10-Q: Fluent, Inc. Q3 2025: Revenue Plunges, Going Concern Warning

Fluent, Inc. reports a significant revenue decline and continued net losses for Q3 2025, driven by challenges in its O&O Sites business and compliance with the FTC Consent Order, despite growth in Commerce Media Solutions, leading to a going concern warning.

Summary

• Revenue decreased 27% to $47.0 million for the three months ended September 30, 2025, compared to $64.5 million in the prior year period.
• Revenue decreased 22% to $146.9 million for the nine months ended September 30, 2025, compared to $189.2 million in the prior year period.
• Net loss was $7.6 million, or $0.27 per share, for the three months ended September 30, 2025, a slight improvement from a net loss of $7.9 million, or $0.48 per share, in the prior year period.
• Net loss was $23.0 million, or $0.94 per share, for the nine months ended September 30, 2025, an improvement from a net loss of $25.8 million, or $1.75 per share, in the prior year period.
• Gross profit (exclusive of depreciation and amortization) decreased 31% to $10.9 million (23% of revenue) for Q3 2025, from $15.7 million (24% of revenue) in Q3 2024.
• Media margin decreased 30% to $12.8 million (27% of revenue) for Q3 2025, from $18.2 million (28% of revenue) in Q3 2024.
• Adjusted EBITDA was negative $3.4 million for Q3 2025, a significant worsening from negative $0.1 million in Q3 2024.
• Adjusted EBITDA was negative $9.2 million for the nine months ended September 30, 2025, worsening from negative $3.9 million in the prior year period.
• Management has concluded that there is substantial doubt about the company's ability to continue as a going concern for one year after the date of issuance of this Quarterly Report on Form 10-Q.
• The decrease in Owned and Operated (O&O) Sites revenue was primarily due to media supply challenges resulting from business practices enacted to comply with the FTC Consent Order.
• Commerce Media Solutions revenue increased significantly, partially offsetting the decline in O&O Sites revenue, driven by new long-term contracts with media partners.
• The company implemented workforce reductions in the first quarter of 2025, following similar reductions in 2024, to align resources and reduce costs.

Sentiment

Score: 3

Explanation: The company faces significant financial headwinds, including substantial revenue declines, worsening adjusted EBITDA, and a formal 'going concern' warning. While there are some positive developments like the growth of Commerce Media Solutions and successful capital raises, these are overshadowed by the overall negative financial performance and operational challenges stemming from regulatory compliance and market dynamics.

Positives

• Net loss improved slightly for both the three months ($7.6 million vs. $7.9 million) and nine months ($23.0 million vs. $25.8 million) ended September 30, 2025, compared to the prior year periods.
• Commerce Media Solutions revenue increased by 80% to $18.8 million in Q3 2025 from $10.4 million in Q3 2024, and by 98% to $47.5 million for the nine months ended September 30, 2025, from $24.0 million in 2024.
• Gross margin for Commerce Media Solutions expanded in the third quarter of 2025 due to improved monetization of newer placements.
• Net cash used in operating activities improved to $4.3 million for the nine months ended September 30, 2025, compared to $12.0 million in the prior year period.
• Successfully raised approximately $10.3 million in equity capital in August 2025 through the sale of common stock and warrants.
• The company was in compliance with its financial covenants under the SLR Credit Agreement as of September 30, 2025.

