Fluent's Q3 2025: Contradictions Emerge in FTC Settlement Impact, Ad Serving Expansion, Margins, and Advertiser Spending

Date of Call: None provided

Financials Results

• Revenue: $47.0M, down 27.1% YOY (from $64.5M in Q3 2024)
• EPS: $-0.23 per share (adjusted net loss), compared with -$0.22 per share in Q3 2024 (adjusted)
• Gross Margin: Media margin 27.2% of revenue vs 28.1% in prior year; Commerce Media Solutions media margin 25% (vs 34% in Q3 2024); CMS gross profit margin up sequentially to 22% from 18% in Q2 2025

Guidance:

• Q4 2025: gross profit expected to grow by double digits quarter-over-quarter, driving positive adjusted EBITDA.
• Commerce Media Solutions expected to overtake owned-and-operated as the main driver of consolidated revenue in Q4 2025.
• CMS expected to deliver triple-digit YoY growth, supporting double-digit consolidated revenue growth in 2026.
• Full-year 2026 expected to achieve adjusted EBITDA profitability.

Business Commentary:

• Commerce Media Solutions Growth:
• Fluent's Commerce Media Solutions' revenue grew over 80% year-over-year in Q3 2025, accounting for 40% of consolidated enterprise revenue compared to 16% in Q3 2024.
• Growth was driven by strategic partnerships with leading industry partners like Databricks and Authentic Brands Group, as well as the expansion of existing partnerships.

• Challenges in Owned and Operated Marketplaces:
• Owned and operated marketplaces experienced a 50% decline year-over-year, impacted by strong advertising and regulatory headwinds.

• The decline is due to advertiser pricing and budget pullbacks, particularly late in Q3, which is linked to advertiser-specific issues.

• Financial Pivot and Profitability:

• Fluent anticipates gross profit to grow by double digits quarter-over-quarter in Q4, with positive adjusted EBITDA expected in Q4 2025 and full-year adjusted EBITDA profitability in 2026.
• This pivot is due to an expected shift in revenue mix towards the growing Commerce Media Solutions, as well as enhanced results and profitability from this segment.

• Advertiser and Partner Integration:
• Fluent expanded its partnership with Rebuy Engine, a leading e-commerce personalization platform for Shopify brands, which is expected to scale across the Shopify platform.
• This expansion is driven by the opportunity to access over 12,000 active e-commerce brands on the Shopify ecosystem, presenting new business channels and catalysts for growth.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly states they expect a Q4 inflection: "gross profit is expected to grow by double digits quarter over quarter...resulting in positive adjusted EBITDA." They highlight strong CMS momentum: "Commerce Media Solutions grew 81% to $18.8 million," "annual run rate...exceeding $85 million," and forecast triple-digit CMS growth driving double-digit consolidated revenue in 2026.

Q&A:

• Question from Maria Ripps (Canaccord Genuity): Can you expand on Rebuy partnership trends (retention, wallet share, 1M ad unit sessions in September) and whether post-transaction ad load can be expanded over time? Also, is the Authentic Brands Group expansion a greenfield win or share-taking?
  Response: Rebuy (signed in June) scaled rapidly to a top-five media partner, opening access to ~12,000 Shopify merchants and driving ~1M ad sessions in September; ad load is partner- and consumer-experience specific (we limit impressions to preserve UX), and the Authentic Brands expansion included conquests from a large competitor.

• Question from Patrick Sholl (Barrington Research): Were the ad pullbacks mentioned specific to Commerce Media or broader; which industries were affected and is this macro-driven? What needs to happen in owned-and-operated to hit profit and revenue targets, and when will CMS margins reach the high-20s?
  Response: Pullbacks were advertiser- and industry-specific (linked to tariffs and short-term budget shifts), not systemic to CMS; management is migrating owned-and-operated advertisers into CMS to stabilize monetization; CMS margins rose sequentially and should reach the high-20s over time as initial incentives roll off and mix shifts toward enterprise deals.

• Question from William Dezellem (Tyed On Capital Management): Is Dick’s Sporting Goods a client (the site shows 'Powered by Fluent'), when did the relationship begin, and how material is it to CMS?
  Response: Dick’s went live in September (end of Q3) after switching from a competitor, is now a top-five partner by sessions; late-quarter launch muted Q3 impact but will contribute meaningful recurring revenue going forward.

Contradiction Point 1

Impact of FTC Settlement on Owned and Operated (O&O) Segment

It highlights differing perspectives on the impact of the FTC settlement on the O&O segment, which could influence investor understanding of the financial and operational challenges faced by the company.

Can you discuss the Rebuy partnership, including trends in retention and wallet share for early client cohorts post-transaction inventory, and whether ad load on post-transaction pages can be expanded over time or is static? - Maria Ripps (Canaccord Genuity Corp., Research Division)

2025Q3: Our owned and operated business remains core to our long-term growth but is tighter. - Don Patrick(CEO)

What caused the steeper declines in your Q2 O&O segment? How do you plan to stabilize this segment moving forward? - Maria Ripps (Canaccord Genuity Corp., Research Division)

2025Q2: Owned and operated remains core to long-term growth but now is tighter. - Donald Huntley Patrick(CEO)

Contradiction Point 2

Expansion of Ad Serving Beyond Post-Transaction

It reflects differing views on the company's strategy and capabilities in expanding ad serving beyond post-transaction, which could impact perceptions of growth opportunities and execution.

What trends are you seeing in retention and wallet share among early client cohorts post-transaction inventory? Is there potential to increase ad load on post-transaction pages over time, or is it likely to remain static? - Maria Ripps (Canaccord Genuity Corp., Research Division)

2025Q3: We're expanding our ad serving outside of post-transaction, with solutions before checkout. - Don Patrick(CEO)

Can you elaborate on new placements beyond post-transaction activities? - Bill Dezellem (Tieton Capital Management, LLC)

2025Q2: We are expanding into loyalty and post-event monetization. - Donald Huntley Patrick(CEO)

Contradiction Point 3

Impact of New Solutions on Gross Margins

It involves differing expectations on the impact of new solutions on gross margins, which are critical for understanding the company's financial performance and profitability.

Was the 400 basis point sequential gross margin improvement due to the roll-off of initial incentives with larger customers? - William Dezellem (Tyed On Capital Management)

2025Q3: We expect continued margin improvement as investments in new solutions pay off. - Don Patrick(CEO)

Are new agreements primarily revenue share or guarantee-based? How long will margin pressures ease? - Patrick Sholl (Barrington Research Associates, Inc., Research Division)

2025Q2: Three factors affect margins: new solutions scaling, pricing adjustments, and lower margins with new partnerships. - Donald Huntley Patrick(CEO)

Contradiction Point 4

Advertiser Budget Allocation and Industry Pullbacks

It involves changes in advertising strategies and spending patterns among partners and industry trends, which directly impact Fluent's revenue and business outlook.

Can you clarify if the advertising spending pullbacks mentioned were specific to the Commerce Media segment or broader, and identify affected industries along with whether this is macro-driven or other factors? - Patrick Sholl(Barrington Research)

2025Q3: Throughout 2025, our partners have been more conservative and short-term in terms of budget allocation due to factors like tariffs. Some traditional advertisers pulled back budgets or lowered pricing due to specific industry issues. - Don Patrick(CEO)

Regarding O&O, can you clarify the headwinds you're facing and how you expect them to stabilize in the medium term? - Stuart L. Jeffrey(B. Riley Financial)

2024Q4: Our partners and our advertisers are conservative and, yes, they're managing their budgets very tightly. - Don Patrick(CEO)