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What changed in Fluent, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Fluent, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+490 added−614 removedSource: 10-K (2024-04-02) vs 10-K (2023-03-15)

Top changes in Fluent, Inc.'s 2023 10-K

490 paragraphs added · 614 removed · 317 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

58 edited+22 added−21 removed9 unchanged
Biggest changeAs a result, we believe many companies who offer products and services to consumers do not have ready access to accurate consumer data or timely alerts through which they could programmatically target their advertising, nor do they have the ability to resolve data sets and thereby confirm consumer identities or enrich data profiles. 1 Table of Contents Our Offerings and Solutions to Clients We primarily provide performance marketing solutions to our clients based on their desired outcomes, or specific actions in their marketing funnels, including the submission of a registration form, an app installation, or a completed transaction.
Biggest changeOur Offerings and Solutions to Clients We primarily provide performance marketing solutions to our clients based on their desired outcomes, or specific actions in their marketing funnels, including the submission of a registration form, an app installation, or a completed transaction. Our owned and operated media properties include Flash Rewards, The Smart Wallet, and Careers & Jobs, among others.
We bear the cost and risk of paying various media sources to generate consumer traffic to our digital media properties or to media properties owned or operated by our clients, without the assurance of a subsequent revenue-generating event from such activity.
We bear the cost and risk of paying various media sources to generate consumer traffic to our owned and operated digital media properties or to media properties operated by our clients, without the assurance of a subsequent revenue-generating event from such activity.
This data is also stored and analyzed and can be further enhanced as consumers return to our sites and declare and exhibit additional preferences and behaviors through additional surveying, allowing for the development of deeper insights and additional monetization opportunities. Our Growth Strategy We believe that the performance marketing industry has significant opportunities for growth.
This data is also stored and analyzed and can be further enhanced as consumers return to our sites and declare and exhibit preferences and behaviors through additional surveying, allowing for the development of deeper insights and additional monetization opportunities. Our Growth Strategy We believe that the performance marketing industry has significant opportunities for growth.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our Investor Relations website at http://investors.fluentco.com/ as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our Investor Relations website at investors.fluentco.com/ as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
By presenting consumers with a broad array of offers particularly curated to their preferences, as informed by their responses to our surveys and our platform’s ad serving logic, we seek to facilitate transactions that are beneficial for the advertiser, the consumer and us.
By presenting consumers with a broad array of offers curated to their preferences, as informed by their responses to our surveys and our platform’s ad serving logic, we seek to facilitate transactions that are beneficial for the advertiser, the consumer and us.
Our periodic reports are filed or furnished electronically with the SEC under SEC File Number 001-37893, and can be accessed at the SEC’s website at www.sec.gov, and specifically at https://www.sec.gov/edgar/browse/?CIK=1460329. 5 Table of Contents
Our periodic reports are filed or furnished electronically with the SEC under SEC File Number 001-37893 and can be accessed at the SEC’s website at www.sec.gov, and specifically at www.sec.gov/edgar/browse/?CIK=1460329. 5 Table of Contents
To further increase our value proposition to clients and to fortify our leadership position in relation to the evolving regulatory landscape of our industry, we implemented a Traffic Quality Initiative ("TQI") in 2020 to remove lower quality customer traffic, including traffic that did not consistently meet regulatory standards from our platform.
To further increase our value proposition to clients and to fortify our leadership position in relation to the evolving regulatory landscape of our industry, we implemented a Traffic Quality Initiative ("TQI") in 2020 to remove lower quality customer traffic, including traffic that did not consistently meet regulatory standards from our marketplaces.
Legal Proceedings for further discussion of the impacts of these proceedings and various laws, rules, and regulations on our business. 4 Table of Contents Human Capital Fluent is dedicated to certain core principles and values which include continuous learning, pace, collaboration, and high-performance.
Legal Proceedings for further discussion of the impacts of these proceedings and various laws, rules, and regulations on our business. 4 Table of Contents Human Capital Fluent is dedicated to certain core principles and values which include continuous learning, efficiency, collaboration, and high performance.
We believe our first-party data is more reliable and reflective of consumers' current interests and preferences. • Programmatic Data Offerings Since 2018, we have been offering data sets pertaining to certain audience segments from our database in programmatic environments, thereby enabling advertisers, such as those in the healthcare industry, to leverage such data in an anonymized, privacy-minded manner to target high-intent prospects for their offerings.
We believe our first-party data is more reliable and reflective of consumers' current interests and preferences. • Programmatic Data Offerings Since 2018, we have been offering modeled data sets pertaining to certain audience segments in programmatic environments, thereby enabling advertisers, such as those in the healthcare industry, to leverage the modeled data in an anonymized, privacy-minded manner to target high-intent prospects for their offerings.
The website address provided in this 2022 Form 10-K is not intended to function as a hyperlink and information obtained on the website is not and should not be considered part of this 2022 Form 10-K and is not incorporated by reference in this 2022 Form 10-K or any filing with SEC.
The website address provided in this 2023 Form 10-K is not intended to function as a hyperlink and information obtained on the website is not and should not be considered part of this 2023 Form 10-K and is not incorporated by reference in this 2023 Form 10-K or any filing with SEC.
We own and operate consumer facing websites in the United Kingdom, Canada, and Australia and are subject to the laws, rules, and regulations of those countries as they impact our operations.
Outside of the United States, we own and operate consumer facing websites in the United Kingdom, Canada, and Australia and are subject to the laws, rules, and regulations of those countries as they impact our operations.
Our Intellectual Property We rely on trade secret, trademark and copyright law, confidentiality agreements, and technical measures to protect our intellectual property rights. With respect to our trademarks, we maintain a portfolio of perpetual common law and federally registered trademark rights across several brands and domains relating to our business units, products, services, and solutions.
Our Intellectual Property We rely on trade secret, trademark and copyright law, confidentiality agreements, and technical measures to protect our intellectual property rights. We maintain a portfolio of perpetual common law and federally registered trademark rights across several brands and domains relating to our business units, products, services, and solutions.
Item 1. Business. This business description should be read in conjunction with our audited consolidated financial statements and accompanying notes thereto appearing elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), which are incorporated herein by this reference. Company Overview Fluent, Inc.
Item 1. Business. This business description should be read in conjunction with our audited consolidated financial statements and accompanying notes thereto appearing elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K"), which are incorporated herein by this reference. Company Overview Fluent, Inc.
This capability allows us to run thousands of campaigns simultaneously and cost-effectively for our clients, at acceptable media costs and margins to us. • Proprietary and Innovative Technology Platform - We believe our internally developed technology platform is unique in the industry, having been purpose-built for performance marketing and developed with a mobile-first user experience in mind.
This capability allows us to run thousands of campaigns simultaneously and cost-effectively for our clients, at acceptable media costs and margins to us. • Proprietary and Innovative Technology Platform - Our internally developed technology platforms are unique in the industry, having been purpose-built for performance marketing and developed with a mobile-first user experience in mind.
Elements of our strategy include: • Increasing Traffic Quality to Our Owned Digital Media Properties. As our business has grown, we have attracted larger and more sophisticated clients to our platform.
Elements of our strategy include: • Increasing H igh Quality Traffic to Our Owned and Operated Digital Media Properties. As our business has grown, we have attracted larger and more sophisticated clients to our platform.
By leveraging our scale and expertise in acquiring consumer traffic, we work with our clients to define billable events and pricing tolerances that meet both our and our clients' profitability objectives, the latter of which may be difficult for them to achieve themselves economically, if at all. • Consumer Data We also generate revenues by providing clients with qualifying customer data of consumers, who have opted to be marketed to, directly through means such as direct mail, email, telephone, messaging, and other channels.
By leveraging our scale and expertise in acquiring consumer traffic, we work with our clients to define billable events and pricing tolerances that meet both our and our clients' profitability objectives, the latter of which may be difficult for them to achieve themselves economically, if at all. • Consumer Data We also generate revenue by providing clients with qualifying data of consumers who have opted to be marketed to directly, on our owned and operated media properties, through means such as direct mail, email, telephone, messaging, and other channels.
We differentiate ourselves from other marketing alternatives by our abilities to provide clients with a cost-effective and measurable return on advertising spend ("ROAS") (a measure of profitability of sales compared to the money spent on ads), to manage highly targeted and highly fragmented online media sources and to provide access to our owned digital media properties and technology platforms.
We differentiate ourselves from other marketing alternatives by our abilities to provide clients with a cost-effective and measurable return on advertising spend ("ROAS"), a measure of profitability of sales compared to the money spent on ads, and to manage highly targeted and highly fragmented online media sources.
Some of our competitors have substantially greater financial, technical, sales and marketing resources, better name recognition and a larger customer base. 3 Table of Contents Concentration We have an extensive list of clients across a wide range of industries. For the year ended December 31, 2022, a single long-standing advertiser client of the Company accounted for 22.1% of consolidated revenue.
Some of our competitors have substantially greater financial, technical, sales and marketing resources, better name recognition and a larger customer base. Concentration We have an extensive list of clients across a wide range of industries. For the year ended December 31, 2023, a single long-standing advertiser client of the Company accounted for 18.1% of consolidated revenue.
In addition, by using the data consumers provide about themselves when registering on our sites, our advertiser clients are able to reach the precise audiences they are targeting through the modes of contact these consumers, who have opted to be marketed to, prefer and at the times they are most receptive to being contacted. • Performance Campaigns For clients who seek the completion of certain actions by consumers, such as the submission of a registration form, the installation of a mobile app, or a trial subscription of a good or service, we provide performance campaigns that meet the criteria specified by the client.
By using the data consumers provide when they register on our sites, our advertiser clients are able to reach the precise audiences they are targeting through the modes of contact these consumers prefer and at the times they are most receptive to being contacted. • Performance Campaigns For clients who seek the completion of certain actions by consumers, such as the submission of a registration form, the installation of a mobile app, or a trial subscription of a good or service, we provide performance campaigns that meet the criteria specified by the client.
As we continue to improve consumer engagement on our platform, we expect to strengthen our relationships with existing advertisers and build new relationships with potential advertisers.
As we continue to improve consumer engagement on our platform, we will continue to strengthen our relationships with existing advertisers and build relationships with new advertisers.
As a performance-based organization, Fluent offers generous and competitive salaries and bonus/commission plans to both attract and retain our employees. We match up to 4% of employees’ contributions in their 401(k) to help our employees plan for their futures. We reward positive performance and celebrate our employees for their persistent drive to succeed.
Investing in our People As a performance-based organization, Fluent offers generous and competitive salaries and bonus/commission plans to both attract, reward, and retain our employees. We match up to 4% of employees’ contributions in their 401(k) to help our employees plan for their futures.
Since our inception, we have deployed approximately $2 billion in media spend. Our team has gained knowledge and experience that we believe allows us to generate higher levels of profitability from given media sources, thereby enabling us to acquire media more competitively than others.
Since our inception, we have deployed more than $2 billion in media spend to our owned and operated media properties and those of our clients. Our team has gained knowledge and experience in creating content that we believe allows us to generate higher levels of profitability from given media sources, thereby enabling us to acquire media more competitively than others.
We service established clients through our in-house account directors and managers, who seek to optimize results for and expand our business with these clients. Our Competition Our traditional competitors have been digital marketing and database marketing services providers, online and traditional media companies, and advertising agencies. We believe the competitive landscape is changing and becoming more complex.
We service established clients through our in-house account directors and managers, who seek to optimize results for and expand our business with these clients. Our Competition Our traditional competitors have been digital marketing and database marketing services providers, online and traditional media companies, and advertising agencies.
We believe the scale and depth of first-party, self-declared information captured on our websites and reflected in our data profiles is a competitive advantage within the industry. Many other providers of consumer data offer data or information that is inferred from a consumer’s behavior but not directly observed or otherwise provided by a consumer.
Because consumers directly provide us with their information, we believe the scale and depth of information captured on our websites and reflected in our data profiles is a competitive advantage within the industry. Many other providers of consumer data offer data or information that is inferred from a consumer’s behavior but not directly observed or otherwise provided by a consumer.
Additionally, over the past few years we have worked to support internal mobility for those who have excelled in their roles and are looking to gain new experience in other areas of the business that align with their individual career goals.
Additionally, over the past few years, we have worked to support internal mobility for those who have excelled in their roles and are looking to gain new experience in other areas of the business that align with their individual career goals. We reward positive performance and celebrate our employees for their persistent drive to succeed.
We attract consumers at scale to our owned digital media properties primarily through promotional offerings where they are rewarded for completing activities within the platforms . To register on our sites, consumers provide their names, contact information and opt-in permission to present them with relevant offers on behalf of our clien ts.
We attract consumers at scale to our owned and operated digital media propert ies primarily through promotional offerings where they are rew arded for completing activities within our platforms . When registering on our sites, consumers provide their names, contact information, and opt-in permission to present them with relevant offers on behalf of our clien ts.
Although still representing a small percentage of our overall revenue, we believe it represents a strategically significant and incremental revenue stream for our existing database. • Social Media Campaigns Through AdParlor Holdings, Inc. we offer clients a sophisticated suite of social media strategy, planning and buying, along with highly tailored creative services. • Call Center Solutions Through our Fluent Sales Solutions ("FSS") service, we maintain a contact center operation which serves as a marketplace to match consumers, we have sourced, to the needs of our advertising clients.
Although representing a small percentage of our overall revenue, we believe it represents a strategically significant and incremental revenue stream. 2 Table of Contents • Social Media Campaigns Through AdParlor, we offer clients a sophisticated suite of social media strategy, planning and buying, along with highly tailored creative services. • Call Solutions Marketplace Through our Call Solutions service, we maintain a contact center operation, which serves as a marketplace to connect consumers we have sourced with our advertising clients.
Our clients then use this customer data to conduct their own marketing campaigns. The data records we provide contain varying depths of user profiles, ranging from basic contact information to in-depth self-declared preferences and behaviors.
Our clients then use this customer data to conduct their own marketing campaigns. The data records we provide contain varying depths of user profiles depending on what consumers self-declare to us, ranging from basic contact information to detailed preferences and behaviors.
We believe our data and our ad serving and customer acquisition technologies enable our clients to better target, engage, qualify, and communicate with relevant consumers, in a more profitable manner than our competitors.
We believe the competitive landscape is changing and becoming more complex, but we believe our data and our ad serving and customer acquisition technologies enable our clients to better target, engage, qualify, and communicate with relevant consumers, in a more measurable and profitable manner than our competitors.
We are predominantly paid on a negotiated or market-driven “per click,” “per lead,” or other “per action” basis that aligns with the customer acquisition cost targets of our clients. We bear the costs of sourcing traffic from publishers for our owned digital media properties that ultimately generate qualified clicks, leads, calls, app downloads or customers for our clients.
We are predominantly paid on a negotiated or market-driven "per click," "per lead," or other "per action" basis that aligns with the customer acquisition cost targets of our clients. We bear the costs of acquiring traffic from publishers for our performance marketplaces that ultimately generate qualified clicks, leads, calls, app downloads, or customers for our clients.
