Fluent, Inc.
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 31, 2025
FLNT$3.84+6.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-04-02.
0001437749-24-010639
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001437749-25-010194
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 124 previous paragraphs and 145 current paragraphs.
48 unchanged; 51 reworded; 44 added; 23 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 21 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (44)
Current report
Since 2022, however, we have experienced challenges maintaining traffic volume to our O&O Sites, primarily due to the FTC inquiry and subsequent FTC Consent Order that mandated that we tighten our standards for media sourcing and put us at a competitive disadvantage to our competitors in the performance marketing market. Other factors that affected our traffic volume have included the volatility and attrition of affiliate supply sources, changes in search engine algorithms, and email and text message blocking algorithms. In response to these challenges, we have invested in strategic and internal efforts to secure additional traffic from the growing influencer sector and to expand our ad network beyond our O&O Sites. However, these efforts have not fully offset the decrease in volume to our O&O Sites and increasing costs for acquiring that traffic, and as a result we have seen lower revenue and lower gross profit in our owned and operated business.
Current report
In 2023, we launched our Commerce Media Solutions business to access additional high value consumers for our advertiser clients and help media owners and ecommerce businesses generate additional revenue from their existing consumer traffic. Fluent’s Commerce Media Solutions embeds proprietary ad-serving technology in the post-action and post-transaction inventory on partner sites and mobile apps across a range of industries, including retail, ticketing and quick service restaurants. In 2024, we served ads to over 100 million consumers in the post-action and post-transaction moment for top-tier publishers and brands. These consumers are the highest intent consumers and drive significantly higher ROAS for our advertiser clients than those from our O&O Sites. The mix and profitability of our media channels, strategies, and partners is likely to continue to be dynamic and reflect evolving market trends and the regulatory environment.
Current report
Trends & Seasonality
Current report
The first quarter of 2025 has continued to be characterized by tepid economic conditions and media supply uncertainty in the O&O Sites marketplaces and rising media costs in the Call Solutions business that have depressed gross profit in recent quarters. To confront these headwinds, we are continuing to invest in securing additional media partners for our Commerce Media Solutions marketplace and by diversifying our client base. We also continue to develop our "ROAS program" across additional segments of advertisers in an effort to gain additional allocations and pricing increases to further improve our user monetization.
Current report
We have continued to be affected by slowed economic conditions and the impacts of the FTC Consent Order (as described in Note 15,Contingencies, in the Notes to the consolidated financial statements) on our O&O Sites and programmatic advertising business. The industry-leading compliance measures we implemented on our O&O Sites in response to such FTC Consent Order, in addition to the TQI, continue to negatively impact our revenues and gross profit.
Current report
For the year ended December 31, 2024 and 2023, revenue was comprised of owned and operated marketplaces of $168.4 million and $235.7 million, Commerce Media Solutions of $41.3 million and $10.7 million, and other streams of $44.9 million and $52.0 million, respectively. The decrease in owned and operated marketplaces revenue was primarily attributable to a challenging macro-economic environment and a decrease in media supply resulting from changes in our business practices to comply with the FTC Consent Order, which drove a reduction in spend from key clients in the Media & Entertainment and Staffing & Recruitment sectors. Revenue in owned and operated marketplaces was further negatively impacted by the enormous social media advertising spend driven by the US Presidential election, which started in late August 2024 and impacted our ability to buy media at acceptable margins for existing advertiser demand. Partially offsetting that decline, our Commerce Media Solutions business added long-term contracts with new media partners which drove up revenue from advertiser clients in the Retail & Consumer sector. Within our other streams, we experienced a decrease related to the True North business we exited in the second quarter of 2024. We expect year-over-year declines in the owned and operated marketplace to continue; however, we expect such declines and decreases to be more than offset by the continued growth of Commerce Media Solutions in the second half of 2025.
Current report
For the year ended December 31, 2024 and 2023, cost of revenue (exclusive of depreciation and amortization) consisted mainly of owned and operated media and fulfillment costs of $130.6 million and $173.6 million, Commerce Media Solutions media cost of $27.0 million and $9.9 million, media and enablement costs related to our other revenue streams of $31.8 million and $32.5 million, and indirect costs of revenue of $4.4 million and $3.9 million, respectively. Our owned and operated marketplaces cost of revenue (exclusive of depreciation and amortization) primarily consists of media and related costs associated with acquiring traffic from third-party publishers, digital media platforms, and influencers for our O&O Sites and fulfillment costs related to rewards earned by consumers. The decrease in O&O Sites media cost was largely attributable to the challenges in acquiring media due to changes in our business practices to comply with the FTC Consent Order. Such costs increased as a percentage of revenue. Our Commerce Media Solutions cost of revenue consists of fees and revenue share payments made to media partners for ads served on their digital properties. The increase in cost of revenue (exclusive of depreciation and amortization) in the Commerce Media Solutions was driven by increased impressions from new media partners added over the period. Cost of revenue (exclusive of depreciation and amortization) for Commerce Media Solutions decreased as a percentage of revenue. The decrease in cost of revenue (exclusive of depreciation and amortization) for other revenue streams, which includes, in addition to media costs, enablement costs and tracking costs related to our consumer data associated with our call centers, was attributable to these added costs to support the ACA business offset by a decrease related to our exit from the True North business in the second quarter of 2024. Cost of revenue (exclusive of depreciation and amortization) for other revenue streams increased as a percentage of revenue. Indirect costs of revenue increased as a result of escalated hosting costs.
Current report
For the year ended December 31, 2024, overall cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue increased to 76.1%, compared to 73.7% for the year ended December 31, 2023.
Current report
The decrease in depreciation and amortization expense was mainly due to the full amortization of certain intangible assets as compared to the year-ended December 31, 2023.
Current report
We recognized a $1.3 million goodwill impairment in the current year period related to the All Other reporting unit and a $1.0 million impairment on its software developed for internal use related to the Fluent reporting unit and customer relationships related to the All Other reporting unit in the current year period, compared to the goodwill impairment of $55.4 million for the Fluent and All Other Reporting Unit for the prior year period.
Current report
Fair Value adjustment of Convertible Notes with related parties.
Current report
The change was due to a $1.7 million unrealized loss related to the fair value of Convertible Notes entered into in the current year as compared to none in the prior year.
Current report
The change was due to a $1.0 million loss on early extinguishment of debt related to the Citizens Credit Agreement on April 2, 2024 due on September 30, 2025, as compared to no loss on debt extinguishment in the prior year.
Current report
Loss before income taxes.
Current report
The decrease in loss before income taxes of $32.2 million was a result of the foregoing.
Current report
Income tax benefit.
Current report
Cash flows and liquidity position
Current report
Cash flows provided by (used in) financing activities. For the years ended December 31, 2024 and 2023, net cash provided by financing activities was $15.2 million for the current year period, compared to net cash used in financing activities of $10.8 million in the prior period, respectively. The change of $26.0 million in cash provided by financing activities in 2024 was mainly due to the sale of pre-funded warrants, convertible notes and common stock, in part to officers, directors, and significant stockholders, and net proceeds received from the issuance of new debt, which was partly offset by repayment of the prior debt and new debt revolver as well as debt financing costs.
