrate that our strategy continues to gain momentum. The investments made over the past three years are now paying off in both revenue and profitability. Fluent continues to reinforce its standing as an industry leader and a recognized brand — a reflection of the expanding roster of world-class partners we work with and the superior outcomes we deliver. Our partner portfolio continues to grow, and our existing relationships continue to deepen. We have remained steadfast in our strategy since we invested aggressively and pivoted the business in 2023. In Q3, the money we put in continued to deliver the financial returns we've projected ever since the pivot, and the brand partnerships we've secured continue to pay off consistently; at this point they're the engine behind our Commerce Media business achieving its 11th straight quarter of year-over-year revenue growth at high double digits or better. Growth for Commerce Media in Q3 was driven by expanding the businesses of partners we already have as well as by landing new partnerships in online post-transaction. Because of that, Commerce Media Solutions ended the quarter running at an annual revenue run rate above $145 million, and consolidated gross profit margins widened as this higher-margin business accounts for a larger portion of our mix. On the financial side, Commerce Media Solutions has grown large enough that it now fuels expansion throughout Fluent's entire operation. Having gotten back to revenue growth versus the prior year on an aggregate continuing businesses basis during Q2, Fluent posted another gain in Q3 and, notably, continued to widen margins compared with a year earlier. Revenue rose 14% against Q3 of last year, a figure that includes revenue from the Call Solutions business we divested along with other runoff revenue. Third-quarter revenue from aggregate continuing businesses climbed 29% year over year. The trust we've built and our strategic standing in commerce media—a sector expanding quickly—have sped up momentum across our business. We're heartened both by what we're delivering for partners and by the shareholder value we're creating for stakeholders. Notably, that momentum is carrying into Q4. Going forward, we think we're positioned well to achieve double-digit revenue growth across our combined continuing businesses for the whole of 2026. Given the visibility we have right now, we anticipate continuing to deliver double-digit growth in total consolidated revenue in 2027. I'll walk you through the quarter now — first the financials, then some time on where we believe the industry is going, as partner trust and measurable performance becomes the standard for commerce media. For Q3 2026, our results came in as follows and beat the guidance we gave last quarter. Revenue was $53.6 million. As I noted earlier, revenue climbed 14%, and revenue from our aggregate continuing businesses grew 29%; that makes two quarters in a row of double-digit revenue growth on our aggregate continuing businesses. Commerce Media Solutions was up 100%, which is our 11th consecutive quarter of high double-digit growth or better. Gross profit reached $15.3 million, up 41% year-over-year, at a 28% margin. Gross margin for the year rose over 500 basis points compared with a year earlier, driven by ongoing growth at Commerce Media Solutions, which now makes up 70% of consolidated revenue. Adjusted EBITDA came in close to break-even, an improvement of $3.3 million from last year. Revenue growth across our continuing businesses for two straight quarters marks a beginning rather than a finish line. We build our trajectory quarter by quarter, and we are committed to linking more of them together, consistently and durably. That is what strategic and financial alignment looks like. We shifted into the high-growth, higher-margin commerce media industry, constructed the platform for superior partner performance on the foundation of our Owned and Operated marketplaces, and invested aggressively behind it. So at this point, the plan we've been deliberate about has revenue, margin, and profitability all moving up together. Commerce Media Solutions is the standout, and the consistent expansion in that unit is driving overall consolidated revenue growth and stronger adjusted EBITDA for the third quarter. As the numbers show, Commerce Media Solutions now accounts for the bulk of consolidated revenue — 70%, compared with 40% in Q3 of 2025 and just 16% in Q3 of 2024 — and the CMS annual revenue run rate has now passed $145 million. You don't get expansion of this kind unless top-tier companies choose to work with you and then choose to remain, since Fluent creates dependable, long-range alliances that produce solid financial outcomes for those companies; we continue bringing top-tier partners on board, and companies that together bring in over $1.1 trillion in yearly revenue now form the core of our partner ecosystem. These brands are expanding alongside us because what we deliver can be measured and reproduced. During the prior quarter, we informed you that our partner pipeline had increased in both size and quality, and that we anticipated it would convert in the second half; that conversion is happening and keeps scaling as anticipated. In the prior quarter, we also talked about a change in the industry. Captive retail media networks are seeing slower growth, so they're pursuing non-endemic monetization to drive their next wave of expansion. Audiences on these networks are looking for goods and services that go past the core catalog. At the point of sale, our post-transaction platform fills that gap, generating high-margin incremental revenue for the partner; these networks need integrations that are more tailored than traditional enterprise deals. That work also builds durable relationships and widens the market we can serve. We already bring non-endemic demand into one of the world's largest retail media networks, demonstrating how fresh revenue pools become available to our partners. Yet who leads won't be determined by access to demand. Platform trust, data integrity, and verified performance are where the industry is heading. Advertisers are looking for measurement that ties online activity to what happens in stores. Retail networks, meanwhile, want a partner that safeguards their first-party customer relationships. For 16 years we have built to that standard. That same standard is our route into physical retail. We're validating it aggressively through in-store and loyalty work, and we're pursuing that opportunity deliberately. We'll report on how that progress unfolds in future quarters. Q4 is about scaling new partners on our platform while embracing retail seasonality and execution. For our retail partners, this is the year's most important quarter, and our job is to deliver for them when it matters most. We enter Q4 with strong momentum. From what we’re seeing today, we expect revenue growth in the fourth quarter to continue at a double-digit year-over-year rate and adjusted EBITDA to be positive for the quarter. With that, I’ll hand the call to Ryan Perfit for a closer look at the financials.

