Fluent, Inc. Q3 FY2023 Earnings Call

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 while 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 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 the 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 a 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 expand further on 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 marketplace 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 and 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 are 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 roadmap, 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 on, coupled with immediate term pressure on margin, which limits 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. In the latter 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 a 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 from 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've 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 will continue to leverage Fluent's performance marketplace to respond to these shifts by managing media margin mix. Financial results were as follows. 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 it will play an essential role in fueling our new business unit growth. In concert, we continue to rebuild our performance marketplace in a post-FTC landscape and will 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 was not immediately absorbed by other bidders due to the 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 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 on 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 approximately a 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 the 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 their definitive needs, but also builds stronger strategic relationships 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 a 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 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. Lastly, we also anticipate the traditional seasonality of return in Q4. As I've stated, Fluent is fulfilled by the leadership role we play 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 latter 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 with 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 experienced a reduction of over $80 million in annual revenue. We expect it will take a couple of quarters to return to growth, albeit more modest growth across the entire enterprise. 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 as we see in the near-term financial implications, it is an investment in the future and 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 delights 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 we are playing in, 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 everyone for joining us today. I'll now share additional details on our Q3 earnings, including year-to-date comparisons where relevant. This quarter, Fluent generated $66.2 million in revenue, a decline of 26% from the previous year and a 19% decrease from Q2. Year-to-date, our total revenue is $225.6 million, which is an 18% decrease compared to the same period last year. The decline was primarily attributed to the media and entertainment sector, particularly the gaming industry, due to a pricing pullback from one of our largest clients. As Don noted, this pullback reflects our clients' transition from growth to focusing on the return on ad spend, which echoes similar adjustments we've observed across our client base over the past four quarters. On a positive note, we saw sequential revenue growth in the streaming services sector and from other clients in the gaming sector, which helped mitigate the overall decline. We anticipate a moderate recovery in the gaming sector, along with growth from other new business initiatives that Don mentioned, which should enhance our marketplace and drive sequential revenue growth in Q4. However, we do foresee economic challenges that may affect our clients' consumer acquisition strategies, combined with our efforts to meet current regulatory standards, potentially leading to ongoing growth challenges into mid-2024. Media margin for Q3 was $19.3 million, reflecting a 31% decline year-over-year, which constitutes 29.2% of revenue. Year-to-date, our media margin totals $67.2 million, a 22% decrease from the same timeframe last year, accounting for 29.8% of revenue. These declines are mainly due to the previously mentioned client spending issues, which were not offset by a reduction in media costs. The sequential decline in media margin as a revenue percentage from 31.5% is linked to the market pressure from one of our largest clients. On a GAAP basis, our total operating expenses for Q3 totaled $17.8 million, a reduction of $2 million year-over-year. For the nine months ending September 30, our total operating expenses were $52.5 million, down by $7.9 million from the same period last year. It's important to note that our G&A line in Q3 includes specific litigation and related expenses of $153,000, along with a $1.8 million benefit from insurance reimbursements tied to the FTC settlement. For the nine months ending September 30, G&A also incorporates a net benefit of $6 million from litigation and related expenses. Additionally, the G&A line includes accrued compensation expenses related to the Winopoly and True North acquisitions totaling $517,000 and $1.7 million for the three and nine months ending September 30, respectively. All these costs and benefits fall outside regular business operations and are thus excluded from our adjusted EBITDA calculation. As detailed in our 10-Q filing, the drop in our market cap from Q2, along with our performance during the quarter, signaled an event indicating impairment of goodwill. Following an analysis, the company recognized a noncash impairment charge to goodwill of $29.7 million, related to the acquisition of Fluent and AdParlor. This noncash charge is excluded from our adjusted EBITDA and does not impact our operations or liquidity. Our adjusted EBITDA for Q3 amounted to negative $1.7 million, or negative 2.6% of revenue. This represented a year-over-year decrease of $7.6 million as a result of the revenue decline and the reduced media margin percentage. For the nine months ending September 30, adjusted EBITDA was $4.3 million, or 1.9% of revenue, reflecting a decline of $15.8 million from the same period last year. We expect sequential revenue growth in Q4 to lead to a return to positive adjusted EBITDA in that quarter and beyond. However, in the coming quarters, we foresee positive adjusted EBITDA as a percentage of revenue remaining in the low single digits as we continue to invest in enhancing our performance marketplace initiatives such as Call Solutions, Influencer, and AdFlow. The company cannot provide a reconciliation to expected net income or net loss in Q4 due to the uncertain impact, timing, and potential magnitude of certain operating costs, expenses, share-based compensation, and tax provisions. Interest expense for the third quarter rose by $419,000 to $936,000 due to elevated interest rates. For the nine months ending September 30, interest expense increased by $1.1 million to $2.4 million, again as a result of rising rates. For the quarter, the tax provision was a benefit of $1.2 million, while for the year-to-date period, it amounted to an expense of $551,000. In the third quarter, we reported a net loss of $33.6 million, with an adjusted net loss of $4.1 million, which is equivalent to a loss of $0.05 per share. Year-to-date, our net loss totals $61.3 million, with an adjusted net loss of $6.8 million, amounting to a loss of $0.08 per share. Now turning to our balance sheet, we ended the quarter with $20.5 million in cash and cash equivalents, a decline of $470,000 from June 30, 2023, and down $5 million from December 31, 2022. The total debt as of September 30, 2023, was $32.5 million, reflecting an $8.8 million reduction compared to December 31, 2022. For the three months ending September 30, 2023, the company was not in compliance with the total leverage ratio defined in our credit agreement with Citizens Bank. Consequently, we entered into a temporary waiver agreement through January 15, 2024, where the bank agreed to waive the rights arising from the breach. Management intends to negotiate a fifth amendment to the credit agreement before the waiver period ends that will adjust certain financial covenants through the five quarters ending December 31, 2024. Since we are currently not in compliance with financial covenants and have not amended the credit agreement yet, the maturity dates could be accelerated following the waiver period. Thus, the Form 10-Q contains a disclosure highlighting significant doubt regarding our ability to continue as a going concern for the one-year period following the filing date. The company and Citizens Bank had previously made amendments to the credit agreement, and management is optimistic about entering into a new amendment that would mitigate the going concern qualification for the upcoming Form 10-K. Working capital, defined as current assets minus current liabilities, was $4.1 million at the end of the quarter, down from $34.9 million at the end of Q2 due to the necessity of presenting the full $32.5 million debt balance as current because of the compliance status under our credit agreement. In Q3, we invested $1.7 million into capitalized product development and technology, 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 strengthening the core performance marketplace while expanding strategic extensions to offer our clients better growth opportunities. We are confident that our strategy will result in significant and lasting financial benefits in 2024 and beyond. We appreciate your ongoing support.