Negatives

• Overall revenue decreased 27% for the three months and 22% for the nine months ended September 30, 2025, compared to the prior year periods.
• Owned and Operated (O&O) Sites revenue declined substantially due to media supply challenges stemming from FTC Consent Order compliance.
• Gross profit (exclusive of depreciation and amortization) decreased 31% for both the three and nine months ended September 30, 2025.
• Media margin decreased 30% for the three months and 31% for the nine months ended September 30, 2025.
• Adjusted EBITDA worsened significantly, becoming negative $3.4 million in Q3 2025 from negative $0.1 million in Q3 2024, and negative $9.2 million for the nine months ended September 30, 2025, from negative $3.9 million in 2024.
• Adjusted net loss worsened to $6.5 million in Q3 2025 from $3.7 million in Q3 2024, and to $19.0 million for the nine months ended September 30, 2025, from $15.2 million in 2024.
• The Call Solutions business experienced a decrease in revenue due to a shift in supply sourcing strategy and the cessation of the Affordable Care Act (ACA) business in Q3 2024.
• The AdParlor business was negatively impacted by the loss of a key retail customer in Q3 2024.
• Total cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue increased to 77% in Q3 2025 from 76% in Q3 2024, and to 78% for the nine months ended September 30, 2025, from 75% in 2024.
• A non-cash loss of $698 thousand was recognized related to the write-off of acquired proprietary technology in connection with TAPP in Q1 2025.
• Fair value adjustment of Convertible Notes with related parties resulted in unrealized losses of $554 thousand for Q3 2025 and $156 thousand for the nine months ended September 30, 2025.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern for one year after the date of issuance of this Quarterly Report on Form 10-Q.
• Borrowings under the SLR Revolver are limited by a fluctuating borrowing base, which has the potential to be insufficient to fund operations and meet the company's needs.
• Non-compliance with any financial covenants under the SLR Credit Agreement in future quarters would result in default, giving SLR the right to accelerate maturities, and the company would not have sufficient funds to repay the borrowings.
• The company has experienced declining revenue and profitability in recent years, largely due to difficulties sourcing traffic for its owned and operated digital media properties (O&O Sites).
• The FTC Consent Order imposed more rigorous standards and vetting of third-party publishers, negatively impacting registration volume on O&O Sites and putting the company at a competitive disadvantage.
• Traffic volume is affected by volatility and attrition of affiliate supply sources, changes in search engine algorithms, social media pricing and policies, and email and text message blocking algorithms.
• A prolonged period of economic downturn could negatively influence both advertiser spend and commerce media traffic volumes.
• The company is exposed to credit risks from its clients and may not be able to collect on amounts owed.
• Inability to raise additional capital on acceptable terms, or at all, if needed for future acquisitions or investments, would adversely affect the business.

Future Outlook

The company expects the growth of its Commerce Media Solutions business to partially offset the year-over-year revenue decline in its Owned and Operated (O&O) Sites and discontinued businesses. It anticipates securing additional long-term contracts for Commerce Media Solutions and expects gross margin to improve in this segment, lifting consolidated gross margin over time as early-term incentives are phased out. The company also continues to develop its Return on Advertising Spend (ROAS) program across additional advertiser segments to gain allocations and pricing increases, aiming to further improve user monetization.

Management Comments

• "The Company has experienced declining revenue and profitability in the last several years, in large part due to difficulties sourcing traffic for the Company's owned and operated digital media properties ('O&O Sites')."
• "Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern for one year after the date of issuance of this Quarterly Report on Form 10-Q."
• "Given the continued challenges the Company has faced achieving profitability, the Company has made reductions in workforce, including during the first quarter of 2025, and restructured certain long-term contracts to better align with the Companys results and cash flow requirements."
• "The Company will continue to monitor the performance of its business units to determine the impact of potential divestments and consider further cost reduction measures and reallocation of resources that will enable the Company to meet its projected budget and cash flow requirements."
• "We believe that significant value has been, and will continue to be, created by improving the quality of consumers driven to our advertiser clients' offers."
• "We have made continued progress in driving the adoption of Commerce Media Solutions among enterprise media partners during the current quarter and anticipate securing additional long-term contracts as the market continues to expand."

Industry Context

The company operates within the digital advertising industry, which is currently facing challenges from uncertain macroeconomic conditions, including inflation, rising interest rates, and reduced consumer confidence, leading clients to be cautious in their spending. The company's Owned and Operated (O&O) Sites business has been particularly impacted by regulatory changes, specifically the FTC Consent Order, which has mandated tighter standards for ad serving media sourcing, placing the company at a competitive disadvantage. In response, the company is strategically shifting towards Commerce Media Solutions, which leverages post-action and post-transaction inventory on partner sites, a model less susceptible to the traffic sourcing issues affecting its O&O Sites. The Call Solutions business also benefits from seasonal trends, such as Medicare open enrollment periods.

Corporate Governance

Legal Proceedings

• FTC Consent Order: On July 17, 2023, the FTC and the Company filed a Joint Motion for Entry of Proposed Stipulated Order, which was entered by the Court on August 11, 2023. The company filed its required compliance report on August 12, 2024. This order imposed rigorous standards on third-party publishers, negatively impacting the company's O&O Sites registration volume.
• Telephone Consumer Protection Act (TCPA) Class Action (Daniel Berman v. Freedom Financial Network): An Amended Class Action Settlement Agreement was entered on May 31, 2023, with final approval filed on February 23, 2024. The company was responsible for $3.1 million, making a cash payment of $1.1 million on March 15, 2024, and issuing a $2.0 million junior secured promissory note to co-defendant FDR.