Current report
Going concern
Current report
The financial covenants under the SLR Credit Agreement (as defined below) were reset based on our twelve- month projections. However, we have not met our projections for certain recent quarters, and are currently trending below our 2025 first quarter projections. If during any fiscal quarter, we do not comply with any of our financial covenants, such non-compliance would result in an event of default that would give SLR (as defined below) the right to accelerate maturities. In such case, we would not have sufficient funds to repay the SLR Term Loan (as defined below) under the SLR Credit Agreement and any outstanding balance on the SLR Revolver (as defined below). Furthermore, even with the additional capital raise completed in March 2025, there is no assurance the available cash, plus borrowing base on the SLR Revolver will be sufficient to fund operations over the next twelve months and we expect to raise additional capital. We will consider implementing cost-saving measures, but there is no guarantee that such plans would be successfully executed or have the expected benefits. Based upon the foregoing and uncertainty of our ability to satisfy covenants in the SLR Credit Agreement (see "SLR Credit Agreement" below), management concluded that there exists a substantial doubt about our ability to continue as a going concern, and our independent registered public accounting firm included in its opinion for the year ended December 31, 2024 an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern. Our financial statements as of December 31, 2024 did not include any adjustments that might result from the outcome of this uncertainty.
Current report
If our current plans are not successful, we may need to consider other strategic alternatives, including restructuring or refinancing our debt, seeking additional equity or debt financing, reducing or delaying our business activities and strategic initiatives, selling assets, and other strategic transactions and/or other measures. See Item 1A. Risk Factors –— "There is substantial doubt about our ability to continue as a going concern." for further information about the risks of these strategic alternatives.
Current report
Workforce reductions and divestitures
Current report
Given the continued challenges we have faced achieving profitability, we made reductions in workforce throughout 2024 and the beginning of 2025 and will continue to further consider cost reduction measures and focus resources on opportunities that will enable us to meet our projected budget and cash flow requirements. We divested a non-core business unit (see Note 14,Variable Interest Entity, in the Notes to the consolidated financial statements), transferred another business unit (see Note 6,Intangible assets, net in the Notes to the consolidated financial statements), ceased continuing operations of a non-core business, and we will review other business units to determine the impact of potential divestments.
Current report
Capital resources and cash requirements
Current report
Our sources of capital include cash on hand, cash from operations to the extent available and borrowings from the SLR Credit Facility (as defined below) to the extent available. We have no other committed sources of capital.
Current report
SLR Credit Agreement
Current report
On May 15, 2024, we entered into the First Amendment to the SLR Credit Agreement, pursuant to which SLR (1) waived any required prepayments on the SLR Revolver from the proceeds from the Private Placement; (2) required that the Credit Parties (as defined in the SLR Credit Agreement) retain a financial advisor to assist in preparing the Company's projections, (3) increased the minimum excess availability covenant following the Private Placement; (4) amended the definition of borrowing base (as defined in the SLR Credit Agreement); and (5) amended certain post-closing obligations.
Current report
We entered into two letter agreements with SLR, one on July 31, 2024, and another on August 14, 2024, pursuant to which SLR extended the deadline for delivery of the compliance certificate required for the fiscal month ended June 30, 2024, and the related notice of event of default, to August 21, 2024.
Current report
On August 19, 2024, we entered into the Second Amendment to the SLR Credit Agreement, which, among other things, required that we raise $2.0 million in additional capital. To raise the capital, we entered into convertible subordinated notes (See Note 8,Long-term debt, net in the Notes to the consolidated financial statements) raising an aggregate of $2.1 million. In addition, the Second Amendment (1) waived non-compliance with the financial covenants as of June 30, 2024, (2) modified the financial covenants through December 31, 2025, (3) ended a requirement to engage a financial advisor, (4) increased the interest rate margin from 5.25% to 5.75%, and (5) and waived any required prepayments from the proceeds from the convertible subordinated notes financing.
Current report
We entered into a letter agreement with SLR on October 30, 2024, pursuant to which SLR extended the deadline for delivery of the compliance certificate required for the fiscal month ended September 30, 2024, and the related notice of event of default, to November 19, 2024.
Current report
On November 14, 2024, we entered into the Third Amendment to the SLR Credit Agreement, which, among other things, required that we raise at least $7.5 million of additional capital by November 29, 2024 which was subsequently extended to December 3, 2024. On November 29, 2024, we entered into purchase agreements with (1) two institutional investors who purchased stock pursuant to a registered direct offering (the "Registered Direct Offering") and (2) four Company insiders who purchased pre-funded warrants (the "December Pre-Funded Warrants"), pursuant to which, on December 2, 2024, we received aggregate net proceeds of approximately $7.9 million, through the combined transactions, after deducting offering expenses (See Note 11,Equity in the Notes to the consolidated financial statements). In addition, the Third Amendment (1) waived non-compliance with the financial covenants as of September 30, 2024, (2) extended the duration of the call protection applicable to the loans, and (3) modified the cash dominion provisions to remain in effect on an indefinite basis. (See Note 8,Long-term debt, net in the Notes to the consolidated financial statements).
Current report
As a result of our economic downward trends as described above in "Advertiser Trends & Seasonality", we were not in compliance with our financial covenant under the SLR Credit Agreement as of December 31, 2024. In addition, we updated our projections to reflect the continued pressure on our operating results. On January 30, 2025 and then on March 3, 2025, we entered into letter agreements with SLR, pursuant to which SLR extended the deadline for delivery of the compliance certificate required for the fiscal month ended December 31, 2024, and the related notice of event of default to March 10, 2025. On March 10, 2025, we entered into the Fourth Amendment to the SLR Credit Agreement, which, among other things, required that we raise at least $5.0 million of additional capital for Fluent, LLC, our wholly-owned subsidiary, by March 20, 2025. On March 19, 2025, we entered into securities purchase agreements with directors and/or officers and certain stockholders of the Company, including our largest shareholder, pursuant to which, on March 20, 2025, they acquired pre-funded warrants to purchase up to 2,332,104 shares of our common stock for gross proceeds of $5.1 million, before deducting offering expenses payable by us of $0.1 million (See Note 16,Subsequent Events in the Notes to the consolidated financial statements). In addition, the Fourth Amendment waived non-compliance with the financial covenants as of December 31, 2024, extended the duration of the call protection applicable to the loans, and modified the financial covenants, among other things (See Note 16,Subsequent Events in the Notes to the consolidated financial statements).
Current report
The financial covenants under the SLR Credit Agreement were reset based on our twelve month projections. However, we have not met our projections for certain recent quarters and we may not meet our projections in the future. If during any fiscal quarter, we do not comply with any of our financial covenants, such non-compliance would result in an event of default that would give SLR the right to accelerate maturities. In such case, we would not have sufficient funds to repay the SLR Term Loan under the SLR Credit Agreement and the additional amount owing on the SLR Revolver.
Current report
Sales of securities
Current report
On May 13, 2024, the Company issued pre-funded warrants to purchase up to 2,955,084 shares of the Company's common stock, at a purchase price of $3.384 per warrant. The aggregate gross proceeds totaled $10.0 million before deducting offering expenses payable by the Company. See Note 11*, Equity*in the Notes to the consolidated financial statements.
Current report
On August 19, 2024, the Company sold convertible subordinated promissory notes in aggregate principal amount of $2.1 million. See Note 8,Long-term debt, netin the Notes to the consolidated financial statements.
Current report
On December 2, 2024, the Company issued 2,483,586 shares of common stock pursuant to a registered direct offering and issued pre-funded warrants to purchase up to 1,187,802 shares of the Company’s common stock, at a purchase price of $2.3147 per warrant. The aggregate gross proceeds totaled $8.5 million before deducting offering expenses payable by the Company. See* Note 11, Equity*in the Notes to the consolidated financial statements.
Current report
On March 20, 2025, the Company issued pre-funded warrants to purchase up to 2,332,104 shares of the Company's common stock, at a purchase price of $2.174 per warrant. The aggregate gross proceeds totaled $5.1 million before deducting offering expenses payable by the Company. See Note 16,Subsequent Eventsin the Notes to the consolidated financial statements.
