Fluent, Inc.’s Earnings Call Contradictions: O&O Strategy Shifts and Diverging Commerce Media Margin Timelines Clash

Date of Call: Mar 9, 2026

Financials Results

• Revenue: $61.8M, up 31% sequentially, down 18% year-over-year for FY 2025
• EPS: $0.09 loss per share (adjusted), improved from $0.18 loss per share in Q4 2024
• Gross Margin: 31% (media margin), up from 25% in Q4 2024, includes a one-time benefit; Commerce Media Solutions gross margin 33% in Q4, up from 18% in Q2 2025
• Operating Margin: Adjusted EBITDA margin of 0.3% in Q4, up from a loss in Q3 2025 and Q4 2024

Guidance:

• Expect Q1 2026 total company revenue relatively flat year-over-year; aggregate continuing businesses to achieve double-digit revenue growth for full year 2026.
• Expect double-digit year-over-year growth for Commerce Media Solutions in 2026, though adjusted EBITDA will not be positive (revised from prior expectation).
• Expect gross margins to normalize and reach mid-20s by late 2026, with further expansion in 2027.

Business Commentary:

Commerce Media Solutions Revenue Growth:

• Fluent, Inc. reported that Commerce Media Solutions contributed 56% of total Q4 revenue, more than doubling from 26% in Q4 2024.
• The revenue for Commerce Media Solutions in Q4 2025 was $34.7 million, representing a 101% increase compared to Q4 2024.
• This growth was driven by strategic investments and industry expansion, particularly around the holiday season, and a strong pipeline of new commerce partners.

Overall Revenue and Strategic Shift:

• Fluent's total consolidated revenue for Q4 2025 was $61.8 million, compared to $65.4 million in the prior year period.
• The company's full-year 2025 revenue was $208.8 million, reflecting an 18% decline year-over-year due to a deliberate managed transition away from legacy revenue streams.
• The strategic shift towards Commerce Media Solutions is evident, with the company expecting double-digit growth in aggregate continuing businesses in 2026, marking a return to year-over-year revenue growth after a multiyear decline.

Media Margin and Profitability Outlook:

• The media margin for Q4 2025 was $19.1 million, an increase of 49% from Q3 2025.
• The adjusted EBITDA for Q4 improved to $0.2 million, an increase of $3.6 million from Q3 2025.
• Fluent expects improved adjusted EBITDA in 2026, supported by continued growth in Commerce Media, although the company does not anticipate being adjusted EBITDA positive in 2026 due to strategic investments in growth.

Balance Sheet and Financial Flexibility:

• Fluent ended 2025 with $12.9 million in cash and cash equivalents, an increase from $9.4 million at the end of 2024, and a net debt of $30.8 million.
• The company raised over $19 million in equity capital in 2025 and completed the sale of its Call Solutions business in January 2026.
• These actions have strengthened Fluent's balance sheet and financial flexibility, enabling continued investment in Commerce Media Solutions.

Gross Margin and Future Expectations:

• Commerce Media Solutions gross profit margin improved to 33% in Q4 2025, up from 22% in Q3 and 18% in Q2 2025, although it included a $4.3 million one-time benefit.
• Excluding one-time items, the company expects gross margins to normalize and return to the mid-20s over the course of 2026.
• The focus on expanding into new adjacent solutions is expected to enhance gross margins in the longer term, with significant growth anticipated in 2027.

Sentiment Analysis:

Overall Tone: Positive

• CEO states: '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.' Also: 'The trend line has shifted. The momentum is real. We are energized by what lies ahead.'

Q&A:

• Question from Maria Ripps (Canaccord Genuity Corp.): You talked about sort of adding AI-based functionality to your Rebuy 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?
  Response: AI is embedded across all solutions and partners; focus is on embedding AI into workflows for competitive moat and operating leverage. Rebuy partnership is successful, providing indirect route to Shopify merchants and integrated well.

• Question from Patrick Sholl (Barrington Research Associates, Inc.): 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.
  Response: Expect strong double-digit Commerce Media revenue growth in 2026 (greater than 50% but lower than 100%), though originally aimed for doubling; early termination impacted outlook. Margin expansion expected into the mid-20s by late 2026, with further expansion in 2027 from new adjacencies.

• Question from David Marsh (Single Research): Is this a good run rate going forward that we could kind of rely on what you were able to print this year? (Regarding SG&A)
  Response: Will maintain cost discipline but expect OpEx to step up due to Commerce Media investments; divesting non-core business helps keep OpEx low.

• Question from David Marsh (Single Research): 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.
  Response: Gross margin tightening expected initially but to expand over time, reaching mid-20s by late 2026 and further in 2027; Q4 margin included one-time benefit, so adjusted EBITDA and media margin are more indicative.

• Question from David Marsh (Single Research): 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 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?
  Response: Competitors exist but focus on smaller Shopify/D2C clients; large enterprise players need significant investment in compliance and platform to compete. Fluent's direct advertiser model, brand equity, and results create a moat.

• Question from Bill Dezellem (Tieton Capital Management, LLC): 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?
  Response: Expect strong double-digit growth in Commerce Media for 2026 (greater than 50% but lower than 100%), impacted by early termination and investments in adjacencies.

• Question from Bill Dezellem (Tieton Capital Management, LLC): And strong double digits, would you like to bracket that with some numbers?
  Response: Greater than 50%, lower than 100%.

