Fluent Inc

NASDAQ:FLNT

Q3-2025 Earnings Call

[Operator]

Good afternoon, and welcome. Thank you for joining us to discuss Fluent's Third Quarter 2025 Earnings Results. With me today are Fluent's Chief Executive Officer, Don Patrick; Chief Financial Officer, Ryan Perfit, and Chief Strategy Officer, Ryan Schulke. Our call today will begin with comments from Don Patrick and Ryan Perfit, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded. A replay of the event will also be made available following the call on Fluent's website.

To access the webcast, please visit the Investor Relations page at www.fluentco.com. Before we begin, I would like to advise 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 only speak as of the date hereof. Actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with the company's business. These statements may be identified by words such as expects, plans, projects, 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 the company's business on a variety of indicators, including these non-GAAP metrics. The definitions of these metrics and reconciliations to the most directly comparable GAAP financial measure are provided in the earnings press release issued today.

With that, I'm pleased to introduce Fluent's CEO, Don Patrick.

[Donald Patrick, executive]

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 Chief Financial Officer. Our strategic momentum continues to accelerate in establishing an industry leadership position in Commerce Media. However, as we expected, our third quarter financial results demonstrated a challenging environment due to timing delays in onboarding the new partners who are fueling our transformative pivot into the rapidly growing Commerce Media industry.

On a segment basis, Commerce Media Solutions revenue in the third quarter grew over 80% year-over-year while increasing its portion of contribution to consolidated enterprise revenue from 16% in Q3 2024 to 40% in Q3 2025, as Fluent expanded its position in the Commerce Media industry. As of September 30, 2025, our Commerce Media Solutions business surpassed an annual revenue run rate of over $85 million as we grow our market share based on the consumer value we are creating for our partners and advertisers.

Q3 Commerce Media Solutions' financial results would have been even more impressive in the quarter, if not affected by 2 factors I'd like to call out: Number one, some new partner wins launched on our platform later in the quarter than anticipated, and therefore, had less impact on our revenue and gross profit for the quarter. These wins will impact full quarters moving forward. Number two, consistent with the industry, we saw some advertiser pricing and budget pullback in the later part of Q3. This appeared tied to advertiser-specific issues which you're seeing continuing in early Q4.

Our positive Commerce Media Solutions growth trend was not enough to offset our owned and operated marketplaces decline, which remain near 50% year-over-year exasperated by strong advertising and regulatory headwinds. That being said, we are very pleased with the growth of the Commerce Media Solutions. And as Commerce Media Solutions becomes a bigger piece of our consolidated revenue pie, we expect enhanced results and profitability to closely follow.

Contributing to our enthusiasm for our Commerce Media Solutions, we announced several new and expanding partnerships in the quarter with leading industry partners like Databricks and top-tier brands, including Authentic Brands Group, the world's leading sports, lifestyle and entertainment brand owner. Partnerships like these are the cornerstone of our Commerce Media Solutions growth. Our marketplace credentials continue to be validated by a stable of iconic global brands who are choosing to partner with us. Our growing list of world-class partners recognize the fundamental value we are creating in building consumer loyalty as we consistently exceed our partners' revenue and our advertisers' return on ad spend expectations.

Lastly, during the third quarter, we completed a $10.3 million equity raise that included new fundamental institutional investors and insiders, which significantly strengthened our balance sheet and provides us with additional capital to continue investing in the growth of our Commerce Media Solutions.

Slide 4 reiterates just how excited we are about the Commerce Media Solutions and the tremendous upside that is presenting us for our business. Commerce Media Solutions has a current annual run rate of over $85 million, up from $80 million a quarter ago. We expect this growth to continue as we capture a larger share of the market. Taking a step back for a moment, what's most important to the business and for our shareholders is ultimately having our financial scorecard reflect our strategic vision. As such, and as we have identified as the core milestone in our strategic plan, we expect our financial pivot will deliver trend line shift in Q4 where Fluent's gross profit is expected to grow by double digits quarter-over-quarter for the first time in 10 quarters, resulting in positive adjusted EBITDA.