Current report
Commission revenue
Current report
We, acting as the agent, recognize commission revenue in the amount expected to be received from the insurance provider when we submit the initial policy application. Further, we apply the practical expedient to estimate the commission revenue for each insurance policy by applying the use of the portfolio approach to policies grouped together by product type and period submitted for effectuation.
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Removed paragraphs (23)
Previous report
Since 2022, we have experienced challenges growing our traffic volume to our owned and operated properties due to several factors including the volatility of affiliate supply sources, changes in search engine algorithms, email and text message blocking algorithms, and increased competition for available media. In response to these challenges, we invested in strategic and internal efforts to secure additional traffic from the growing influencer sector and expanding our ad network beyond our owned and operated marketplace to new syndicated performance marketplaces.** **The mix and profitability of our media channels, strategies, and partners is likely to continue to be dynamic and reflect evolving market trends and the regulatory environment.
Previous report
Advertiser Trends & Seasonality
Previous report
We believe the first half of 2024 will continue to be characterized by slowed economic conditions and uncertainty. To confront these headwinds, we will continue to diversify our client base, and we intend to further develop our "ROAS program" across additional segments of advertisers in an effort to gain additional budget allocations and further improve our user monetization. We project improvement in the second half of 2024, but we cannot assure you that such improvement will occur.
Previous report
During 2023, we continued to be impacted by slowed economic conditions and uncertainty. Additionally, as a result of the FTC Consent Order described in Part I, Item 3– Legal Proceedings, above, we made additional changes to our employment opportunities marketplace and programmatic advertising businesses and implemented industry-leading compliance measures to the owned and operated marketplace, which have had negative impacts on our revenues and media margin throughout the year. In the medium term, we expect that the increased regulatory scrutiny will eliminate the advantage that less compliance-focused competitors currently benefit from, enabling us to recapture market share. Additionally, legal fees related to the FTC Consent Order decreased over the year and were ultimately offset by insurance reimbursements for legal fees incurred in current and prior periods.
Previous report
The decrease was primarily attributable to contraction of our owned and operated marketplaces due to a challenging macro-economic environment, which influenced reductions in spend by key clients in the media & entertainment and subscription sectors. Additionally, these decreases were partially an effect of changes in business practices to reflect regulatory requirements in connection with the FTC Consent Order described in Part I, Item 3 – Legal Proceedings, above. The decreases related to these factors were partially offset by:
Previous report
The key factors that drove lower revenue in 2023, and the accompanying offsets, are expected to persist into 2024, with economic headwinds lightening and effect reversing over the year.
Previous report
The decrease was attributable to the same factors causing the decline in revenue for the period. Our cost of revenue primarily consists of media and related costs associated with acquiring traffic from third-party publishers, digital media platforms, and influencers for our owned and operated websites and purchasing media from syndicated publisher partners. The costs also include enablement costs associated with our call centers and tracking costs related to our consumer data. In addition, there are indirect costs which include fulfillment costs related to rewards earned by consumers who complete the requisite number of advertiser offers, along with call center software and hosting costs.
Previous report
For the year ended December 31, 2023, cost of revenue as a percentage of revenue decreased slightly to 73.7%, compared to 74.1% for the year ended December 31, 2022.
Previous report
The decrease was mainly due to certain intangibles that fully amortized during the current year, partly offset by the amortization of the intangibles related to the consolidation of TAPP Influencers Corp ("TAPP").
Previous report
Goodwill impairment.
Previous report
The Company recognized $55.4 million impairment loss for the year ended December 31, 2023, as compared to $111.1 million for the year ended December 31, 2022, related to both the Fluent and All Other reporting units.
Previous report
Write-off of long-lived assets.
Previous report
The Company did not recognize write-offs of intangible assets for the year ended December 31, 2023, compared to $0.2 million for the write-offs of intangible assets related to software developed for internal use for the year ended December 31, 2022.
Previous report
The Company recognized no gain or loss on disposal of property and equipment for the year ended December 31, 2023, compared to de minimis loss on disposal for the year ended December 31, 2022.
Previous report
Net loss before income taxes.
Previous report
Income tax (expense) benefit.
Previous report
Cash flows used in financing activities. For the years ended December 31, 2023 and 2022, net cash used in financing activities was $10.8 million and $5.4 million, respectively. The change of $5.3 million in cash used by financing activities in 2023 was mainly due to the $5.0 million prepayment made on the debt along with the fees paid related to the debt modification, slightly offset by the decline in taxes paid related to share settlements of vesting of restricted stock units.
Previous report
We may explore the possible acquisition of businesses, products, and/or technologies that are complementary to our existing business. We continue to identify and prioritize additional technologies, which we may wish to develop internally or through licensing or acquisition from third parties. While we may engage from time to time in discussions with respect to potential acquisitions, there can be no assurance that any such acquisitions will be made or that we will be able to successfully integrate any acquired business with our then current business or realize anticipated cost synergies. In order to finance such acquisitions and working capital, it may be necessary for us to raise additional funds through public or private financings. Any equity or debt financings, if available at all, may be on terms which are not favorable to us and, in the case of equity financings, may result in dilution to shareholders.
Previous report
On March 31, 2021, Fluent, LLC entered into a credit agreement (as amended, modified, extended, restated, replaced, or supplemented from time to time, the "Citizens Credit Agreement") with certain subsidiaries of Fluent, LLC as guarantors, the lenders thereto, and Citizens Bank, N.A. ("Citizens Bank") as administrative agent, lead arranger and bookrunner. The original Citizens Credit Agreement provided for a term loan in the aggregate principal amount of $50.0 million funded on the Closing Date, along with an undrawn revolving credit facility of up to $15.0 million (together with the term loan, the "Citizens Credit Facility").
Previous report
On January 26, 2024, the Borrower and Citizens Bank entered into a Third Temporary Waiver and Amendment to Credit Agreement (the "Third Waiver"), pursuant to which Citizens Bank agreed to waive through the earlier of April 30, 2024, an occurrence of any other event of default, or failure to comply with requirements of the Third Waiver and its rights and remedies arising from the Company’s breach of the total leverage covenant and fixed charge ratio during the quarters ending December 31, 2023 and March 31, 2024. Among other things, the Third Waiver required the Borrower to, by March 31, 2024, deliver one or more Transaction Commitments, defined as: (i) a third-party commitment to provide additional capital in exchange for equity or subordinated debt, (ii) a purchase agreement for the sale of a divested business, or (iii) a third-party commitment to refinance the Credit Agreement. One condition of the Transaction Commitments was that they had to, in the aggregate, provide for net proceeds to Fluent of not less than $10.0 million.
Previous report
For the three months ended March 31, 2023, we considered a combination of the income and market approaches to determine the fair value of the Fluent reporting unit. We determined that a market-based approach, due to the decline in value of our publicly traded stock, provided the best indication of fair value of the Fluent reporting unit. The market approach considers our implied market multiple applied to management’s forecast and further adjusted for a control premium. If we were to experience an additional decline in market capitalization or assumptions in management's forecast, there would be an increased risk of impairment of goodwill. Based on the results of this market-based approach as of March 31, 2023, we concluded that the Fluent reporting unit's carrying value exceeded its estimated fair value by 20% and concluded that its goodwill of $51,614 was impaired and recorded a non-cash impairment charge of $25,700.
