Fluent, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Pivot: Fluent's shift to focus on Commerce Media Solutions is well underway. The Commerce Media business has an annual revenue run rate over $65 million. A key partnership with Rebuy Engine was announced, leveraging Rebuy's large e-commerce ecosystem for Shopify brands.
• Financials: Total revenue in Q1 2025 was $55.2 million, down 16% year-over-year. Commerce Media Solutions revenue grew 99%, while owned and operated revenue declined 30%. Gross margins were affected by media cost pressure and revenue mix shift, but expected to improve as Commerce Media scales. Adjusted EBITDA was a loss of $3.1 million in Q1 2025.
• Owned and Operated Role: Owned and operated provides the operational platform and cash flow for Commerce Media Solutions growth. Its proprietary data and AI-powered technology supports Commerce Media partnerships.

Segment Performance

• Commerce Media Solutions: Revenue increased 99% to $12.7 million in the first quarter of 2025, accounting for 23% of consolidated revenue (up from 10% a year ago). The business is expected to continue strong growth through the rest of 2025.
• Owned and Operated: Revenue decreased 30% year-over-year to $31.1 million in Q1 2025. This decline is primarily due to tightened supply in social media channels for owned and operated sites.

Guidance

• Anticipate Q2 consolidated revenue to be consistent with Q1 2025 due to owned and operated revenue decline from reduced social media supply.
• Expect accelerated growth in the back half of 2025 supported by triple-digit growth in Commerce Media Solutions.
• Aim to return to year-over-year consolidated revenue growth and positive adjusted EBITDA as Commerce Media scales.

Risks

• Impact of international tariffs and retail inflation creating industry uncertainty for brand and retail partnerships.
• Tightened supply in social media channels affecting owned and operated revenue.

Question and Answer

• Q: Color on Rebuy Engine partnership and contributors to CMS revenue growth accelerating. A: Partnership with Rebuy is a strategic milestone, with significant upside in the Shopify ecosystem. CMS revenue growth acceleration is due to acquiring new partners and scaling technology.
• Q: O&O trends and stabilization. A: O&O is profitable but declining. The key to consolidated growth is the Commerce Media business, with its pipeline and seasonality in the second half driving revenue growth and EBITDA positive in the second half.
• Q: Commerce media performance in softer consumer environment. A: O&O can manage downturns via media pricing, while Commerce Media benefits from new partners offsetting potential consumer decline.
• Q: Commerce Media business model and long-term outlook. A: Commerce Media has a $1 billion opportunity, with operating leverage expected in 2025 and 2026. The Rebuy partnership is an upside to growth projections.
• Q: Rebuy relationship financial impact and pipeline. A: Rebuy partnership is an indirect sales channel with incremental revenue potential. The enterprise pipeline for CMS is larger and of higher quality.
• Q: Capital raising process. A: Focus on driving to positive free cash flow, Board prioritizes capital structure, and will raise capital as needed with support from shareholders.