We also prioritize the health and well-being of our people, who we want to be their best and authentic selves both personally and professionally. We offer multiple health insurance plans to choose from, on-demand wellness sessions, and mental health resources like virtual and in-person therapy, coaching, mental wellness screenings, and self-help exercises.
We also prioritize the health and well-being of our people, offering multiple health insurance plans to choose from, on-demand wellness sessions, and mental health resources like virtual and in-person therapy, coaching, mental wellness screenings, and self-help exercises.
We may also leverage our existing database into new revenue streams, including utilization-based models, such as programmatic advertising and call centers. We generate revenue by delivering measurable online marketing results to our clients.
We may also leverage our existing technology and database to drive new revenue streams, including utilization-based models ( e.g., programmatic advertising). We generate revenue by delivering measurable marketing results to our clients.
Our goal is to create a flexible work environment that fuels creativity and results. Diversity, Equity, & Inclusion (DEI) We are constantly striving to make Fluent a more inclusive and compassionate place to work. We make a concerted effort to post roles and source top candidates to present a diverse candidate slate for our hiring teams.
Diversity, Equity, & Inclusion ("DEI") We are constantly striving to make Fluent a more inclusive and compassionate place to work. We make a concerted effort to post roles and source top candidates to present a diverse candidate slate for our hiring teams, and our dedicated DEI team is designed to create opportunities for connection, education, and service.
(“we,” “us,” “our,” “Fluent,” or the “Company”), a Delaware corporation, is an industry leader in data-driven digital marketing services. We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach.
("we," "us," "our," "Fluent," or the "Company") is an industry leader in digital marketing services. We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach.
For the year ended December 31, 2021, this same client accounted for 11.7% of the Company's consolidated revenue.
For the year ended December 31, 2022, this same client accounted for 22.1% of the Company's consolidated revenue.
We leverage this data in our performance offerings primarily to serve advertisements that we believe will be relevant to users based on the information they provide when they engage with our sites, and in our data offerings to provide our clients with users' contact information so that our clients may communicate with them directly.
We then leverage their self-declared data in our performance offerings primarily in two ways: (1) to serve advertisements that we believe will be relevant to users based on the information they provide when they engage on our sites or other partner sites through our syndicated performance marketplaces and (2) to provide our clients with users' contact information so that such clients may communicate with them directly.
We have been the recipients of many awards for our corporate culture including regularly being on Crains ’ s Best Places to Work for in recent years. As of December 31, 2022 , we had 275 employees, of which 272 were full-time employees. This represents an increase of 3.8% over the number of employees as of December 31, 2021.
We are proud to have been the recipients of many awards for our corporate culture including regularly being listed on Crain ’ s Best Places to Work . As of December 31, 2023, we had 277 employees, of which 274 were full-time employees. This represents an increase of 0.7% over the number of employees as of December 31, 2022.
Examples of some areas on which our product development team is currently focused include designing new consumer-facing creative concepts, enhancing site experiences, developing mobile app products to expand our media footprint beyond our mobile web presence, and improving the reputation of our domains. • Post-Transaction Ad Solutions.
Examples of some areas where our product development team is currently focused include designing new consumer-facing creative concepts, enhancing site experiences, developing mobile app products to expand our media footprint beyond our mobile web presence, and improving the reputation of our domains. 3 Table of Contents Sales and Marketing We generate new client sales primarily through our in-house sales team.
Available Information Fluent’s principal executive offices are located at 300 Vesey Street, 9th Floor, New York, New York 10282, and our telephone number is (646) 669-7272. Our internet website is www.fluentco.com .
We are proud to foster a learning and coaching culture to support the development and growth for all of our employees. Available Information Fluent’s principal executive offices are located at 300 Vesey Street, 9th Floor, New York, New York 10282, and our telephone number is (646) 669-7272. Our internet website is www.fluentco.com.
Our platform deploys proprietary machine-learning capabilities to build upon our experience with various promotional offers, consumer segments and advertisers, through which we continuously optimize our digital marketing campaigns. • Database of First-Party Consumer Information - We attract consumers to our owned media properties on a daily basis and collect demographic, behavioral and other data as they engage with our direct marketing experiences.
Our platforms use our robust consumer data and proprietary machine-learning capabilities to optimize the performance of our digital marketing campaigns for our advertisers. • Database of First-Party Consumer Information - We attract hundreds of thousands of consumers to our owned and operated media properties on a daily basis and collect demographic, behavioral and other data as they engage with our direct marketing experiences.
Through this capability, we provide a positive and high-quality consumer experience enabling us to capture greater value from the leads we initially source. 2 Table of Contents Our Competitive Strengths We believe our competitive strengths will continue to enable us to provide a compelling value proposition to our clients and drive differentiation of our offerings in the marketplace. • Scale and Experience in Purchasing Media - Our ability to effectively access, at scale, channels and sources of media that supply consumer traffic to our media properties and those of our clients has been critical to our growth.
Our Competitive Strengths We believe our competitive strengths will continue to enable us to provide a compelling value proposition to our clients and drive differentiation of our offerings in the marketplace. • Scale and Experience in Purchasing Media and Creating Content - Our ability to effectively access, at scale, channels and sources of media that supply consumer traffic and build meaningful experiences and relationships with those consumers has been critical to our growth.
We encourage curiosity and provide our people with the tools and resources to learn and grow. From internal Fluent University courses, company-wide Diversity, Equity, and Inclusion (DEI) workshops, and corporate She Runs It memberships, we offer continuous opportunities for personal and professional development. In 2022 through these courses, we created approximately 1,800 hours of learning for our employees.
From internal Fluent University courses to company-wide workshops and memberships to corporate networking organizations, such as She Runs It, we offer continuous opportunities for personal and professional development. In 2023 through these courses, we created approximately 1,000 hours of learning for our employees.
Once users have registered on our sites, we integrate our proprietary direct marketing technologies and analytics to engage them with surveys, polls, and other experiences, through which we learn about their lifestyles, preferences and purchasing histories. Based on these insights, we serve targeted, relevant offers to them on behalf of our clients.
Approximately 90% of these users engage with our media on their mobile devices or tablets. Once users have registered on our sites, we integrate our proprietary direct marketing technologies to engage them with surveys, polls, and other experiences, through which we gather information about their lifestyles, preferences, and purchasing histories, among other matters.
We believe that influencers will represent an increasing share of our paid media and by operating our own influencer network, we will be better able to ensure compliant operations, effectively manage our media spend by eliminating middlemen, and afford our clients access to our stable of influencers. • Increasing Monetization of Our Traffic.
By operating our own influencer marketing platform, we can ensure compliant operations, effectively manage our media spend by eliminating middlemen, and offer our clients direct access to our network of influencers. • Increasing Monetization of Our Traffic.
Our owned and operated media properties include Flash Rewards, The Smart Wallet, and Find Dream Jobs, among others. We believe our solutions are well-aligned with the needs and objectives of our clients, notably, due to our ability to provide them with measurability, scalability, and flexibility.
We believe our solutions are well-aligned with the needs and objectives of our clients, notably, due to our ability to provide them with measurability of return on ad spend ("ROAS"), scalability, and flexibility within our owned and operated properties and beyond.
Investing in our People Competition in the recruitment of top talent within our industry remains constant and our future success will depend in part on our continued ability to hire, motivate, and retain exceptional colleagues across the business inclusive of sales and marketing, executive, administrative, creative, and technical colleagues.
Competition in the recruitment of top talent within our industry remains constant and our future success will depend in part on our continued ability to hire, motivate, and retain exceptional colleagues across the business. As the business evolves, we continue to source talent to complement the existing team with different strengths, experience, and ideas.
We have created a more sustainable foundation for our business by improving the quality of customer traffic we sourced to our media properties, with through increased user participation rates on our sites, leading to higher conversion rates and more 'name brand' advertiser clients, resulting in increased monetization and ultimately increasing revenue.
By improving the quality of consumer traffic sourced to our media properties, we have increased user participation and conversion rates, ultimately, increased revenue from more "name brand" advertiser clients and created a more sustainable foundation for our business. In an effort to source more high quality traffic, we have also built out an influencer marketing platform.
We deliver data and performance-based marketing executions to our clients, which in 2022 included over 500 consumer brands, direct marketers and agencies across a wide range of industries, including Media & Entertainment, Financial Produc ts & Services, Health & Wellness, Retail & Consumer and Staffing & Recruitment.
In 2023 we delivered data and performance-based customer acquisition services for over 500 consumer brands, direct marketers, and agencies across a wide range of industries, inclu ding Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.
In addition, the application and interpretation of these laws, rules, and regulations are often uncertain, particularly in the rapidly evolving industry in which we operate.
In addition, the application and interpretation of these laws, rules, and regulations are often uncertain, particularly in the rapidly evolving industry in which we operate. We were involved in investigations with federal and state regulators over our practices including the Federal Trade Commission ("FTC") and the Pennsylvania Office of the Attorney General ("PAAG").
We continuously enhance our product offerings for consumers and targeting capabilities for advertisers to ensure we are optimizing the value of our traffic. • Developing and Enhancing Products that Increase the Quality of Our Offering to Consumers, Advertisers and Partners. Our product development efforts are intended to appeal to consumers, drive traffic, increase monetization and increase affiliate and partner opportunities.
Adflow has been operating for the majority of 2023, with growth during the second half. • Developing and Enhancing Products to Increase the Quality of Our Offerings. Our product development efforts are intended to attract consumers, drive traffic, increase monetization and increase affiliate and partner opportunities.
As new users register and engage with our sites and existing registrants re-engage, we believe the enrichment of our database expands our addressable client base and improves the effectiveness of our performance-based campaigns. Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences.
Based on these insights, we serve targeted, relevant offers to them on behalf of our clients. As new users register and engage on our sites and existing registrants re-engage, the enrichment of our database expands our addressable client base and improves the effectiveness of our performance-based campaigns.
Through AdParlor Holdings, Inc. (“AdParlor”), we conduct our non-core business which offers clients various social media strategies through the planning and buying of media on different platforms. Market Opportunity According to eMarketer, aggregate spending on digital media exceeded the aggregate spending on offline media in the U.S. for the first time in 2019.
Through AdParlor, LLC ("AdParlor"), we conduct our non-core business which offers clients various social media strategies through the planning and buying of media on different platforms. Market Opportunity According to the Dentsu 2024 Forecast, global advertising spend is projected to reach $752 billion, defining the Total Addressable Market ("TAM") for companies operating in this space.
These investigations and claims have been and will likely continue to be expensive to defend, will divert management’s time away from our operations and may result in changes to our business practices that adversely affect our results of operations. See Item 1A. Risk Factors - Risks Relating to Legal and Regulatory Matters and Item 3.
These investigations and claims have all been settled as of December 31, 2023. As part of the FTC settlement, we have made additional changes to our business practices that adversely affected our results of operations for the year ended December 31, 2023. See Item 1A. Risk Factors - Risks Relating to Legal and Regulatory Matters and Item 3.
Through FSS, we offer clients a high-value source of live call transfers and phone verified prospective customers for their businesses.
We offer clients a high-value source of live call transfers of phone verified prospective customers for their businesses or in some cases direct sales transactions. Through this capability, we provide a positive and high-quality consumer experience enabling us to capture greater value from the leads we initially source.
Leveraging our acquisition of True North Loyalty, LLC (“True North”), we have developed and launched an e-commerce post purchase ad serving solution to access a new pool of users for our advertiser clients. We deploy an “ad module” on the e-commerce website that offers a series of curated offers to users after check-out.
Adflow, our post-sale e-commerce solution to access a new pool of users for our advertiser clients. We deploy an "ad module" primarily on the transaction confirmation page of the e-commerce website that offers a series of curated offers to users after check-out. We compensate our e-commerce partners by either sharing revenue proceeds or by remunerating them on an impression basis.
According to the 2023 Influencer Marketing Benchmark Report, influencer marketing is estimated to grow to approximately $21.1 billion in 2023 and is expected to account for an increasing share of the marketing spend of a majority of companies.
This platform allows us to diversify our current media buys on social media platforms and capture available scale in the influencer market. According to Aspire's 2024 State of Influencer Marketing report, influencer marketing is estimated to grow to approximately $24 billion in 2024 and is expected to account for an increasing share of most companies' marketing spend.
We also launched LinkedIn Learning in 2022 to provide colleagues with real time access to top content to help them develop areas of focus to fuel their growth. To ensure our people take time to recharge, we offer discretionary time off, that provides vacation days throughout the year in addition to our 13 paid company holidays.
To ensure our people take time to recharge, we offer discretionary time off that provides vacation days throughout the year in addition to our 13 paid company holidays. Our goal is to create a flexible work environment that fuels creativity and results. We encourage curiosity and provide our people with the tools and resources to learn and grow.
As the impact of the COVID-19 pandemic began to subside during 2022, we modified our policy to a hybrid model to encourage people to come into the office. While we believe we adapted well to a work-from-home model, we are now focused on a hybrid strategy based around flexibility and collaboration.
While we believe we adapted well to a work-from-home model, we continue to operate under a hybrid strategy based around flexibility and collaboration See Item 1A.
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Approximately 90% of these users engage with our media on their mobile devices or tablets. Our always-on, real-time capabilities enable users to access our media whenever and wherever they choose.
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We access these consumers through both our owned and operated digital media properties and our auxiliary syndicated performance marketplace products.
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We have consented permission to contact the majority of users in our database through multiple channels, such as email, home address, telephone, push notifications and SMS text messaging.
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We also operate syndicated performance marketplaces on partner sites where we utilize our proprietary ad-serving technology to identify and acquire additional consumers for our advertiser clients. Our technology is integrated at key moments in the consumer experience to capitalize on high engagement and improve conversion.
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Industry spending on digital media is projected by eMarketer to have exceeded $240 billion in 2022, representing approximately 70% of total media spend in the U.S., and is expected to grow at a compound annual rate of 9.5% through 2025. Software-driven, programmatic ad-spending makes up a large and growing share of digital display ad spending.
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For example, Adflow, our post-sale e-commerce business, connects our advertisers to consumers on e-commerce websites after check-out. These syndicated solutions generate meaningful income for our partners, while driving additional growth for our advertiser clients. We typically remunerate our syndication partners on a revenue share or impression basis.
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In 2019, more than 86% of U.S. display ad spending was transacted programmatically representing $61 billion of the digital display ad spending, and it is expected that will exceed 91% and $142 billion of the segment in 2023, according to eMarketer.
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Additionally, the company operates a call center performance marketplace that provides live-call-based performance campaigns to help clients increase engagement. The call solutions marketplace serves clients across an array of industries but has a heavy focus on the health insurance sector. Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences.
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Key Challenges Facing our Clients While performance-based pricing models dominate digital media spend, we believe that a significant portion of such spend represents an intermediary step in an advertiser’s process of procuring new customers, such as a click on a banner advertisement.
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We solicit our users' consent to be contacted by us and/or our advertisers via various contact methods including email, telephone, SMS/text, and push messaging.
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According to The Nielsen Global Annual Marketing Report 2022, marketer’s confidence in their ability to measure full-funnel return on investment ("ROI") stands at just 54%. We believe advertisers are operating in an environment where greater accountability is being mandated and, therefore, are increasingly focused on the ability to precisely measure return on their media spend.
