Fluent, Inc.

Previous wording

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), about our expectations, beliefs, or intentions regarding our business, financial condition, results of operations, strategies, the outcome of litigation, or prospects. Forward-looking statements are those that do not relate strictly to historical or current matters, but instead relate to anticipated or expected events, activities, trends, or results as of the date they are made. These forward-looking statements can be identified by the use of terminology such as "anticipate," "believe," "estimate," "expect," "intend," "project," "will," or the negative thereof or other variations thereon or comparable terminology. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements , including, without limitation, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") on March 31, 2025 (the "2024 Form 10-K"), those contained in our Quarterly Reports on Form 10-Q (including this one), and such other factors contained in our other filings we make with the SEC. We do not undertake any obligation to update forward-looking statements, except as required by law and intend that all forward-looking statements be subject to the safe harbor provisions of the PSLRA.

Current wording

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), about our expectations, beliefs, or intentions regarding our business, financial condition, results of operations, strategies, the outcome of litigation, or prospects. Forward-looking statements are those that do not relate strictly to historical or current matters, but instead relate to anticipated or expected events, activities, trends, or results as of the date they are made. These forward-looking statements can be identified by the use of terminology such as "anticipate," "believe," "estimate," "expect," "intend," "project," "will," or the negative thereof or other variations thereon or comparable terminology. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements , including, without limitation, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the "SEC") on March 31, 2026, as amended on April 30, 2026 (as amended the "2025 Form 10-K"), those contained in our Quarterly Reports on Form 10-Q (including this one), and such other factors contained in our other filings we make with the SEC. We do not undertake any obligation to update forward-looking statements, except as required by law and intend that all forward-looking statements be subject to the safe harbor provisions of the PSLRA.

Previous wording

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 wording

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, we unlock additional revenue streams for partners and empower 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 targeted consumers.

Previous 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 400 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 marketplace ("Commerce Media Solutions"), which delivers targeted advertising within e-commerce and digital media transaction flows on partner sites and mobile apps, and our owned and operated digital media properties ("O&O Sites"). Over the last twelve months, we provided data and performance-based customer acquisition services for over 300 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 operate 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.

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. Commerce Media Solutions generates meaningful revenue for our media partners, while driving high-quality customer acquisition for our advertiser clients. We enter into exclusive 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 also attract consumers at scale to our O&O Sites primarily through promotional offers, 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. Over 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. Upon registration, consumers provide their name, contact information, and opt-in consent for telemarketing and email marketing. Over 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 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.

Current wording

Once users have registered, they are engaged through our proprietary direct marketing technologies and analytics with surveys, polls, and other experiences, through which we capture information about their lifestyles, preferences, and purchasing histories, among other attributes. Based on these insights, we serve users targeted, relevant offers on behalf of our clients. As new users register and existing registrants re-engage, our database is enriched and improves the effectiveness of our performance-based campaigns, thus expanding our addressable advertiser client base.

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 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 Solutions 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 non-core 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 channels including email, telephone, SMS/text, and push messaging. We leverage their self-declared data primarily in two ways: (1) to serve advertisements we believe will be relevant to users based on the information they provide on our O&O Sites and our Commerce Media Solutions and (2) to provide our clients with users' contact information for direct outreach. We may also leverage our technology and database to drive non-core revenue streams, including utilization-based models (e.g., programmatic advertising).

Previous wording

Additionally, we operate a call center-supported performance marketplace ("Call Solutions") that provides live, call-based performance campaigns to help clients increase engagement. The Call Solutions business serves clients across an array of industries but has had a heavy focus on the health insurance sector.

Current wording

Additionally, we operated a call center-supported performance marketplace ("Call Solutions") that provided live, call-based performance campaigns to help clients increase engagement, which was divested through the sale of Winopoly, LLC on January 31, 2026. Our Call Solutions business served clients across an array of industries but had a heavy focus on the health insurance sector.

Previous wording

Across our business, 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 operates under exclusive long-term contracts with media partners that generally remunerate the partner on a revenue share basis. Notwithstanding occasional minimum guarantees, the business does not take significant media inventory risk.

