Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fluent Inc (NASDAQ:FLNT) reported a 9.9% increase in revenue compared to Q2 2024, reaching $64.5 million.
• The company's Commerce Media Solutions segment demonstrated triple-digit year-over-year revenue growth, now accounting for 16% of total revenue.
• Fluent Inc (NASDAQ:FLNT) added 15 new partners in Q3 2024, contributing to the growth of its Commerce Media Solutions.
• The Commerce Media Solutions segment achieved higher gross margins of 33% compared to the consolidated gross margin of 24%.
• The company anticipates continued strong quarter-over-quarter revenue growth in Q4 2024 and into 2025, driven by its strategic shift towards Commerce Media Solutions.

Negative Points

• Fluent Inc (NASDAQ:FLNT) experienced a 2.6% decline in revenue compared to the prior year.
• The owned and operated marketplace revenue was negatively impacted by increased media costs due to the US Presidential election, affecting margins.
• The company reported a net loss of $7.9 million in Q3 2024, although this was an improvement from the previous year's loss.
• Interest expenses increased to $1.3 million due to higher average interest rates on the company's term loan.
• The owned and operated marketplace segment is expected to continue facing year-over-year declines into Q4 2024.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with FLNT.

Q: What were the main factors contributing to the softer Q3 and Q4 outlook compared to expectations last quarter? A: The biggest impact was the election and the significant increase in digital ad spending on social media channels, which made it difficult to buy media at acceptable margins. This was a major factor affecting our owned and operated marketplace. (Don Patrick, CEO)

Q: Can you elaborate on the expectations for double-digit revenue growth next year, particularly for the owned and operated segment and the Commerce Media Solutions business? A: We expect growth to come primarily from the Commerce Media Solutions side, with owned and operated expected to be slightly down. We have a clear line of sight on how to continue growing the Commerce Media business, which is winning in the marketplace. (Don Patrick, CEO)

Q: Why are media margins higher in the growing Commerce Media Solutions segment, and where do you see them expanding to once the segment is at scale? A: The Commerce Media business model involves revenue sharing, leading to more consistent margins currently in the 30s. As we scale, we expect margins to reach the late 30s to early 40s due to economies of scale and improved targeting. (Don Patrick, CEO)

Q: How did the third quarter unfold relative to your original plans, and what were the key developments in the Commerce Media and owned and operated segments? A: On the Commerce Media side, we added 15 new partners as planned, and momentum continues into Q4. In the owned and operated segment, media supply challenges due to election spending impacted growth, but conditions have improved post-election. (Don Patrick, CEO)

Q: Can you provide more detail on the loyalty business and how it differentiates from typical loyalty programs? A: Our loyalty solution integrates non-endemic ads to generate revenue, making it a profit center rather than a loss leader. This approach allows partners to use the revenue to incentivize loyalty, differentiating it from traditional programs. (Don Patrick, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.