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The performance marketing sector, a subset of TAM excluding brand advertising and top-of-the-funnel budget considerations, maintains a Serviceable Available Market ("SAM") of $300 billion. This delineates the scope and potential for Fluent within the dynamic and ever-expanding digital marketing landscape.
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In addition, many companies seeking to learn more about their existing customers or target new customers either gather data themselves or purchase data to inform their advertising and marketing strategies. However, the data they obtain is often either not first-party, not sufficiently recent or sufficiently complete.
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According to eMarketer reports, digital marketing has grown steadily since 2021 and is anticipated to continue growing at 9.3% annually through 2027.
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Moreover, these companies may not have the ability to capture real-time signals that are indicated by a consumer’s behavior, even if it is observable.
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The overall landscape is experiencing a significant transformation with the emergence of commerce media which combines media impressions and commerce transactions for informed ad placements on a retailer's e-commerce platform and the broader retail media network, which seeks to provide a unified approach to data-informed advertising on-site, off-site, and in-store.
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Through TQI, we have improved the quality of the customer traffic that we source ourselves and we demand the same from our suppliers. We believe these actions have and will continue to benefit the Company over time, providing the foundation to support sustainable long-term growth and positioning us as an industry leader.
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Projections suggest that by 2027, this evolution could offer a substantial opportunity, surpassing $109 billion in the digital advertising space. The industry is undergoing further transformations as publishers increasingly invest in proprietary media networks (a collection of digital channels owned by a retail company), foster direct engagements with brands, and emphasize the value of first-party data.
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We are also building out our influencer marketing capabilities to diversify our current internal media buys on social media platforms and capture available opportunities in the influencer market.
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This shift is particularly noteworthy considering growing concerns about data privacy, with 86% of Americans expressing apprehension, according to KPMG research.
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We compensate our e-commerce partners by either sharing revenue proceeds or by remunerating them on an impression basis. Although we are still in an initial launch phase, we believe this ad solution will become a meaningful contributor to our operations. Sales and Marketing We generate new client sales primarily through our in-house sales team.
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As the use of cookies becomes more limited, marketers and businesses must realign their operations with this evolving landscape and Fluent is poised to assist. 1 Table of Contents Key Challenges Facing our Clients Digital marketing professionals face a trio of challenges: cookie deprecation, rising acquisition costs, and the quest for reliable reporting.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeContinued international expansion will require us to invest significant funds and other resources and may subject us to new risks that we have not faced before or increase risks that we currently face, including risks associated with: • compliance with applicable foreign laws and regulations and adapting to foreign customs and practices as they relate to our business; • compliance with the UK-GDPR and other foreign data privacy, data protection and information security laws and regulations and the risks and costs of noncompliance; • cross-border data transfers among us, our subsidiaries, and our customers, vendors, and business partners; • difficulties and added costs of conducting our business in foreign countries, including the need to retool our consumer facing product offerings to better align with local customs, practices, and consumer acceptance of our product offerings; • credit risk and higher levels of payment fraud, as well as longer sales or collection cycles in some countries; • compliance with anti-bribery laws, such as the Foreign Corrupt Practices Act; • recruiting, training, managing, and retaining contractors and service providers in foreign countries; • increased competition from local providers; • economic and political instability in some countries, including as a result of health concerns, terrorist attacks and civil unrest; • less protective or restrictive intellectual property laws; • compliance with the laws of the foreign taxing jurisdictions in which we conduct business, potential double taxation of our international earnings and potentially adverse tax consequences due to changes in applicable U.S. and foreign tax laws; and • overall higher costs of doing business internationally.
Biggest changeContinued international expansion will require us to invest significant funds and other resources and may subject us to additional risks, including those related to cross-border data transfers; retooling our consumer facing product offerings to better align with local customs, practices, and consumer preferences; compliance with anti-bribery laws, such as the Foreign Corrupt Practices Act; recruiting, training, managing, and retaining contractors and service providers in foreign countries; increased competition from local providers; economic and political instability; and less protective or restrictive intellectual property laws.
Cybersecurity risks have significantly increased in recent years, in part, because of the proliferation of new technologies, the use of the internet and telecommunications technologies to exchange information and conduct transactions, and the increased sophistication and activities of computer hackers, organized crime, terrorists, and other external parties, including foreign state actors.
Cybersecurity risks have significantly increased in recent years, in part because of the proliferation of new technologies, the increased use of the internet and telecommunications technologies to exchange information and conduct transactions, and the increased sophistication and activities of computer hackers, organized crime, terrorists, and other external parties, including foreign state actors.
If we are required to pay damages or expenses in connection with these legal claims, our business and results of operations may be harmed. We display original content and third-party content on our websites and in our marketing messages.
If we are required to pay damages or expenses in connection with these legal claims, our business and results of operations may be harmed. We display original and third-party content on our websites and in our marketing messages.
Many of our publishers buy media on these platforms and they may seek to pass along their increased media costs to us or be unable to supply us with media at the volume and price we require, either of which could adversely affect our results.
Many of our publishers buy media on these platforms and may seek to pass along their increased media costs to us or be unable to supply us with media at the volume and price we require, either of which could adversely affect our results.
Any negative outcomes from regulatory actions or litigation or claims, including monetary penalties or damages or injunctive provisions regulating or restricting how can we conduct our business could have a material adverse effect on our business, financial condition, results of operations and reputation.
Any negative outcomes from regulatory actions or litigation or claims, including monetary penalties or damages or injunctive provisions regulating or restricting how we conduct our business could have a material adverse effect on our business, financial condition, results of operations and reputation.
These upgrades and expansion in our technical capabilities are costly and complex and could result in inefficiencies or operational failures which could damage our reputation and cause us to lose current and potential users and clients and could harm our operating results.
However, these upgrades and expansion in our technical capabilities are costly and complex and could result in inefficiencies or operational failures which could damage our reputation and cause us to lose current and potential users and clients and harm our operating results.
Moreover, there is substantial competition for web traffic among both established media buyers and smaller operators, and we expect this competition to continue to increase, given the limited barriers to entry into the market.
There is substantial competition for web traffic among both established media buyers and smaller operators, and we expect this competition to continue to increase, given the limited barriers to entry into the market.
If a third-party publisher decides not to make media inventory available to us, decides to demand higher pricing or a higher revenue share, or places significant restrictions on the use of such inventory, we may not be able to find media inventory from other media sources that satisfy our requirements in a timely and cost-effective manner.
If a third-party publisher decides not to make media inventory available to us, decides to demand higher pricing or a higher revenue share, or places significant restrictions on the use of such inventory, we may not be able to find media inventory from other media sources that satisfies our requirements in a timely and cost-effective manner.
Any or all of these issues could adversely affect our ability to attract new users and increase engagement by existing users, cause advertisers to not use our services or cause publishers to stop providing media or subject us to governmental or third-party lawsuits, investigations, regulatory fines or other actions or liability, thereby harming our business.
Any or all of these issues could adversely affect our ability to attract new users and increase engagement by existing users, cause advertisers to not use our services or cause publishers to stop providing media, disrupt our business operations or subject us to governmental or third-party lawsuits, investigations, regulatory fines or other actions or liability, thereby harming our business.
The use of SOFR based rates is intended to replace rates based on the London Interbank Offered Rate or LIBOR and reflects the discontinuation of the use of LIBOR in the financial markets.
The use of SOFR based rates is intended to replace rates based on the London Interbank Offered Rate ("LIBOR") and reflects the discontinuation of the use of LIBOR in the financial markets.
These laws and regulations involve matters central to our business, including user privacy, data protection, content, intellectual property, electronic contracts and other communications, e-commerce, sweepstakes, rewards and other promotional marketing campaigns, competition, protection of minors, consumer protection, taxation, libel, defamation, internet or data usage, and online payment services.
These laws and regulations continuously evolve and involve matters central to our business, including user privacy, data protection, content, intellectual property, electronic contracts and other communications, e-commerce, sweepstakes, rewards and other promotional marketing campaigns, competition, protection of minors, consumer protection, taxation, libel, defamation, internet or data usage, and online payment services.
The costs to acquire media from our publishers is also subject to seasonal variability with media cost typically increasing in the fourth quarter. Our results of operations have in the past been adversely affected when we were unable to respond to the fluctuations in the price and availability of media, and similar effects may occur in the future.
The costs to acquire media from our publishers are also subject to seasonal variability with media cost typically increasing in the fourth quarter. Our results of operations have in the past been adversely affected when we were unable to respond to the fluctuations in the price and availability of media, and similar effects may occur in the future.
We generally rely on the “fair use” exception for our use of third-party brand names and marks, but these third parties may disagree, and the laws governing the fair use of these third-party materials are imprecise and adjudicated on a case-by-case basis. We also create content we believe to be original for our websites.
We generally rely on the "fair use" exception for our use of third-party brand names and marks, but these third parties may disagree, and the laws governing the fair use of these third-party materials are imprecise and adjudicated on a case-by-case basis. We also create content we believe to be original for our websites.
Any imposition of liability that is not covered by insurance, or is in excess of insurance coverage, could materially adversely affect our business, financial condition, and results of operations. Risks Related to Financial Matters Covenants in our Credit Agreement impose restrictions that may limit our operating and financial flexibility.
Any imposition of liability that is not covered by insurance, or that exceeds our insurance coverage, could materially adversely affect our business, financial condition, and results of operations. Risks Related to Financial Matters Covenants in our Credit Agreement impose restrictions that may limit our operating and financial flexibility.
Our future success depends in part on the efficient performance of our ad serving and lead generation systems and technology infrastructure. As the number of websites and internet users and the amount of data collected increases, we have begun to revamp our technology infrastructure to accommodate this increased volume.
Our future success depends in part on the efficient performance of our ad serving and lead generation platforms and technology infrastructure. As the number of websites and internet users and the amount of data collected increases, we have begun to revamp our technology infrastructure to accommodate this increased volume.
Click-through fraud occurs when automated systems (sometimes called "bots") are used to create an individual click on an ad displayed on a website, with the intent of generating a revenue share payment to the publisher, rather than an individual user actually viewing the underlying content.
Click-through fraud occurs when automated systems (sometimes called "bots") are used to create an individual click on an ad displayed on a website, rather than an individual user actually viewing the underlying content, with the intent of generating a payment to the publisher.
Our success depends on our ability to attract users to our websites and generate revenues from their activities thereon in a cost-effective manner. A substantial majority of our revenue is attributable to visitor traffic originating from third-party publishers, including ad networks, social media platforms and search engines.
Our success depends on our ability to attract users to our owned and operated websites and generate revenue from their activities thereon in a cost-effective manner. A substantial majority of our revenue on our websites is attributable to visitor traffic originating from third-party publishers, including ad networks, social media platforms, and search engines.
In addition, some of our clients are thinly capitalized and pose credit risks, and we may have difficulty collecting on amounts owed to us. Some of our clients may challenge the determination of amounts we believe they owe or may refuse to pay because of performance-related or other claims.
Some of our clients are thinly capitalized and pose credit risks, and some of our clients may challenge the determination of amounts we believe they owe or may refuse to pay because of performance-related or other claims. In these circumstances, we may have difficulty collecting on amounts we believe are owed us.
If our revenue from our international operations does not exceed the expense of establishing and maintaining these operations, our business and operating results could suffer, and we may decide to make changes to our business or exit certain jurisdictions in an effort to mitigate losses.
If our revenue from our international operations does not exceed the expense of establishing and maintaining these operations, our business and operating results could suffer, and we may decide to make changes to our business or exit certain jurisdictions to mitigate losses.
We have a substantial amount of goodwill and purchased intangible assets on our consolidated balance sheet as a result of acquisitions. The carrying value of goodwill represents the fair value of an acquired business in excess of identifiable assets and liabilities as of the acquisition date.
As a result of prior acquisitions, we had a substantial amount of goodwill and purchased intangible assets on our consolidated balance sheet. The carrying value of goodwill represents the fair value of an acquired business in excess of identifiable assets and liabilities as of the acquisition date.
Lower conversion rates could be even more likely as we expand our services and relationships with our clients by moving our conversion point further “down the funnel,” closer to where our clients are able to monetize the leads we provide.
Lower conversion rates could be even more likely as we expand our services and relationships with our clients by moving our conversion point further "down the funnel," closer to where our clients are able to monetize the leads we provide.
Currently, we are a “smaller reporting company,” meaning that our outstanding common stock held by nonaffiliates had a value of less than $250 million at the end of our most recently completed second fiscal quarter.
Currently, we are a "smaller reporting company," meaning that our outstanding common stock held by nonaffiliates had a value of less than $250 million at the end of our most recently completed second fiscal quarter.
A more complete discussion of each these and other risks and uncertainties is set forth under “Risk Factors.” Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, including those set forth below and elsewhere in this 2022 Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results.
A more complete discussion of each these and other risks and uncertainties is set forth under "Risk Factors." Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, including those set forth below and elsewhere in this 2023 Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results.
We are also exposed to risk that content provided by third parties is inaccurate or misleading, and for material posted to our websites by users and other third parties. These claims could divert management time and attention away from our business and result in significant costs to investigate and defend, regardless of the merit of these claims.
We are also exposed to risk that content provided by third parties and posted to our websites is inaccurate or misleading. These claims could divert management time and attention away from our business and result in significant costs to investigate and defend, regardless of the merit of these claims.
If our common stock were delisted and determined to be a “ penny stock, ” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock in the secondary market.
If our common stock were delisted and determined to be a "penny stock," a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock on the secondary market.
The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange, which is the exception on which we currently rely.
The SEC has adopted regulations that define a "penny stock" to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange, which is the exception on which we currently rely.
If we are unable to contact users effectively by email, telephone, text, or other means as a result of legislation, regulatory rules or interpretive positions, blockage, screening technologies or otherwise, our business, operating results and financial condition would be harmed.
If we are unable to contact users effectively by email, telephone, text, or other means because of legislation, regulatory rules or interpretive positions, blockage, screening technologies or otherwise, our business, operating results and financial condition would be harmed.
We bear the risk that the rates we are charged by our lenders will increase faster than the earnings and cash flow of our business, which could reduce profitability, adversely affect our ability to service our debt, or cause us to breach covenants contained in our credit agreement or leases, which could materially adversely affect our business, financial condition, and results of operations.
We bear the risk that the rates we are charged by our lenders will increase faster than the earnings and cash flow of our business, which could reduce profitability, adversely affect our ability to service our debt, or cause us to breach covenants contained in our credit agreement or leases.
Further complicating the determination of the sales taxability of services is the need to determine where the revenues from the services are sourced (i.e., where the service is rendered, where the service is consumed or where the information is accessed).
Further complicating the determination of the sales taxability of services is the need to determine the source of revenues from the services (i.e., where the service is rendered, where the service is consumed or where the information is accessed).
Our ability to protect such information and to provide services using such information without unauthorized disclosure is critical, and a breach of the security measures on our systems or on those of our third-party vendors could result in the misappropriation of either our proprietary information or the personal information of users that we collect, or the interruption or breakdown of our operations.
Our ability to protect such information and to provide services using such information without unauthorized disclosure is critical. A breach of the security measures on our systems or on those of our third-party vendors could result in the misappropriation of either our proprietary information or our users' personal information, or the interruption or breakdown of our operations.