I want to reemphasize that our enthusiasm for our Commerce Media Solutions leadership position is numbers validated. Our current second half momentum is expected to deliver triple-digit revenue growth year-over-year, a testament to our Commerce Media Solutions platform capability that is earning us world-class brand partnerships. We believe this will result in strong Fluent enterprise and a double-digit year-over-year revenue growth in 2026 as our overarching shift to mix strategy begins to drive improved consolidated results.

As you can see by the graph on Slide 5, Commerce Media Solutions made up 40% of our total revenue in the quarter, up from 16% in third quarter 2024 and 4% in the third quarter of 2023. Looking ahead, we see the opportunity to better leverage our owned and operated business and the strong brand equity we built in the marketplace over the last decade as a springboard for more aggressive growth for our Commerce Media Solutions. More specifically, as the marketplace continues to evolve, we are beginning to see a convergence between our owned and operated and Commerce Media capabilities in the Commerce Media marketplace, creating differentiated opportunities with our partners and advertisers that we are uniquely qualified to address. Commerce Media Solutions provides highly engaged and extremely valuable audiences for our advertisers, the convergence of owned and operated rewarded experiences and Commerce Media is enabling us to build unique proprietary demand for our partners while enhancing our competitive advantage.

An example of this convergence during Q3 is that we were able to deepen our penetration with 2 existing owned and operated advertising verticals into the Commerce Media marketplace, which quickly grew past 40% of our commerce revenue. Building unique supply and demand increases our Commerce Media competitive moat and rationalizes the continuing value of our owned and operating marketplace. We expect that Commerce Media Solutions revenue will surpass owned and operated in the fourth quarter of 2024 as the main driver of consolidated revenue, supported by increased activity in Commerce Media around the holiday season. We entered several new and exciting partnerships in the quarter, which will be key drivers both of our Commerce Media Solutions and our consolidated revenue growth. Our partnership with Databricks allows us to enhance and expand our data collaboration capabilities, which we expect to significantly enhance the performance of our Commerce Media Solutions.

As a part of this partnership, we also welcome the Board a key leadership hire in Virginia Marsh, who joined Fluent as Head of Data & Agencies to drive and support the ongoing growth of our data collaboration capabilities.

Also in the quarter, we expanded our existing partnership with Authentic Brands Group, a leading sports, lifestyle and entertainment brand owner generating over $32 billion in global annual retail sales. Through this broader agreement, Fluent will support post-purchase monetization for additional brands such as Reebok, Vince Camuto, Volcom, Champion, RVCA, DT shoes and more with the goal of adding millions of annual transactions to our growing Commerce Media partner network.

Another one of our many successful partner integrations is our strategic partnership with Rebuy Engine, a leading e-commerce personalization platform for Shopify brands. This partnership opened an expansive network of over 12,000 active e-commerce brands on the Shopify ecosystem, which is a new channel and business opportunity for us.

Our integrated solution, Rebuy Monetize powered by Fluent, continues to perform well as this partnership scales across the Shopify platform. In fact, we saw more than 1 million ad unit sessions in September alone, representing a 79% increase on a month-over-month basis. This channel provides a catalyst of upside as we cultivate new business relationships where we didn't previously have access.

Before turning the call over to Ryan, I would like to provide a quick update on our outlook as we move through the fourth quarter and close out 2025. Regarding our future, we believe this is just the beginning as we aggressively scale our Commerce Media business, we see an exciting emerging market development before us. I'll provide some nail sketch today that will further delineate in future earnings releases in 2026.