Thank you, Don, and I appreciate everyone being with us today. What I'll do now is give you a closer look at how we performed in the third quarter, along with some commentary on the year-to-date figures where that's useful. Consolidated revenue in total came to $53.6 million for the third quarter of 2026, versus $47 million during the same period a year earlier, which works out to a 14% increase. That makes this our second quarter in a row of year-to-date growth in consolidated revenue. The third quarter of 2025 included revenue from our Call Solutions business, which we divested in January, as well as other runoff revenue. For our aggregate continuing businesses, revenue rose 29% against the third quarter of 2025, which is an acceleration from the 25% we saw in this year's second quarter. On a year-to-date basis, revenue across aggregate continuing businesses is up 16%, and for the full year we remain on track to deliver double-digit growth on that basis. On top of that, as Don noted, given the visibility we have today, we believe we are well-positioned to keep driving double-digit consolidated revenue growth in 2027. Commerce Media Solutions, which is now the primary driver of our business, doubled its revenue to $37.5 million in the quarter compared with the third quarter of 2025, and accounted for 70% of total consolidated revenue versus 40% in the prior year period. On a sequential basis, revenue grew 23% from $30.5 million in the second quarter. Commerce Media Solutions is now running at an annual revenue run rate above $145 million. Demand remains strong, and we continue to be encouraged by the interest we're seeing from world-class brands across a range of industries, including some of the largest retailers in the United States. With visibility into our seasonally high fourth quarter, we expect growth at Commerce Media Solutions to moderate from the third quarter while staying in the high double digits year-over-year. Owned and Operated revenue fell 33% to $13.8 million, compared with $20.7 million in the third quarter of 2025, as we keep shifting our focus toward Commerce Media Solutions. Media margin, which is a non-GAAP measure, came in at $18.9 million in the third quarter, up 48% and equal to 35% of total consolidated revenue, versus $12.8 million, or 27% of revenue, in the prior year period. Commerce Media Solutions media margin in the third quarter of 2026 rose 189% to $13.3 million, or 36% of Commerce Media Solutions revenue, compared with $4.6 million, or 25% of revenue, in the third quarter of 2025. Consolidated gross profit, excluding depreciation and amortization, rose 41% to $15.3 million, which represents 28% of revenue. Commerce Media Solutions gross profit was $11.1 million in the third quarter of 2026, up 173% compared with the third quarter of 2025, and representing 30% of revenue, up from 27% in the second quarter. While gross margins at Commerce Media Solutions came in above our stated expectations for margins to return to the mid-to-high 20s range over the course of 2026, the increase this quarter was driven by improved monetization with certain commerce media partners and the benefit related to a partner contract negotiation. Over the long run, the main thing that will drive growth in our consolidated margin is Commerce Media Solutions continuing to scale and making