Current wording

Across our business, 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 fragmented online media sources. We are predominantly compensated 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 our prior 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 operates under exclusive long-term contracts with media partners that generally remunerate the partner on a revenue share basis. Notwithstanding occasional minimum guarantees, the business does not take significant media inventory risk.

Previous wording

Media margin, adjusted EBITDA, and adjusted net income (loss) are non-GAAP financial measures. See "Definitions, Reconciliations and Uses of Non-GAAP Financial Measures" below.

Current wording

Media margin, adjusted EBITDA, and adjusted net loss are non-GAAP financial measures. See "Definitions, Reconciliations and Uses of Non-GAAP Financial Measures" below.

Previous wording

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. Because Commerce Media Solutions does not require us to source traffic to partner sites, it is not subject to the sourcing challenges that resulted from the FTC Consent Order. 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 wording

We launched Commerce Media Solutions in the first quarter of 2023 to access high-value consumers for our advertiser clients and help media owners and e-commerce businesses monetize their existing consumer traffic. 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 2025, we served ads to over 200 million consumers in the post-action and post-transaction moment for top-tier media owners and brands. These consumers are among the highest-intent consumers in digital advertising and have driven significantly higher ROAS for our advertiser clients compared to other channels.

Previous wording

Our legacy O&O Sites 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 high-value consumers. Sourcing high quality traffic will remain a focus and part of a broader initiative to improve customer acquisition for our clients.

Current wording

Our primary revenue channel has historically been our O&O Sites. This business depends on our ability to identify and access high-quality media sources and attract targeted users to our offers. As the business grew, we attracted larger and more sophisticated advertiser clients to our marketplaces. In response to evolving client expectations, to increase our value proposition, and strengthen our compliance posture within the evolving regulatory landscape, we implemented various initiatives to improve traffic quality.

Previous wording

Since 2022, however, we have experienced challenges acquiring and maintaining traffic volume to our O&O Sites, primarily due to the Federal Trade Commission ("FTC") inquiry and resulting Joint Motion for Entry of Proposed Stipulated Order (the "FTC Consent Order") that mandated that we tighten our standards for ad serving media sourcing. This 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, social media pricing and policies, 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 media network beyond our O&O Sites. However, these efforts have not fully offset the decrease in revenue 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 wording

In recent years, however, we experienced challenges maintaining traffic volume to our O&O Sites due to changes in our ad serving and media sourcing standards following the Federal Trade Commission ("FTC") inquiry and subsequent Joint Motion for Entry of Proposed Stipulated Order (the "FTC Consent Order") filed by the FTC and the Company in the United States District Court for the Southern District of Florida on July 17, 2023, . In response, we have taken steps to diversify our traffic sources and expand our ad network beyond our O&O Sites. In addition, we have made a strategic transition to our Commerce Media Solutions business, which has not yet fully offset the decrease in revenue to our O&O Sites.

Previous wording

Our performance is subject to fluctuations related to seasonality and cyclicality in our clients' businesses and in media sources. Specifically, our retail-specific media partners in our Commerce Media Solutions experience high seasonality based on fourth quarter consumer spending and our Call Solutions business benefits from Medicare open enrollment periods 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.

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 which can affect advertiser demand and campaign performance. In addition, advertiser marketing budgets may fluctuate throughout the year based on seasonal spending patterns, economic conditions, and other factors, which can impact the timing and volume of advertising spend across our platform. Other factors affecting our business may include macroeconomic conditions that impact the digital advertising industry, the various advertiser client verticals we serve, and general market conditions.

Previous wording

We have continued to be affected by uncertain economic conditions and the impacts of the FTC Consent Order (as described in Note 10,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 continue to negatively impact our revenues and gross profit.

Current wording

We have continued to be affected by uncertain economic conditions and the impacts of the FTC Consent Order, as previously disclosed. In response to the FTC Consent Order in 2023, we enhanced our compliance standards and processes across our O&O Sites and programmatic advertising business. These changes have affected our ability to source traffic at historical levels and have contributed to declines in revenue and gross profit in these channels.

Previous wording

We are subject to risks and uncertainties caused by events with significant macroeconomic impacts. Inflation, rising interest rates, the U.S. government shutdown, recently imposed tariffs, 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 uncertain macroeconomic environment, we continue to prioritize strategic investments that have near-term benefits to revenue while also streamlining our organization through cost saving initiatives.