For any transaction involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions.
For any transaction involving a "penny stock," unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions.
Heightened scrutiny on the part of the public or regulators may lead to general distrust of our industry, consumer reluctance to share and permit use of personal data and increased consumer opt-out rates, any of which could negatively influence, change or reduce our current and prospective clients’ demand for our products and services, and adversely affect our business, financial condition, and results of operations.
Heightened scrutiny on the part of the public or regulators and an increasing regulatory burden especially relating to data privacy may lead to general distrust of our industry, consumer reluctance to share and permit use of personal data and increased consumer opt-out rates, any of which could negatively influence, change, or reduce our current and prospective clients' demand for our products and services, and adversely affect our business, financial condition, and results of operations.
Because the majority of our contracts with our advertiser clients do not have fixed commitments, these clients have the ability to unilaterally terminate their agreements with us, pause their campaigns, or materially reduce the amount of business they conduct with us at any time, with little or no prior notice.
Because the majority of our contracts with our advertiser clients do not require fixed commitments, these clients can unilaterally terminate their agreements with us, pause their campaigns, or materially reduce the amount of business they conduct with us at any time, with little or no prior notice.
We are exposed to credit risk from and occasionally have payment disputes with our clients, and we may not be able to collect on amounts owed to us. We regularly extend payment terms to our clients, which exposes us to risk of bad debt.
We are exposed to credit risk from our clients, and we may not be able to collect on amounts owed to us. We regularly extend payment terms to our clients, which exposes us to risk of bad debt.
Such actions could have substantial adverse impact on the Company’s reputation and its ability to continue to buy media cost effectively and the willingness of the Company’s advertiser clients to continue to do business with the Company, which could in turn materially and adversely affect the Company's results of operations and financial position.
Such actions could have a substantial adverse impact on our reputation and ability to continue to buy media cost effectively and the willingness of our advertiser clients to continue to do business with us, which could in turn materially and adversely affect our results of operations and financial position.
If any of these platforms or applications goes down for an extended period of time, it is possible that we may lose clients and/or incur significant costs to either internalize some of these services or find suitable alternatives, which could have a material adverse effect on our business or results of operations. 14 Table of Contents Risks Relating to Legal and Regulatory Matters Our business is subject to a significant number of laws and regulations.
If any of these platforms or applications malfunctions for an extended time period, we may lose clients and/or incur significant costs to either internalize some of these services or find suitable alternatives, which could have a material adverse effect on our business or results of operations. 11 Table of Contents Risks Relating to Legal and Regulatory Matters Our business is subject to a significant number of telemarketing laws and regulations.
As a result, we have faced and will continue to face potential liability based on a variety of legal theories, including deceptive advertising and copyright or trademark infringement.
As a result, we have faced and may continue to face potential liability based on a variety of legal theories, including copyright or trademark infringement.
Beyond these budgetary constraints and buying patterns of clients, other factors affecting our business may include macroeconomic conditions affecting the digital media industry and the various market verticals we serve. Poor macroeconomic conditions could decrease our clients’ advertising spending and, thereby, have a material adverse effect on our business and results of operations.
Beyond these budgetary constraints and buying patterns of clients, macroeconomic conditions affecting the digital media industry and the various market verticals we serve may result in a decrease of our clients' advertising spending and, thereby, have a material adverse effect on our business and results of operations.
We have exposure with respect to clients in particular verticals where there is a risk of tightening regulations or restrictions on sourcing consumer traffic. For example, if new regulations affect our clients such that their businesses are no longer viable, our clients may become insolvent or otherwise unable to pay amounts owed to us.
We are particularly exposed in certain verticals where there is a risk of tightening regulations or restrictions on sourcing consumer traffic. For example, if new regulations affect our clients such that their businesses are no longer viable, our clients may become insolvent or otherwise unable to pay amounts owed to us.
Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects, as the information we provide to investors is less robust than the disclosure investors receive from public companies that are not a smaller reporting company. 21 Table of Contents Item 1B. Unresolved Staff Comments. Not applicable.
Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects, as the information we provide to investors is less robust than the disclosure investors receive from public companies that are not a smaller reporting company. 18 Table of Contents
Also, as of December 31, 2022, there was an additional 6,362,156 shares of restricted stock and underlying options issued under the 2022 Plan, as well as outstanding warrants and other compensatory arrangements that might vest and be delivered through 2031. The benefits derived by us from any future acquisition might not exceed the dilutive effect of the acquisition.
Also, as of December 31, 2023, there were an additional 6,203,001 shares of restricted stock and underlying options issued under the 2022 Plan, as well as other compensatory arrangements that might vest and be delivered through 2031. The benefits derived by us from any future acquisition might not exceed the dilutive effect of the acquisition.
As with all software and web applications and systems, there may be, from time to time, technical malfunctions that arise with some of these third-party providers. It is possible that to remedy any such situation would require substantial time, resources, and technical knowledge that we may not have or be able to acquire in a timely fashion.
As with all software and web applications and systems, there may be occasional technical malfunctions that arise with some of these third-party providers. Remedying any such situation could require substantial time, resources, and technical knowledge that we may not have or be able to acquire in a timely fashion.
As of December 31, 2022 , our executive officers, directors, and holders of 10% or more of our outstanding common stock beneficially owned and have the ability to exercise some voting control over, in the aggregate, approximate ly 43.7% o f our outstanding shares of common stock.
As of December 31, 2023 , our executive officers, directors, and holders of 10% or more of our outstanding common stock, in the aggregate, beneficially owned and have the ability to exercise some voting control over approximate ly 43.6% of our outstandin g shares of common stock.
Regardless of whether any current or future claims in which we are involved have merit, or whether we are ultimately held liable or subject to payment of penalties or consumer redress, such investigations and claims have been and may continue to be expensive to defend, may divert management’s time away from our operations and may result in changes to our business practices that adversely affect our results of operations.
Regardless of whether any current or future claims in which we are involved have merit, or whether we are ultimately held liable or subject to payment of penalties or consumer redress, such investigations and claims have been and may continue to be expensive to defend, may divert management's time away from our operations and may result in changes to our business practices that adversely affect our results of operations. 13 Table of Contents Our business and the businesses of our advertiser clients may be subject to sales and use tax and other taxes.
Additionally, the concentration of stock ownership may also serve to limit the trading volume of our common stock and lead to greater volatility in our stock price. Our largest shareholder, Frost Gamma Investments Trust, owns, directly and indirectly, approxima tely 35.2% of our outstanding common stock .
The concentration of stock ownership may also serve to limit the trading volume of our common stock and lead to greater volatility in our stock price. Our largest shareholder, Frost Gamma Investments Trust ("FGIT"), owns, directly and indirectly, approx imately 35.6% of our outstanding common stock .
As a result, these stockholders may be in a position to exert significant influence over all matters requiring stockholder approval, including the election of directors and determination of significant corporate actions.
As a result, these stockholders could exert significant influence over all matters requiring stockholder approval, including the election of directors and determination of significant corporate actions.
Compliance with these laws and regulations may cause us to incur significant expenses or reduce the availability or effectiveness of our solutions, and failure to comply with them could subject us to civil or criminal penalties or other liabilities. Our business is subject to regulation under a number of federal, state, and local laws and regulations.
Compliance with these laws and regulations may cause us to incur significant expenses or reduce the availability or effectiveness of our solutions, and failure to comply with them could subject us to civil or criminal penalties or other liabilities.
Our ability to do so is dependent on many factors, including having the right media sources to drive users who engage with our sites, providing content and experiences that retain users' attention and displaying relevant advertisements and other content to users.
Our ability to do so is dependent on many factors, including having the right media sources to drive users who engage with our sites, providing content and experiences that retain users' attention and displaying relevant advertisements and other content to users. Our results are also subject to fluctuation from seasonality and cyclicality in our and our clients' businesses.
As a result of these activities, we and our email publishers are subject to various state and federal laws regulating commercial email communications, including the CAN-SPAM Act of 2003 (“CAN Spam”) and the California Business and Professions Code Sec. 17529.5 (“CAL Anti-Spam Act”).
As a result of these activities, we and our email publishers are subject to various state and federal laws regulating commercial email communications, including the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act of 2003 and the California Business and Professions Code Sec. 17529.5.
Despite our efforts to monitor the Internet for look-alike sites, there can be no assurance that we will be able to quickly detect and remove look-alike sites which can adversely affect our business, impair our reputation, or expose us to regulatory scrutiny. Policing unauthorized use of our proprietary rights can be difficult and costly.
Despite our efforts to monitor the internet for look-alike sites, there can be no assurance that we will be able to quickly detect and remove all look-alike sites, which could impair our reputation, expose us to regulatory scrutiny, and adversely affect our business.
If we are unable to maintain our corporate culture as we grow, our business, financial condition, and results of operations could be harmed. We are dependent upon third-party service providers in our operations.
If we are unable to maintain our corporate culture as we grow, our business, financial condition, and results of operations could be harmed.
Because of the volume of user registrations on our owned-and-operated websites, we receive requests from a number of users per day seeking to exercise their data privacy rights. We elected to implement a third-party solution to support our systems and processes to handle these requests.
Due to the high volume of user registrations on our owned-and-operated websites, we receive many requests from users seeking to exercise their data privacy rights. We elected to implement a third-party solution to support our systems and processes to handle these requests and have already devoted significant resources to handling data privacy requests.
This could result in increased borrowing costs for the Company. We may require additional capital in the future in order to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances. If capital is not available to us, our business, financial condition, and results of operations may be harmed.
This could result in increased borrowing costs for the Company, which could materially adversely affect our business, financial condition, and result of operations. We may require additional capital in the future to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances.
We have already devoted significant resources to handling data privacy requests and expect to incur additional costs to maintain compliance with the evolving data privacy and data protection laws and regulations.
We expect to incur additional costs to maintain compliance with the evolving data privacy and data protection laws and regulations.
During 2021 and 2022 we issued 4,090,317 shares of our common stock in connection with acquisitions, vesting of awards made under our 2015 and 2018 Stock Incentive Plans and our 2022 Omnibus Equity Incentive Plan (the "2022 Plan"), and for other business purposes.
During 2022 and 2023, we issued 1,328,375 and 1,532,433 shares, respectively, of our common stock in connection with acquisitions, vesting of awards made under our 2018 Stock Incentive Plans and our 2022 Omnibus Equity Incentive Plan (the "2022 Plan"), and for other business purposes.
Our stock price has been volatile and may be volatile in the future. We may incur rapid and substantial increases or decreases in our stock price in the foreseeable future attributable to various factors including those discussed in these “Risk Factors” and may be unrelated to our operating performance or prospects and some of which are beyond our control.
We may incur rapid and substantial increases or decreases in our stock price in the foreseeable future attributable to various factors including those discussed in the Risk Factors included in this report. Some factors may be unrelated to our operating performance or prospects or may be beyond our control.
Conversion rates for leads can be impacted by factors other than the lead quality, many of which are outside our control, such as competition in our clients’ industries and our clients’ sales practices.
Conversion rates for leads can be impacted by factors outside our control, such as competition in our clients' industries and our clients' sales practices.
We could lose clients if we fail to adequately detect click-through or other fraud on advertisements. We are exposed to the risk of fraudulent clicks or actions on our websites or our third-party publishers’ websites, which could lead our clients to become dissatisfied with our campaigns and, in turn, lead to a loss of clients and related revenue.
However, we are exposed to the risk of fraudulent clicks or actions on our websites or our third-party publishers’ websites, which could lead our clients to become dissatisfied with our campaigns and lead to a loss of clients and related revenue.
If the concentration of our common stock ownership were to significantly shift, via sales of shares currently held by Frost Gamma Investments Trust or otherwise, we cannot predict the impact that any resulting change to the trading volume might have on our stock price.
FGIT has no obligation to provide us with advance notice of any sale or purchase of our common stock. If the concentration of our common stock ownership were to significantly shift, via sales of shares currently held by FGIT or otherwise, we cannot predict the impact that any resulting change to the trading volume might have on our stock price.
The time, expense and effort associated with developing and offering new and enhanced products, services, and back-end systems may be greater than anticipated. If we are unsuccessful in enhancing and upgrading our websites, products, services, and back-end systems, we may fail to maintain our profitability, attract new clients, or grow our revenue, or we may suffer service disruptions.
If we are unsuccessful in enhancing and upgrading our websites, products, services, and back-end systems, we may fail to maintain our profitability, attract new clients, or grow our revenue, or we may suffer service disruptions.
However, based on our experience, new websites, systems, products, and services may be less predictable and have lower margins than more established websites, products and services and may be more prone to technological instability or failure. Further, we may not be able to develop and bring new products and services to market in a timely manner, or at all.
However, based on our experience, new websites, systems, products, and services may be less predictable and have lower margins than more established websites, products and services and may be more prone to technological instability or failure.
The failure to maintain the key aspects of our culture as our organization grows could result in decreased employee satisfaction, increased difficulty in attracting top talent, increased turnover and could compromise the quality of our client service, all of which are important to our success and to the effective execution of our business strategy.
The failure to maintain the key aspects of our culture as our organization grows could result in decreased employee satisfaction and increased difficulty in attracting and retaining top talent, which in turn could compromise the quality of our client service and adversely affect our operations.
Failure by a third-party service provider could expose us to an inability to operate our websites, connect our advertiser clients with users, provide online marketing and advertising services or track the performance and results of our online marketing activities and our operations in general.
A failure by a third-party service provider could prevent us from operating our websites, connecting our advertiser clients with users, providing online marketing and advertising services, or tracking the performance and results of our online marketing activities and our operations in general.
The move away from user level tracking may also adversely impact the efficiency of ad platforms such as those operated by Alphabet and Meta and other social media platforms which could lead to publishers reducing their spend on social media platforms or increases in the cost of media.
Google also plans to eliminate the use of third-party cookies for ad tracking, which may lead some advertisers to curtail their ad spend or other clients to stop online advertising altogether. 9 Table of Contents The move away from user level tracking may also adversely impact the efficiency of ad platforms such as those operated by Alphabet and Meta and other social media platforms which could lead to publishers reducing their spend on social media platforms or increases in the cost of media.
While our websites are designed with a “mobile first” approach, the vast majority of consumers' time accessing content on mobile devices is increasingly through mobile applications, rather than mobile browsers. Mobile applications are not a primary driver of our business, which could place us at a competitive disadvantage in the marketplace.
Mobile devices are now the primary means by which people access online content, increasingly through mobile applications rather than browsers. While our websites are designed with a "mobile first" approach, mobile applications are not a primary driver of our business, which could place us at a competitive disadvantage in the marketplace.
We utilize numerous third-party service providers in our operations such as cloud-based hosting services, enterprise resource planning systems and other software as a service (“SaaS”) platforms and services.
In addition to risks associated with purchasing online media from third-party publishers discussed above, we utilize numerous third-party service providers in our operations such as cloud-based hosting services, enterprise resource planning systems and other software as a service platforms and services.
We have been expanding our website offerings into additional international markets beyond the United Kingdom into Canada and Australia and we may expand further into additional countries.
