Good afternoon and welcome. Thank you for joining us to discuss our Second Quarter 2024 Earnings Results. With me today are Fluent's CEO, Don Patrick; Interim CFO, Ryan Perfit and Chief Strategy Officer, Ryan Schulke. Our call today will begin with comments from Dan and Ryan Perfit, followed by a question-and-answer session. I would like to remind you that this call is being recorded, live recorded in webcast. A replay of the event will be available following the call on our website. To access the website, please visit our Investor Relations page on our website at www.fluentco.com. Before we begin, I would like to advise the listeners that certain information discussed by management during this conference call will contain forward-looking statements covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements made during this call speak only as of the date hereof. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company business. These statements may be identified by words such as expect, plan, project, could, will, estimates, and other words of similar meaning. The company undertakes no obligation to update the information provided on this call. For a discussion of the risks and uncertainties associated with Fluent's business, we encourage you to review the company's filings with the Securities and Exchange Commission, including the company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. During the call, management will also present certain non-GAAP financial information relating to media margin, adjusted EBITDA and adjusted net income. Management evaluates the financial performance of our business on a variety of indicators, including these non-GAAP metrics. The definition of these metrics and reconciliations to the most directly comparable GAAP financial measures are provided in the earnings press release issued earlier today. With that I am pleased to introduce Fluent’s CEO, Don Patrick. You may begin.

Good afternoon. Thank you all for joining our call today. I'm here together with Ryan Schulke, our Chief Strategy Officer and Company Co-Founder, and Ryan Perfit, our Interim Chief Financial Officer. I'll start today with some brief comments regarding our strategic initiatives and progress in the second quarter. On the strategic front, we are highly energized by the progress we've continued to make in our strategic growth plan with the continued stabilization of our own and operated marketplace, and business pivot to our new higher margin syndicated performance marketplaces. We believe we've reached an inflection point in our transition, which is exciting as this progress provides a clear strategic and financial validation of our longer-term growth agenda with our early second half performance metrics. Since the launch of our syndicated performance marketplace in late 2022, our strategy and investments have been focused on shifting our business mix into long-term growth markets, where our differentiated position will allow us to deliver Fluent’s margins that are accretive to the core. And we've successfully delivered sequential improvements in both revenue and gross profit in our performance marketplaces each and every quarter since. Our momentum is accelerating, and we remain confident that we've reached the real stage of Fluent's financial rebound. To that end we expect to deliver single-digit consolidated year-over-year growth in Q3 and then accelerate with consolidated double-digit year-over-year growth in Q4. And in 2025, as our business mix continues to shift into the performance marketplaces, the momentum should build and we anticipate a strong year of consolidated year-over-year double-digit growth. While we see our performance marketplace platform as stickier, it tends to have longer and more sophisticated sales cycle than our owned in our operated marketplace. But once we sign a new partner, there's a corresponding positive predictability of the business…

Thank you, Don and thanks to everyone for joining us today. I'll now provide some additional color on our Q2 earnings. We generated revenue of $58.7 million in the second quarter of 2024, down 28.5% from prior year and down 11.1% sequentially from Q1. While we had success driving key long-term strategic initiatives during the quarter, macro headwinds and competitive challenges related to the FTC order continued to impact our performance of our owned and operated marketplaces, contributing to decreased margin performance overall. Moreover, we chose to exit a non-strategic business during the quarter, and our call solutions business was faced with regulatory changes in Medicare and ACA marketplaces, and we took an accounts receivable write-down of ACA policies in the quarter totaling approximately $3.1 million with an equal offset to Q2 revenue, which equally affected media margin and adjusted EBITDA. Absent this write-down, our overall financial performance for the quarter was largely consistent with the road map we had laid out last quarter. We are optimistic about the growth of our syndicated marketplaces and coupled with our continued expense discipline, we anticipate revenue growth and improved adjusted EBITDA performance in the back half of 2024 compared with the comparable quarters of 2023. Media margin in the second quarter was $15.7 million which represented 26.7% of revenue compared with $25.9 million or 31.5% of revenue last year. As we continue to scale our performance marketplaces, we expect media margin as a percentage of revenue to improve over time. On a GAAP basis, total operating expense in the second quarter of 2024 totaled $18.2 million, an increase of $5.4 million compared to the second quarter of 2023. But of note, G&A during the quarter was $8.9 million which was down sequentially from the first quarter G&A of $10.4 million. G&A in…

Thank you. [Operator Instructions] Our first question comes from the line of Maria Ripps with Canaccord. Your line is open.