Related Party Transactions

• Convertible Notes: On August 19, 2024, the company sold convertible subordinated promissory notes in an aggregate principal amount of $2,050 thousand to certain officers, directors, and the largest stockholder.
• May 2024 Private Placement: On May 13, 2024, the company sold pre-funded warrants to purchase up to 2,955,084 shares of common stock to certain accredited or sophisticated investors, all of whom were related parties, including three officers and/or directors and the largest stockholder.
• December 2024 Private Placement: On November 29, 2024, the company sold unregistered pre-funded warrants to purchase up to 1,187,802 shares of common stock to certain accredited or sophisticated investors, all of whom were related parties, including three officers and/or directors and the largest stockholder.
• March 2025 Private Placement: On March 19, 2025, the company sold unregistered pre-funded warrants to purchase up to 2,332,104 shares of common stock to certain accredited or sophisticated investors, all of whom were related parties, including three officers and/or directors, the largest stockholder, and an institutional investor.
• May 2025 Private Placement: On May 15, 2025, the company sold unregistered pre-funded warrants and unregistered common stock warrants to certain accredited or sophisticated investors, all of whom were related parties, including four officers and/or directors, the largest stockholder, and institutional investors or others for whom they have or share beneficial ownership.
• August 2025 Private Placement: On August 19, 2025, the company sold unregistered shares of common stock, unregistered pre-funded warrants, and unregistered common stock warrants to certain officers and/or directors, the largest stockholder, and other accredited investors.

Stakeholder Impact

• Shareholders: Face significant dilution from multiple equity offerings and warrants. The 'going concern' warning and declining financial performance present substantial risks to investment value. Support agreements for capital raises indicate a need for shareholder cooperation.
• Employees: Workforce reductions in Q1 2025 (24 employees) and prior quarters (20, 19, 29 employees in 2024) indicate job insecurity and ongoing cost-cutting measures. Share-based compensation plans are in place to attract and retain talent.
• Customers/Advertisers: The company's focus on improving Return on Advertising Spend (ROAS) and high-quality customer acquisition aims to benefit advertisers. However, challenges in O&O Sites traffic sourcing could impact service delivery, while growth in Commerce Media Solutions offers new avenues for high-value consumers.
• Creditors (SLR Credit Solutions, Freedom Debt Relief, Convertible Note holders): The company's compliance with SLR Credit Agreement covenants is critical; non-compliance could lead to accelerated debt maturities. Convertible Notes are subordinated, indicating higher risk for these holders.
• Suppliers/Media Partners: The FTC Consent Order led to more rigorous vetting of third-party publishers, causing some to cease working with the company. The Commerce Media Solutions business involves revenue share payments to media partners, creating new partnership opportunities.

Next Steps

• Continue to monitor the performance of business units to determine the impact of potential divestments.
• Consider further cost reduction measures and reallocation of resources to meet projected budget and cash flow requirements.
• Continue to work with advertiser clients to define high-performing consumer segments and strategically price paid conversions.
• Continue to develop the Return on Advertising Spend (ROAS) program across additional segments of advertisers to gain additional allocations and pricing increases.
• Obtain stockholder approval for the exercise of May 2025 PFWs by officers and/or directors no later than the 2026 annual meeting of stockholders.
• Obtain stockholder approval for the exercise of August 2025 PFWs by August 2025 Inside Investors no later than the 2026 annual meeting of stockholders.
• Assess the implications of the One Big Beautiful Bill Act, enacted on July 4, 2025, on its financial statements.
• Evaluate the impact of adopting recently issued accounting standards updates (ASU 2023-06, 2023-09, 2024-03, 2024-04, 2025-05, 2025-06) on its consolidated financial statements and disclosures.

Key Dates

Recommendation

The company is in a precarious financial position, explicitly stating 'substantial doubt' about its ability to continue as a going concern. This, coupled with significant revenue declines, worsening adjusted EBITDA, and ongoing operational challenges stemming from regulatory compliance, paints a highly negative picture. While recent capital raises provide temporary liquidity and the Commerce Media Solutions segment shows growth, these positives are insufficient to offset the fundamental issues and high risks. The potential for accelerated debt maturities and the inability to fund operations make the stock a high-risk investment with significant downside potential. A seasoned investor would likely recommend selling to mitigate further losses.

Keywords

Digital marketing, Performance marketing, Commerce media, Ad tech, Customer acquisition, SEC filing, 10-Q, Financial results, Fluent Inc., FLNT, Owned and Operated Sites, FTC Consent Order, Capital raise, Going concern, Debt, Warrants, Stock