At this time, we will now conduct a question-and-answer session. Our first question will come from 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?

Thank you for your question, Maria. It was essentially what we anticipated. When the settlement was announced, there was considerable activity focused on understanding the new compliance standards we established with the FTC. This included clarifying how we plan to conduct our business. While we've observed some competitors improve their compliance efforts and collaborate with us, there hasn't been a significant change in competitive behavior from a compliance standpoint. Most competitors are simply trying to understand our approach and adjust their strategies accordingly. Regarding timing, we've always indicated that it would likely take a couple of quarters. Notably, we will need to provide extensive reporting to the FTC moving forward, including traffic metrics. We anticipate increased activity from the FTC, as they indicated that this is just the beginning. We expect to see a more level competitive landscape by the second half of 2024.

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, Maria, for the question. We mentioned this briefly in our last call. All three of our businesses—AdFlow, Call Solutions, and Influencer—are beyond proof-of-concept and are now in scaling mode. This means our margins aren’t where we want them to be yet, but we are aggressively growing revenue. The good news is that once fully scaled, these businesses will achieve margins higher than Fluent's core business. Starting with AdFlow, we have made significant investments in technology, utilizing Fluent's core tech to develop this capability. It is now scaling well in terms of monetization. Our focus has shifted to acquiring new publishers, and we added several in Q3, which will increase our volume by 50% for all of 2024. We're performing well against our competitors in this marketplace and are optimistic about this segment, which is likely to contribute significantly to the projected $150 million in incremental revenue over the next two years. Regarding the Call Solutions business, we discussed today its expansion into health, associated with the ACA. We see this as a major opportunity for both revenue and profit, although it's still in the early stages since we launched it in August. We're currently going through the ACA period and scaling this initiative, with a greater focus expected in the latter half of next year as we validate our numbers and scaling capabilities. For the Influencer business, we see exceptional potential for consumer acquisition for our brands. We have developed the initial version of our marketplace technology and are working on a second component, focusing on enhancing our core owned and operated businesses. There are promising growth opportunities here, and it has been a strong growth area this year. The larger opportunities involve directly connecting influencers with brands to drive consumer acquisition, which will involve more technology and is anticipated to become a significant opportunity in the second half of 2024. In response to your last question about the $150 million revenue opportunity, we expect it to be distributed fairly evenly, with half in 2024 and half in 2025.

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

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 your core business from the parts that are impacted by the FTC settlement.

Thank you for the question, Pat. The FTC settlement actually underscores and strengthens our competitive advantage. It doesn't detract from it. We attract nearly half a million consumers to our digital properties each day, where we create significant experiences and establish long-term relationships. We connect these consumers with brands and continue our relationship through customer relationship management and lifetime value opportunities. Our ability to engage consumers on our platforms and provide them with meaningful experiences allows us to collect valuable first-party data and foster lasting connections with consumers while linking them to top-tier brands we partner with. The technology that supports this integration of media and supply plays a crucial role. In our emerging businesses, we’re utilizing that technology in various ways. We're either bringing in these world-class brands for cross-selling opportunities or connecting consumers, as seen with Call Solutions, to enhance our marketplace. Our unique competitive edge lies in our capability to attract consumers to our properties, nurture relationships with them, and meaningfully connect them to products and services that enrich their lives. This presents a substantial opportunity for us in terms of how we deliver value to both consumers and brands as we expand our business.