Current wording

We are subject to risks and uncertainties caused by events with significant macroeconomic impacts. Inflation, rising interest rates, uncertainty regarding tariff policy, global hostilities, 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 uncertain macroeconomic environment, we continue to prioritize strategic investments that have near-term benefits to revenue while also streamlining our organization through cost saving initiatives.

Previous wording

Please seeItem 1A. Risk Factors in the 2024 Form 10-K —"Economic or political instability could adversely affect our business, financial condition, and results of operations," and "We are exposed to credit risks from our clients, and we may not be able to collect on amounts owed to us" for further discussion of the possible impact of unfavorable conditions on our business.

Current wording

Please seeItem 1A. Risk Factors in the 2025 Form 10-K —"Economic or political instability could adversely affect our business, financial condition, and results of operations," and "We are exposed to credit risk from our clients, and we may not be able to collect on amounts owed to us" for further discussion of the possible impact of unfavorable conditions on our business.

Previous wording

Media margin is defined as that 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. Gross profit (exclusive of depreciation and amortization) represents revenue minus cost of revenue (exclusive of depreciation and amortization). Media margin is also presented as a percentage of revenue.

Current wording

Media margin is defined as that 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 and one-time items. Gross profit (exclusive of depreciation and amortization) represents revenue minus cost of revenue (exclusive of depreciation and amortization). Media margin is also presented as a percentage of revenue.

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) goodwill impairment, (7) impairment of intangible assets, (8) fair value adjustment of Convertible Notes with related parties (see Note 4,Long-term debt, net), (9) acquisition-related costs, (10) restructuring and other severance costs, and (11) 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) loss on disposal of assets, (7) goodwill impairment, (8) impairment of intangible assets, (9) fair value adjustment of Convertible Notes with related parties (see Note 4,Debt, net), (10) acquisition-related costs, (11) restructuring and other severance costs, (12) certain litigation and other related costs, and (13) other one-time items.

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) goodwill impairment, (4) impairment of intangible assets, (5) fair value adjustment of Convertible Notes with related parties, (6) acquisition-related costs, (7) restructuring and other severance costs, and (8) 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) loss on disposal of assets, (4) goodwill impairment, (5) impairment of intangible assets, (6) fair value adjustment of Convertible Notes with related parties (see Note 4,Debt, net), (7) acquisition-related costs, (8) restructuring and other severance costs, (9) certain litigation and other related costs, and (10) other one-time items. 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) for the three and nine months ended September 30, 2025 and 2024, which we believe is the most directly comparable U.S. GAAP measure:

Current wording

Below is a reconciliation of media margin from gross profit (exclusive of depreciation and amortization) for the three months ended March 31, 2026 and 2025, which we believe is the most directly comparable U.S. GAAP measure:

Previous wording

Below is a reconciliation of adjusted EBITDA from net loss for the three and nine months ended September 30, 2025 and 2024, which we believe is the most directly comparable U.S. GAAP measure:

Current wording

Below is a reconciliation of adjusted EBITDA from net loss for the three months ended March 31, 2026 and 2025, which we believe is the most directly comparable U.S. GAAP measure:

Previous wording

Below is a reconciliation of adjusted net loss and adjusted net loss per share from net loss for the three and nine months ended September 30, 2025 and 2024, which we believe is the most directly comparable U.S. GAAP measure.

Current wording

Below is a reconciliation of adjusted net loss and adjusted net loss per share from net loss for the three months ended March 31, 2026 and 2025, which we believe is the most directly comparable U.S. GAAP measure.

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 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. 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 as described below (see Note 10,Contingencies, in the notes to the consolidated financial statements). 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.

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 viewed as 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 as described below (see Note 10,Contingencies, in the notes to the consolidated financial statements).

