FLNT - NASDAQ

Good afternoon, and welcome. Thank you for joining us to discuss our Third Quarter 2023 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 Don 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 be available following the call on our website. To access the webcast, please visit our Investor Relations page on our website 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 speak only as of the date hereof. Actual results could differ materially from those stated or implied by 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, we 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 definitions of these metrics and reconciliations to the most directly comparable GAAP financial measure are provided in the earnings press release issued earlier today. With that, I’m pleased to introduce Fluent's CEO, Don Patrick.

Good afternoon, and thank you all for joining our call today. I’m here together with Ryan Schulke, our Chief Strategy Officer; Chairman of the Board and company Founder; and Ryan Perfit, our Interim Chief Financial Officer. I'll make some brief comments about our third quarter results which clearly reflect our post-FTC settlement transition along with the immediate term impact on our business and financials. Importantly, I will also share more regarding the strategic pivot we are making via our evolving growth strategies which further support our confidence in and commitment to reestablishing Fluent as the industry leader in performance marketing. Our strategic direction is intended to strengthen and modestly grow our core also expanding our margins and in parallel establishing Fluent credentials in new high-volume, high-growth marketplaces that we are already beginning to successfully enter. To be clear, we are excited about our strategic course as we believe the road forward will have us clearly differentiate Fluent brands in exciting new markets, where we intend to demonstrate our core capabilities and establish a strong competitive advantage. And as Fluent grows our new emerging businesses, we expect to over time drive enterprise value for all stakeholders. Our goal is to position Fluent at the forefront of our industry and our recent FTC settlement fills a void by providing much needed clear industry compliance standards that others would be wise to follow, to do business a Fluent way. Fluent's foundational commitment to enhance the quality of consumer engagement within our performance marketplace is an investment we believe is unequivocally worth making. And in the process we have been consciously exiting businesses we no longer find strategically viable. In turn, we see the near-term financial implications, where we will reestablish our base as an investment in the future and the return to more profitable growth of our company. Bottom line, over the last 2.5 years, we've consciously walked away from over $80 million in annual revenue in our core performance marketplaces. We did this because we feel certain revenue sources were no longer strategically compelling, perhaps more so in regulatory environment that is continually evolving. Sacrificing quality for immediate-term revenue is somewhat mainstream for many in a dynamic marketplace, and where we have consciously chosen not to do. I've referenced Fluent's strategic pivot. So let me expound further, as to why, we are confident in our course, mindful of the near-term financial challenges, we've chosen to manage and that I'll speak to shortly. Foundationally, our strategic pivot is based on rebuilding the base of our core performance marketplaces, our owned and operated digital properties, where Fluent is highly differentiated within the industry. A healthy performance marketplace is essential to our strategy. It provides us a unique go-to-market capability, while also generating the gross profit dollars that we will invest in our growth initiatives. Strictly stated, we have built unparalleled fluent capabilities and competitive advantage vis-à-vis, our core performance marketplaces, primarily our rewards, jobs and content platforms. These owned and operated marketplaces allow consumers, who are seeking high-quality engagement to make meaningful connections to products and services that improve their lives. We are now leveraging that leading-edge, owned and operated marketplaces, to springboard us into new high-growth adjacent marketplaces, just as we're doing with AdFlow, Call Solutions and Influencer. More compelling both strategically and financially, is that we enter these marketplaces with a proprietary technology platform that unleashes new capabilities that our clients are asking for. In our core performance marketplaces, we buy media for our own account, to bring consumers to our owned and operated marketplaces, and create meaningful experiences to connect them to world-class brands. Our technology platform expansion, now enables us to create new marketplaces