I referenced the industry-wide strategic convergence before us, where the Commerce Media and the rewarded owned and operated marketplaces continue to evolve and merge and where our loyalty marketing strategy can create competitive advantage for Fluent. We believe we are uniquely differentiated in the space to win big. By leveraging what we've learned and perfected in our rewards grounded owned and operated properties, premium pricing, high-intent audiences and CRM-driven optimization. Although it's early, this converging marketplace has the potential to significantly accelerate Fluent's consolidated business growth. We look forward to updating you further as we progress.

[Ryan Perfit, executive]

Thank you, Don, and thanks to everyone for joining us today. I'll now provide a review of our third quarter results. Total consolidated revenue was $47 million in the third quarter of 2025 compared with $64.5 million in the prior year. However, Commerce Media Solutions grew 81% to $18.8 million compared with $10.4 million in the third quarter of 2024. Commerce Media Solutions has demonstrated continued momentum with the annual revenue run rate from this business now exceeding $85 million and its revenue representing 40% of our total consolidated revenue in the third quarter of 2025 compared with just 16% in the third quarter last year and 4% in the third quarter of 2023. Commerce Media Solutions continues to grow at a rapid pace, which is our expectation as we invest in and scale this business.

With the bump in consumer spending that we see around the holiday season, we expect CMS to overtake our owned and operated business in the fourth quarter of 2025 as the main driver of consolidated revenue. This will be a key inflection point for Fluent. Owned and operated revenue decreased 52% from the prior year, and we expect the year-over-year decline of roughly 50% to continue into Q4 as we focus more of our effort and capital on Commerce Media growth. Media margin in the third quarter was $12.8 million, which represents 27.2% of revenue compared to $18.2 million or 28.1% of revenue last year.

Commerce Media Solutions media margin in the third quarter of 2025 was $4.6 million or 25% of the Commerce Media Solutions revenue compared with $3.5 million or 34% of revenue in the third quarter of 2024. As we mentioned in our second quarter call, margins were compressed in Q2 due to a strategic choice to offer more flexible pricing structures to win new partners and penetrate into new placements beyond post transaction. We saw this strategy start to pay off in the third quarter as Commerce Media Solutions gross profit margins increased sequentially to 22% as compared to 18% in the second quarter of 2025 or an increase of roughly 400 basis points.

As we continue to monetize these new opportunities, we expect Commerce Media gross margin to return to the high 20s over time. On a GAAP basis, total operating expense in the third quarter of 2025 totaled $14.7 million compared with $17.2 million in the third quarter of 2024. Interest expense in the third quarter decreased to $711,000 from $1.3 million in the prior year period based on a lower outstanding loan balance and lower interest rates.

We reported a net loss of $7.6 million in the third quarter compared with a net loss of $7.9 million in the prior year period. Adjusted net loss, a non-GAAP measure, was $6.5 million, equivalent to a loss of $0.23 per share compared with an adjusted net loss of $3.7 million or a loss of $0.22 per share in the third quarter of 2024. Adjusted EBITDA in the third quarter of 2025 was a loss of $3.4 million compared with an adjusted EBITDA loss of $71,000 in the third quarter of 2024. We believe we're in a good position with the growth and seasonality of Commerce Media Solutions to achieve adjusted EBITDA profitability in the fourth quarter of 2025 and as we continue to drive our shift in revenue mix to focus more on CMS, we expect adjusted EBITDA to be positive for full year 2026 as well.

Shifting now to our balance sheet. We ended the quarter with $9.2 million in cash and cash equivalents and an additional $710,000 in restricted cash. During the quarter, we successfully completed a private placement in excess of $10 million, including both fundamental institutional investors and insiders, representing shareholder confidence in our long-term strategy. This transaction provided us with the working capital to support the continued growth of our Commerce Media Solutions business and a strategy to drive revenue growth and adjusted EBITDA profitability in 2026. Our total net long-term debt was $26 million at September 30, 2025, compared with $35.6 million at December 31, 2024.

We had an outstanding principal balance of $22.6 million on our credit facility with SLR Credit Solutions. This facility provides us with $20 million term loan and the revolving credit facility of up to $30 million that matures on April 2, 2029. We will continue to strategically utilize debt as a source of capital as our business scales.