Great. Good afternoon, and thanks for taking my questions. First, can you maybe talk a little bit more about the unauthorized activity for the ACA policies this quarter so that impacted you? Was there something that sort of impacted the industry more broadly or sort of your platform more so? And I guess, what are some measures or initiatives that you may have added to prevent maybe limit this going forward?

Hi Maria, thanks for the question. I'll give a little bit of detail. But the short answer to you is it affected the entire industry. In fact everyone who is involved with ACA. So it wasn't specific to Fluent's industry-wide. But if you remember, in Q4 '23, our call solutions business started the ACA Agency, where Fluent license agents sells ACA policies and the behalf of top health insurance companies. We were already in that business of providing quality ACA consumer prospects to partners. And we built the ACA agency as a natural performance market extension into that business with the ability to bring the consumer further down the funnel. So the economics of that business is when we sell an ACA policy to a qualified consumer, we become the agency of record and all relevant policy information, including agency of record is maintained in a government database that is run and controlled by the centers for Medicare and Medicaid Services, CMS. So each ACA policy is in the name of consumer with the designated health care. And as AOR, Fluent gets paid a monthly commission for each policy, we are AOR for, for as long as that consumer has that policy. And the typical time frame for that policy and the commission is averages somewhere between 17 months and 24 months where we'd be getting those commissions. But during Q2 2024, it became apparent that there was a lack in controls in the CMS' ACA database which allowed other licensed agents to access the database and the ability to illegally change the AOR without any consumer approval. So Fluent could sell the ACA policy to a consumer an unauthorized agent would come into the government database, change the AOR from Fluent to them. And with the [illegal AOR] (ph)…

No, that's great. Thank you so much for the color. And then maybe secondly, could you maybe talk about sort of any potential liquidity needs and maybe just how should investors think about some of the options that are available to you on that front?

Yes. Yes. From liquidity, we have a very favorable credit facility with SLR. As you know, it's a receivables based facility, and it continues to -- as we grow, continue to provide the liquidity, we need to move forward. We have put some -- recently put a small amount of money in roughly $2 million to continue to provide enough liquidity for the company. But we feel with the SLR facility and the acceleration of the revenue that we talked about in our performance marketplaces that we have enough liquidity to not only execute on our business plan, but over deliver.

Got it. That’s very helpful. Thank you so much.

Thanks Maria.

Our next question comes from the line of James Goss with Barrington Research. Your line is open.

Okay, First -- and maybe this follows up a little on the liquidity issue. You've had a couple of quarters now where there have been a couple of -- I think they were mostly financially related issues, although perhaps this one was more with ACA that have delayed your reporting. And I was wondering if there are any other specific issues you are aware of that we should be aware of to be -- or be concerned of going into the next couple of quarters?

Hi Jim, thanks for the question. We do not have anything that we're aware of around our ability to execute on our plan and to grow. As I said, we have a very favorable facility with our debt partner that allows us to continue to access cash as we grow and against receivables. And I think that was put in place, as you know, back in April and is going to serve us well in the back half of '24 and into 2025.

Okay. Another question. You mentioned the syndicated access performance marketplaces, we are the tip of the spear and that Adflow platform was the -- your way to enable access. I wonder if you could talk a little more about exactly how that works? And also, if you could talk about the mix of the syndicated platforms versus your owned and operated places?