by bringing our brands to where valuable consumers exist, like post transactional e-commerce for AdFlow. That's our strategic pivot, leveraging our leading-edge, go-to-market capabilities that are our core performance marketplaces, then leveraging our proprietary technology to extend into new marketplaces where we connect our clients with valuable consumers. Our strategy has us charting a course where we are winning, with both consumers and world-class brands we partner with. That's a win-win in classic business terms. So, you can see, why we are bullish on our growth strategies. We're investing with confidence, based on the caliber of iconic brands that already seeking Fluent partnerships, coupled with the enthusiasm they are exhibiting for our new emerging business initiatives. Our Q3 financial results are consistent, with the more cautious near-term business road map, we laid out in previous earnings releases and were driven largely by the decline in our owned and operated rewards marketplace. As noted this is due to businesses we are no longer focused against coupled with immediate term pressure on margin, which limit our ability to scale media profitably. Our rewards marketplace margin pressure was driven by two headwinds; first, the impact of post FTC settlement, which drove strategic and financial decisions to forgo certain revenue streams that were no longer strategically compelling where we felt did not meet our evolving quality standards. Although this conscious decision will continue to negatively impact rewards growth over the next several quarters, our go-to-market model remains highly differentiated from the competitive set allowing us to continue to leverage our rewards platform towards a higher quality consumer engagement unlike anyone else in our industry. This course is expected to drive immediate growth in the medium-term. This transition will reestablish our strategic base, while setting the course for us to lean into our emerging business growth agenda on a sequential basis in fiscal year 2024. And we're in the later part of the year, we expect to begin improving margins as we scale. Second, early in Q3, one of our largest clients shifted their consumer acquisition strategies from growth to clear prioritization of return on ad spend due to competitive pressures in their market. As discussed in previous earnings releases this is a trend we've seen some other clients throughout the year based on continued consumer volatility in the market. We began seeing other clients increase spending as an offset in late Q3 that we continued seeing into Q4 leading to our margin sequentially improving in Q4 to date. We are prepared for our clients focused on return on ad spend in the immediate term and we'll continue to leverage Fluent's performance marketplace to respond to these shifts by managing media margin mix. Financial results were as followed. Revenue of $66.2 million represents a 19% decline sequentially compared to Q2. We are repositioning our highly profitable and more stable rewards business at the center of our growth strategy as we'll play an essential role of fueling our new business unit growth. In concert, we continue to rebuild our performance marketplace in a post FTC landscape and we'll update you regarding our progress in future quarters. Our media margin of $19.3 million was a 25.6% sequential decrease over Q2 at 29.2% of revenue, we saw margin decline sequentially from softer pricing across our performance marketplace. primarily from one of our largest clients in the gaming sector, which is not immediately fully absorbed by other bidders due to levels of unpredictability within the entire digital advertising industry. Margins did improve later in Q3 and have continued in Q4. As we're seeing more existing brand partners leaning in along with the onboarding of major new brands. Adjusted EBITDA of a negative $1.7 million represents negative 2.6% of revenue. This reflects both our ongoing strategic investments in our growth agenda as well as the impact of the additional quality initiatives we proactively implemented during the last three quarters. Results also recognize the businesses we deem non-strategic in our longer-term growth agenda. Our focus is now sequentially rebuilding our base, aligned with the strategic pivots we are making into the exciting new business ventures that we have embarked upon. Most importantly, in Q3, and as we outlined in our last earnings release, we continue to make significant progress on our emerging businesses in the three strategic growth initiatives where we made our biggest bets, Call Solutions, AdFlow and Influencer. As we stated in the last earnings release, we see more than $150 million of revenue growth potential in the next two years, in these three marketplaces. AdFlow, our post-transaction e-commerce solution turned to positive gross profit in Q3 ahead of plan. Since July, AdFlow closed new