Previous report
Additionally, we engaged a third party to assist in conducting an interim test of the fair value of our goodwill for potential impairment for the three months ended June 30, 2023. We determined that a combination of income approach and the market approach provided the best indication of fair value of the Fluent reporting unit. The income approach and market approach utilize accounting estimates and assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions. The critical assumptions in the income approach include forecasted revenues and profitability, long-term growth rates, and discount rates. The market approach considers our implied market multiple applied to management's forecasted profitability and is further adjusted for control premium. Management exercises judgment in developing these assumptions. If we were to experience sales declines, a significant change in operating margins which may impact our cash flows, an increase in our discount rates, a decline in our market capitalization, and/or a decrease in our projected long-term growth rates, there would be an increased risk of impairment of goodwill. Based on the results of this approach as of June 30, 2023, we concluded that the Fluent reporting unit's fair value exceeded its estimated carrying value by 5% and concluded that its goodwill of $27,469 was not impaired.
Previous report
Further, we engaged a third party to assist in conducting an interim test of the fair value of our goodwill for potential impairment for the three months ended September 30, 2023. We determined that a combination of income approach and the market approach provided the best indication of fair value of the Fluent and All Other reporting units. The income approach and market approach utilize accounting estimates and assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates and assumptions. The critical assumptions in the income approach include forecasted revenues and profitability, long-term growth rates, and discount rates. The market approach for the Fluent reporting unit considers our implied market multiple applied to management's forecasted profitability and is further adjusted for control premium. The market approach for the All Other reporting unit considers the enterprise values of comparable companies applied to management's forecasted profitability and is further adjusted for control premium. Management exercises judgment in developing these assumptions. If we were to experience sales declines, a significant change in operating margins which may impact our cash flows, an increase in our discount rates, a decline in our market capitalization, and/or a decrease in our projected long-term growth rates, there would be an increased risk of impairment of goodwill. The results of this approach indicated that the Fluent reporting unit’s carrying value and All Others carrying value exceeded its fair value by 32% and 29%, respectively. We therefore concluded that the Fluent reporting unit’s goodwill was impaired and recorded a non-cash impairment for the remainder of the goodwill balance of $27,469. In addition, the All Other reporting unit's goodwill of $3,497 was also concluded to be impaired, and we recorded a non-cash impairment charge of $2,236. Based on the results from the interim test as of September 30, 2023, we concluded no further triggering events existed as of October 1, 2023 that would indicate it is more likely than not that the fair value was less that the carrying value for our annual impairment test.
Reworded paragraphs (51)
Previous wording
Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company"), is an industry leader in digital marketing services. We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach. We access these consumers through both our owned and operated digital media properties and our auxiliary syndicated performance marketplace products. In 2023, we delivered data and performance-based customer acquisition services for over 500 consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.
Current wording
We access these consumers through both our commerce media solutions marketplace ("Commerce Media Solutions"), and our owned and operated digital media properties ("O&O Sites"). Since the beginning of 2024, we have delivered data and performance-based customer acquisition services for over 500 consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.
Previous wording
We also operate syndicated performance marketplaces on partner sites where we utilize our proprietary ad-serving technology to identify and acquire additional consumers for our advertiser clients. Our technology is integrated at key moments in the consumer experience to capitalize on high engagement and improve conversion. For example, Adflow, our post-sale e-commerce business, connects our advertisers to consumers on e-commerce websites after check-out. These syndicated solutions generate meaningful income for our partners, while driving additional growth for our advertiser clients. We typically remunerate our syndication partners on a revenue share or impression basis.
Current wording
We operate our Commerce Media Solutions on partner sites and mobile apps where we embed our proprietary ad-serving technology to identify and acquire consumers for our advertiser clients. Our technology is integrated at key moments in the consumer experience to capitalize on high engagement and improve conversion. For example, our post-transaction solution connects our advertisers to consumers on e-commerce websites and apps after a purchase or similar transaction. These syndicated Commerce Media Solutions generate meaningful income for our media partners, while driving high-quality customer acquisition for our advertiser clients. We sign agreements with our media partners with one to five year terms, typically remunerating them on a revenue share and/or impression basis.
Previous wording
We attract consumers at scale to our owned and operated digital media properties primarily through promotional offerings where they are rewarded for completing activities within the platforms. When registering on our sites, consumers provide their names, contact information, and opt-in permission to present them with relevant offers on behalf of our clients. Approximately 90% of these users engage with our media on their mobile devices or tablets.
Current wording
We also attract consumers at scale to our O&O Sites primarily through promotional offerings, through which consumers are rewarded for completing activities on our sites. When registering on our sites, consumers provide their name, contact information, and opt-in permission for telemarketing and email marketing. Approximately 90% of these users engage with our media on their mobile devices or tablets.
Previous wording
Once users have registered on our sites, we integrate our proprietary direct marketing technologies and analytics to engage them with surveys, polls, and other experiences, through which we learn about their lifestyles, preferences, and purchasing histories, among other matters. Based on these insights, we serve targeted, relevant offers to them on behalf of our clients. As new users register and engage with our sites and existing registrants re-engage, the enrichment of our database expands our addressable client base and improves the effectiveness of our performance-based campaigns.
Current wording
Once users have registered on our sites, we integrate our proprietary direct marketing technologies and analytics to engage them with surveys, polls, and other experiences, through which we learn about their lifestyles, preferences, and purchasing histories, among other matters. Based on these insights, we serve users targeted, relevant offers on behalf of our clients. As new users register and engage with our sites and existing registrants re-engage, the enrichment of our database expands our addressable advertiser client base and improves the effectiveness of our performance-based campaigns.
Previous wording
Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences. We solicit our users’ consent to be contacted by us and/or our advertisers via various contact methods including email, telephone, SMS/text, and push messaging. We then leverage their self-declared data in our performance offerings primarily in two ways: (1) to serve advertisements that we believe will be relevant to users based on the information they provide when they engage on our sites or other partner sites through our syndicated performance marketplaces and (2) to provide our clients with users' contact information so that such clients may communicate with them directly. We may also leverage our existing technology and database to drive new revenue streams, including utilization-based models (e.g., programmatic advertising).
Current wording
Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences. We solicit our users' consent to be contacted by us and/or our advertisers via various contact methods including email, telephone, SMS/text, and push messaging. We then leverage their self-declared data in our array of performance offerings primarily in two ways: (1) to serve advertisements that we believe will be relevant to users based on the information they provide when they engage on our O&O Sites or other partner sites through our commerce media marketplace and (2) to provide our clients with users' contact information so that such clients may communicate with them directly. We may also leverage our existing technology and database to drive new revenue streams, including utilization-based models (e.g., programmatic advertising).
Previous wording
Additionally, the company operates a call center performance marketplace that provides live-call-based performance campaigns to help clients increase engagement. The call solutions marketplace serves clients across an array of industries but has a heavy focus on the health insurance sector.
Current wording
Additionally, we operate a call center-supported performance marketplace ("Call Solutions") that provides live, call-based performance campaigns to help clients increase engagement. In some cases, we have sold products and services directly on behalf of our clients. The Call Solutions business serves clients across an array of industries but has had a heavy focus on the health insurance sector.
Previous wording
We generate revenue by delivering measurable marketing results to our clients. We differentiate ourselves from other marketing alternatives by our abilities to provide clients with a cost-effective and measurable return on advertising spend ("ROAS"), a measure of profitability of sales compared to the money spent on ads, and to manage highly targeted and highly fragmented online media sources. We are predominantly paid on a negotiated or market-driven "per click," "per lead," or other "per action" basis that aligns with the customer acquisition cost targets of our clients. We bear the costs of acquiring traffic from publishers performance marketplaces that ultimately generate qualified clicks, leads, calls, app downloads, or customers for our clients.