We have website offerings beyond the U.S., in the United Kingdom (the "UK"), Canada, and Australia, and we may expand further into additional countries.
If the carrying value of the asset exceeds its current fair value, the asset is considered impaired and its carrying value is reduced to fair value through a non-cash charge to earnings.
If the carrying value of the asset exceeds its current fair value, the asset is considered impaired and its carrying value is reduced to fair value through a non-cash charge to earnings. As of December 31, 2023, substantially all of the goodwill from prior acquisitions has been impaired.
Our rewards fulfillment costs fluctuate, which has impacted and may continue to impact our results of operations . Our rewards sites generate the majority of our revenues and gross profit. Users who complete the program requirements and are verified during the claims process can earn valuable rewards such as gift cards and cash equivalents.
Our rewards sites generate a large portion of our revenues and gross profit. Users who complete the program requirements and are verified during the claims process can earn valuable rewards such as gift cards and cash equivalents.
If our websites are unavailable when users attempt to access them, or if they do not load as quickly as expected, users may not return as often in the future, or at all.
Our business is largely dependent on consumer-facing websites, which could become inaccessible due to service interruptions or attacks. If our websites are unavailable when users attempt to access them, or if they do not load as quickly as expected, users may not return as often in the future, or at all.
Unexpected constraints on our technology infrastructure could lead to slower website response times or system failures and adversely affect the availability of our websites and the level of user responses received, which could result in the loss of clients or revenue or have a material adverse effect on our business and results of operations.
Unexpected constraints on our technology infrastructure could lead to slower website response times or system failures and adversely affect the availability of our websites and the level of user responses received, which could result in the loss of clients or revenue. We are continuously upgrading our systems, procedures, processes, and controls to support our future operations as we grow.
We intend to continue to make investments to support our growth and may require additional capital to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances.
If capital is not available to us, the future growth of our business and operations would be severely limited. We intend to continue to make investments to support our growth and may require additional capital to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances.
These agreements may not effectively prevent unauthorized disclosure of confidential information or unauthorized parties from copying aspects of our services or obtaining and using our proprietary information. Further, these agreements may not provide an adequate remedy in the event of unauthorized disclosures or uses, and we cannot guarantee that our rights under such agreements will be enforceable.
Further, these agreements may not provide an adequate remedy in the event of unauthorized disclosures or uses, and we cannot guarantee that our rights under such agreements will be enforceable. Policing unauthorized use of our proprietary rights can be difficult and costly.
Risks Related to Our Business Risks Related to Current Regulatory Actions ● Active regulatory actions with the FTC and the PAAG Risks Related to Our Industry ● Operate in a rapidly evolving industry ● Competition with other digital marketing and advertising companies ● High concentration associated with the gaming industry ● Unfavorable publicity and perception of our industry ● Fluctuation and seasonality of our clients ’ needs ● Credit risk and payment disputes with our clients Risks Related to Our Publishers ● Competition buying media ● Need to connect with users in specific media channels ● Impact of unauthorized or unlawful acts by third-party publishers or vendors ● Limitations on our ability to collect user data Risks Related to Our Owned Media Properties ● Need to evolve our products and services to meet client and user needs and changing technologies ● Need to connect with users through mobile apps ● Detection of click-through and/or other fraud ● Rewards fulfillment costs Other Business Risks ● Growth of operations, effective management, and ability to scale ● Increased challenges of international operations ● Impact of acquisitions on operations ● Unfavorable global economic conditions ● Dependence on key personnel ● Ability to attract and retain employees ● Dependence on third-party service providers Risks Relating to Legal and Regulatory Matters ● Impact of governmental laws and regulations ● Laws and regulations regarding privacy, data protection and personal information ● Environmental, employment, social and governance matters ● Litigation, inquiries, investigations, examinations, or other legal proceedings ● Sales and use and other taxes Risks Relating to Data Security and Intellectual Property ● Need to safeguard personal information and other data ● Need to protect our intellectual property rights ● Third party claims from creation and use of digital media content Risks Related to Financial Matters ● Restrictions on operations from covenants in Credit Agreement ● Impact of change of credit facility terms ● Need for additional capital ● Earnings charges from impairment of goodwill and/or intangible assets Risks Related to Our Common Stock and the Securities Markets ● Fluctuations in stock price ● Failure to meet listing requirements may result in delisting ● Trading of shares impacted by delisting ● Concentration of stock ownership ● Dilution from future share issuances from acquisitions or stock incentive plans ● No cash dividends for foreseeable future ● Status as a "smaller reporting company" 6 Table of Contents Risk Factors Risks Relating to Our Business Risks Related to Current Regulatory Actions The FTC and the PAAG have active investigations pending against the Company .
Risks Related to Our Business Risks Related to Our Industry ● Operate in a competitive, rapid ly evolving industry ● High concentration associated with the gaming industry ● Unfavorable publicity and perception of our industry ● Reduction in online marketing spend ● Credit risk from our clients Risks Related to Our Publishers ● Supply and cost of media ● Need to connect with users in specific media channels ● Limitations on our ability to collect user data Risks Related to Our Owned and Operated Media Properties ● Need to connect with users through mobile apps ● Rewards fulfillment costs and detection of f raud Other Business Risks ● Growth of operations, effective management, and ability to scale ● Economic or political instability ● Increased challenges of international operations ● Impact of acquisitions, investments, and divestitures on operations ● Failure to recruit or the loss of management and highly trained personnel ● Ability to attract and retain employees ● Dependence on third-party service providers Risks Relating to Legal and Regulatory Matters ● Impact of telemarketing governmental laws and regulations ● Impact of e-mail marketing laws and rules ● Laws and regulations regarding privacy, data protection, and personal information ● Litigation, inquiries, investigations, examinations, or other legal proceedings ● Sales and use and other taxes Risks Relating to Data Security and Intellectual Property ● Need to safeguard personal information and other data ● Need to protect our intellectual property rights ● Third party claims from creation and use of digital media content 6 Table of Contents Risks Related to Financial Matters ● Restrictions on operations from covenants in Credit Agreement ● Impact of change of credit facility terms ● Need for additional capital ● Significant charges from impairment of goodwill and/or intangible assets Risks Related to Our Common Stock and the Securities Markets ● Minimum Bid Price Rule and Nasdaq listing ● Fluctuations in stock price ● Concentration of stock ownership ● Dilution from future share issuances from acquisitions or stock incentive plans ● No cash dividends for foreseeable future ● Status as a "smaller reporting company" Risk Factors Risks Relating to Our Business Risks Related to Our Industry We operate in a competitive, rapidly evolving industry, which makes it difficult to evaluate our business and prospects.
In these circumstances, we may have difficulty collecting on amounts we believe are owed. A small portion of our client business is sourced through advertising agencies and brokers. In many cases, agencies are not required to pay us unless and until they are paid by the underlying client.
In such circumstances, we may be exposed to risks of significant bad debt, which could have a material adverse effect on our results of operations. A small portion of our client business is sourced through advertising agencies and brokers. In many cases, agencies are not required to pay us unless and until they are paid by the underlying client.
FSS promotes Medicare Supplement and Affordable Care Act plans by supplying call transfers and contract information of interested users to insurance agencies, brokers and other parties participating in the sale of these policies.
In addition, we promote Medicare Supplement plans by supplying call transfers and contract information of interested users to insurance agencies, brokers and other parties participating in the sale of these policies, as well as selling policies using our own agents.
There can be no guarantee that our stock price will remain at current prices or that future sales of our common stock will not be at prices lower than those sold to investors. If we fail to meet the continued listing requirements of Nasdaq it could result in a delisting of our common stock.
Our stock price has been and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses. There can be no guarantee that our stock price will remain at current prices or that future sales of our common stock will not be at prices lower than those sold to investors.
In general, while we rely on internally created identifiers to associate returning users with their user profile, we and our third-party advertisers use cookies to track user attributes and conversions.
Major web browsers such as Google Chrome and Apple Safari either block by default or permit users to block third-party cookies and user-level tracking. In general, while we rely on internally created identifiers to associate returning users with their user profile, we and our third-party advertisers use cookies to track user attributes and conversions.
The stability and potential growth of this client base depends in part on the state of the app-based gaming industry, which is subject to numerous risks including: ● the relative availability and popularity of other forms of entertainment; ● changes in consumer demographics, tastes, and preferences; ● general economic conditions, particularly economic conditions adversely affecting discretionary consumer spending; ● social perceptions of gaming, especially those related to the impact of gaming on health and social development; and ● the introduction of legislation or other regulatory restrictions on gaming, such as restrictions addressing violence in video games and addiction to video games, also referred to as Gaming Disorder by the World Health Organization.
The stability and potential growth of this client base depends in part on the state of the app-based gaming industry, which is subject to numerous risks including: ● the relative availability and popularity of other gaming apps and forms of entertainment compared to those offered by our advertisers; ● changes in consumer demographics, tastes, spending habits, and preferences; ● social perceptions of gaming, especially those related to the impact of gaming on health and social development; and ● the introduction of legislation or other regulatory restrictions on gaming, such as restrictions addressing violence in video games and addiction to video games. 7 Table of Contents Moreover, one of our gaming advertiser clients accounted for 18.1% of consolidated revenue in 2023, a decrease from 22.1% of consolidated revenue in 2022.
In addition, as we have limited the volume of affiliate traffic that we source onto our platform as a result of the TQI, we need to find other traffic sources that meet our quality standards at a cost and volume that meets our requirements. We increasingly focus our media spend on social media platforms and influencers.
As we have limited the volume of affiliate traffic to our websites as a result of the Traffic Quality Initiative ("TQI"), we have had to find other traffic sources that meet our quality standards at a cost and volume that meets our requirements.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe AdParlor business operates out of a shared co-working space located at 200 Bay Street, North Tower Suite 1200, Toronto, Ontario M5J 2J2, Canada under a 13-month lease, effective July 1, 2022. As of December 31, 2022, we have not terminated any significant lease arrangements. We believe our present facilities are suitable and adequate for our current operating needs.
Biggest changeThe AdParlor business operates out of a shared co-working space located at 200 Bay Street, North Tower Suite 1200, Toronto, Ontario M5J 2J2, Canada under a 12-month lease, effective August 1, 2023. As of December 31, 2023, we have not terminated any significant lease arrangements.
Item 2. Properties. Our headquarters are located at 300 Vesey Street, 9th Floor, New York, NY 10282, where we lease 42,685 rentable square feet of office space under an 84-month lease , effective November 2018.
Item 2. Properties. Our headquarters are located at 300 Vesey Street, 9 th Floor, New York, NY 10282, where we lease 42,685 rentable square feet of office space under an 84-month lease, effective November 2018.
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We believe our present facilities are suitable and adequate for our current operating needs. 19 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOn January 12, 2023, the Company made an initial proposal of $5.0 million for the civil monetary penalty contingent on successful negotiation of the remaining outstanding injunctions and other provisions. On January 30, 2023, FTC staff forwarded a complaint recommendation to the FTC’s Bureau of Consumer Protection for consideration.
Biggest changeOn October 18, 2022, the FTC staff sent the Company a draft complaint and proposed consent order seeking injunctive relief and a civil monetary penalty. On January 12, 2023, the Company made an initial proposal of $5.0 million for the civil monetary penalty contingent on successful negotiation of the remaining outstanding terms.
After the Company and the PAAG were unable to reach agreement on a proposed Assurance of Voluntary Compliance (“AVC”), the Commonwealth of Pennsylvania filed a complaint for permanent injunction, civil penalties, and other relief in the United States District Court for the Western District of Pennsylvania on November 2, 2022.
After the Company and the PAAG were unable to reach agreement on a proposed Assurance of Voluntary Compliance, the Commonwealth of Pennsylvania filed a complaint for permanent injunction, civil penalties, and other relief in the United States District Court for the Western District of Pennsylvania on November 2, 2022.
The Tax Department asserted that revenue derived from certain of the Company’s customer acquisition and list management services are subject to sales tax, as a result of being deemed taxable information services. The Company reached a settlement with the Tax Department for $1.7 million which was paid on April 1, 2022.
The Tax Department had asserted that revenue derived from certain of the Company's customer acquisition and list management services were subject to sales tax, as a result of being deemed taxable information services. The settlement amount was paid on April 1, 2022.
Starting in March 1, 2022, the Company has been collecting and remitting New York sales tax on certain of list management and hosted revenues from New York based clients. 22 Table of Contents On January 28, 2020, Fluent received a Civil Investigative Demand (“CID”) from the FTC regarding compliance with the FTC Act and the Telemarketing Sales Rule (“TSR”).
Since March 1, 2022, the Company has been collecting and remitting New York sales tax on certain types of revenue from New York-based clients. On January 28, 2020, Fluent received a Civil Investigative Demand from the FTC regarding compliance with the FTC Act and the TSR.
The New York State Department of Taxation and Finance (the “Tax Department”) performed a sales and use tax audit covering the period from December 1, 2010 to November 30, 2019.
Certain Legal Matters On March 31, 2022, the Company reached a settlement for $1.7 million with the New York State Department of Taxation and Finance (the "Tax Department") following a sales and use tax audit covering the period from December 1, 2010 to November 30, 2019.
On October 6, 2020, the Company received notice from the Pennsylvania Office of the Attorney General (“PAAG”) that it was reviewing the Company’s business practices relating to telemarketing.
As of December 31, 2023, the Company had recognized $6.2 million as contra-expense to general and administrative expenses with a small remaining current asset related to these insurance policies. On October 6, 2020, the Company received notice from the PAAG that it was reviewing the Company's business practices relating to telemarketing.
Removed
Certain Legal Matters On October 26, 2018, the Company received a subpoena from the New York Attorney General’s Office (“NY AG”) regarding compliance with New York Executive Law § 63 ( 12 ) and New York General Business Law § 349, as they relate to the collection, use, or disclosure of information from or about consumers or individuals, as such information was submitted to the Federal Communication Commission (“FCC”) in connection with the FCC’s rulemaking proceeding captioned “Restoring Internet Freedom,” WC Docket No. 17-108.
Added
The Company accrued the same amount for the year ending December 31, 2022. On May 26, 2023, Fluent agreed to the terms of a Stipulated Order for Permanent Injunction, Monetary Judgment, Civil Penalty Judgment, and Other Relief (the "FTC Consent Order").
Removed
On May 6, 2021 , the Company and the NY AG executed an Assurance of Discontinuance (the “AOD”) to resolve this matter.
Added
The FTC Consent Order imposed a civil penalty of $2.5 million, required additional changes to the Company's employment opportunities marketplace and programmatic advertising business, and resulted in the implementation of compliance measures across the business.
Removed
The AOD imposed injunctive provisions on the Company’s practices with regard to political advocacy campaigns, most of which the Company had already implemented, and imposed a $3.7 million penalty, which was in line with the Company's accrual as of March 31, 2021 and paid in full as of June 30, 2021.
Added
On July 17, 2023, the FTC filed its Complaint for Civil Penalties, Permanent Injunction, Monetary Relief, and Other Relief and, together with Fluent, filed a Joint Motion for Entry of Proposed Stipulated Order in the United States District Court for the Southern District of Florida.