up a larger share of total revenue as we get past the early incentive periods. Operating expenses, leaving out depreciation and amortization, came to $16.7 million in the third quarter of 2026, versus $14.7 million in the third quarter of 2025. That rise mostly comes from performance-related compensation and sales commissions that move with our results, plus higher share-based compensation, and a $504,000 provision for credit losses on the note receivable tied to our January divestiture. Managing costs remains a priority as we work toward profitability. Interest expense for the third quarter was $712,000, basically level with $711,000 in the third quarter of 2025. Income tax expense was $6,000 in the third quarter of 2026, versus a benefit of $12,000 in the same period last year. Our net loss was $3.1 million, or $0.10 per basic share and $0.12 per diluted share, in the third quarter of 2026, versus a net loss of $7.6 million, or $0.27 per share, in the prior year period, which is a 59% reduction in net loss. Adjusted net loss, which is a non-GAAP measure, came to $2.5 million, or a loss of $0.08 per share, versus an adjusted net loss of $6.5 million, or a loss of $0.23 per share, in the third quarter of 2025, a 62% reduction in adjusted net loss. Importantly, we achieved near break-even adjusted EBITDA, a non-GAAP measure, of — $43,000, versus an adjusted EBITDA loss of $3.4 million in the third quarter of 2025. Year to date, adjusted EBITDA loss shrank to $5 million from $9.2 million in the prior year period, which shows our continued commitment to better profitability through 2026. Reconciliations of our non-GAAP measures to the most directly comparable GAAP measures appear in our earnings release. Moving now to the balance sheet and cash flow: we held $11.4 million in cash and cash equivalents at September 30, 2026, versus $12.9 million at December 31, 2025. Accounts receivable stood at $41.4 million, versus $46.7 million at year-end 2025. Year to date, we produced positive operating cash flow of $2.8 million, versus cash used in operating activities of $4.3 million in the first nine months of 2025, mainly because of a smaller net loss, with working capital changes still providing cash. Short-term debt, net of unamortized discount fees, was $31.5 million as of September 30, 2026, versus $30.8 million at year-end 2025; on September 30, we amended our facility with Bay View Funding to raise the maximum credit to $35 million so it keeps pace with our growth. We appreciate their support. All in all, we are extremely pleased with this quarter's results and the progress made year to date. Commerce Media Solutions is up 98% year-to-date and now accounts for more than 70% of our revenue. During the second and third quarters, the consolidated business came back to growth on a year-over-year basis, and in the quarter we posted adjusted EBITDA close to break-even as we kept building the Fluent brand alongside world-class media partners in a range of market verticals. Execution on our side has been solid, and given what we can see at present, we still anticipate double-digit consolidated revenue growth across the aggregate continuing businesses, along with better full-year adjusted EBITDA in 2026, backed by ongoing expansion in Commerce Media Solutions. With that said, I'll hand things back to Don.