Current wording
We generate revenue by delivering measurable marketing results to our clients. We differentiate ourselves from other marketing alternatives by our ability to provide clients with a cost-effective and measurable return on advertising spend ("ROAS"), a measure of profitability of sales compared to the money spent on ads, and to manage highly targeted and highly fragmented online media sources. We are predominantly paid on a negotiated or market-driven "per click," "per lead," or other "per action" basis that aligns with the customer acquisition cost targets of our clients. For our O&O Sites and Call Solutions business, we bear the responsibility and cost of acquiring consumers from media partners that ultimately generate qualified clicks, leads, calls, app downloads, or customers for our clients. Our Commerce Media Solutions business does not bear media inventory risk.
Previous wording
Through AdParlor, LLC ("AdParlor"), we conduct our non-core business which offers clients various social media strategies through the planning and buying of media on different platforms.
Current wording
Through AdParlor, LLC ("AdParlor"), our wholly owned subsidiary, we conduct our non-core business which offers advertiser clients a managed service for creator marketing and media buying on different social platforms.
Previous wording
For the years ended December 31, 2023 and 2022, we recorded revenue of $298.4 million and $361.1 million, net loss of ($63.2) million and ($123.3) million, and adjusted** EBITDA of **$6.8 million and$22.7 million, respectively. Adjusted EBITDA is a non-GAAP financial measure equal to net income (loss), the most directly comparable financial measure based on US GAAP, adding back income taxes, interest expense, depreciation and amortization, share-based compensation expense, and other adjustments. See our audited consolidated financial statements and accompanying notes thereto appearing elsewhere in this 2023 Form 10-K, and for further discussion and analysis of our results of operations. For further discussion of adjusted EBITDA, including a reconciliation from net income (loss), see "Definitions, Use and Reconciliation of Non-GAAP Financial Measures" below.
Current wording
For the years ended December 31, 2024 and 2023, we recorded revenue of $254.6 million and $298.4 million, net loss of$29.3 million and$63.2 million, and adjusted** EBITDA of negative **$5.6 million and positive$6.8 million, respectively. Adjusted EBITDA is a non-GAAP financial measure equal to net income (loss), the most directly comparable financial measure based on U.S. GAAP, adding back income taxes, interest expense, depreciation and amortization, share-based compensation expense, and other adjustments. See our audited consolidated financial statements and accompanying notes thereto appearing elsewhere in this 2024 Form 10-K for further discussion and analysis of our results of operations. For a further discussion of adjusted EBITDA, including a reconciliation from net income (loss), see "Definitions, Use and Reconciliation of Non-GAAP Financial Measures" below.
Previous wording
Our business depends on identifying and accessing media sources that are of high quality and on our ability to attract targeted users to our owned and operated media properties. As our business has grown, we have attracted larger and more sophisticated clients to our marketplaces. To further increase our value proposition to clients and to fortify our leadership position in the evolving regulatory landscape of our industry, we implemented a Traffic Quality Initiative in 2020 and expanded into new syndicated performance marketplaces in 2023. Sourcing high quality traffic will remain a focus and part of a broader initiative to improve customer acquisition for our clients.
Current wording
Our legacy owned and operated business depends on identifying and accessing high quality media sources and on our ability to attract targeted users to our offers. As our business grew, we attracted larger and more sophisticated advertiser clients to our marketplaces. To further increase our value proposition to clients and to fortify our leadership position in the evolving regulatory landscape of our industry, we implemented a Traffic Quality Initiative ("TQI") in 2020 and established our Commerce Media Solutions business in 2023 to access more higher value consumers. Sourcing high quality traffic will remain a focus and part of a broader initiative to improve customer acquisition for our clients.
Previous wording
Starting in 2022, we increased our spend with major digital media platforms, revised our bidding strategies for affiliate traffic, and developed partnerships to expand traffic from social media platforms, including the growing influencer sector. We also pursued strategic initiatives that enable us to grow revenue with existing user traffic volume, while attracting users to our media properties via email and SMS messages. These efforts continued in 2023, as we focused on improved monetization of consumer traffic through improved customer relationship management and internal capabilities that allow us to re-engage consumers who have registered on our owned media properties. Through these initiatives, our business has become less dependent on the volume of users to generate revenue growth.
Current wording
Starting in 2022, we increased our spend with major digital media platforms, revised our bidding strategies for affiliate traffic, and developed partnerships to expand traffic from social media platforms, including the growing influencer sector. We have pursued strategic initiatives that enable us to grow revenue with existing user traffic volume by attracting users to our O&O Sites using email and SMS messages. In addition, we have focused on improved monetization of consumer traffic through improved customer relationship management that allow us to re-engage consumers who have registered on our O&O Sites. Through these initiatives, our business has become less dependent on the volume of users to generate revenue growth.
Previous wording
We believe that significant value has been, and will continue to be, created by improving the quality of traffic sourced to our media properties, through increased user participation rates on our sites, leading to higher conversion rates, resulting in increased monetization, and ultimately increasing revenue and media margin. Media margin, a non-GAAP measure, is the portion of gross profit (exclusive of depreciation and amortization) reflecting variable costs paid for media and related expenses and excluding non-media cost of revenue.
Current wording
We believe that significant value has been, and will continue to be, created by improving the quality of traffic and consumers driven to our O&O Sites. Better quality users lead to increased user participation rates and higher conversion rates for our advertiser clients, resulting in increased monetization, and ultimately increased revenue and media margin. Media margin, a non-GAAP measure, is the portion of gross profit (exclusive of depreciation and amortization) reflecting variable costs paid for media and related expenses and excluding non-media cost of revenue.
Previous wording
We deliver data and performance-based marketing executions to our clients across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment. Both data and performance-based spend continued to be challenged in 2023 by general economic uncertainty. We experienced slowdowns in 2023 in certain sectors of the Media & Entertainment, Staffing & Recruitment, and Financial Products & Services industries. Specifically, in the third quarter of 2023 our largest client in the gaming sector pulled back pricing and spend as they refocused on ROAS rather than growth. Although the Company addressed this pullback by scaling other clients in the marketplace from the gaming sector and other sectors of the Media & Entertainment industry, the gap was not fully absorbed by other bidders.
Current wording
We deliver data and performance-based marketing executions to our clients across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment. In 2023, we experienced slowdowns in certain sectors of the Media & Entertainment, Staffing & Recruitment, and Financial Products & Services industries. Both data and performance-based spend continued to be challenged in 2024 by general economic uncertainty. In 2024, revenue declined largely due to media supply challenges in our O&O Sites, effects of the FTC Consent Order on our programmatic extension of the owned and operated business, and declines related to the divestiture of the Company's subscription business in May 2024. In 2025, we expect that growth of our Commerce Media Solutions business will offset year-over-year revenue decline related to continued media supply challenges in our O&O Sites.
Previous wording
To offset these challenges, we continue to work with a select group of advertisers to define high performing consumer segments and strategically price paid conversions to help clients drive higher ROAS. This initiative has driven increased budgets from clients across the Media & Entertainment industry, which, collectively, represents a large component of our revenue mix.
Current wording
We continue to work with select advertiser clients to define high performing consumer segments on both our O&O Sites and Commerce Media Solutions marketplace and strategically price paid conversions accordingly. This initiative has helped clients drive higher ROAS and driven increased budgets from clients across the Media & Entertainment industry, which represents a large component of our revenue mix.