Removed
On December 13, 2018, the Company received a subpoena from the United States Department of Justice (“DOJ”) regarding the same issue. On March 12, 2020, the Company received a subpoena from the Office of the Attorney General of the District of Columbia ("DC AG") regarding the same issue.
Added
The FTC Consent Order was entered by the Court on August 11, 2023, and the monetary judgement was paid on August 15, 2023. The Company maintains insurance policies that cover certain legal costs, which include those incurred related to the FTC investigation.
Removed
The Company has not received any communications from either the DOJ or the DC AG since the second quarter of 2020 . At this time, it is not possible to predict the ultimate outcome of this matter or the significance, if any, to the Company's business, results of operations or financial position.
Added
On May 18, 2023, the parties entered into a settlement and jointly filed a Consent Petition of Final Decree, wherein the Company agreed to injunctive relief and to pay the PAAG $0.25 million for investigatory costs, all of which was paid as of June 30, 2023. The Company has been involved in a TCPA class action, Daniel Berman v.
Removed
On October 18, 2022, the FTC staff sent the Company a draft complaint and proposed consent order seeking injunctive relief and a civil monetary penalty. The Company has been negotiating resolution of the terms of the consent order with the FTC staff.
Added
Freedom Financial Network , which was originally filed in the Northern District of California in 2018. On May 31, 2023, the parties entered into an Amended Class Action Settlement Agreement (the "Berman Settlement Agreement"), which includes injunctive provisions and payment to plaintiffs of $9.75 million for legal fees and a consumer redress fund.
Removed
On March 3, 2023, the Company met with the Bureau of Consumer Protection and as a result of that meeting, the Company is continuing negotiation with the FTC staff.
Added
On July 28, 2023, the Court preliminarily approved the Berman Settlement Agreement, and the Company contributed $3.1 million, payable following the final approval of the settlement. The final approval of the Berman Settlement Agreement was filed on February 23, 2024, with payment required by March 15, 2024.
Removed
The Company believes it is more likely than not that it will be able to come to an agreement with the FTC staff on the terms of a consent order, including injunctive and civil monetary penalty provisions, but there can be no assurance this will occur.
Added
The Company's contribution amounts were accrued as of December 31, 2022, which includes $1.1 million in cash and $2.0 million pursuant to an interest-bearing note with a two-year term provided by co-defendant, Freedom Financial Network. Item 4. Mine Safety Disclosures. Not Applicable. 20 Table of Contents PART II
Removed
The Company accrued $5.0 million in connection with this matter for the year-ended December 31, 2022; however, a final civil monetary penalty could be higher or lower. The Company will continue to devote substantial resources and incur outside legal expenses to reach a settlement.
Removed
While the Company believes that its historical practices were in full compliance with the PA Consumer Protection Law and the TSR, the Company has updated its telemarketing practices. We are currently negotiating a potential Consent Order with the PAAG to resolve the matter. The Company has been involved in a TCPA class action, Daniel Berman v.
Removed
Freedom Financial Network , which was originally filed in 2018. Plaintiff's second Motion for Class Certification (the first such motion was denied) is pending and oral argument was scheduled for February 7, 2023. The parties have agreed to stay the proceeding as a result of a preliminary settlement reached by the parties.
Removed
The parties are currently negotiating the terms of a Settlement Agreement which provides for payment to plaintiffs of $9.75 million and injunctive provisions.
Removed
The Company will contribute $3.1 million towards the settlement, $1.1 million following the District Court’s entry of the Final Approval Order and Judgment, anticipated to occur in about a year, and $2.0 million pursuant to an interest-bearing note in favor of Freedom Financial which is payable over two years following entry of the order. Item 4. Mine Safety Disclosures.
Removed
Not Applicable. 23 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures. 23 PART II 24 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 24 Item 6. [Reserved]. 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 25
Biggest changeItem 4. Mine Safety Disclosures. 20 PART II 21 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 21 Item 6. [Reserved]. 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 22 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 33 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur common stock is listed on The Nasdaq Global Market (“Nasdaq”) under the symbol “FLNT.” Prior to March 26, 2018, our common stock was listed on Nasdaq under the symbol “COGT.” As of March 13, 2023, there were 223 record holders of our common stock.
Biggest changeOur common stock is listed on The Nasdaq Capital Market ("Nasdaq") under the symbol "FLNT." Prior to March 26, 2018, our common stock was listed on Nasdaq under the symbol "COGT." As of March 27, 2024, there were 236 record holders of our common stock.
Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs October 1-31, 2022 — — — — November 1-30, 2022 — — — — December 1-31, 2022 — — — — Total — — — — (1) During October 2022, November 2022 and December 2022, no shares were purchased to satisfy federal and state withholding obligations of our employees upon the settlement of restricted stock units, all in accordance with the applicable equity incentive plan.
Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs October 1-31, 2023 — — — — November 1-30, 2023 — — — — December 1-31, 2023 — — — — Total — — — — (1) During October 2023, November 2023, and December 2023, no shares were purchased to satisfy federal and state withholding obligations of our employees upon the settlement of restricted stock units, all in accordance with the applicable equity incentive plan.
During our fiscal years ended December 31, 2022 and 2021, we paid no dividends and made no other distributions in respect of our common stock. We have no plans to pay any cash dividends or make any other cash distributions in the foreseeable future.
During our fiscal years ended December 31, 2023 and 2022, we paid no dividends and made no other distributions in respect of our common stock. We have no plans to pay any cash dividends or make any other cash distributions in the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBelow is a reconciliation of adjusted net income and adjusted net income per share from net income (loss), which we believe is the most directly comparable US GAAP measure: Year Ended December 31, (In thousands, except share data) 2022 2021 Net loss $ (123,332 ) $ (10,059 ) Share-based compensation expense 4,092 4,761 Loss on early extinguishment of debt — 2,964 Accrued compensation expense for Put/Call Consideration — 3,213 Goodwill impairment 111,069 — Write-off of intangible assets 186 354 Loss on disposal of property and equipment 19 — Acquisition-related costs (1)(2)(3) 2,247 4,297 Restructuring and certain severance costs 414 230 Certain litigation and other related costs 11,079 1,808 Adjusted net income $ 5,774 $ 7,568 Adjusted net income per share: Basic $ 0.07 $ 0.09 Diluted $ 0.07 $ 0.09 Adjusted weighted average number of shares outstanding: Basic 81,412,595 79,977,313 Diluted 81,565,372 80,852,095 (1) Balance includes compensation expense related to non-competition agreements entered into as a result of an acquisition.
Biggest changeThe earn-out expense was $434 and $121 for the years ended December 31, 2023 and 2022, respectively. 24 Table of Contents Below is a reconciliation of adjusted net income and adjusted net income per share from net income (loss), which we believe is the most directly comparable US GAAP measure: Year Ended December 31, (In thousands, except share and per share data) 2023 2022 Net loss $ (63,218 ) $ (123,332 ) Share-based compensation expense 3,756 4,092 Goodwill impairment 55,405 111,069 Write-off of intangible assets — 186 Loss on disposal of property and equipment — 19 Acquisition-related costs (1) 2,745 2,247 Restructuring and certain severance costs 456 414 Certain litigation and other related costs (6,311 ) 11,079 Adjusted net income (loss) $ (7,167 ) $ 5,774 Adjusted net income (loss) per share: Basic $ (0.09 ) $ 0.07 Diluted $ (0.09 ) $ 0.07 Adjusted weighted average number of shares outstanding: Basic 82,622,131 81,412,595 Diluted 82,622,131 81,565,372 (1) Balance includes compensation expense related to non-competition agreements and earn-out expense incurred as a result of business combinations (see Note 13, Business acquisitions, and Note 14, Variable Interest Entity , in the Notes to the Consolidated Financial Statements).
We believe adjusted net income affords investors a different view of the overall financial performance of the Company than adjusted EBITDA and the US GAAP measure of net income (loss). Media margin, adjusted EBITDA, adjusted net income, and adjusted net income per share are non-GAAP financial measures with certain limitations regarding their usefulness.
We believe adjusted net income (loss) affords investors a different view of the overall financial performance of the Company than adjusted EBITDA and the US GAAP measure of net income (loss). Media margin, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per share are non-GAAP financial measures with certain limitations regarding their usefulness.
Adjusted net income is defined as net income (loss) excluding (1) Share-based compensation expense, (2) loss on early extinguishment of debt, (3) accrued compensation expense for Put/Call Consideration, (4) goodwill impairment, (5) write-off of intangible assets, (6) loss on disposal of property and equipment, (7) acquisition-related costs, (8) restructuring and other severance costs, and (9) certain litigation and other related costs.
Adjusted net income (loss) is defined as net income (loss), excluding (1) share-based compensation expense, (2) loss on early extinguishment of debt, (3) accrued compensation expense for Put/Call Consideration, (4) goodwill impairment, (5) write-off of intangible assets, (6) loss (gain) on disposal of property and equipment, (7) acquisition-related costs, (8) restructuring and other severance costs, and (9) certain litigation and other related costs.
Adjusted net income, as defined above, and the related measure of adjusted net income per share exclude certain items that are recognized and recorded under US GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded.
Adjusted net income (loss), as defined above, and the related measure of adjusted net income (loss) per share exclude certain items that are recognized and recorded under US GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded.
We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, and intellectual property rights. We may be required to draw upon our revolving credit facility in order to meet these future capital requirements.
We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights. We may be required to draw upon our revolving facility in order to meet these future capital requirements.
On an ongoing basis, Fluent evaluates its estimates, including those related to revenue recognition, recoverability of the carrying amounts of goodwill and intangible assets, share-based compensation, and income taxes.
On an ongoing basis, Fluent evaluates its estimates, including those related to revenue recognition, recoverability of the carrying amounts of goodwill and intangible assets, share-based compensation, income taxes, and contingencies.
All amounts below are presented in thousands. We believe the following critical accounting policies govern our more significant judgments and estimates used in the preparation of our consolidated financial statements.
All amounts below are presented in thousands. We believe the following critical accounting estimates govern our more significant judgments and estimates used in the preparation of our consolidated financial statements.
In line with industry practice, the unbilled revenue balance is recorded based on the Company's internally tracked conversions, net of estimated variances between this amount and the amount tracked and subsequently confirmed by customers. Substantially all amounts included within the unbilled revenue balance are invoiced to customers within the month directly following the period of service.
In line with industry practice, the unbilled revenue balance is recorded based on our internally tracked conversions, net of estimated variances between this amount and the amount tracked and subsequently confirmed by customers. Substantially all amounts included within the unbilled revenue balance are invoiced to customers within the month directly following the period of service.
Gross profit (exclusive of depreciation and amortization) represents revenue minus cost of revenue (exclusive of depreciation and amortization). Media margin is also presented as percentage of revenue.
Gross profit (exclusive of depreciation and amortization) represents revenue minus cost of revenue (exclusive of depreciation and amortization). Media margin is also presented as a percentage of revenue.
Once the internal use software is ready for its intended use, it is amortized on a straight-line basis over its useful life. 33 Table of Contents Finite-lived intangible assets are evaluated for impairment periodically, or whenever events or changes in circumstances indicate that their related carrying amounts may not be recoverable, in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets .
Once the internal use software is ready for its intended use, it is amortized on a straight-line basis over its useful life. Finite-lived intangible assets are evaluated for impairment periodically, or whenever events or changes in circumstances indicate that their related carrying amounts may not be recoverable, in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets .
This 2022 Form 10-K contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from any future results expressed or implied by such forward-looking statements.
This 2023 Form 10-K contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from any future results expressed or implied by such forward-looking statements.
We attract consumers at scale to our owned digital media properties primarily through promotional offerings where they are rewarded for completing activities within the platforms. To register on our sites, consumers provide their names, contact information and opt-in permission to present them with relevant offers on behalf of our clients .
We attract consumers at scale to our owned and operated digital media properties primarily through promotional offerings where they are rewarded for completing activities within the platforms. When registering on our sites, consumers provide their names, contact information, and opt-in permission to present them with relevant offers on behalf of our clients .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report on Form 10-K (“2022 Form 10-K”).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report on Form 10-K ("2023 Form 10-K").
Changes in recognition or measurement are reflected in the period in which the change in judgment occurs and we consult with external tax counsel as appropriate. Our accounting policy is to accrue interest and penalties related to uncertain tax positions, if and when required, as interest expense and a component of other expenses, respectively, in the consolidated statements of operations.
Changes in recognition or measurement are reflected in the period in which the change in judgment occurs and we consult with external tax counsel as appropriate. We accrue interest and penalties related to uncertain tax positions, if and when required, as interest expense and a component of other expenses, respectively, in the consolidated statements of operations.
If the carrying value of a reporting unit exceeds its fair value, the Company recognizes an impairment loss equal to the amount of the excess, limited to the amount of goodwill allocated to that reporting unit. For the quantitative factors, management utilizes a third-party valuation firm for certain assumptions and analysis including discount rate and market multiples.
If the carrying value of a reporting unit exceeds its fair value, we recognize an impairment loss equal to the amount of the excess, limited to the amount of goodwill allocated to that reporting unit. For the quantitative factors, management utilizes a third-party valuation firm for certain assumptions and analysis including discount rate and market multiples.
In accordance with ASC 350-40, Software - Internal-Use Software , we capitalize eligible costs, including applicable salaries and benefits, share-based compensation expense, travel expenses and other direct costs of developing internal-use software that are incurred in the application development stage, when developing or obtaining software for internal use.
We also capitalize eligible costs, in accordance with ASC 350-40, Software - Internal-Use Software , which include applicable salaries and benefits, share-based compensation expense, travel expenses and other direct costs of developing internal-use software that are incurred in the application development stage, when developing or obtaining software for internal use.
Deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
The Credit Agreement contains restrictive covenants which impose limitations on the way we conduct our business, including limitations on the amount of additional debt we are able to incur and our ability to make certain investments and other restricted payments.
The SLR Credit Agreement contains restrictive covenants which impose limitations on the way we conduct our business, including limitations on the amount of additional debt we are able to incur and our ability to make certain investments or to pay dividends or other restricted payments.
Contingencies The Company accounts for contingencies in accordance with ASC 450, Contingencies , by accruing a loss contingency if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
Contingencies We account for contingencies in accordance with ASC 450, Contingencies , by accruing a loss contingency if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
Factors that could cause or contribute to those differences include, but are not limited to, those discussed in the section titled "Cautionary Note Regarding Forward-Looking Statements" and in Part I, “Item 1A. Risk Factors” of this 2022 Form 10-K. Overview Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company"), is an industry leader in data-driven digital marketing services.
Factors that could cause or contribute to those differences include, but are not limited to, those discussed in the section titled "Cautionary Note Regarding Forward-Looking Statements" and in Part I, "Item 1A. Risk Factors" of this 2023 Form 10-K. Overview Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company"), is an industry leader in digital marketing services.
We differentiate ourselves from other marketing alternatives by our abilities to provide clients with a cost-effective and measurable return on advertising spend ("ROAS") (a measure of profitability of sales compared to the money spent on ads), to manage highly targeted and highly fragmented online media sources and to provide access to our owned digital media properties and technology platforms.
