Fluent(US:FLNT)2025-03-31 20:15Part I Item 1. Business Fluent, Inc. provides commerce media solutions through its marketplace and O&O properties, focusing on performance-based customer acquisition and network growth - Fluent operates as a commerce media solutions provider through its Commerce Media Solutions marketplace and Owned & Operated (O&O) digital media properties3031 - The company's growth strategy focuses on expanding its Commerce Media Solutions, which launched in Q1 2023 and showed year-over-year growth in every quarter of 202458 - Gaming app advertisers accounted for approximately 35% of consolidated revenue in 2024, down from 38% in 2023, posing industry-specific risks93 - Client concentration risk decreased, with no single client exceeding 10% of revenue in 2024, compared to 18.1% in 202364 - Regulatory actions, including an FTC settlement, have required business practice changes and adversely affected operational results68 - As of December 31, 2024, the company had 210 employees, a 24% decrease from the prior year, reflecting strategic shifts and cost management71 Item 1A. Risk Factors The company faces significant risks including going concern doubt, competitive and regulatory challenges, reliance on gaming, declining O&O traffic, and data privacy concerns - There is substantial doubt about the company's ability to continue as a going concern due to declining revenue, profitability issues, and non-compliance with debt covenants as of December 31, 2024787981 - The company's SLR Credit Agreement contains restrictive covenants that limit operational and financial flexibility, with non-compliance potentially leading to an event of default and accelerated debt maturities8385 - Fluent is a relatively new entrant in the post-transaction commerce media business, which is dominated by a major player (Rokt), presenting significant competitive challenges102 - User traffic to the company's O&O Sites has been declining for five years, primarily due to the Traffic Quality Initiative (TQI) and heightened publisher monitoring standards required by the FTC Consent Order108 - Evolving and complex data privacy laws, such as GDPR and CCPA, could have a material adverse effect on the business, requiring significant resources to maintain compliance155157158 - Ownership is highly concentrated, with executive officers, directors, and 10%+ holders controlling approximately 64.9% of outstanding common stock as of March 17, 2025, which could limit other stockholders' influence169 Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments - Not applicable176 Item 1C. Cybersecurity The company outlines its cybersecurity risk management program, based on NIST standards and overseen by the CTO, General Counsel, and Board's Audit Committee, reporting no material incidents in 2024 - The company's cyber risk management program is based on recognized standards, including NIST, and is reviewed annually by internal and external auditors178 - Cybersecurity governance involves the IT, Legal, and Compliance teams, with the CTO and General Counsel reporting to the CEO and providing quarterly updates to the Board's Audit Committee179 - The company did not experience a material cybersecurity incident during the year ended December 31, 2024181 Item 2. Properties Fluent's headquarters are in a leased New York City office space with a sublease terminating in November 2025, while its AdParlor business operates from a co-working space in Toronto, Canada - The company's headquarters are located at 300 Vesey Street, 9th Floor, New York, NY, under a sublease scheduled to terminate on November 7, 2025182 Item 3. Legal Proceedings The company has settled all significant recent legal matters as of December 31, 2023, including an FTC Stipulated Order for a $2.5 million civil penalty and a TCPA class action settlement for $3.1 million - The company settled with the Federal Trade Commission (FTC), agreeing to a $2.5 million civil penalty and implementing additional compliance measures, with the FTC Consent Order entered by the Court on August 11, 2023186 - Fluent was involved in a TCPA class action (Daniel Berman v. Freedom Financial Network), which was settled, with the company's responsibility being $3.1 million, paid via a $1.1 million cash payment and a $2.0 million junior secured promissory note187 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on The Nasdaq Capital Market under "FLNT", with no dividends paid in FY2024 and no plans for future payments due to credit agreement restrictions - The company's common stock is listed on The Nasdaq Capital Market under the symbol "FLNT"190 - No dividends were paid in fiscal year 2024, and the company does not plan to pay cash dividends in the foreseeable future, a policy reinforced by the current Credit Agreement's prohibition on dividend payments192 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations FY2024 revenue decreased 15% to $254.6M, resulting in a $29.3M net loss and negative Adjusted EBITDA, raising substantial doubt about going concern Key Financial Results (2024 vs. 2023) | Metric | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $254.6M | $298.4M | -15% | | Net Loss | ($29.3M) | ($63.2M) | +54% | | Adjusted EBITDA | ($5.6M) | $6.8M | -183% | | Adjusted Net Loss | ($18.5M) | ($7.2M) | -157% | | Adjusted Net Loss per Share | ($1.14) | ($0.52) | -119% | - Management concluded there is substantial doubt about the company's ability to continue as a going concern due to covenant non-compliance, the need for additional capital, and projections trending below plan255357363 - The company has undertaken multiple workforce reductions throughout 2024 and into Q1 2025 to align resources with strategic initiatives and manage costs amid profitability