This has been a very exciting year to date for Fluent as it pertains to our Commerce Media Solutions business. Looking ahead, we believe that we are ideally positioned with a clear and defined strategy, a proven growth catalyst and the liquidity to continue investing in Commerce Media solutions to capture additional share of this rapidly growing market. In addition to the enhanced revenue, margin performance and cash flow that we anticipate as Commerce Media Solutions scales, we remain confident in our expectation that we will achieve positive adjusted EBITDA in the fourth quarter of 2025 as well as full year double-digit consolidated revenue growth and full year adjusted EBITDA profitability in 2026. With that, we will now open the call up for questions.

[Operator]

[Operator Instructions]

Our first question comes from the line of Maria Ripps from Canaccord Genuity.

[Matthew Weber, analyst]

This is Matt on for Maria. I just wanted to ask about the Rebuy partnership. I mean the momentum you're seeing in Commerce Media more broadly is encouraging. And then it seems like you're seeing some strong results early from Rebuy. Don, I think you said 1 million ad unit sessions in September, I believe. Could you just expand upon some of the trends you're seeing with earlier client cohorts in terms of retention and wallet share post-transaction inventory.

And then as we think about like ad load on these sort of post-transaction pages, is there an opportunity to expand that over time? Or is it pretty static? And I just have a quick follow-up.

[Donald Patrick, executive]

Matt, thanks for your question. I'll hit Rebuy first, and then we can get to your ad load question. So what's really exciting is really 5 months into Rebuy. We signed this in June. And we -- a lot of the first part was around the tech integration, the market integration. So we're quite excited by the momentum that it has, and it is now one of our top media partners across our entire network. So it has been expanding and it's been expanding aggressively. So we're quite excited about the opportunities.

As you know, that also opens up the Shopify ecosystem to us. So they are our main channel in which to get access to over 12,000 merchants that they work with on the Shopify ecosystem. So it's a phenomenal partnership, very early days. It is expanding rapidly, as you talked about. And we see even deeper expansion and other solution expansion with these with Rebuy as we head into 2026. So I would tell you from a standpoint of where we're at, we're quite excited, and it's very early days in a very large market that we did not have access to previously. And the trends, they have a lot of small merchants, small merchants that do less under 1 million transactions annually, where our enterprise sales group goes after obviously, large enterprise brands that do millions of transactions annually. So for us to work through Rebuy, it's a very efficient channel and a very successful channel for us. Does that answer your question, Matt, around trends or in Rebuy.

[Matthew Weber, analyst]

Yes, yes, very helpful.

[Donald Patrick, executive]

Yes. And then I didn't understand if you just expand a little bit -- you had a question around ad load and expansion of ad loads. So can you just expand on that?

[Matthew Weber, analyst]

Yes. I guess I was just -- is there an opportunity to sort of add more like ad impressions on the post-transaction page? Or are they pretty saturated already with how you guys are approaching it now.

[Donald Patrick, executive]

I understand the question. It's a good one. So ultimately, it comes down to consumer experience. And each partner we have, obviously, has a different type of experience that gets to post transaction. So for example, if your consumer on one of our media commerce partners, and you already were served something around loyalty, you already were served a survey, et cetera. We will then tend to lower that the number of impressions that we extend to them in a post-transaction spot. If they're not served that we might serve 2 or 3 type of impressions. So it really comes down to the consumer experience on our partner's site and I think it's one of our competitive advantages where we're really -- we really understand how to curate a consumer experience that's meaningful and effective that long term drives loyalty for that for that consumer on that property.

So it's very, very partner specific. Where we are making -- expanding our ad serving is outside of the post transaction. So we are doing things around pre-checkout areas, we're starting to put some -- we have a number of different solutions that are going out before that post transaction. And you'll hear us talk a lot more about that expansion of our -- a very adjacent solution set in the commerce market as we get into 2026.