Thanks, Ryan. We're happy with how the third quarter turned out and with our capacity to produce revenue growth in the double digits alongside a better gross profit margin and adjusted EBITDA that came close to break-even. Commerce Media doubled, marking the 11th quarter in a row of high double-digit growth or stronger, and top-tier brands are picking Fluent as the partner at the leading edge. The results this quarter show the strategic dedication we set out to speed up our business across 2026. Now that strategy and financial results line up structurally, all of our attention turns to disciplined execution as we expand this framework and strive to deliver steady growth.

Hello, and thanks for taking the question. On Commerce Media and what we expect for Q4 and 2027 — I appreciate the explanation you gave about that bump in Commerce Media margins. But as time goes on, once you move past some of the early phase, I suppose the better revenue share with partners in the first parts of the contracts, how do you expect that margin to trend over time? Given the kind of slowdown, the step-down in growth at Commerce Media in Q4, how much of that is simply the timing of partner additions, and how do you — it seems like a fairly significant step-down relative to your current run rate of growth. I was hoping you could give a bit more detail on how you're viewing the fourth quarter and how the timing of additions helps shape the growth trend. Thank you.

Hi, Pat. Ryan Perfit here. Thanks for asking. Let me start with margin. In Q3, we were quite happy with gross margin at Commerce Media Solutions. That said, it got a lift from a partner renegotiation that won't carry into future periods. So for the Commerce Media business going forward, we're still guiding to a gross margin in the high 20s. The partner incentives largely finish rolling off around 2026. Beginning in Q4, that headwind should no longer be a factor for us. On the growth rate, the story is genuinely positive. We posted an elevated growth rate across Q1 through Q3 — Commerce Media Solutions grew 98% year to date versus the prior year over the first nine months, as I recall. We do anticipate a step-down, partly due to the law of large numbers. The main driver there is that we're diversifying our partner base. Adding partners such as CVS and Wyndham during this year means their retail patterns differ from what our earlier partner base showed—Q4 won't deliver the same growth pace—yet these tie-ups benefit us in other quarters since their business is steadier. In effect, we're smoothing out our seasonal curve, which works in our favor, though as our partner mix broadens you shouldn't expect the same heightened Q4 growth rates.

Pat, it's Don here. I realize you're already aware of this, but the dollars of growth are still going to rise; what Ryan was pointing to, of course, is the growth percentages.

Yeah.

As our size increases, that growth rate is going to keep going. Yeah.

All right. Regarding the in-store integrations, I suppose, have you reached a stage where you've got any kind of initial insights into how that business could grow, plus which kinds of offers and which kinds of advertising clients tend to work better there?

Yes. Pat, it's Don here. Appreciate the question; we're aligned with what we told you in Q2; we're taking a very measured approach and trying not to get ahead of our partners when it comes to announcements. We are live with key partners on both of these solutions in Q4, and 2027 will be the appropriate moment for a fuller discussion on this subject. Strategically, this is an enormous market. We have clients that are now live in Q4; we have additional ones coming on in 2027. We're quite enthusiastic about combining online and in-store post-transaction solutions, linking them through loyalty where they transact; that genuinely makes the marketplace far more viable for both the shopper and the retail partner. We'll be measured about this, Pat, but we told you we would test and learn in Q4, and we are live in Q4, and we will be precisely on track for that.

Okay. Thank you.

Thanks, Pat.

Great, thanks a lot for taking my questions, and congratulations on the quarter. Could you perhaps dig a bit deeper into what drove the accelerating growth in your CMS segment during Q3? I suppose, what are some things that turned out better than you expected? And understanding that you're looking at some deceleration here in Q4, but given all the momentum, can you talk about the segment heading into a seasonally stronger quarter here?

Yep. Hi, Maria. This is Don. Two specific things that we — the one we discussed and that's publicly disclosed is CVS. CVS went live in Q3, and it's scaling and growing aggressively. That's a major factor, and since this is an extremely big customer, clearly adding a partner of that kind for that sort of supply generates considerable growth on our side. We've discussed the second key growth area, which is essentially moving into what I'd describe as captive retail media networks. These are the really massive networks such as Amazon, Walmart, Kroger, and so on. That's where 80% of the commerce market sits right now. In the past, we saw our primary target as what I refer to as enterprise clients that sit just beneath those and aren't constructing their own retail media networks. But at this point we're engaged with one of the leading captive retail media networks. Our growth alongside them stems largely from their desire to move past the endemic demand they have today — clearly, that means selling the products they already offer, such as detergent, on a grocer's checkout page — and they're now moving into non-endemic territory, which is precisely what Fluent has done for 16 years: linking a high-quality consumer to a category outside that partner, such as travel or insurance, on that same kind of grocery checkout. So those two trends — bigger, larger deals coming online, and gaining access to those captive retail media — we have a number that we have. We are in one of the largest. We view this as an opportunity for growth that we can keep building on through 2027.

Understood. Understood. That's really useful. So when you consider roughly double-digit revenue growth for next year, how should we think about the profitability level and cash flow along the way? I suppose, are there any investments you believe you need to make as this double-digit growth carries on next year?