• Question from Bill Dezellem (Tieton Capital Management, LLC): 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?
  Response: Pipeline is stronger due to differentiated brand and strategic conversations around broader commerce media opportunities; partners see Fluent as a strategic partner beyond just incremental post-transaction growth.

• Question from Bill Dezellem (Tieton Capital Management, LLC): You 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?
  Response: Market potential is greater due to adjacencies and low penetration of commerce media, with tailwinds from increased market penetration and new opportunities.

• Question from Bill Dezellem (Tieton Capital Management, LLC): 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?
  Response: Will be deliberate on details for competitive reasons; some adjacencies are equal to or larger than post-transaction market in the U.S., with more to share after testing/learning in Q2.

• Question from Bill Dezellem (Tieton Capital Management, LLC): 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?
  Response: Yes, some are equal to or larger than post-transaction market in the U.S.

• Question from Bill Dezellem (Tieton Capital Management, LLC): 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?
  Response: Generally yes, with one possibly smaller; focus is on strategic consumer journey for partners and growth for Fluent.

• Question from Bill Dezellem (Tieton Capital Management, LLC): 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?
  Response: Cross-selling to existing partners will have shorter cycles due to established trust; new partners may have longer cycles as they evaluate broader vision, but goal is to win 100% of post-transaction and add significant growth from adjacencies.

• Question from Bill Dezellem (Tieton Capital Management, LLC): 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?
  Response: Owned & operated is a competitive advantage, being leveraged to drive Commerce Media performance; not expected to grow, as focus is on shifting resources to higher-value Commerce Media opportunity.

Contradiction Point 1

Performance and Strategic Role of the Owned & Operated (O&O) Business

Contradiction on whether O&O is declining and being deprioritized or stabilizing and being strategically leveraged.

William Dezellem (Tieton Capital Management, LLC) - William Dezellem (Tieton Capital Management, LLC)

2025Q4: The flat performance is expected as resources are concentrated on the higher-growth Commerce Media opportunity. O&O remains a core asset... it is being leveraged to enhance Commerce Media performance. - Donald Patrick(CEO)

What does the flat to slightly increased owned & operated revenue this quarter indicate? - William Dezellem (Tieton Capital Management)

20251114-2025 Q3: Stabilization is due... and importantly, the strategic convergence allowing Fluent to bring its O&O advertisers into Commerce Media. This creates a proprietary demand flywheel, making Fluent a more strategic partner. - Donald Patrick(CEO)

Contradiction Point 2

Timeline for Achieving High-20% Gross Margins in Commerce Media

Contradiction on the expected timeline for reaching high-20% gross margins.

David Marsh (Single Research) - David Marsh (Single Research)

2025Q4: Gross margins are expected to normalize, reach the mid-20s by the back half of 2026, and expand further in 2027. - Ryan Perfit(CFO)

What is a realistic long-term goal for gross margins for the business, especially Commerce Media? - Patrick Sholl (Barrington Research)

20251114-2025 Q3: Margins improved sequentially from Q2 to Q3 and are expected to increase further in Q4. The path to the high-20s involves... - Donald Patrick(CEO)

Contradiction Point 3

Commerce Media Margin Recovery Timeline

Contradiction on when Commerce Media will return to high-20% historical margins.

Patrick Sholl (Barrington Research Associates, Inc.) - Patrick Sholl (Barrington Research Associates, Inc.)

2025Q4: Investments are being made in adjacent solutions... with margins improving over time. - Ryan Perfit(CFO)

What are the expectations for churn, retention, and margin maintenance in Commerce Media over the next few years, considering early contract termination? - Patrick William Sholl (Barrington Research Associates, Inc.)

2025Q2: The company expects to return to historical high-20% margins by Q4 as new enterprise clients come on and scaling occurs. - Donald Patrick(CEO)

Contradiction Point 4

Owned & Operated (O&O) Business Outlook and Role

Contradiction on whether O&O is being actively managed for growth or is in decline.

William Dezellem (Tieton Capital Management, LLC) - William Dezellem (Tieton Capital Management, LLC)

2025Q4: The flat performance is expected as resources are concentrated on... O&O remains a core asset... O&O is not being asked to grow. - Donald Patrick(CEO)

What does the flat/slightly up owned & operated revenue this quarter indicate? - Maria Ripps (Canaccord Genuity Corp.)

2025Q2: The decline was driven by regulatory headwinds... The company is reducing strategic reliance on O&O but it remains core... - Donald Patrick(CEO)

Contradiction Point 5

Commerce Media Growth Trajectory and Targets

Contradiction on the expected growth rate and target phrasing for the Commerce Media business.

Patrick Sholl (Barrington Research Associates, Inc.) - Patrick Sholl (Barrington Research Associates, Inc.)

2025Q4: Commerce Media is expected to grow at strong double-digit rates in 2026, though not as high as initially projected due to the early termination. - Donald Patrick(CEO)

What are the expectations for churn, retention, and margin maintenance in Commerce Media over the next few years, considering early contract termination? - Maria Ripps (Canaccord Genuity Corp.)

2025Q1: Growth acceleration in the back half of the year for triple-digit CMS growth is driven by acquiring new commerce partners and leveraging the expanded platform... - Donald Patrick(CEO)