[Matthew Weber, analyst]

Got it. Looking forward to that. That was very helpful. And then just really quick on the Authentic Brands partnership. Is this like a greenfield win net new for Fluent or does scaling this relationship essentially mean that you'll be taking share from other providers?

[Donald Patrick, executive]

Yes. We -- another great question, Matt. We had a number of authentic brands originally in a number of the other -- they have obviously a portfolio of brands. Some of their other brands were with the largest competitor. So in this specific example, winning the Authentic Brands was a conquest over the largest competitor in the marketplace.

[Operator]

Our next question comes from the line of Patrick Sholl from Barrington Research.

[Patrick Sholl, analyst]

I just wondered if you could talk a little bit about the ad pullbacks you talked about in the prepared remarks. Was that specific to the Commerce Media segment or more broadly? And then like, could you just maybe talk about like some of the industries affected and what is that macro driven or what could be driving that?

[Donald Patrick, executive]

Yes. Pat, thanks for the question. So I'll start at the highest level, and then I'll kind of narrow down deeper. For the most part, for all of 2025, our partners have been what I'll call more conservative and more short term in sort of their thinking process. Obviously, we've all had to deal with tariffs, the impact of tariffs, the lack of visibility in their businesses and what would really come. So for the most part of 2025, we saw a very -- more of a shorter-term thinking around budgets and moving things around in terms of where the efficiency of that channel existed. So we've seen that repeatedly in -- and -- with our partners, they quite honestly said if they had 1 strategy and then new tariffs came in at a different country that they were involved in. Obviously, they had to sort of pivot and move. And so we -- in general, that's what we've seen throughout the course of the year.

Specific to my comment on the earnings script, and this kind of led us to a different -- a very -- what we're really excited about on the strategic path here is there's been some traditional advertisers that have been in Commerce Media for a while and there were specific things that were going on in their industry and that basically had them pull back some budgets or lower pricing as we saw in the later part of Q3 and early part of Q4.

So it was very specific to their business and the industry that they existed in. One of the things we've talked about and 1 of the things we're really excited about, Pat, is the word convergence and how we're kind of looking at that business. So we launched Commerce Media knowing that our owned and operated properties provided us a great competitive advantage with that first-party data asset and our performance marketing expertise of curating audiences and building those audiences in a meaningful and effective way. because of some of this pullback, we have now started bringing our owned and operated advertisers who have not advertised before on Commerce Media into Commerce Media. So not -- and we've been able to teach them how to buy, show them how the ROAS works and really get them to scale.

And the number we gave in the earnings was over 40% of our monetization in Q3 was tied to these new proprietary advertisers that we're bringing on to our network. So we're quite excited by that. Obviously, the supply of our media is proprietary, the 3-year contracts, and we provide a unique proprietary supply for advertisers.

Now we're able to provide -- go to our media partners and say, we now have a unique and competitive and differentiated audience to connect and making a more meaningful experience to you. So it's still very early days around that. But we're very excited about how that owned and operated advertisers can start to purchase in a meaningful way in a premium -- and quite honestly, a premium pricing way to drive a differentiated marketplace for ourselves.

[Patrick Sholl, analyst]

Okay. And then on the 2026 outlook, could you maybe sort of talk about like what you're seeing in terms of like -- or what you feel needs to happened within the O&O segment, assuming that you're continuing to grow at a really solid clip within Commerce Media, what needs to happen within the O&O segment to hit the profit trends and perhaps also the revenue growth? So I guess, double digits is a wide range.

