Fluent, Inc. Common Stock 2026 Q2 Earnings Call

Good afternoon, and thank you for joining us today. I'm here with Ryan Schulke, our Chief Strategy Officer and company co-founder, and Ryan Perfit, our Chief Financial Officer. Our Q2 financial results marked an important milestone in the execution of our business strategy. Fluent returned to year-over-year revenue growth. On an aggregate continuing business basis, revenue grew 25% year-over-year in the second quarter, and even on a reported basis, inclusive of the Call Solutions divestiture, total revenue grew 8%. This is not an isolated data point. As we discussed in previous earning calls, this is part of our strategic plan that we have been aggressively investing to capture the significant opportunity in front of us in commerce media. We are solidly positioned to accelerate as we become a recognized brand in the industry based on the results we provide our partners. This quarter is the proof.

Revenue growth paired with improving margins, the signature of a sustainable business strategy, showing up on a consolidated level, not just within a single business line. Looking ahead, we believe that we are well-positioned to drive double-digit growth in revenue on an aggregate continuing business for full year 2026. Q2 was also a quarter where we leveraged our credentials and extended our platform into new adjacent Commerce Media markets with innovative first-mover advantage. In June, we announced our in-store partnership with Bilt, extending Commerce Media beyond digital post-transaction moments and into physical checkout. More than 80% of retail transactions still happen in the physical store, and this gives us a way to engage our partners' most valuable customers wherever they shop, online or in person. I'll go deeper on this in a few minutes.

Let me take you through the quarter, starting with the financial results, and then spend time on where Fluent will continue to innovate in leading Commerce Media. Q2 2026 results were as follows, and consistent with what we advised last quarter. Revenue of $48.4 million, up 25% year-over-year on an aggregate continuing businesses, excluding the impact of the Call Solutions divestiture and other divested and run-off revenue. Year-over-year revenue was up 8% on a reported basis. Our Commerce Media Solutions business again led that growth, with revenue up 90% year-over-year. Gross profit of $14 million, up 36% year-over-year and representing 28.9% of revenue, a 650 basis point improvement from Q1 2026, driven directly by improved monetization with certain key Commerce Media Solution partners, and those partnerships becoming a larger share of our business.

Adjusted EBITDA of negative $1.8 million, a margin of negative 4%, a sequential improvement of $1.8 million from Q1 of 2026. Commerce Media continues to be the lead story of our company, and it's where we will deliver shareholder value by expanding our footprint in the rapidly growing marketplace. What gives us increasing conviction isn't just the growth rate. It's the momentum we're building with world-class brands, combined with new innovative adjacent solutions we're beginning to build in loyalty and in-store. The marketplace continues to expand, and we're leading in meeting our partners' current and future needs. That strategic combination, a growing roster of premier partners, plus real future product innovation beyond our core, is what positions Fluent to be a market leader in the Commerce Media industry.

Commerce Media Solutions revenue grew 90% year-over-year in the second quarter, our 10th consecutive quarter of high double digit to triple digit growth. That growth in Q2 was driven by continued momentum in online post-transaction, as we ended the quarter with an annual revenue run rate of over $125 million. A second strategic breakthrough with in-store lays the foundational platform for additional future growth, and it's not part of our successful Q2 financial performance. In-store represents a large market opportunity we're moving decisively to prove out in the second half of this year, with material revenue impact beginning in 2027. Let me walk you through both. Our core online post-transaction business remains the largest and most mature piece of our Commerce Media Solutions, and it continues to do the heavy lifting. This isn't a new thesis.

It is validated based on the continued superior execution by our team and built on our ability to deliver superior results through our data and performance marketing industry leadership. Our foundation is uniquely grounded in our Owned and Operated marketplace, which our competitors simply cannot replicate, given our decade-plus of industry experience. The first-party data, performance marketing expertise, and consumer and advertiser relationships we built there are the competitive advantages we're now leveraging to deliver superior, measurable results for our commerce partners. That foundation is driving our growth and has established a competitive moat. We continue to add world-class partners to our Commerce Media network in Q2. We believe we are a reflection of the partners we do business with, and our partner pipeline has grown significantly in both size and quality.

Given the seasonality of the retail partner sales cycle, we expect that pipeline to convert and accelerate in the second half, and we'll take that redefined baseline into fiscal year 2027. As validation of our business and brand momentum, one of the largest retail pharmacy chains in the country, CVS, has chosen us to partner with Fluent, and they came online in Q3. We are excited to enrich the checkout experience for their customers with an eye towards deeper loyalty integration over time, which will add value to an already best-in-class experience. A meaningful trend that we're seeing in our online post-transaction business is bringing non-endemic advertising demand into traditional captive retail media networks. As those networks continue to look for new growth opportunities, they're beginning to turn to partners like Fluent for non-endemic demand.

Our partners understand that their customers enjoy products and services that they don't directly sell, and our post-transaction business enables them to do so successfully on their behalf. These captive network relationships are more bespoke compared to our traditional enterprise partnerships, but they meaningfully expand our addressable market and further validate Fluent's competitive position in Commerce Media. We're already delivering non-endemic demand into one of the largest retail media networks in the world, a proof point of how we expand these captive networks' addressable market. Our partner sales pipeline is expanding with other retail media networks. Importantly, working directly with captive retail media networks gives us a differentiated avenue to unlock massive new audiences for our advertisers. During the second quarter of 2026, we introduced In-Store, a strategic marketplace opportunity that will lean on loyalty for success.

Loyalty data is what lets us recognize the same shopper, whether they're checking in online or standing at the physical register. This is the connective tissue between the two moments. That matters because we're not building two separate online and in-store businesses. We're building one commerce platform that follows the shopper wherever they transact, and that makes both sides of the marketplace more valuable to the shopper and to our retail partners. Our first proof point here is our expansion into in-store Commerce Media through a partnership with Bilt Technologies, a nationwide commerce and loyalty network that offers in-store point-of-sale systems for retailers. In an estimated $140 billion Commerce Media industry, in-store remains the hardest segment to measure, and this partnership is built to close that gap. The in-store offering is a first-mover position for Fluent, and we're deliberate about how we're going to build it.

The partnership launches later this year with Beyond, Inc., operator of Bed Bath & Beyond, buybuy BABY, and The Container Store. We have developed a strong pipeline of potential additional partners for onboarding in early 2027. In the second half of 2026, we are committed to testing and learning, proving out the consumer experience, the measurement, and the advertiser return on ad spend. We are not expecting any meaningful financial contribution from in-store this year. We expect that in 2027, once we have validated the model at scale. To put this in perspective, online post-transaction is driving our results today. In-store is what we are building for tomorrow. A vast market that allows us and commerce partners to tap into 83% of transactions that do not happen online, which represents an additional 70 billion-80 billion annual transactions in the U.S.

This is a 5x unlock across commerce, and for media partners in pharmacy, grocery, and home improvement retail sectors, this could mean a 10x increase over monetizable transactions. In short, this is a huge market opportunity and one where being first matters. Returning to year-over-year growth this quarter, layered on top of accelerating and now two-pronged Commerce Media Solutions business strategy, gives us more visibility than at any other point since we have completed our strategic pivot. We remain confident in our stated financial targets for the full year. We expect continued double-digit consolidated revenue growth on an aggregate continuing businesses, and to maintain the gross margin expansion reflected in Q2 as our higher margin business becomes an increasingly dominant share of the mix. We also expect continued improvement in adjusted EBITDA as that revenue growth and margin expansion flow through the P&L.