Previous wording
Additionally, our performance is subject to fluctuations as a result of seasonality and cyclicality in our traffic sources and our clients’ businesses. Specifically, Adflow and our businesses that benefit from Medicare open enrollment experience increased volume in the fourth quarters. Other factors affecting our business may include macroeconomic conditions that impact the digital advertising industry, the various client verticals we serve, and general market conditions
Current wording
Our performance is subject to fluctuations related to seasonality and cyclicality in our clients' businesses and fluctuations in media sources. Specifically, our retail specific media partners in our Commerce Media Solutions marketplace are highly seasonal based on fourth quarter consumer spending and our Call Solutions business that benefits from Medicare open enrollment periods ("OEPs") experiencing increased volume in the first and fourth quarters. Other factors affecting our business may include macroeconomic conditions that impact the digital advertising industry, the various client verticals we serve, and general market conditions.
Previous wording
We are subject to risks and uncertainties caused by events with significant macroeconomic impacts. Inflation, rising interest rates, and reduced consumer confidence have caused our clients and their customers to be cautious in their spending. The full impact of these macroeconomic events and the extent to which these macro factors may impact our business, financial condition, and results of operations in the future remains uncertain. In light of the challenging macro-economic environment, we prioritized strategic investments in 2023 that had near-term benefits to revenue while also streamlining our organization through targeted workforce reductions.
Current wording
We are subject to risks and uncertainties caused by events with significant macroeconomic impacts. Inflation, rising interest rates, and reduced consumer confidence have caused our clients and their customers to be cautious in their spending. The full impact of these macroeconomic events and the extent to which these macro factors may impact our business, financial condition, and results of operations in the future remains uncertain. Considering the slowed macro-economic environment, we continue to prioritize strategic investments that have near-term benefits to revenue while also streamlining our organization through targeted workforce reductions.
Previous wording
Definitions, Use and Reconciliation of Non-US GAAP Financial Measures
Current wording
Definitions, Use and Reconciliation of Non-GAAP Financial Measures
Previous wording
We report the following non-US GAAP measures:
Current wording
We report the following non-GAAP measures:
Previous wording
Adjusted EBITDA is defined as net income (loss), excluding (1) income taxes, (2) interest expense, net, (3) depreciation and amortization, (4) share-based compensation expense, (5) loss on early extinguishment of debt, (6) accrued compensation expense for Put/Call Consideration, (7) goodwill impairment, (8) write-off of intangible assets, (9) loss on disposal of property and equipment, (10) acquisition-related costs, (11) restructuring and other severance costs, and (12) certain litigation and other related costs.
Current wording
Adjusted EBITDA is defined as net income (loss), excluding (1) income taxes, (2) interest expense, net, (3) depreciation and amortization, (4) share-based compensation expense, (5) loss on early extinguishment of debt, (6) accrued compensation expense for Put/Call Consideration, (7) goodwill impairment, (8) impairment of intangible assets, (9) loss (gain) on disposal of property and equipment, (10) fair value adjustment of Convertible Notes with related parties, (11) acquisition-related costs, (12) restructuring and other severance costs, and (13) certain litigation and other related costs.
Previous wording
Adjusted net income (loss) is defined as net income (loss), excluding (1) share-based compensation expense, (2) loss on early extinguishment of debt, (3) accrued compensation expense for Put/Call Consideration, (4) goodwill impairment, (5) write-off of intangible assets, (6) loss (gain) on disposal of property and equipment, (7) acquisition-related costs, (8) restructuring and other severance costs, and (9) certain litigation and other related costs. Adjusted net income (loss) is also presented on a per share (basic and diluted) basis.
Current wording
Adjusted net income (loss) is defined as net income (loss), excluding (1) share-based compensation expense, (2) loss on early extinguishment of debt, (3) accrued compensation expense for Put/Call Consideration, (4) goodwill impairment, (5) impairment of intangible assets, (6) loss (gain) on disposal of property and equipment, (7) fair value adjustment of Convertible Notes with related parties, (8) acquisition-related costs, (9) restructuring and other severance costs, and (10) certain litigation and other related costs. Adjusted net income (loss) is also presented on a per share (basic and diluted) basis.
Previous wording
Below is a reconciliation of media margin from gross profit (exclusive of depreciation and amortization), which we believe is the most directly comparable US GAAP measure:
Current wording
Below is a reconciliation of media margin from gross profit (exclusive of depreciation and amortization), which we believe is the most directly comparable U.S. GAAP measure:
Previous wording
Below is a reconciliation of adjusted EBITDA from net income (loss), which we believe is the most directly comparable US GAAP measure:
Current wording
Below is a reconciliation of adjusted EBITDA from net income (loss), which we believe is the most directly comparable U.S. GAAP measure:
Previous wording
(1) Balance includes compensation expense related to non-competition agreements and earn-out expense incurred as a result of business combinations (see Note 13,Business acquisitions, and Note 14,Variable Interest Entity, in the Notes to the Consolidated Financial Statements). The earn-out expense was $434 and $121 for the years ended December 31, 2023 and 2022, respectively.
Current wording
(1) Balance includes compensation expense related to non-competition agreements and earn-out expense incurred as a result of business combinations (see Note 14,Variable Interest Entity, in the Notes to the consolidated financial statements). The earn-out expense was $110 and $434 for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Below is a reconciliation of adjusted net income and adjusted net income per share from net income (loss), which we believe is the most directly comparable US GAAP measure:
Current wording
Below is a reconciliation of adjusted net income and adjusted net income per share from net income (loss), which we believe is the most directly comparable U.S. GAAP measure:
Previous wording
(1) Balance includes compensation expense related to non-competition agreements and earn-out expense incurred as a result of business combinations (see Note 13,Business acquisitions, and Note 14,Variable Interest Entity, in the Notes to the Consolidated Financial Statements). The earn-out expense was $434 and $121 for the years ended December 31, 2023 and 2022, respectively.
Current wording
(1) Balance includes compensation expense related to non-competition agreements and earn-out expense incurred as a result of business combinations (see Note 14,Variable Interest Entity, in the Notes to the consolidated financial statements). The earn-out expense was $110 and $434 for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Adjusted EBITDA, as defined above, is another primary metric by which we evaluate the operating performance of our business, on which certain operating expenditures and internal budgets are based and by which, in addition to media margin and other factors, our senior management is compensated. The first three adjustments represent the conventional definition of EBITDA, and the remaining adjustments are items recognized and recorded under US GAAP in particular periods but might be viewedas not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. These adjustments include litigation and other related costs associated with legal matters outside the ordinary course of business, including costs and accruals related to matters described above under Part I, Item 3 — Legal Proceedings. We consider items one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. There were no adjustments for one-time items in the periods presented.
Current wording
Adjusted EBITDA, as defined above, is another primary metric by which we evaluate the operating performance of our business, on which certain operating expenditures and internal budgets are based and by which, in addition to media margin and other factors, our senior management is compensated. The first three adjustments represent the conventional definition of EBITDA, and the remaining adjustments are items recognized and recorded under U.S. GAAP in particular periods but might be viewedas not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. These adjustments include certain litigation and other related costs associated with legal matters outside the ordinary course of business, including costs and accruals related to matters described above under Part I, Item 3 — Legal Proceedings. We consider items one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules.
Previous wording
Adjusted net income (loss), as defined above, and the related measure of adjusted net income (loss) per share exclude certain items that are recognized and recorded under US GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. We believe adjusted net income (loss) affords investors a different view of the overall financial performance of the Company than adjusted EBITDA and the US GAAP measure of net income (loss).