[Donald Patrick, executive]

Yes. Yes. So we've stated -- we've grown Commerce Media obviously doubled it from '24 to '25. We believe we will double it again in -- from '25 to '26 based on the wins that we've had in '25 and our pipeline and things that are coming on board early 2026. So that -- as Ryan talked about in his comments, that shifting of the mix and being the majority of our business is the core driver to our consolidated earnings, both consolidated revenue growth and back to profitability. The owned and operated business has declined significantly, 50% year-over-year. And we, in our forecast anticipated to continue to decline, although we are seeing -- we're starting to see some -- it exhibits some stability. It was negative 3% when you look at Q2 to Q3. We've seen similar type of trends so far in Q4. And we think this convergence that we've talked about, where we can bring our advertisers unique advertisers on will help provide some of that stabilization. But for the forecast and the guidance that we're giving you, we continue to project that, that owned and operated business will decline.

[Patrick Sholl, analyst]

Okay. And then back to the Commerce Media side, you talked about the high 20% margin range from its current level. I guess how quickly do you sort of -- do you anticipate like achieving that type of level? I mean, can you bring on new partners and you might have like a minimum guarantee or a lower initial margin, but I guess, yes, just over the longer term, how does that sort of blend higher.

[Donald Patrick, executive]

Yes. From a macro perspective, Pat, we obviously -- you've seen an increase from Q2 to Q3, we anticipate and we are seeing an increase -- a similar increase from Q3 to Q4. The margins have been -- lower margin drivers have than what we talked about new solutions that we brought on that we're scaling. We also have provided some short-term incentives to get some partners onto our platform in terms of implementing different revenue splits or bonuses.

And then the last piece that's affecting that is, what I'll call, the mix of, what I'll call, enterprise channel, which is working directly with these brands. And then also like the Rebuy is a channel partnership, and we obviously have lower margins in that because, obviously, they're sharing those margins with us as a channel partner. So some of it is mix, but a lot of it has to do with that scaling that we have around those new solutions and eliminate -- the short-term incentives start to wear off. So we see us getting into -- in the late 20s and continue to incrementally increase on a quarter-by-quarter basis.

[Operator]

Our next question comes from the line of Bill Dezellem from Tieton Capital Management.

[William Dezellem, analyst]

When one goes on the Dick's Sporting Goods website, it -- and you complete the purchase, it references powered by Fluent. So my question for you is, did we read that correctly? First of all, is Dick's Sporting Goods now a client that you've not referenced in your release here. And secondarily, if that's accurate, when did that relationship begin?

[Donald Patrick, executive]

Yes. Thanks, Bill. Thanks for the question. So we're often not allowed to disclose our partners without their approval from a marketing perspective. But you are absolutely right. Dick's was one of the large enterprise clients that we brought on to our platform in Q3. And as you know, Dick's and the other ones that we brought on, they are iconic world-class brands. We're really proud to work with them. And I also want to thank you for supporting Dick's Sporting Goods and Fluent at the same time. So Dick's specifically is a really exciting win for us back in '24, they ran an RFP and they did not select Fluent. They selected the largest competitor in the market in '24. In '25, they came back to us and said they weren't happy. They weren't getting the results or partnership they wanted and they came to us in less -- in a very short time.

So getting that type of win back and having proved out our value proposition with that is in a very -- obviously, a very exciting opportunity for us and one we can continue to leverage with our brand.

We are working with some of the largest and most sophisticated brands in the world. And we're quite proud that like a validation of Dick's coming -- after choosing someone else coming back to us really reinforces our leadership position in Fluent and also the leadership position we have in Commerce Media that we built in a very, very short time frame. Have you been on any other websites for us, Bill?

[William Dezellem, analyst]

Possibly a few, but let's stick with this one for a moment if I may. So when did this actually convert over? It sounds like it converted from your largest competitor to you all, when did that conversion take place?

[Donald Patrick, executive]

It took place in September. So it came on the very end of Q3.

[William Dezellem, analyst]

So that did not have a great influence on the third quarter results then?