business wins that will drive an approximately 50% increase in annual run rate volume for AdFlow going into 2024. Our foundational strategies in this dynamic marketplace have yielded excellent results. In concert, we have market validation that our technology solution drives value for our e-commerce partners and they represent a new opportunity for world-class brands to reach high-quality consumers at the optimal purchase moment. We are quite enthusiastic about our major strategic investment we're making in these exciting businesses, based on the longer-term return on investment and inherent impact on enterprise value. Progress is also being made in our Influencer business, where we continue to experience significant double-digit growth year-over-year. In medium-term, we'll focus on building and leveraging this media channel to support Fluent's owned and operated performance marketplaces. The larger and more compelling longer-term growth opportunity is tied to expanding our proprietary Influencer marketplace to drive growth directly for world-class brands we partner with. And in Q3, our Call Solutions business launched a new extension in our health vertical focused on the Affordable Care Act, ACA market. Our new platform capabilities allow us to connect consumers directly to health care insurance providers as new policyholders. This not only deepens our relationship with consumers by bringing them further down the marketing funnel to meet the definitive needs, but also build stronger strategic relationship with world-class health care brands. This vertical market expansion will drive growth in Q4 during the ACA open enrollment period that started on November 1st and is highly sequential growth opportunity where we believe Fluent can differentiate ourselves in the marketplace, also with margin potential that exceeds, the Fluent core. Although early stage, the results of all three of these emerging businesses, AdFlow, Influencer and Call Solutions, continue to validate our strategic course commitment to higher-quality consumer engagement that enhances Fluent's total value proposition for consumers and our clients. In Q4, we see a sequential growth over Q3 being driven by three important trends. First, from a modest decline in our owned and operated digital properties with margins improving through our focus on higher-quality consumer engagement, as a result, more existing brand partners are leaning in and major new brands are coming on board. Second, we will continue to focus on the acceleration of our new strategic initiatives and the emerging business growth that we've outlined, as these businesses have opened up entirely new and vibrant marketplaces for Fluent and our brand partners. Last, we also anticipate traditional seasonality of return in Q4. As I've stated, Fluent is fulfilled by the leadership role we played in establishing a best-in-class industry compliance standard. And we are excited by the prospect of a more level competitive playing field arriving in the later half of fiscal year 2024 that should have some returning to growth at or above industry growth rates with sequential margin improvement as well. However, we must manage through the realities of the immediate term, as we expect it will take a few quarters or more for our competitors to implement a parallel compliance standard. I know that's a lot to digest, so please allow me to summarize in straightforward terms. One, Fluent is the industry leader in performance marketing and our core performance marketplace remains a highly differentiated brand equity and competitive advantages within our owned and operated marketplaces. Two, our core performance marketplace took the brunt of the impact of the FTC settlement and over the last 2.5 years a reduction in over $80 million in annual revenue. We expect it will take a couple of quarters to return to growth, albeit more modest growth in the entire enterprise. Fluent's foundational commitment to enhance the quality of consumer engagement with underperformance marketplace is investments we believe is unequivocally worth making. And as we see in the near-term financial implications as an investment in the future, profitable growth of our company. Three, we've recalibrated our growth strategy with performance marketplace businesses at the core and with a focus on growing strategically in the new marketplaces with business units that leverage our Fluent assets. We are enthusiastic, as we've already delivered proof-of-concept that delight of the brands we partner with and new world-class brands that we are adding to our roster of clients who recognize the unique value proposition. Four, as the new marketplaces continue to grow and Fluent establishes credentials in the markets in which we're playing, we expect to accelerate our growth while expanding our margins. And with that I'll turn it to Ryan to provide more detail on our financial results.