Previous wording

Comparison of Our Results of Operations for the Three and Nine Months Ended September 30, 2025 and 2024

Current wording

Comparison of Our Results of Operations for the Three Months Ended March 31, 2026 and 2025

Previous wording

For the three months ended September 30, 2025 and 2024, cost of revenue (exclusive of depreciation and amortization) consisted mainly of O&O Sites media and related fulfillment costs of $16.7 million and $34.7 million, Commerce Media Solutions media and related costs of $14.7 million and $7.1 million, and media enablement and other indirect costs related to our other revenue streams of $4.8 million and $7.1 million, respectively. Our O&O Sites 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, fulfillment costs related to rewards earned by consumers, and associated hosting costs. The decrease in O&O Sites media cost was largely attributable to the challenges in acquiring media related to business practices enacted to comply with the FTC Consent Order. Such costs increased as a percentage of revenue. Commerce Media Solutions cost of revenue consists of fees and revenue share payments made to media partners for ad inventory on their digital properties and associated hosting costs. Commerce Media Solutions media partners are generally remunerated on a per impression or revenue share basis, leading to higher and more predictable profitability. The increase in cost of revenue (exclusive of depreciation and amortization) in Commerce Media Solutions was driven by increased revenue share payments generated from impressions from new media partners added over the period. Cost of revenue (exclusive of depreciation and amortization) for Commerce Media Solutions increased as a percentage of revenue, due to the growth of certain lower margin commerce media placements and renegotiation of a key media partner agreement. The decrease in cost of revenue (exclusive of depreciation and amortization) for other revenue streams, including media costs, enablement costs and tracking costs related to our consumer data associated with our call centers, was attributable to a decreased cost of media related to the modified supply strategy for our Call Solutions business and the cessation of our ACA business in the third quarter of 2024. Cost of revenue (exclusive of depreciation and amortization) for other revenue streams decreased materially as a percentage of revenue largely related to the aforementioned exit from the ACA business.

Current wording

For the three months ended March 31, 2026 and 2025, cost of revenue (exclusive of depreciation and amortization) consisted mainly of O&O Sites media and related costs of $12.5 million and $24.8 million, Commerce Media Solutions media and related costs of $20.9 million and $9.8 million, and media enablement and other indirect costs related to our other revenue streams of $1.4 million and $9.2 million, respectively. Our O&O Sites 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, influencers for our O&O Sites, fulfillment costs related to rewards earned by consumers, and web hosting costs. The decrease in O&O Sites media cost was largely attributable to the challenges in acquiring media related to business practices following the FTC Consent Order. Such costs remained consistent as a percentage of revenue. Commerce Media Solutions cost of revenue consists of fees and revenue share payments made to media partners for ad inventory on their digital properties, web hosting costs, and fulfillment costs related to incentives earned by consumers. The increase in cost of revenue (exclusive of depreciation and amortization) in Commerce Media Solutions was driven by increased revenue share payments generated from impressions from new media partners added over the period. Cost of revenue (exclusive of depreciation and amortization) for Commerce Media Solutions increased as a percentage of revenue, due to the growth of certain lower margin commerce media placements and the increased prevalence of consumer incentives to drive engagement. The decrease in cost of revenue (exclusive of depreciation and amortization) for other revenue streams, which includes media costs, enablement costs and tracking costs related to our consumer data associated with our call centers, was attributable to the decreased cost of media related to the Call Solutions that was divested on January 31, 2026. Cost of revenue (exclusive of depreciation and amortization) for other revenue streams decreased materially as a percentage of revenue largely related to the divestiture of Call Solutions.

Previous wording

For the three months ended September 30, 2025, the total cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue increased to 77% compared to 76% for the three months ended September 30, 2024. The increase was primarily driven by the aforementioned reasons and shifts in revenue mix related to the discontinuation of certain businesses in 2024.

Current wording

For the three months ended March 31, 2026, the total cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue decreased to 78% compared to 79% for the three months ended March 31, 2025. The change was primarily driven by the aforementioned reasons and shifts in revenue mix.

Previous 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 nine months ended September 30, 2025, 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 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.

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. As we perform that evaluation, 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.

Previous wording

For the three months ended September 30, 2025 and 2024, sales and marketing expenses consisted mainly of employee salaries and benefits of $2.7 million and $3.3 million, restructuring and severance costs of $0.1 million and $0.2 million, advertising costs of $0.3 million and $0.2 million, and professional fees of $0.2 million and $0.1 million, respectively. The decrease was primarily due to lower salaries and other employee-related costs driven by a decline in headcount, along with the decrease in restructuring and severance costs in the current year period.