Current wording
Adjusted net income (loss), as defined above, and the related measure of adjusted net income (loss) per share exclude certain items that are recognized and recorded under U.S. GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. We believe adjusted net income (loss) affords investors a different view of the overall financial performance of the Company than adjusted EBITDA and the U.S. GAAP measure of net income (loss).
Previous wording
Media margin, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per share are non-GAAP financial measures with certain limitations regarding their usefulness. They do not reflect our financial results in accordance with GAAP, as they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations. Accordingly, these metrics are not indicative of our overall results or indicators of past or future financial performance. Further, they are not financial measures of profitability and are neither intended to be used as a proxy for the profitability of our business nor to imply profitability. The way we measure media margin, adjusted EBITDA, and adjusted net income (loss) may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in our various agreements.
Current wording
Media margin, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per share are non-GAAP financial measures with certain limitations regarding their usefulness. They do not reflect our financial results in accordance with U.S. GAAP, as they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations. Accordingly, these metrics are not indicative of our overall results or indicators of past or future financial performance. Further, they are not financial measures of profitability and are neither intended to be used as a proxy for the profitability of our business nor to imply profitability. The way we measure media margin, adjusted EBITDA, and adjusted net income (loss) may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in our various agreements.
Previous wording
In the normal course of executing paid media campaigns to source consumer traffic, we regularly evaluate new channels, strategies, and partners. Traffic acquisition costs incurred with the major digital media platforms have historically been higher than affiliate traffic sources. For the year ended December 31, 2023, digital media spend continued to be driven by strategic test and learn initiatives that began in the second quarter of 2022. The mix and profitability of our media channels, strategies, and partners reflect evolving market dynamics and the impact of our Traffic Quality Initiative and the increased compliance obligations from the FTC Consent Order. As we evaluate and scale new media channels, strategies, and partners, we may determine that certain sources initially able to provide us profitable quality traffic may not be able to maintain our quality standards over time, and we may need to discontinue, or direct a modification of the practices of, such sources, which could reduce profitability. The improved traffic quality being sourced is the foundation to support sustainable long-term growth and positioning us as an industry leader. Past levels of cost of revenue (exclusive of depreciation and amortization) may therefore not be indicative of future costs, which may increase or decrease as these uncertainties in our business play out.
Current wording
In the normal course of executing paid media campaigns to source consumer traffic for our O&O Sites, we regularly evaluate new channels, strategies, and partners. For the year ended December 31, 2024, O&O Sites digital media spend continued to be a mix of affiliate traffic, paid media from major digital platforms, influencer activations, and inventory from strategic media partners. Traffic acquisition costs incurred with the major digital media platforms have historically been higher than affiliate traffic sources and the mix and profitability of our media channels, strategies, and partners reflect evolving market dynamics, the impact of our Traffic Quality Initiative, and the increased compliance obligations from the FTC Consent Order. As we evaluate and scale new media channels, strategies, and partners, we may determine that certain sources initially able to provide us profitable quality traffic may not be able to maintain our quality standards over time, and we may need to discontinue, or modify the practices of, such sources, which could reduce profitability further. Commerce Media Solutions media partners are generally renumerated on a per impression or rev share basis, leading to more consistent profitability. Ultimately, we believe improved traffic quality is the foundation to support sustainable long-term growth and position us as an industry leader and Commerce Media Solutions is key to that goal. Although past levels of cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue are not indicative of future percentages in the owned and operated and Call Solutions businesses, we expect revenue share agreements in the Commerce Media Solutions to create more stability in the long-term.
Previous wording
For the years ended December 31, 2023 and 2022, respectively, the amounts consisted primarily of employee salaries and benefits of $15.8 million and $14.4 million, advertising costs of $0.9 million and $1.1 million, non-cash share-based compensation expense of $0.5 million and $0.6 million, and travel and entertainment expenses of $0.4 million and $0.4 million. The change in employee salaries and benefits was primarily due to salary increases.
Current wording
For the years ended December 31, 2024 and 2023, sales and marketing expense consisted primarily of employee salaries and benefits of $14.8 million and $15.8 million, restructuring costs of $0.6 million and $0.1 million, advertising costs of $0.6 million and $0.9 million, professional fees of $0.5 million and $0.4 million, travel and entertainment expense of $0.4 million and $0.4 million, and non-cash share-based compensation expense of $0.2 million and $0.5 million, respectively. The decrease was primarily due to lower salaries and other employee related costs driven by a decline in headcount and lower non-cash share-based compensation as a result of lower grants, partly offset by an increase in restructuring costs driven by the current year reductions in workforce, as described below.
Previous wording
For the years ended December 31, 2023 and 2022, respectively, the amounts consisted primarily of employee salaries and benefits of $13.6 million and $13.0 million, software license and maintenance costs of $1.9 million and $1.6 million, professional fees of $1.7 million and $2.4 million, and non-cash share-based compensation expense of $0.6 million and $0.6 million, respectively. The slight increase in product development expense was primarily due to increased salary costs and IT related fees mainly offset by lower consulting fees.
Current wording
For the years ended December 31, 2024 and 2023, product development expense consisted primarily of employee salaries and benefits of $12.7 million and $13.6 million, professional fees of $1.6 million and $1.7 million, software license and maintenance costs of $1.5 million and $1.9 million, restructuring and severance costs of $0.7 million and $0.1 million, and non-cash share-based compensation expense of $0.2 million and $0.6 million, respectively. The decrease was primarily due to a decline in salaries driven by lower headcount and lower spend on IT-related vendors and a decline in non-cash share-based compensation due to lower grants, partly offset by an increase in restructuring and severance costs in the current year period due to the reductions in workforce, as described below.
Previous wording
For the years ended December 31, 2023 and 2022, respectively, the amounts consisted mainly of employee salaries and benefits of $18.5 million and $21.0 million, professional fees of $6.6 million and $6.0 million, office overhead of $4.3 million and $4.5 million, acquisition-related costs of $2.7 million and $2.2 million, non-cash share-based compensation expense of $2.6 million and $2.9 million, software license and maintenance costs of $2.6 million and $2.4 million, and certain litigation and related costs of ($6.3) million and $11.1 million. The decrease in litigation and related costs was mainly the result of the lower-than-expected regulatory settlement reached in the second quarter of 2023 and insurance reimbursements for previously incurred legal fees related to the FTC Consent Order, even as prior to the settlement legal fees had increased. The reduction in salary costs was due to corporate restructuring in the first quarter of 2023 and fourth quarter of 2022, which was slightly offset by increased consulting fees and strategic employee training expenses.
Current wording
For the years ended December 31, 2024 and 2023, general and administrative expense consisted mainly of employee salaries and benefits of $17.1 million and $18.5 million, professional fees of $6.3 million and $6.6 million, office overhead of $4.2 million and $4.3 million, software license and maintenance costs of $3.1 million and $2.6 million, acquisition-related costs of $2.1 million and $2.7 million, non-cash share-based compensation expense of $1.5 million and $2.6 million, restructuring and severance costs of $0.6 million and $0.3 million, and certain litigation and related costs of $0.0 million and a credit of ($6.3) million, respectively. The increase in general and administrative expenses was primarily related to the absence of the credit for certain litigation and related costs due to insurance reimbursements for previously incurred legal fees and lower than expected regulatory settlement in the prior year, along with an increase in restructuring or severance costs, based on the reduction in workforce as described below. This was partially offset by a reduction in salaries and benefits due to lower headcount, a decline in share-based compensation expense due to lower grants, and a decrease in acquisition related costs mainly due to the conveyance of True North, LLC and its direct and indirect subsidiaries.