Thank you, Don, and thanks everyone for joining us today. I'll now provide some additional detail on our Q3 earnings providing year-to-date comparisons where applicable. For the quarter, Fluent produced $66.2 million in revenue, down 26% from prior year and down 19% sequentially from Q2. Year-to-date, our total revenue stands at $225.6 million reflecting an 18% decrease from the same period last year. The sequential decline was driven by the media and entertainment industry, specifically the gaming sector driven by a pricing pullback from one of our largest clients. As Don mentioned, the pullback was an effect of our clients shift from growth to ROAS and mirror similar adjustments that we've seen across our client base over the last four quarters. Conversely, we were encouraged by sequential revenue growth in the streaming services sector and from other clients within the gaming sector that helped offset the decline. We expect moderate recovery in the gaming sector along with the growth of our other new business initiatives that Don mentioned, to strengthen our marketplace and drive sequential revenue growth in Q4. That said, we do expect economic headwinds as reflected by our clients' consumer acquisition strategies coupled with our efforts to exemplify current regulatory standards to continue to cause quarter over same quarter growth challenges into mid-2024. Media margin in Q3 of $19.3 million represents a 31% year-over-year decline and 29.2% of revenue. Year-to-date our media margin of $67.2 million represents a 22% decline over the same period last year and 29.8% of revenue. The declines versus prior year periods were largely a factor of the previously mentioned client spend challenges, not being offset by a lower cost of media. The sequential decline in media margin, as a percentage of revenue from 31.5% can be attributed to the aforementioned marketplace pressure, created by one of our largest clients. On a GAAP basis, our aggregate operating expenses for Q3 were $17.8 million, a $2 million year-over-year decrease. For the nine months ended September 30, our aggregate operating expenses were $52.5 million, a $7.9 million decrease from the same period last year. Of note, our G&A line in Q3, includes specific litigation and related expenses amounting to $153,000 and a $1.8 million benefit from insurance reimbursements related to the FTC settlement. For the nine months, ended September 30, G&A includes a $6 million net benefit from specific litigation and related expenses. The G&A line also includes accrued compensation expenses linked to the Winopoly and True North acquisitions of $517,000 and $1.7 million for the three and nine months ended September 30, respectively. All of these costs and benefits, fall outside the normal course of business and thus are excluded from our adjusted EBITDA calculation. As detailed in our 10-Q filing, the company determined that the drop in our market cap from Q2, coupled with our performance during the quarter, represented a triggering event and an indication of impairment of goodwill. Based on an analysis, the company recorded a noncash impairment charge to goodwill of $29.7 million, associated with the acquisition of the Fluent operating business in 2015 and the acquisition of AdParlor in 2019. The noncash impairment charge is excluded from our adjusted EBITDA and has no impact on our operations or liquidity. Our Q3 adjusted EBITDA summed to negative $1.7 million, representing a negative 2.6% of revenue. This amounts to a year-over-year decrease of $7.6 million. And was a consequence of the previously noted decline in revenue, coupled with the decreased media margin as a percentage of revenue. For the nine months ended September 30 2023, adjusted EBITDA of $4.3 million represents 1.9% of revenue and a $15.8 million decline from the same period last year. We expect sequential revenue growth in Q4 to drive a return to a positive adjusted EBITDA in Q4 and beyond. But over the next few quarters, we anticipate positive adjusted EBITDA as a percentage of revenue to remain in the low single digits, as we continue to invest into growing our performance marketplace initiatives like Call Solutions, Influencer and AdFlow. The company cannot provide a reconciliation to expected net income or net loss in Q4, due to the unknown effect, timing and potential significance of certain operating costs and expenses share-based compensation expense and the provision for or benefit from income taxes. Interest expense in the third quarter increased over prior year by $419,000 to $936,000 as an effect of the increased interest rates. For the nine months ended September 30, 2023 interest expense increased $1.1 million to $2.4 million also in effect of increased rates. For the quarter, the provision for income taxes was a benefit of $1.2 million. For the year-to-date period, the provision is a $551,000 expense. For the third quarter, we reported net loss of $33.6 million, and an adjusted net loss a non-GAAP measure of $4.1 million equivalent to the loss of $0.05 per share. Year-to-date, our net loss sums to $61.3 million with adjusted net loss of $6.8 million equivalent to a loss of $0.08 per share. Now looking to our balance sheet. We ended the quarter with $20.5 million in cash and cash equivalents a $470,000 decline from June 30, 2023 and a $5 million decline from December 31, 2022. Total debt as reflected on the balance sheet as of September 30, 2023 was $32.5 million, representing an $8.8 million reduction as compared to the balance at December 31, 2022. For the three months ended September 30, 2023, the company was not in compliance with the total leverage ratio as defined in the existing credit agreement with Citizens Bank. As a result the company entered into a temporary waiver with the bank in which the bank agrees to waive the rights arising from the breach through January 15, 2024. Prior to the end of the waiver term, it is management's intention to negotiate a fifth amendment to the credit agreement that modifies certain financial covenants for the five quarters ended December 31, 2024. As the company is not currently in compliance with financial covenants and has not yet amended the credit agreement to revise covenants, the maturity dates under the credit agreement could be accelerated following the waiver period and therefore the Form 10-Q includes a disclosure indicating significant doubt to remain as a going concern for a one-year period following the filing date. The company and Citizens Bank had previously entered into amendments to the credit agreement and management expects to be able to enter into a new amendment that would alleviate the going concern qualification for the upcoming Form 10-K. Working capital as defined as current assets minus current liabilities was $4.1 million at the end of the quarter, a decline from $34.9 million at Q2 quarter end. Due to the required presentation of the entire $32.5 million debt balance as current related to the status of the financial covenant compliance under our credit agreement. In Q3, we invested $1.7 million into capitalized product development and technology as compared to $1.1 million in Q3 of 2022. Year-to-date the company has capitalized $4.1 million in product development and technology versus $3.3 million for the same period last year. As a management team, our focus is on fortifying the core owned and operated performance marketplace while growing the strategic extensions to the marketplace to provide our clients with enhanced growth opportunities. We're confident that our strategy will yield substantial and enduring financial benefits in 2024 and beyond. We appreciate your ongoing support. [Technical Difficulty]