We differentiate ourselves from other marketing alternatives by our abilities to provide clients with a cost-effective and measurable return on advertising spend ("ROAS"), a measure of profitability of sales compared to the money spent on ads, and to manage highly targeted and highly fragmented online media sources.
These adjustments include litigation and other related costs associated with legal matters outside the ordinary course of business, including costs and accruals related to matters described above under Part III — Legal Proceedings.
These adjustments include litigation and other related costs associated with legal matters outside the ordinary course of business, including costs and accruals related to matters described above under Part I, Item 3 — Legal Proceedings.
Changes in assets and liabilities consumed cash of $3.8 million in 2022, as compared with consumed cash of $1.3 million in 2021, primarily due to ordinary-course changes in working capital, largely involving the timing of receipt of amounts owing from clients and disbursements of amounts payable to vendors . Cash flows used in investing activities .
Changes in assets and liabilities sourcing cash of $0.9 million in 2023, as compared with consumed cash of $3.8 million in 2022, primarily due to ordinary-course changes in working capital, largely involving the timing of receipt of amounts owing from clients and disbursements of amounts payable to vendors . Cash flows used in investing activities .
Recently Issued Accounting Standards See Note 2, Summary of significant accounting policies, under the caption " (r) Recently issued and adopted accounting standards" in the Notes to Consolidated Financial Statements for further information on certain accounting standards that have been adopted during 2022 or that have not yet been required to be implemented and may be applicable to our future operations. 34 Table of Contents Item 7A.
Recently Issued Accounting Standards See Note 2, Summary of significant accounting policies, under the caption " (r) Recently issued and adopted accounting standards" in the Notes to Consolidated Financial Statements for further information on certain accounting standards that have been adopted during 2023 or that have not yet been required to be implemented and may be applicable to our future operations.
We focus on improved monetization of consumer traffic through improved customer relationship management and internal capabilities that allow us to re-engage consumers who have registered on our owned media properties. Through these initiatives, our business has become less dependent on the volume of users to generate revenue growth.
These efforts continued in 2023, as we focused on improved monetization of consumer traffic through improved customer relationship management and internal capabilities that allow us to re-engage consumers who have registered on our owned media properties. Through these initiatives, our business has become less dependent on the volume of users to generate revenue growth.
Through AdParlor Holdings, Inc. (“AdParlor”), we conduct our non-core business which offers clients various social media strategies through the planning and buying of media on different platforms.
Through AdParlor, LLC ("AdParlor"), we conduct our non-core business which offers clients various social media strategies through the planning and buying of media on different platforms.
Goodwill is tested for impairment at the reporting unit level and is conducted by estimating and co mparing the fair value of each of the Company’s reporting units to its carrying value.
Goodwill is tested for impairment at the reporting unit level and is conducted by estimating and co mparing the fair value of each of our reporting units to their carrying value.
We have also been pursuing strategic initiatives that enable us to grow revenue with existing user traffic volume, while attracting new users to our media properties via email and SMS messages.
We also pursued strategic initiatives that enable us to grow revenue with existing user traffic volume, while attracting users to our media properties via email and SMS messages.
For more information regarding our lease obligations, refer to Note 4 of the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
For more information regarding our term loan, refer to Note 8 and Note 16 of the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K. For more information regarding our lease obligations, refer to Note 4 of the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
As of December 31, 2022, we had noncancelable operating lease commitments of $6.6 million and long-term debt which had a $41.3 million principal balance. For the year ended December 31, 2022, we funded our operations using available cash.
As of December 31, 2023, we had noncancelable operating lease commitments of $4.2 million and long-term debt which had a $31.3 million principal balance. For the year ended December 31, 2023, we funded our operations using available cash.
Income taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes , which requires the use of the asset and liability method of accounting for income taxes.
Income taxes We account for income taxes in accordance with ASC 740, Income Taxes , which requires the use of the asset and liability method of accounting for income taxes.
During the fourth quarter of 2022, the Company implemented reductions in the workforce that resulted in the termination of approximately twenty-one employees. These reductions in workforce were implemented following management’s determination to reduce headcount and decrease the Company's costs to more effectively align resources to the core business operations.
During the fourth quarter of 2022 and first quarter of 2023, the Company implemented reductions in the workforce that resulted in the termination of 21 and 20 employees, respectively. These reductions in workforce were implemented following management’s determination to reduce headcount and decrease the Company's costs to more effectively align resources to the core business operations.
This interpretation requires that an entity recognize in its financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized.
Further, we recognize in our financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized.
The costs also include enablement costs associated with our call centers and tracking costs related to our consumer data. In addition, there are indirect costs which include fulfillment costs related to rewards earned by consumers who complete the requisite number of advertiser offers, along with call center software and hosting costs.
In addition, there are indirect costs which include fulfillment costs related to rewards earned by consumers who complete the requisite number of advertiser offers, along with call center software and hosting costs.
The Credit Agreement provides for a term loan in the aggregate principal amount of $50.0 million funded on the Closing Date (the “Term Loan”), along with an undrawn revolving credit facility of up to $15.0 million (the "Revolving Loans," and together with the Term Loan, the "Credit Facility").
The original Citizens Credit Agreement provided for a term loan in the aggregate principal amount of $50.0 million funded on the Closing Date, along with an undrawn revolving credit facility of up to $15.0 million (together with the term loan, the "Citizens Credit Facility").
Valuation allowances are provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized, based on management's review of historical results and forecasts. ASC 740 clarifies the accounting for uncertain tax positions.
The valuation allowances are provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized, which is based on our review of historical results and forecasts.
While we may engage from time to time in discussions with respect to potential acquisitions, there can be no assurances that any such acquisitions will be made or that we will be able to successfully integrate any acquired business.
While we may engage from time to time in discussions with respect to potential acquisitions, there can be no assurance that any such acquisitions will be made or that we will be able to successfully integrate any acquired business with our then current business or realize anticipated cost synergies.
We are predominantly paid on a negotiated or market-driven “per click,” “per lead,” or other “per action” basis that aligns with the customer acquisition cost targets of our clients. We bear the costs of sourcing traffic from publishers for our owned digital media properties that ultimately generate qualified clicks, leads, calls, app downloads or customers for our clients.
We are predominantly paid on a negotiated or market-driven "per click," "per lead," or other "per action" basis that aligns with the customer acquisition cost targets of our clients. We bear the costs of acquiring traffic from publishers performance marketplaces that ultimately generate qualified clicks, leads, calls, app downloads, or customers for our clients.
We may also leverage our existing database into new revenue streams, including utilization-based models, such as programmatic advertising and call centers. We generate revenue by delivering measurable online marketing results to our clients.
We may also leverage our existing technology and database to drive new revenue streams, including utilization-based models ( e.g., programmatic advertising). We generate revenue by delivering measurable marketing results to our clients.
In connection with these reductions in workforce, the Company incurred $0.4 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by March 31, 2023. Subsequently, the Company implemented an additional reduction in workforce in the first quarter of 2023, this resulted in the additional termination of approximately twenty employees.
In connection with fourth quarter 2022 reductions in workforce, the Company incurred $0.4 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by March 31, 2023.
For the years ended December 31, 2022 and 2021, respectively, the amounts consisted primarily of employee salaries and benefits of $13.0 million and $11.0 million, professional fees of $2.4 million and $1.6 million, software license and maintenance costs of $1.6 million and $1.1 million, non-cash share-based compensation expense of $0.6 million and $0.9 million, and acquisition related costs of $0.0 million and $0.6 million, respectively.
Year Ended December 31, (In thousands) 2023 2022 % Change Product development $ 18,454 $ 18,159 2 % For the years ended December 31, 2023 and 2022, respectively, the amounts consisted primarily of employee salaries and benefits of $13.6 million and $13.0 million, software license and maintenance costs of $1.9 million and $1.6 million, professional fees of $1.7 million and $2.4 million, and non-cash share-based compensation expense of $0.6 million and $0.6 million, respectively.
For the years ended December 31, 2022 and 2021, net cash used in financing activities was $5.4 million and net cash provided by financing activities was $2.5 million, respectively.
Cash flows used in financing activities . For the years ended December 31, 2023 and 2022, net cash used in financing activities was $10.8 million and $5.4 million, respectively.
We leverage this data in our performance offerings primarily to serve advertisements that we believe will be relevant to users based on the information they provide when they engage with our sites, and in our data offerings to provide our clients with users' contact information so that our clients may communicate with them directly.
We then leverage their self-declared data in our performance offerings primarily in two ways: (1) to serve advertisements that we believe will be relevant to users based on the information they provide when they engage on our sites or other partner sites through our syndicated performance marketplaces and (2) to provide our clients with users' contact information so that such clients may communicate with them directly.
We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach.
We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach. We access these consumers through both our owned and operated digital media properties and our auxiliary syndicated performance marketplace products.
For the years ended December 31, 2022 and 2021, respectively, the amounts consisted of employee salaries and benefits of $14.4 million and $10.9 million, advertising costs of $1.1 million and $0.7 million, non-cash share-based compensation expense of $0.6 million and $0.8 million, and travel and entertainment expenses of $0.4 million and $0.1 million.
Year Ended December 31, (In thousands) 2023 2022 % Change Sales and marketing $ 18,576 $ 17,121 8 % For the years ended December 31, 2023 and 2022, respectively, the amounts consisted primarily of employee salaries and benefits of $15.8 million and $14.4 million, advertising costs of $0.9 million and $1.1 million, non-cash share-based compensation expense of $0.5 million and $0.6 million, and travel and entertainment expenses of $0.4 million and $0.4 million.
The following tables show our results of operations for the periods presented and express the relationship of certain line items as a percentage of revenue for those respective periods: Year Ended December 31, (in thousands) 2022 2021 Revenue $ 361,134 100 % $ 329,250 100 % Costs and expenses: Cost of revenue (exclusive of depreciation and amortization) 267,487 74.1 243,716 74.0 Sales and marketing 17,121 4.7 12,681 3.9 Product development 18,159 5.0 15,789 4.8 General and administrative 53,470 14.8 48,205 14.6 Depreciation and amortization 13,214 3.7 13,170 4.0 Goodwill impairment and write-off of intangible assets 111,255 30.8 354 0.1 Loss on disposal of property and equipment 19 0.0 — — Total costs and expenses 480,725 133.1 333,915 101.4 Loss from operations (119,591 ) (33.1 ) (4,665 ) (1.4 ) Interest expense, net (1,965 ) (0.5 ) (2,184 ) (0.7 ) Loss on early extinguishment of debt — — (2,964 ) (0.9 ) Loss before income taxes (121,556 ) (33.7 ) (9,813 ) (3.0 ) Income tax expense (1,776 ) (0.5 ) (246 ) (0.1 ) Net loss $ (123,332 ) (34.2 ) $ (10,059 ) (3.1 ) 28 Table of Contents Year ended December 31, 2022 compared to year ended December 31, 2021 Revenue.
The following tables show our results of operations for the periods presented and express the relationship of certain line items as a percentage of revenue for those respective periods: Year Ended December 31, (in thousands) 2023 2022 Revenue $ 298,399 100 % $ 361,134 100 % Costs and expenses: Cost of revenue (exclusive of depreciation and amortization) 219,884 73.7 267,487 74.1 Sales and marketing 18,576 6.2 17,121 4.7 Product development 18,454 6.2 18,159 5.0 General and administrative 35,334 11.8 53,470 14.8 Depreciation and amortization 10,876 3.6 13,214 3.7 Goodwill impairment and write-off of intangible assets 55,405 18.6 111,255 30.8 Loss on disposal of property and equipment — — 19 — Total costs and expenses 358,529 120.2 480,725 133.1 Loss from operations (60,130 ) (20.2 ) (119,591 ) (33.1 ) Interest expense, net (3,204 ) (1.1 ) (1,965 ) (0.5 ) Loss before income taxes (63,334 ) (21.2 ) (121,556 ) (33.7 ) Income tax (expense) benefit 116 — (1,776 ) (0.5 ) Net loss $ (63,218 ) (21.2 ) $ (123,332 ) (34.2 ) 26 Table of Contents Year ended December 31, 2023 compared to year ended December 31, 2022 Revenue.
The expected exit-related restructuring costs are expected to be approximately $0.4 million. Apart from these exit-related restructuring costs, these reductions in workforce are expected to result in corresponding reductions in future salary and benefit expenses primarily in product development and general and administrative expense. 29 Table of Contents Depreciation and amortization.
Apart from these exit-related restructuring costs, these reductions in workforce are expected to result in corresponding reductions in future salary and benefits within sales and marketing, product development, and general and administrative expenses. 28 Table of Contents Depreciation and amortization.
For the years ended December 31, 2022 and 2021, we recorded revenue of $361.1 million and $329.3 million , net loss of ( $123.3 ) million and ( $10.1 ) million, and adjusted EBITDA of $22.7 million and $23.2 million, respectively.
For the years ended December 31, 2023 and 2022, we recorded revenue of $298.4 million and $361.1 million , ne t loss of ( $63.2 ) million and ( $123.3 ) million, and adjusted EBITDA of $6.8 million and $22.7 million, respectively.
For awards with market conditions, the Company recognizes costs on a straight-line basis, regardless of whether the market conditions are achieved and the awards ultimately vest. For awards with performance conditions, the Company begins recording share-based compensation when achievement of the performance criteria is deemed probable. The Company recognizes forfeitures as they occur.
For equity awards with market conditions, we recognize costs on a straight-line basis, regardless of whether the market conditions are achieved and the awards ultimately vest. For equity awards with performance conditions, we record the share-based compensation when achievement of the performance criteria is deemed probable using the grant date fair value.
We deliver data and performance-based marketing executions to our clients, which in 2022 included over 500 consumer brands, direct marketers and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Wellness, Retail & Consumer, and Staffing & Recruitment.
In 2023, we delivered data and performance-based customer acquisition services for over 500 consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.
Once users have registered with our sites, we integrate our proprietary direct marketing technologies and analytics to engage them with surveys, polls, and other experiences, through which we learn about their lifestyles, preferences and purchasing histories. Based on these insights, we serve targeted, relevant offers to them on behalf of our clients.
Approximately 90% of th ese users engage with our media on their mobile devices or tablets. Once users have registered on our sites, we integrate our proprietary direct marketing technologies and analytics to engage them with surveys, polls, and other experiences, through which we learn about their lifestyles, preferences, and purchasing histories, among other matters.
Adjusted net income is also presented on a per share (basic and diluted) basis. 26 Table of Contents Below is a reconciliation of media margin from gross profit (exclusive of depreciation and amortization), which we believe is the most directly comparable US GAAP measure: Year Ended December 31, 2022 2021 Revenue $ 361,134 $ 329,250 Less: Cost of revenue (exclusive of depreciation and amortization) 267,487 243,716 Gross Profit (exclusive of depreciation and amortization) $ 93,647 $ 85,534 Gross Profit (exclusive of depreciation and amortization) % of revenue 26 % 26 % Non-media cost of revenue (1) 16,392 14,843 Media margin $ 110,039 $ 100,377 Media margin % of revenue 30.5 % 30.5 % (1) Represents the portion of cost of revenue (exclusive of depreciation and amortization) not attributable to variable costs paid for media and related expenses.