Yes. I'll handle the investment side, and then we'll have Ryan walk you through all the details, Maria, on the financial side. So, we put a great deal into our platform during the early years, correct? You saw those in our financials, right? So, you saw that in how Commerce Media grew, but the Commerce Media business wasn't big enough to carry the entire consolidated company. That shifted in Q2, when Commerce Media became the largest piece of our business, and that growth is big enough and meaningful enough to carry the whole company to a double-digit growth rate; so, I think we've built substantial operating leverage into that business, and we feel very good about our ability to scale it. When you look at in-store, and you look at loyalty, those are probably the areas we'll be investing in, which means add-ons and adjacent add-ons into our platform. But the good news is that this is a far more predictable model. It's very deliberate. We know how to integrate. So, it's going to be timed, and we can do a very good job tying it to revenue and tying it to profit. But that's the investment side, more or less. Beyond that, as we keep scaling, we add new partners, we'll have to bring on more support and operations, et cetera.

Ryan Perfit is up next with a follow-up. You likely noticed that in Q3 of this year we were basically at break-even, and improving adjusted EBITDA has been among our stated goals; we expect that improvement to carry on in 2027, though at this point we aren't providing any specific guidance. Our investment opportunities will be weighed against our profitability, since that matters to us now. Considering our history and where we have been, continuing to move toward profitability and pushing dollars down to the bottom line is important.

Understood. That is really useful. Thanks to both of you.

Hi, congrats on doubling the CMS. That is an impressive benchmark you have hit. I wanted to zero in on expectations, I suppose, on the pipeline side. You have delivered plenty, but we are always hungry for more. How would you describe the media partner pipeline right now compared with, let's say, 90 days back or perhaps a year back? Give us a bit of insight into that pipeline.

Hi, Eric; this is Don. Appreciate the question. I mentioned it in my earnings script that we do not disclose figures on our pipeline, but it is expanding considerably in both quality and size. We are not just seeing expansion in the overall count in terms of our capacity to keep driving that growth rate, but we are also seeing big ones, like the CVSs, the larger players arriving that could add substantial supply to us at different moments; we do track our pipeline in stages and how it progresses through those stages; and for us to achieve what we are stating about our double-digit revenue growth, we simply need to keep performing at the level we have been running at; we are not seeking new, improved conversion on the pipeline or larger pipelines following growth. It is out there. Commerce Media is, as you know, enjoying strong tailwinds, and we also hold a highly differentiated position, so our pipeline keeps building accordingly to reach those numbers.

All right. When it comes to getting that pipeline moving, I realize plenty of people who are just getting into Commerce Media want to speak with someone already working with you folks. Have you been able to — maybe this leans more toward marketing — do you have a reference customer list that keeps growing, or would someone like a Wyndham or a Dick's or a CVS be less than fully willing to share what they've experienced with others?

No, Eric, that is the strongest sales tool and sales relationship we have, in terms of — getting a partner to issue a press release alongside us is tough, which explains why we frequently avoid mentioning names during this call or when speaking with you. Still, when it comes to talking with their colleagues about the decisions they made, the vendors they've worked with, the reasons they picked Fluent, that is among the primary reasons we keep winning. And we produce better results for them, we compare favorably against alternatives for them, we craft strategic joint business plans together with them, and we gauge how strong that relationship is in a highly disciplined manner throughout the whole company.

Alright. So you deal with the bigger companies in this space, but during any particular quarter, would there be a customer at 10% of revenue that you'd be required to disclose? I'm trying to understand what was behind the outperformance here. Would that have to be a customer accounting for 10% of total revenue, or one at 10% of CMS revenue?

Hi, Eric. Ryan Perfit here; disclosure would be required for a customer above 10% or a partner above 10% of the whole business, not merely CMS. Right now, we have nothing to report, and as we expand, it becomes increasingly unlikely that any partner we bring on would reach that level. So on the partner side we don't have concentration problems, and on the advertiser side there might be one customer above 10%, though only just barely. I think that was in Q2. About Q3, I'm not certain.

Understood. Nice work on the strong third quarter, and best of luck in the fourth.

Thanks, Eric.

Thank you, Eric.

Hello, and thanks for having me on the call — another solid quarter. I'd love a bit more detail on where the strength in Commerce Media Solutions is coming from: is it largely wins against competitors, which verticals are performing best for you at the moment, what potential do you see across those verticals, and how much of it reflects general economic strength versus the secular trend in your addressable market? Thank you.