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

We've seen some seasonality in our core owned and operated businesses in Q4. Traditionally, we experience seasonality related to budgets, year-end figures, retail, and certain verticals. However, the businesses we are currently expanding tend to be a bit more seasonal than in the past. For instance, our Call Solutions business, which focuses on healthcare and the ACA, is influenced by open enrollment periods in Q4 that contribute to this seasonality. While the AdFlow business may not remain as seasonal over time, the quality publishers we have onboarded are primarily linked to ticketing, sports, and retail, which naturally leads to a stronger Q4 due to increased sessions. As we continue to grow and add new publishers throughout the year, this will help reduce the seasonality of that business. Nonetheless, historically, Q4 has always been stronger than we typically experience.

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. We discussed that one of our largest clients reduced their engagement early in Q3, focusing more on return on ad spend. In response, we successfully onboarded several significant new brands across three main areas: gaming, subscriptions, and rewards-like products. These new clients helped fill the gap left by the previous client, allowing us to increase bids and improve our margins. In total, we brought on over ten clients, each generating more than $1 million a year in revenue, all across those three categories.

That's helpful. Don, could you share whether the 10 customers tend to reach a revenue run rate of over $1 million quickly, or if the ramp-up is typically more gradual? I'm interested in two parts: first, what's the general trend, and second, how do you see these 10 customers specifically?

Thank you, Bill. That's a great question. Unlike media, where we can quickly adjust on the client side, onboarding a new client takes more time. There's typically a phase where we test the creative, audiences, and their responses. Gathering and analyzing that data, along with refining our approach, requires several iterations to reach a point where they are ready to scale. Generally, this process takes about two to three months for a client in aggressive growth mode. If a client is not in such a mode, it could take longer. We have a solid reputation in gaming and subscription services, which allows us to attract clients more easily based on our audience quality; however, scaling still takes time, and we are observing continued growth as we move 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, that's a great question. We've been hearing a lot of optimism from our clients about budgets, particularly regarding the second half of the year and their movement towards growth. However, as we discussed in previous earnings releases, we didn't see that in Q2. In the early part of Q3, we noticed that both existing and new clients were becoming more engaged. Generally, there’s a heightened focus on return on ad spend. The clients in the sectors we're discussing are quite sophisticated and provide us with the necessary data to drive the right type of growth in ad returns. We're beginning to see a shift towards growth and a better balance. Last year at this time, clients were aggressively cutting spending and raising their return ad spend requirements. Now, there’s a more balanced approach, especially among the verticals that effectively utilize the Fluent platform by providing data beyond just actions. This helps us build more meaningful, higher-quality audiences that add value, encouraging clients to engage further.

Thanks Don. I'm going to follow up on what you just said and approach it from the perspective that we're hearing in the news about economic activity being questioned due to higher rates slowing the economy. Yet, we are witnessing the opposite. I want to ask about clients providing you with more data so you can offer them more valuable leads. Are they engaging with you because of that specifically, or is their engagement connected to something larger that might contradict what we're reading in the headlines?

I would say the main issue is the delay related to the data. When looking at areas like gaming, subscriptions, and rewards, they tend to be services and products that are lower in consideration and value. From a broader perspective, much of the slowdown you’re observing and feeling, particularly in relation to interest rates, is impacting higher cost and higher value purchases. We believe there is still significant economic stress from the consumer's viewpoint. However, spending levels remain; consumers have simply shifted their focus, and our marketplace has adapted to offer lower cost, lower value products and services that meet their current needs.

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

Sure.

Thank you. Regarding revenues, your guidance indicates that Q4 will show a sequential increase, which aligns with seasonal patterns. How are you viewing the situation beyond that? Should we expect ongoing sequential growth across most of the business, apart from solutions due to the healthcare enrollment period, or do you have a different perspective on this?

I can't provide the detailed information you are looking for, but I can offer a broader perspective. The core marketplace that we own and operate has historically seen double-digit growth. However, due to the FTC settlement and our focus on quality, which affected our revenue, that business remains strong but is no longer expected to grow at the same rate. We anticipate single-digit growth moving forward. While the core marketplace is vital for our overall success, it alone is not the main driver of growth; rather, it supports the other areas we are focusing on. In terms of the Call Solutions business, it experiences more seasonality, so we'll see a decline in Q1 and Q2 before it ramps back up. For our AdFlow businesses, we are confident that we are bringing in sufficient publishers, partners, and technology to support ongoing quarter-over-quarter growth based on its potential. Therefore, we expect growth in Q4 compared to Q3, though there may be a dip due to the seasonal nature of the Call Solutions business.

Thank you. And then lastly, just so there's maybe a good clarity relative to your note in the 10-Q 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 a notice under SEC Rule 12b-25. I'll turn it to Don.

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 maintain 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.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.