Current wording

For the three months ended March 31, 2026 and 2025, sales and marketing expenses consisted mainly of employee salaries and benefits of $2.6 million and $3.1 million, advertising costs of $0.5 million and $0.3 million, professional fees of $0.2 million and $0.1 million, and severance costs of $0.1 million and $0.4 million, respectively. The decrease was primarily due to lower salaries and other employee-related costs driven by a decline in headcount and a decline in restructuring and severance costs in the current year period, partly offset by the increase in advertising costs driven by the increase in fees to attend conferences and seminars to grow Commerce Media Solutions.

Previous wording

For the three months ended September 30, 2025 and 2024, product development expenses consisted mainly of salaries and benefits of $1.9 million and $3.1 million, professional fees of $0.1 million and $0.4 million, software license and maintenance costs of $0.4 million and $0.3 million, and restructuring and severance costs of $0.1 million and $0.1 million, respectively. The decrease was primarily due to a decline in salaries driven by lower headcount and lower spend on IT-related vendors, along with the decrease in restructuring and severance costs in the current year period due to the timing of the reductions in product development workforce.

Current wording

For the three months ended March 31, 2026 and 2025, product development expenses consisted mainly of salaries and benefits of $1.9 million and $2.3 million, software license and maintenance costs of $0.3 million and $0.4 million, and professional fees of $0.2 million and $0.5 million, respectively. The decrease was primarily due to a decline in salaries driven by lower headcount and lower spend on IT-related vendors.

Previous wording

For the three months ended September 30, 2025 and 2024, general and administrative expenses consisted mainly of employee salaries and benefits of $3.6 million and $3.9 million, professional fees of $2.2 million and $1.5 million, office overhead of $0.7 million and $1.1 million, software license and maintenance costs of $0.8 million and $0.8 million, restructuring and severance costs of $0.5 million and $0.2 million, non-cash share-based compensation expense of $0.3 million and $0.4 million, provision for bad debt of $0.0 million and $0.3 million, and acquisition-related costs of $0.0 million and $0.4 million, respectively. General and administrative expenses decreased primarily due to lower provision for bad debt, lower office overhead and lower acquisition related costs, partially offset by higher professional fees due to higher restructuring and severance costs.

Current wording

For the three months ended March 31, 2026 and 2025, general and administrative expenses consisted mainly of employee salaries and benefits of $3.8 million and $3.5 million, professional fees of $1.3 million and $1.6 million, office overhead of $0.8 million and $1.0 million, software license and maintenance costs of $0.8 million and $0.9 million, restructuring and severance costs of $0.1 million and $0.8 million, non-cash share-based compensation expense of $0.5 million and $0.3 million, and acquisition-related costs of ($2.4) million and ($0.1) million, respectively. General and administrative expenses decreased primarily due to the non-cash gain on the divestiture of Call Solutions in the current year period, along with lower professional fees and restructuring and severance costs, partially offset by an increase in headcount and related share-based compensation expense.

Previous wording

In each of the first three quarters of 2024 and the first quarter of 2025, we reduced our workforce by 20, 19, 29, and 24 employees, respectively, to better align resources with our strategic initiatives. 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, fully settled in cash by March 15, 2025. In connection with the first quarter of 2025 reductions, we incurred $1.3 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, 2026. Apart from these exit-related restructuring costs, these reductions in workforce have resulted in corresponding reductions in future salary and benefits within sales and marketing, product development, and general and administrative expenses.

Current wording

In each of the first and fourth quarters of 2025, we reduced our workforce by 24 and 9 employees, respectively, to better align resources with our strategic initiatives. In connection with the reductions in the first quarter of 2025, we incurred $1.3 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, which were fully settled in cash by March 31, 2026. In connection with the reductions in the fourth quarter of 2025, we incurred $0.1 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs which were fully settled in cash by December 31, 2025. Apart from these exit-related restructuring costs, these reductions in workforce have resulted in corresponding reductions in future salary and benefits within sales and marketing, product development, and general and administrative expenses.

Previous wording

The decrease in interest expense was driven by lower average outstanding balances and lower interest rates on the SLR Credit Facility.

Current wording

The decrease in interest expense was driven by lower average outstanding balances in our debt as well as lower amortization fees associated with the Financing Agreement (as defined herein).