[Donald Patrick, executive]

That's right. I mean most of the Commerce Media business did grow 80%. As you know, we've clearly, we've clearly signaled that we expect it to grow over 100% for the year, and we believe we are still expected to get there. There are some fluctuations quarter-over-quarter, and that's a good example of a fluctuation. They came -- if they came out in July or August, it would have a bigger impact on our financials, a delay that is primarily -- again, we have to match up to what our partners need and their timing around how they can implement in their tech road map getting live in September was certainly affected Q3. But going forward for the life of the contract, now we have them every single quarter.

[William Dezellem, analyst]

That's helpful, Don. And clearly, Dick's is a high-volume retailer, but we don't have an understanding or a perspective of how their volume would match up relative to the rest of your business. So maybe just taking what they did in the last year with the competitor. If they were to repeat that in the next 12 months, what proportion of your Commerce Media Solutions business would they represent?

[Donald Patrick, executive]

Yes, it's a good question. There'll be a top 5 partner for us from a session standpoint. So between Rebuy and Dick's, we've added two top 5 partners in that -- in the quarter, scaling. Rebuy obviously came on in June but really scaled throughout the -- throughout the third quarter.

[William Dezellem, analyst]

Okay. That's helpful. And then you kind of addressed this, I think, but the 80% growth that you had in the third quarter in Commerce Media Solutions didn't match with the triple digits that you've talked about? And did you essentially just say that was simply a timing of not having a couple of clients come on as quickly as you had anticipated?

[Donald Patrick, executive]

Yes. if you take a step back, quarter-by-quarter will fluctuate based on the timing of when things go live on our platform. And we anticipate as being continuing to double from '24 to '25. And as I said, we feel very good about doubling again in '26.

[William Dezellem, analyst]

That's helpful. And then the 400 basis point sequential gross margin improvement in that business, that was simply tied to the roll-off of some initial incentives with some larger customers? Is that what we understood your earlier comments to explain?

[Donald Patrick, executive]

Yes. It came from what I'll call all 3, Bill. The first is, obviously, we had some other Commerce Media Solutions that we're investing in and scaling. And obviously, much like the post-transaction business when we started it, the margin was lower and as we scaled, it got to higher margins. So some of that was new solutions that started to show better margins. Some of it was with some of these incentives that we put in place.

And then even though Rebuy has grown significantly as a top 5, overall, the mix of what I'll call channel partnerships versus enterprise, the enterprise mix was larger in Q3.

[William Dezellem, analyst]

And then given that some of these new CMS solutions or that you're ramping kind of not in the post-transaction arena. You must have some pretty meaningfully -- frankly, pretty exciting expectations for those. If what you are doing on the front end was enough to influence the margin negatively in Q2 and then swing more favorably in Q3. Is that correct? Or are we reading too much into that?

[Donald Patrick, executive]

You're right. You're right about your assumption, though. We can -- again, we continue to see -- we look at the margins overall, but we also look at the margins when they need a solution in terms of what's the target, if it's below.

[Ryan Perfit, executive]

It's an investment.

[Donald Patrick, executive]

If it's -- we have very strict margin restrictions in terms of how we look at the businesses and scale the businesses. So we consciously make investments in certain areas, either to get to critical mass or win a large brand that we know we can leverage -- and leverage to get more business from.

[William Dezellem, analyst]

Okay. I realize I'm taking probably more time than I should here. But if that's the case and you're able to scale that quickly here from Q2 to Q3, would the implication be that in '26, these new solutions that hopefully you'll be talking more about in future quarters that those will be needle movers in '26?

[Donald Patrick, executive]

Yes. But we also will add other adjacent solutions also, Bill. So the answer is yes. The ones that we've started that we're scaling will be needle movers in 2026, absolutely. But we'll also -- we are in a fortunate position that, as we've talked about, Commerce Media is exploding in growth. So there's lots of tailwinds and our ability to drive superior results compared to our competitors with our partners, obviously, we're able to start to move into other solutions for them and help them, which makes us more strategic and also obviously allows us to drive better revenue and better margins. So we're going to balance those two as we go in -- we balance them in 2025, we'll balance them again in 2026.