At this time, we will now conduct a question-and-answer session. [Operator Instructions] Our first question will come from the line of Maria Ripps from Canaccord. Your line is open.

Good afternoon, and thanks for taking my question. First, is there any additional color you could share on competitive behavior in the aftermath of your settlement with the FTC? Was it in line with your expectations that some competitors may continue to operate with less compliant traffic standards? And so, when would you expect this sort of competitive dynamics to normalize?

Sorry speakers, can you unmute your line please?

Yes. Can you hear me?

I can hear you Maria. Speakers, can you unmute your line?

Can you hear?

Can you hear?

Okay. I can hear you now. Maria, are you able to hear the speakers?

Maria, can you hear me?

Yes.

Great. Thank you for your question, Maria. Basically, it was what we expected when the settlement came out there was a lot of activity around understanding the new compliance standards that we set forth with the FTC and there was a lot of activity around understanding that -- and understanding where we were clearly laying down the lines of how we're going to run our business. And there was a fair amount of activity of trying to understand that. We have not seen any significant change in behavior in terms of how our competitors are competing against us from a compliance perspective. We have seen a couple that have leveled up their game and have continued to work with us. But for the most part, they've gone into understanding what we're doing, looking at where we're going and then continuing their behavior moving forward. Around your question on timing, we always said it would take probably a couple of quarters. Interestingly, enough we have to do a fair amount of reporting to the FTC going forward, and that includes traffic that we use and also others. So we believe that there's going to be a lot more activity from the FTC. They said as much when they settled with us along with others that this was just the beginning and not the end. So we're looking at sort of the back half of 2024 where we see a level of competitive playing field.

Got it. Thank you, Don. And you reiterated an additional $150 million revenue opportunity from your Influencer, Call Solutions, and AdFlow businesses. Is there any additional color you can share in terms of maybe building blocks to capture that revenue opportunity? And how should investors think about sort of the revenue cadence heading into next year and 2025?