Previous wording

For the three months ended September 30, 2025, the effective income tax rate of 0.2% differed from the statutory federal income tax rate of 21%, primarily due to state and local tax expense and losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance. For the three months ended September 30, 2024, the Company's effective income tax rate of 0.4% differed from the statutory federal income tax rate of 21% primarily due to state and local tax expense and losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Current wording

For the three months ended March 31, 2026, the effective income tax rate of 0.0% differed from the statutory federal income tax rate of 21%, primarily due to state and local tax expense and losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance. For the three months ended March 31, 2025, the Company's effective income tax rate of 2.9% differed from the statutory federal income tax rate of 21% primarily due to state and local tax expense and losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Previous wording

As of September 30, 2025 and 2024, 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 valuation 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 March 31, 2026 and 2025, we recorded full valuation allowances against our U.S. net deferred tax assets. We intend to continue maintaining a full valuation allowance on our U.S. net deferred tax assets until there is sufficient evidence to support the release of all or some portion of the allowance. 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.

Previous wording

For the three months ended September 30, 2025 and 2024, net loss was$7.6 million and $7.9 million, respectively, as a result of the foregoing.

Current wording

For the three months ended March 31, 2026 and 2025, net loss was$5.4 million and $8.3 million, respectively, as a result of the foregoing.

Previous wording

Cash used in operating activities. For the nine months ended September 30, 2025, net cash used in operating activities was $4.3 million, compared to net cash used in operating activities of $12.0 million for the nine months ended September 30, 2024. Net loss in the current year period of $23.0 million represents an improvement of $2.8 million, compared with net loss of $25.8 million in the prior period. Adjustments to reconcile net** loss to net cash used in operating activities of **$10.0 million in the current year period decreased by $6.4 million, compared with net cash used in operating activities of $16.4 million in the prior period, primarily due to a goodwill impairment of $1.3 million, impairment of intangible assets of $1.0 million, and a loss on early extinguishment of debt of $1.0 million in the prior period that did not occur in the current year period, a change in fair value adjustment of Convertible Notes with related parties of $2.7 million compared to the prior year period, and lower amortization of debt and share-based compensation expense in the current year period compared to prior year period, partially offset by a non-cash loss on asset write-off of $0.7 million in the current year period. Changes in assets and liabilities generated cash of $8.8 million in the current year period, compared with consuming cash of $2.5 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.

Current wording

Cash provided by operating activities. For the three months ended March 31, 2026, net cash provided by operating activities was $5.1 million, compared to net cash provided by operating activities of $2.1 million for the three months ended March 31, 2025. Net loss in the current year period of $5.4 million represents an improvement of $2.9 million, compared with net loss of $8.3 million in the prior period. Adjustments to reconcile net** loss to net cash provided by operating activities of **$1.2 million in the current year period decreased by $1.8 million, compared with net cash provided by operating activities of $3.0 million in the prior period. The decrease was primarily due to a $2.4 million non-cash gain on divestiture and lower depreciation and amortization, partly offset by the change in fair value adjustment of Convertible Notes with related parties of $0.8 million and increased share-based compensation expense. Changes in assets and liabilities generated cash of $9.3 million in the current year period, compared with generated cash of $7.3 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 used in investing activities. For the nine months ended September 30, 2025 and 2024, net cash used in investing activities was $4.9 million and $4.7 million, respectively. The increase was primarily due to an increase in investment in capitalized software in the current year period.

Current wording

Cash used in investing activities. For the three months ended March 31, 2026 and 2025, net cash used in investing activities was $1.5 million and $1.6 million, respectively. The change was primarily due to payments received on the note receivable related to the Winopoly divestiture in the current year period.

Previous wording

As of September 30, 2025, we had noncancelable operating lease commitments of $3.9 million and long-term** **debt with a $25.7 million principal balance.

Current wording

As of March 31, 2026, we had noncancelable operating lease commitments of $3.4 million and debt with a $26.8 million principal balance.

Previous wording

As of September 30, 2025, we had cash, cash equivalents, and restricted cash of $10.0 million, a decrease of $0.7 million from $10.7 million as of December 31, 2024.

Current wording

As of March 31, 2026, we had cash, cash equivalents, and restricted cash of $11.0 million, a decrease of $2.6 million from $13.6 million as of December 31, 2025.