[William Dezellem, analyst]

So Don, and if we read that forward that we would be -- we need to expand our horizon and not be so narrow-minded as thinking that Commerce Media Solutions is really primarily or totally a post-transaction business. You're building a lot around that is what you're saying and that this is going to -- we need to be broader in our thinking in terms of what you're going to be doing for your customers in that division?

[Donald Patrick, executive]

Yes, it's absolutely right. Bill, it's a broader opportunity and a much larger share of the market. We post transactions where we got in, it was -- quite honestly, is the hardest place to get access to because it's the most valuable place for e-commerce partner when consumer has their credit card out and buying. It's also the most valuable piece for our advertisers.

So we got into the right spot. We've been able to prove our results and get our brands, and we are going to now leverage that into adjacent solutions by leveraging the technology investment and the data investment that we've already built up over the years. So it will allow us to be stickier with our partners and also more valuable and strategic.

[William Dezellem, analyst]

Great. I have a couple of more questions, if I may. First of all, that the owned and operated essentially stabilized, as you pointed out this quarter sequentially, and that sounds like it's continued in the fourth quarter. What are the dynamics that are leading to this positive change?

[Donald Patrick, executive]

Yes. It's always a number of factors, Bill. That business has obviously been hampered by the FTC settlement and our limited ability to get to the media -- the diversified media platforms are very concentrated. Number one was those platforms have been relatively stable, which has helped us. But I think the more important play here in the strategic play is the convergence that we've been talking about. We've been able to bring -- we've been able to help bring our owned and operated advertisers that have not previously been an advertiser in Commerce Media, we'll be able to bring them in, and that also allows us to leverage our relationship across both owned and operated and Commerce Media with these advertisers.

So -- and that is -- that clearly allows us to be looked upon as a more strategic partner for them, which allows us to manage across those 2 different platforms more effectively. So I think a lot of it has to do with, obviously, the platforms. But more importantly, we're able to now provide proprietary demand for our -- and exclusive demand to our media partners. At the same time, having that media partners and providing exclusive supply to these advertisers. So it's that flywheel that we believe is the core of the assets of the owned and operated business that we've leveraged to get into it. We've said it's a huge competitive advantage to us. It has proven out so far from us being able to deliver better results. And now we're starting to see the flywheel around how we can provide even more differentiated solution and marketplace.

[William Dezellem, analyst]

Congratulations on that. One additional question, please. So the 9 months adjusted EBITDA, as listed in the release, is a negative $9 million. But you've said that the full year is going to be positive. So the implication -- are we doing this right, the implication is that the fourth quarter adjusted EBITDA needs to be at least $9 million plus?

[Donald Patrick, executive]

Yes. Bill, I think you read it wrong. We said that our Q4 adjusted EBITDA will be positive.

[William Dezellem, analyst]

Okay. You've not said that the full year will be positive. Next year, full year will be positive?

[Donald Patrick, executive]

Yes. We said in 2026, the full year, that will be positive, yes driven by triple-digit growth in Commerce Media and really shifting -- we're at the point where it's going to be greater than 50% of our business and that Commerce Media growth will now start to drive the consolidated results of the company.

[William Dezellem, analyst]

Great. Thank you for clarifying my air and congratulations on the turn that's happening.

[Operator]

Thank you. At this time, I would now like to turn the conference back over to Don Patrick for closing remarks.

[Donald Patrick, executive]

Thank you. We remain bullish about our prospects and are very excited about the momentum we're generating as we lean into a significant and what we believe is a mega growth opportunity in Commerce Media. As for the numbers, we want to emphasize for clarity, we expect Fluent to achieve consolidated double-digit revenue growth in 2026 driven by triple-digit growth in Commerce Media Solutions as well as adjusted EBITDA profitability in Q4 2025 and full year adjusted EBITDA profitability in 2026. Thank you for joining our call today. We look forward to updating you on our progress in the next earnings release.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.