Thanks. Good question Maria. So, we talked about this a little bit on last call. So, around the building blocks, AdFlow, all three of the businesses are past proof-of-concept in our -- in what I'll call the scaling mode. So, that means that we -- our margins are not where they we want them to be yet or where they should be, but they're scaling revenue and growing aggressively. The great news is at scale, these businesses will all have margins that are above the core Fluent's business. So, if we take each one is a slightly different state. AdFlow has been a heavy investment on the technology side where we leverage the core Fluent technology to build out this capability. It is really -- and it is now scaling nicely from a monetization perspective. It has become more of a, what I'll say, a revenue game in terms of how do we get new publishers into the market. And I referenced that we've added a number in Q3 that basically increased our volume by 50% for all of 2024. So, we're winning in that marketplace. We're winning against the competition. We feel great about that piece. That is probably the largest piece of that $150 million over of incremental revenue that we see over the next two years. The Call Solutions business, we mentioned in our earnings script today around the extension of the business into purpose health, which is tied towards the ACA business. We see that as sort of the second biggest piece and a phenomenal opportunity both on -- from a revenue and profit perspective. It is more early days. We launched it in August. We are going through the ACA period right now and we are scaling it. We will be able to -- that's more of a bigger play towards the second half of next year as we prove out all the numbers and prove out our ability to scale that. But that's a more early-stage venture. And on the Influencer business, we talked about how that unlocks phenomenal opportunities in terms of customer -- consumer acquisition for our brands and the impact that influencers now have on purchasing decisions and the ability to drive consumers' purchasing behaviors. We have built the -- what I'll call the first version of our marketplace technology. We are building a second piece of that. And we are targeting right now against how that helps drive our core owned and operated businesses. So, that will be a nice growth opportunity and has been a nice growth opportunity this year. The larger bigger opportunities are where we go directly with brands where we connect the influencers directly to brands to drive consumer acquisition, there's a little bit more technology involved around that and that's sort of again a second half of 2024 opportunity. Regarding your last question around how we see $150 million splits out over the next, we see it sort of equally half in 2024 and half in 2025.

Got it. Thank you so much for the color Don.

Thank you, Maria.

Thank you. And one moment for our next question. And our next question comes from the line of James Goss from Barrington Research. Your line is open.

Thank you. This is Pat on for Jim. I was wondering if you could talk a little bit about what sort of differentiates kind of your core business from the parts that are impacted from the FTC settlement.

Yeah. Pat, thanks for the question. So I'll just -- slightly the FTC settlement really highlights and actually sort of makes our competitive advantage stronger. So it's not so much that it takes away from it Pat. But basically, we have a little under 0.5 million consumers that come on to our digital owned and operated properties every day. We have meaningful experiences with them. We build a long-term relationship with them. And then, we connect them with brands and continue on with the relationship around CRM and LTV opportunity with them. So our ability to bring consumers to our properties to be able to serve them meaningful experiences and understand things that they're interested in that day, provides fantastic first-party data long-term relationships with the consumers and equally important connect them to world-class brands that we work with. All three of the -- and the technology underneath that obviously is what brings the media and the supply to connect them together. In our newer businesses that we're growing Pat, we're leveraging one or all three of those pieces, right? We're taking that technology to go into to go into AdFlow and we're either bringing the brands, the world-class brands so we can cross-sell across those opportunities. Or we're bringing the consumers like we do with call solutions further down the funnel to extend that marketplace. But the distinct competitive advantage we have is our ability to attract consumers on to our properties to have a relationship with them and then connect them in a meaningful way to products and services that improve their lives. That's a phenomenal leverage point for us in terms of foundationally in terms of how we add value for consumers and brands and can grow with the rest of our business.

Okay. And then, can you maybe talk about just what the traditional seasonality is in your -- in the I guess remaining businesses?