Right. Good. So I'll touch specifically on Adflow about the syndicated marketplaces are basically post event monetization in the commerce media spot. But Adflow is a model, our own proprietary platform that sits in between a post-transaction environment. So if you're purchasing something on the ticketing site before you get the confirmation page. There is an additional ad that is served up based on who you are, what your purchase behavior is what your interests are, which again are things that we access both with our partners approved data. But more importantly, the Fluent data and the first party data that we've built over the years. And then we'll serve you a relevant ad that's most in the purchase moment allows us to monetize you and improve the consumer engagement. So that money is a revenue share between us and the commerce partner. It's a very strategic business for us, both from the standpoint of increasing monetization for our Commerce Media but equally important, it also allows us to continue to help with consumer engagement with them. We've shown very significant growth and acceleration in that business, Jim, in Q2. We don't break that out from a segment perspective, but we talked about the new verticals we got into grocery quick-serve restaurants. We were in ticketing, but we also now in travel. And that growth, what is unique about it compared to the core owned and operated marketplace business is that we -- it's very predictable. It might take a while for it to come from a technical standpoint and an ability to onboard it. But once it's on, we are getting predictable sessions, predictable revenue. We have a lot more ability to forecast what we see in Q3 and Q4. And a significant number of partners are coming on -- have come on since June. They're going to come on through September, October, that puts us in a position to be able to say that we're going to return to single digits in Q3 and show double-digit total consolidated growth in Q4 and -- into 2025.

Okay. And one last thing. I believe media and entertainment was, say, a primary vertical in the own-operated area not mistaken. And has that been minimized at all? Or is that being supplemented by the Adflow incursion into retail and ticketing verticals and travel some of the other things you mentioned.

It is being supplemented, Jim. It's always been a strong vertical for us and it remains a very strong vertical in the owned and operated. Obviously, we are looking to grow that media and entertainment, and grow it consistently, but we are also bringing on other verticals with the new solutions that we have and our ability to drive more solutions for our partners.

So would you try to find owned and operated platforms to serve the new verticals you are serving through the syndicated access right now?

No. I mean the way we've described in the past Jim, is the owned and operated marketplaces are a real competitive advantage to us. As you know, it is the one that has the most challenges over the last couple of years as we've shifted to quality and really enhancing the quality of those sites along with the settlement FTC. But their advantages around our ability to buy media, knowing consumer engagement and being able to interact with consumers in a lifetime value in that performance marketing pedigree. Really allows us to launch and do things like Adflow and syndicated marketplaces with that expertise and our proprietary third-party data to really provide a competitive advantage against the competition in that market. So we look to keep that business stable. We look to continue to keep it healthy and -- the big news lost in the financial numbers here, clearly that we achieve we believe we've achieved stability in the later part of Q2 and continued in Q3 in that business and keeping that stable and leveraging those assets into the higher growth businesses with higher margins is going to be -- continue to be our strategy. So we will not look to continue to grow at the owned and operated in different verticals.

All right. Thanks very much.

Thanks Jim.

[Operator Instructions] Our next question comes from the line of Bill Dezellem with Tieton Capital Management. Your line is open.

Thank you. Relative to Adflow and the addition of grocery, QSR travel, these businesses sound less cyclical to us. So is that the correct way to look at this and that strong cyclicality that this business has had should be mitigated to some degree with some of these new partners coming on?

Yes, hi Bill, thanks for the question. Absolutely. We launched Adflow. We got heavily into retail and ticketing, especially around sports and some things that were more seasonal. These the QSR, the grocery, the travel tend to have different cycles themselves. And we'll help -- will help bring more balance to the course of the year. We still will be very -- we still will be Q4 heavy. But based on us adding these verticals, it will be less so than we were last quarter when we were talking to you.

That's helpful. And then would you anticipate that the absolute rate of growth in Q1 will be greater than Q4 and the rate of growth in Q2 then greater than Q1. So basically, we now have four quarters coming where the rate of growth will be accelerating?

Yes, it's a great question. There is still some falloff from Q4 in our core business, our owned and operated business and in Adflow, Bill. So we will continue to see double digits. There might be a slight dip in Q1, but we will be able to continue to show sequential growth after that.

Yes. I'm sorry, Don, I wasn't actually thinking about the absolute revenue number as much as I was, the percentage rate of growth and whether in Q1, that rate of growth would end up being higher than a double-digit rate of growth that you guided for -- guided

Yes, we will see a small drop in percentage, but we'll continue to see double digit in Q1.

Okay. That’s helpful. Thank you.

Thank you Bill.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Don for closing remarks.

Thank you for joining our Q2 2024 earnings. We believe we’ve reached an inflection point on our strategic pivot, which is exciting, and this progress provides clear strategic and financial validation of our long-term growth agenda with our early second half performance metrics. We are very focused on returning to consolidated growth in Q3 and accelerating in Q4 and into 2025 in delivering on our numbers. Thank you for your continued support. We look forward to updating you on our progress after Q3.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.