challenges239258 - Fluent entered into a new credit agreement with SLR Credit Solutions in April 2024, requiring multiple amendments and waivers since then due to non-compliance with financial covenants, each necessitating additional capital raises262267270271 Results of Operations FY2024 revenue fell 15% to $254.6M due to O&O declines, offset by Commerce Media growth, with net loss narrowing due to lower impairment Revenue Breakdown (2024 vs. 2023) | Revenue Stream | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Owned and Operated Marketplaces | $168.4M | $235.7M | -28.6% | | Commerce Media Solutions | $41.3M | $10.7M | +286.0% | | Other Streams | $44.9M | $52.0M | -13.7% | | Total Revenue | $254.6M | $298.4M | -14.7% | - Cost of revenue as a percentage of revenue increased from 73.7% in 2023 to 76.1% in 2024, indicating pressure on margins234 - The significant decrease in net loss was primarily driven by a goodwill and intangible asset impairment charge of only $2.2 million in 2024, compared to $55.4 million in 2023241 - Interest expense increased by 48% to $4.7 million, driven by a higher average interest rate on the new SLR credit facility242 Liquidity and Capital Resources Liquidity is strained with cash at $10.7M and $14.1M net cash used in operations, requiring capital raises and raising going concern doubt - Net cash used in operating activities was $14.1 million in 2024, a significant decline from the $8.1 million in net cash provided by operating activities in 2023250 - The company's independent registered public accounting firm included an explanatory paragraph in its opinion expressing substantial doubt about the company's ability to continue as a going concern255334 - To satisfy conditions of its credit agreement, the company raised capital multiple times, including $10.0 million in May 2024, $2.1 million in August 2024, $8.5 million in December 2024, and an additional $5.1 million in March 2025273274275276 Critical Accounting Estimates Management identifies critical accounting estimates including revenue recognition, goodwill impairment, convertible note valuation, share-based compensation, and deferred tax asset valuation - Revenue recognition for performance-based marketing involves estimating variances for unbilled revenue based on internally tracked conversions281 - Goodwill is tested for impairment at least annually, with a Q2 2024 triggering event leading to an interim test and a non-cash impairment charge of $1.3 million for the All Other reporting unit, writing off its remaining goodwill287433 - The company elected the fair value option for its convertible notes issued in August 2024, resulting in an initial day-one unrealized loss of $2.1 million and subsequent fair value adjustments being recorded in the statement of operations456458 Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Fluent, Inc. is not required to provide the information for this item - The Company is not required to provide this information as it qualifies as a "smaller reporting company"298 Item 8. Financial Statements and Supplementary Data This section presents audited consolidated financial statements, with the auditor's report highlighting a critical audit matter on revenue recognition and going concern doubt - The report of the independent registered public accounting firm includes an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern334 - The auditor identified the evaluation of revenue recognition for the Fluent reporting segment as a critical audit matter due to the significant audit effort and subjective judgment required338340342 Consolidated Balance Sheet Highlights (December 31) | (In thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Total Current Assets | $65,955 | $78,406 | | Goodwill | $0 | $1,261 | | Total Assets | $93,617 | $111,867 | | Total Current Liabilities | $64,682 | $49,214 | | Total Liabilities | $68,662 | $77,463 | | Total Shareholders' Equity | $24,955 | $34,404 | Consolidated Statement of Operations Highlights (Year Ended December 31) | (In thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Revenue | $254,623 | $298,399 | | Loss from Operations | ($23,660) | ($60,130) | | Goodwill and Intangible Assets Impairment | $2,241 | $55,405 | | Net Loss | ($29,277) | ($63,218) | | Basic and Diluted Loss Per Share | ($1.80) | ($4.59) | Item 9A. Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with no auditor attestation required - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024302 - Management concluded that internal control over financial reporting was effective as of December 31, 2024, with an attestation report from the registered public accounting firm not included as permitted for non-accelerated filers303304 - No changes were made to internal control over financial reporting during the fourth quarter of 2024 that have materially affected, or are reasonably likely to materially affect, these controls305 Part III Items 10-14. Directors, Executive Compensation, Security Ownership, and Principal Accountant Fees Information for Items 10-14, covering directors, executive compensation, security ownership, and principal accountant fees, is incorporated by reference from the 2025 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships, and Principal Accounting Fees is incorporated by reference from the forthcoming 2025 Proxy Statement312313314315316 Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including financial statements, schedules, corporate governance documents, and material contracts - This section provides a comprehensive list of all exhibits filed with or incorporated by reference into the Form 10-K, including multiple amendments to the company's credit agreement and various securities purchase agreements from 2024 and 2025319320