Yeah. So we've the core owned and operated businesses had some seasonality into Q4, Pat. And I think you know us well enough to know that the traditional seasonality that we had that usually was around budgets around end of the year numbers or around a retail or on some of the verticals. The businesses that we're growing right now actually makes us a little bit more seasonal than we have in the past. So the call solutions business with being around healthcare and around ACA, obviously, there's open enrollment periods in Q4 that drive that seasonality. And then on the AdFlow business, over time, it will not be as seasonal. But the great brands that we've -- the publishers that we won and brought on have been around the ticketing or been around sports and been around retail, which obviously has sort of which obviously means you have a big Q4 with those sessions. The fact that that business is growing and we're adding new publishers will make it less seasonal as we add new publishers along the year. But historically -- if you look historically, the -- there will be a larger Q4 than we have traditionally had.

Okay. Thank you.

Thanks for that.

Thank you. One moment for our next question. Our next question will come from the line of Bill Dezellem from Tieton Capital Management. Your line is open.

Thank you. Let me start relative to the new large customers that you said that you are onboarding, would you please discuss those in a bit more detail?

Sure. Hi, Bill, this is regarding our core marketplace that we talked about, I believe. Is that right?

Yes.

Yes. So we talked about one of our largest clients pulled back early in Q3 and went more towards return on ad spend around investment. And what we were able to do is bring on -- we brought on significant new brands across primarily three verticals. One is gaming. The second is subscription. The thirds are sort of rewards like products that were able to eventually take up the inventory that they were walking back and bidding up and getting our margins back up. So it probably came over was 10-plus clients that when we measure these things, it -- can they be larger than $1 million a year in revenue, and those clients all sort of hit that number, but they're across those three verticals, Bill.

That's helpful. And Don those 10 customers -- and maybe you can talk in general and then more specific, do they tend to ramp very quickly to that 1 million plus or 2 their ultimate run rate? Or does it tend to be a very measured ramp? And so I guess I'm asking that question in Part A and Part B would be, A, just in general, what's normal? And then B, how are you viewing these 10 specifically?

Yes. Yes. Thanks, Bill. It's a great question. Unlike media where we can scale up and down pretty fast, like in minutes on the client side, it takes a little bit of time when you land a new client, there's usually a sort of -- you're testing the creative, you're testing audiences and how they respond. And then your getting that data and then equally and responding to it and then building on it takes sort of a number of iterations to get it right to where they're ready to scale. So typically, it takes sort of a, what I'll say, a two months to three months time period. If a client is in aggressive growth mode to get them up and get them to where they're scaling, if they are not an aggressive mode, it might take a little bit longer to go after that. The ones that we've -- we have obviously a very strong reputation in gaming and subscription services. So we were able to get clients in based on our reputation and based on the quality of audiences that we have -- it wasn't as hard to get them in, but it took some time to scale, and we're seeing them still scaling as we go into Q4.

Thank you. And then you'd mentioned that you're now seeing some of your existing customers leaning in. Are these the same customers that earlier this year that you were talking about pulling back? And if so, or I guess, either way, what is different about the environment today versus earlier in the year?

Yes, it's a great question. We've been hearing optimism for a long time, Bill from our clients about budgets and about -- specifically around the second half budgets and how they're going to start to move towards -- more towards growth. But as we talked about in other earnings releases, we didn't see that in Q2 and then in the early part of Q3 there's both existing clients and there's also the new clients that are leaning in. And we're just seeing just a general more -- they're still very focused on return on ad spend. And if you notice the client -- those verticals that we're talking about, obviously, are very sophisticated and are able to work with us to give us data to make sure that we're driving the right type of growth in return ads. But we're just seeing a little more towards the growth side and a better balance between the two. We're early -- really this time last year, we saw clients aggressively move towards cutting spend and increasing their return ad spend requirements. So it really has been a general more balancing across that and primarily on verticals that are what I'll say really leverages the Fluent platform better by giving us data past the action and allowing us to help build better audience and higher-quality audiences that mean more to them and are more valuable, which then allows them to lean in also.

Thanks Don. I'm going to follow up on what you just said and really coming at it from the perspective of we're hearing if one picks up a newspaper that economic activity is a question the impact of higher rates slowing the economy, et cetera. And yet you're seeing the opposite, so I guess the -- I want to ask this relative to what you just said about clients giving you more data so you can provide them more valuable leads. Are they leaning in because of that specifically? Or are they leaning in tied to something bigger that maybe is the opposite of what we're reading in the headlines?