Previous wording
During the fourth quarter of 2022 and first quarter of 2023, the Company implemented reductions in the workforce that resulted in the termination of 21 and 20 employees, respectively. These reductions in workforce were implemented following management’s determination to reduce headcount and decrease the Company's costs to more effectively align resources to the core business operations. In connection with fourth quarter 2022 reductions in workforce, the Company incurred $0.4 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by March 31, 2023. In connection with the first quarter 2023 reductions in the workforce, the Company incurred $0.5 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by March 31, 2024. Subsequently, the Company implemented an additional reduction in workforce in the first quarter of 2024, resulting in the termination of 20 employees. The exit-related restructuring costs are expected to be approximately $0.7 million, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by September 30, 2024. Apart from these exit-related restructuring costs, these reductions in workforce are expected to result in corresponding reductions in future salary and benefits within sales and marketing, product development, and general and administrative expenses.
Current wording
During the first quarter of 2023 and the first, second, and third quarters of 2024, we implemented reductions in the workforce that resulted in the termination of 20, 20, 19, and 29 employees, respectively, following management's determination to more effectively align resources with our strategic initiatives. In connection with the first quarter 2023 reductions, we incurred $0.5 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by March 31, 2024. In connection with the first quarter 2024 reductions, we incurred $0.7 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by September 30, 2024. In connection with the second quarter 2024 reductions, we incurred $0.6 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by December 31, 2024. In connection with the third quarter 2024 reductions, we incurred $0.5 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by March 15, 2025. Subsequently, we implemented an additional reduction in workforce in the first quarter of 2025, resulting in the termination of 24 employees. The exit-related restructuring costs are expected to be approximately $1.3 million, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by March 31, 2026. Apart from these exit-related restructuring costs, these reductions in workforce are expected to result in corresponding reductions in future salary and benefits within sales and marketing, product development, and general and administrative expenses.
Previous wording
The decrease in net loss was primarily due to a decline in cost of revenue of $47.6 million, a decrease of goodwill impairment and write-off of intangibles of $55.9 million, and a decrease in operating expenses of $16.7 million driven in part by the contra-expense related to the insurance reimbursement for prior legal fees, partially offset by decline in revenue of $62.7 million.
Current wording
Goodwill impairment and write-off of intangible assets.
Previous wording
The increase was driven by the higher average interest rate on the Term Loan described below under “Liquidity and Capital Resources”.
Current wording
The increase was driven by the higher average interest rate on the SLR (as defined herein) credit facility in the current year as compared to the prior year's Citizens Bank, N.A. term loan described below under Note 8,* Long-term debt, net* along with increased loan amortization.
Previous wording
For the years ended December 31, 2023 and 2022, there was an effective tax rate of 0.2% and (1.5)%, respectively. This was primarily driven by the impact of a non-deductible goodwill impairment against pre-tax year-to-date losses offset by the benefit of federal research and development credits.
Current wording
For the twelve months ended December 31, 2024, the effective income tax rate of 5.8% differed from the statutory federal income tax rate of 21% primarily due to losses for which no tax benefit is recognized and is fully offset with a valuation allowance, which was partly offset by the benefit of the reversal of uncertain tax positions from the prior year. For the twelve months ended December 31, 2023, our effective income tax rate of 0.2% was primarily driven by the impact of a non-deductible goodwill impairment against pre-tax year-to-date losses offset by the benefit of federal research and development credits.
Previous wording
As of December 31, 2023 and 2022, the Company recorded full valuation allowances against its net deferred tax assets. The Company intends to maintain full valuation allowances against the net deferred tax assets until there is sufficient evidence to support the release of all or some portion of such allowances. Release of some or all of the valuation allowance would result in the recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in which such a release may be recorded, however, the exact timing and amount of any valuation allowance release are subject to change, depending upon the level of profitability that the Company is able to achieve and the net deferred tax assets available.
Current wording
As of December 31, 2024 and 2023, we recorded full valuation allowances against our net deferred tax assets. We intend to maintain full valuation allowances against the net deferred tax assets until there is sufficient evidence to support the release of all or some portion of such allowances. Release of some or all of the valuation allowance would result in the recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in which such a release may be recorded; however, the exact timing and amount of any valuation allowance release are subject to change, depending upon the level of profitability we are able to achieve and the net deferred tax assets available.
Previous wording
For the years ended December 31, 2023 and 2022, net loss was $63.2 million and $123.3 million, respectively, as a result of the foregoing.
Current wording
For the years ended December 31, 2024 and 2023, net loss was $29.3 million and $63.2 million, respectively, as a result of the factors described above.
Previous wording
Cash flows provided by operating activities. For the years ended December 31, 2023 and 2022, net cash provided by operating activities was $8.1 million and $2.0 million, respectively. Net loss in 2023 of $63.2 million represents a decrease of $60.1 million, as compared with net loss of $123.3 million in 2022. Adjustments to reconcile net loss to net cash provided by operating activities of $70.4 million in 2023 decreased by $58.7 million, as compared with $129.1 million in 2022, primarily due to a lower goodwill impairment and depreciation and amortization in the current period as compared to the prior period. Changes in assets and liabilities sourcing cash of $0.9 million in 2023, as compared with consumed cash of $3.8 million in 2022, primarily due to ordinary-course changes in working capital, largely involving the timing of receipt of amounts owing from clients and disbursements of amounts payable to vendors**.**
Current wording
Cash flows (used in) provided by operating activities. For the years ended December 31, 2024 and 2023, net cash used in operating activities was $14.1 million, compared to net cash provided by operating activities of $8.1 million, respectively. Net loss in the current year period of $29.3 million represents a decrease of $33.9 million, as compared with net loss of $63.2 million in the prior period. Adjustments to reconcile net loss to net cash provided by operating activities of $18.1 million in the current year period decreased by $52.3 million, as compared with $70.4 million in the prior period, primarily due to a goodwill impairment of $1.3 million and as compared to the goodwill impairment of $55.4 million in the prior period, offset by the current year period loss on the fair value adjustment of Convertible Notes of $1.7 million, loss on early extinguishment of debt of $1.0 million, and an increase in amortization of debt. There were changes in assets and liabilities consuming cash of $2.9 million in the current year period, as compared with sourcing cash of $0.9 million in the prior period, primarily due to ordinary-course changes in working capital, largely involving the timing of receipt of amounts owing from clients and disbursements of amounts payable to vendors**.**
Previous wording
Cash flows used in investing activities. For the years ended December 31, 2023 and 2022, net cash used in investing activities was $7.1 million and $5.4 million, respectively.** **The increase was mainly due to the increase in investment in capitalized software along with the impact of the TAPP consolidation that occurred in 2023, compared to the True North Acquisition that occurred in 2022.
Current wording
Cash flows used in investing activities. For the years ended December 31, 2024 and 2023, net cash used in investing activities was $6.2 million and $7.1 million, respectively. The decrease was mainly due to the impact of the 2023 TAPP consolidation, compared to the increase in investment in capitalized software in the current year period.
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Current report — wording carried from elsewhere
Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company") is a commerce media solutions provider connecting top-tier brands with highly engaged consumers. Leveraging diverse ad inventory, robust first-party data, and proprietary machine learning, Fluent unlocks additional revenue streams for partners and empowers advertisers to acquire their most valuable customers at scale. We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach.
Current report — wording carried from elsewhere
Loss on early extinguishment of debt.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Loss (gain) on disposal of property and equipment.
Previous report — wording carried elsewhere
The SLR Credit Facility is guaranteed by us and certain of our direct and indirect subsidiaries and is secured by substantially all of our assets and those of certain of our direct and indirect subsidiaries, including Fluent, LLC.