Yeah. I would tell you the bigger part of it Bill is that delaying it around the data. But you also, if you look across those areas the gaming and subscription and rewards, they're lower consideration, lower value services and products. So from a macro perspective a lot of the pullback you're hearing and seeing and feeling especially around interest rates are higher cost higher value purchases. So from a consumer perspective, we believe there's still a lot of distress around the economy. But they're basically -- you see the spending level still exist. They've just moved down and our marketplace has been able to accommodate the lower cost, lower value products and services that are important to them at this point.

Thank you. And may I continue with another question or two?

Sure.

Thank you. And so relative to revenues and your guidance Q4 will be up sequentially. That's a seasonal expectation. How are you thinking beyond that? Do we continue to have sequential increases in basically the entire business except for solutions which has that health care enrollment period or -- and then beyond continue to see sequential growth? Or how are you thinking about that right now?

Yes. I can't give you probably the detail that you want Bill, but I can talk at a higher level to sort of color in some things. So we kind of -- let me put it in the core, right? We've owned and operated what we call the core marketplace owned and operated, right? For historical purposes that business ran and was growing double-digits historically for us. Because of the FTC settlement, because of our commitment to quality and the revenue that we took off the table that we've gone into detail with. That business is still strong, but it's obviously not going to grow the way it historically grow. We see it growing single digits. So that's the core owned and operated marketplace is still foundationally critical to our success but it is not the growth engine in and of itself. It's the fuel that's going to really grow the other businesses as we go after. If you look at the call solutions business obviously there's more seasonality to that. So we'll have a somewhat more -- when you look at sequentially you'll see it go down in Q1 and you'll see it also go down in Q2 as it starts to ramp back up. And on the AdFlow businesses and some of the others we obviously feel that we are adding enough publishers and adding enough partners and bringing on the right technology in order for us to continue to sequentially grow that on a quarter-over-quarter basis based on the growth prospects that it has. So we -- from a sequential perspective on Q4 we see we obviously see it up compared to Q3 and we'll see some dip based on the call solutions and the seasonality of those businesses.

Thank you. And then lastly, just so there's maybe a good clarity relative to your note in the 10-Q got that there will be a going concern. Walk us through again kind of you are comfortable that that will be as temporary and will be removed for the 10-K?

Yes. Hi, this is Ryan. So for ASC 205-40, right, given that the maturity dates of the debt can be accelerated within the next 12 months, we're required to disclose a significant doubt to remain as a going concern. That said, we do expect to be able to negotiate an amendment before the end of the waiver term, which would be January 15. And that would alleviate the doubt. Beyond that there's not much – too much more to say that won't already be said in the Q or it wasn't said in the earnings call.

So Ryan this is essentially an accounting requirement as opposed to an indication that you have trouble relations or negotiations with your bank?

Yes. I mean I won't reiterate the first part of that sense but we do have a good relationship with Citizens Bank and we continue to work with them. This is no indication of that.

Great. Thank you both.

Thank you, Bill.

Thank you. And I'm not showing any further questions. I'd like to turn the call back over to Ryan for any further remarks.

I wanted to let our listeners know that we will not be filing our Form 10-Q today, as we continue to finalize our disclosures. We will avail ourselves of the permitted extension by timely filing and notice under SEC Rule 12b-25. I'll turn it to Don. Okay.

Thank you for joining the call today. As a management team, we're very focused on executing the strategic pivot that we outlined today. We're going to fortify our core owned and operated performance marketplaces. And leverage those competitive advantages into exciting new high-growth and high-volume marketplaces and leverage the client partnerships that we already have. We maintained strong confidence that the groundwork that we're laying out now will yield substantial and evolving strategic and financial benefits for our company. And thank you all for joining and for your continued support.