Below is a reconciliation of media margin from gross profit (exclusive of depreciation and amortization), which we believe is the most directly comparable US GAAP measure: Year Ended December 31, 2023 2022 Revenue $ 298,399 $ 361,134 Less: Cost of revenue (exclusive of depreciation and amortization) 219,884 267,487 Gross Profit (exclusive of depreciation and amortization) $ 78,515 $ 93,647 Gross Profit (exclusive of depreciation and amortization) % of revenue 26 % 26 % Non-media cost of revenue (1) 12,785 16,392 Media margin $ 91,300 $ 110,039 Media margin % of revenue 30.6 % 30.5 % (1) Represents the portion of cost of revenue (exclusive of depreciation and amortization) not attributable to variable costs paid for media and related expenses.
For the years ended December 31, 2022 and 2021, net cash used in investing activities was $5.4 million and $3.0 million, respectively. The increase was mainly due to the True North Acquisition that occurred in 2022 along with continued investment in internally developed software. 30 Table of Contents Cash flows (used in) provided by financing activities .
For the years ended December 31, 2023 and 2022, net cash used in investing activities was $7.1 million and $5.4 million, respectively. The increase was mainly due to the increase in investment in capitalized software along with the impact of the TAPP consolidation that occurred in 2023, compared to the True North Acquisition that occurred in 2022.
For the years ended December 31, 2022 and 2021, respectively, the amounts consisted mainly of employee salaries and benefits of $21.0 million and $19.5 million, certain litigation and related costs of $11.1 million and $1.8 million, professional fees of $6.0 million and $5.5 million, office overhead of $4.5 million and $4.4 million, non-cash share-based compensation expense of $2.9 million and $3.1 million, software license and maintenance costs of $2.4 million and $4.6 million, acquisition-related costs of $2.2 million and $3.7 million (see Note 13, Business acquisition , in the Notes to Consolidated Financial Statements), and accrued compensation expense related to the Put/Call Consideration from the Initial Winopoly Acquisition of $0.0 million and $3.2 million.
Year Ended December 31, (In thousands) 2023 2022 % Change General and administrative $ 35,334 $ 53,470 (34 %) For the years ended December 31, 2023 and 2022, respectively, the amounts consisted mainly of employee salaries and benefits of $18.5 million and $21.0 million, professional fees of $6.6 million and $6.0 million, office overhead of $4.3 million and $4.5 million, acquisition-related costs of $2.7 million and $2.2 million, non-cash share-based compensation expense of $2.6 million and $2.9 million, software license and maintenance costs of $2.6 million and $2.4 million, and certain litigation and related costs of ($6.3) million and $11.1 million.
Below is a reconciliation of adjusted EBITDA from net income (loss), which we believe is the most directly comparable US GAAP measure: Year Ended December 31, 2022 2021 Net loss $ (123,332 ) $ (10,059 ) Income tax expense 1,776 246 Interest expense, net 1,965 2,184 Depreciation and amortization 13,214 13,170 Share-based compensation expense 4,092 4,761 Loss on early extinguishment of debt — 2,964 Accrued compensation expense for Put/Call Consideration — 3,213 Goodwill impairment 111,069 — Write-off of intangible assets 186 354 Loss on disposal of property and equipment 19 — Acquisition-related costs (1)(2)(3) 2,247 4,297 Restructuring and certain severance costs 414 230 Certain litigation and other related costs 11,079 1,808 Adjusted EBITDA $ 22,729 $ 23,168 (1) Balance includes compensation expense related to non-competition agreements entered into as a result of an acquisition.
Below is a reconciliation of adjusted EBITDA from net income (loss), which we believe is the most directly comparable US GAAP measure: Year Ended December 31, 2023 2022 Net loss $ (63,218 ) $ (123,332 ) Income tax expense (benefit) (116 ) 1,776 Interest expense, net 3,204 1,965 Depreciation and amortization 10,876 13,214 Share-based compensation expense 3,756 4,092 Goodwill impairment 55,405 111,069 Write-off of intangible assets — 186 Loss on disposal of property and equipment — 19 Acquisition-related costs (1) 2,745 2,247 Restructuring and certain severance costs 456 414 Certain litigation and other related costs (6,311 ) 11,079 Adjusted EBITDA $ 6,797 $ 22,729 (1) Balance includes compensation expense related to non-competition agreements and earn-out expense incurred as a result of business combinations (see Note 13, Business acquisitions , and Note 14, Variable Interest Entity , in the Notes to the Consolidated Financial Statements).
(3) Included in year ended December 31, 2021 is a net expense of $3,201 related to the Full Winopoly Acquisition. 27 Table of Contents We present media margin, media margin as a percentage of revenue, adjusted EBITDA, adjusted net income, and adjusted net income per share as supplemental measures of our financial and operating performance because we believe they provide useful information to investors.
The earn-out expense was $434 and $121 for the years ended December 31, 2023 and 2022, respectively. We present media margin, media margin as a percentage of revenue, adjusted EBITDA, adjusted net income, and adjusted net income per share as supplemental measures of our financial and operating performance because we believe they provide useful information to investors.
To further increase our value proposition to clients and to fortify our leadership position in the evolving regulatory landscape of our industry, we implemented a Traffic Quality Initiative or TQI in 2020.
As our business has grown, we have attracted larger and more sophisticated clients to our marketplaces. To further increase our value proposition to clients and to fortify our leadership position in the evolving regulatory landscape of our industry, we implemented a Traffic Quality Initiative in 2020 and expanded into new syndicated performance marketplaces in 2023.
Furthermore, the Company elected the "right to invoice" practical expedient available within ASC 606-10-55-18 as the measure of progress, since the Company has a right to payment from a customer in an amount that corresponds directly with the value of the performance completed to date. The Company's revenue arrangements do not contain significant financing components.
Our customers simultaneously receive and consume the benefits provided, as we satisfy our performance obligations. Furthermore, we elected the "right to invoice" practical expedient available within ASC 606-10-55-18 as the measure of progress, because we have a right to payment from a customer in an amount that corresponds directly with the value of the performance completed to date.
See our audited consolidated financial statements and accompanying notes thereto appearing elsewhere in this 2022 Form 10-K, and for further discussion and analysis of our results of operations. For further discussion of adjusted EBITDA, including a reconciliation from net income (loss), see “ Definitions, Use and Reconciliation of Non-GAAP Financial Measures” below.
See our audited consolidated financial statements and accompanying notes thereto appearing elsewhere in this 2023 Form 10-K, and for further discussion and analysis of our results of operations.
The improved traffic quality being sourced is providing the foundation to support sustainable long-term growth and positioning us as an industry leader. Past levels of cost of revenue (exclusive of depreciation and amortization) may therefore not be indicative of future costs, which may increase or decrease as these uncertainties in our business play out. Sales and marketing .
Past levels of cost of revenue (exclusive of depreciation and amortization) may therefore not be indicative of future costs, which may increase or decrease as these uncertainties in our business play out. 27 Table of Contents Sales and marketing .
During 2022, we further increased our spend with major digital media platforms, revised our bidding strategies for affiliate traffic, and developed partnerships to expand traffic from social media platforms, including the growing influencer segment.
Sourcing high quality traffic will remain a focus and part of a broader initiative to improve customer acquisition for our clients. Starting in 2022, we increased our spend with major digital media platforms, revised our bidding strategies for affiliate traffic, and developed partnerships to expand traffic from social media platforms, including the growing influencer sector.
Volatility of affiliate supply sources, changes in search engine algorithms, email and text message blocking algorithms, and increased competition for available media made the process of growing our traffic volume under our evolving quality standards challenging during 2022 and we expect them to continue to be factors in 2023.
Since 2022, we have experienced challenges growing our traffic volume to our owned and operated properties due to several factors including the volatility of affiliate supply sources, changes in search engine algorithms, email and text message blocking algorithms, and increased competition for available media.
In addition, the All Other goodwill of $4,166 was also concluded to be impaired and the Company recorded a non-cash impairment charge of $669 in the fourth quarter of 2022, as well.
In addition, the All Other reporting unit's goodwill of $3,497 was also concluded to be impaired, and we recorded a non-cash impairment charge of $2,236.
On March 31, 2021, Fluent, LLC entered into a credit agreement (the “Credit Agreement”) by and among, Fluent, LLC, certain subsidiaries of Fluent, LLC as guarantors, Citizens Bank, N.A., as administrative agent, lead arranger and bookrunner, and BankUnited, N.A. and Silicon Valley Bank ("SVB").
On March 31, 2021, Fluent, LLC entered into a credit agreement (as amended, modified, extended, restated, replaced, or supplemented from time to time, the "Citizens Credit Agreement") with certain subsidiaries of Fluent, LLC as guarantors, the lenders thereto, and Citizens Bank, N.A. ("Citizens Bank") as administrative agent, lead arranger and bookrunner.
Results of Operations Summary Year ended December 31, 2022 compared to year ended December 31, 2021: • Revenue increased 10% to $361.1 million, from $329.3 million. • Net loss was $123.3 million, or $1.51 per share, compared to net loss of $10.1 million, or $0.13 per share. • Gross profit (exclusive of depreciation and amortization) of $93.6 million, an increase of 9% over December 31, 2021, and representing 26% of revenue. • Media margin increased 10% to $110.0 million, representing 30.5% of revenue, from $100.4 million. • Adjusted EBITDA decreased 2% to $22.7 million, based on a net loss of $123.3 million, from $23.2 million, based on net loss of $10.1 million. • Adjusted net income decreased $1.8 million to $5.8 million, or $ 0.07 per share, from $7.6 million, or $ 0.09 per share.
The way we measure media margin, adjusted EBITDA, and adjusted net income (loss) may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in our various agreements . 25 Table of Contents Results of Operations Summary Year ended December 31, 2023 compared to year ended December 31, 2022: • Revenue decreased 17% to $298.4 million, from $361.1 million. • Net loss was $63.2 million, or $0.77 per share, compared to net loss of $123.3 million, or $1.51 per share. • Gross profit (exclusive of depreciation and amortization) decreased 16% to $78.5 million, representing 26% of revenue, from $93.6 million, representing 26% of revenue. • Media margin decreased 17% to $91.3 million, representing 30.6% of revenue, from $110.0 million, representing 30.5% of revenue. • Adjusted EBITDA decreased 70% to $6.8 million, based on a net loss of $63.2 million, from $22.7 million, based on net loss of $123.3 million. • Adjusted net loss was $7.2 million, or $ (0.09) per share, compared to adjusted net income of $5.8 million, or $ 0.07 per share.
Based on the results from the interim test as of September 30, 2022, the Company concluded no further triggering events existed as of October 1, 2022 that would indicate it is more likely than not that the fair value was less that the carrying value for the Company.
Based on the results from the interim test as of September 30, 2023, we concluded no further triggering events existed as of October 1, 2023 that would indicate it is more likely than not that the fair value was less that the carrying value for our annual impairment test. 32 Table of Contents Intangible assets other than goodwill Intangible assets are initially capitalized based on actual costs incurred, acquisition cost, or fair value if acquired as part of a business combination.
While the Company continues to monitor the circumstances surrounding SVB, the Company does not expect the closure to have a material adverse effect on its liquidity. 31 Table of Contents Critical Accounting Policies and Estimates Management’s discussion and analysis of financial condition and results of operations are based upon Fluent's consolidated financial statements, which have been prepared in accordance with US GAAP.
Critical Accounting Estimates Management’s discussion and analysis of financial condition and results of operations are based upon Fluent's consolidated financial statements, which have been prepared in accordance with US GAAP.
The mix and profitability of our media channels, strategies, and partners is likely to continue to be dynamic and reflect evolving market trends. 25 Table of Contents Advertiser Trends & Seasonality We deliver data and performance-based marketing executions to our clients across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Wellness, Retail & Consumer, and Staffing & Recruitment.
Advertiser Trends & Seasonality We deliver data and performance-based marketing executions to our clients across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment. Both data and performance-based spend continued to be challenged in 2023 by general economic uncertainty.
If actual results are materially lower than originally estimated, it could result in a material impact on our consolidated financial statements in future periods.
Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. If actual results are materially lower than originally estimated, it could result in a material impact on our consolidated financial statements in future periods.
As new users register and engage with our sites and existing registrants re-engage, we believe the enrichment of our database expands our addressable client base and improves the effectiveness of our performance-based campaigns. Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences.
Based on these insights, we serve targeted, relevant offers to them on behalf of our clients. As new users register and engage with our sites and existing registrants re-engage, the enrichment of our database expands our addressable client base and improves the effectiveness of our performance-based campaigns.
Definitions, Use and Reconciliation of Non-US GAAP Financial Measures We report the following non-US GAAP measures: Media margin is defined as that portion of gross profit (exclusive of depreciation and amortization) reflecting variable costs paid for media and related expenses and excluding non-media cost of revenue.
Risk Factors — "Economic or political instability could adversely affect our business, financial condition, and results of operations," and "We are exposed to credit risks from our clients, and we may not be able to collect on amounts owed to us." for further discussion of current economic conditions. 23 Table of Contents Definitions, Use and Reconciliation of Non-US GAAP Financial Measures We report the following non-US GAAP measures: Media margin is defined as that portion of gross profit (exclusive of depreciation and amortization) reflecting variable costs paid for media and related expenses and excluding non-media cost of revenue.
In an effort to offset these challenges, we worked with a select group of advertisers in the Media & Entertainment sector to define high performing consumer segments and strategically price paid conversions to help clients drive higher Return on Ad Spend (“ROAS”) for our clients.
To offset these challenges, we continue to work with a select group of advertisers to define high performing consumer segments and strategically price paid conversions to help clients drive higher ROAS. This initiative has driven increased budgets from clients across the Media & Entertainment industry, which, collectively, represents a large component of our revenue mix.
To confront these headwinds, we will continue to diversify our client base and intend to further develop our “ROAS program” across additional segments of advertisers in an effort to gain additional budget allocations and further improve our user monetization. Current Economic Conditions We are subject to risks and uncertainties caused by events with significant macroeconomic impacts.
To confront these headwinds, we will continue to diversify our client base, and we intend to further develop our "ROAS program" across additional segments of advertisers in an effort to gain additional budget allocations and further improve our user monetization. We project improvement in the second half of 2024, but we cannot assure you that such improvement will occur.
Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired intangible assets, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
Such valuations require management to make significant estimates and assumptions with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired intangible assets, useful lives, and discount rates.
Based on the results of this recoverability test, which measured the Company's projected undiscounted cash flows as compared to the carrying value of the asset group, the Company determined that, as of June 30, 2022, September 30, 2022, and December 31, 2022, its long-lived assets were not impaired.
During the three months ended June 30, 2023 and September 30, 2023, we conducted an interim test of recoverability of its long-lived assets, which compared projected undiscounted cash flows to the carrying value of the asset group.
The Credit Agreement is guaranteed by us and our direct and indirect subsidiaries and is secured by substantially all of our assets and those of our direct and indirect subsidiaries, including Fluent, LLC, in each case, on an equal and ratable basis.
The anticipated opening interest rate of the SLR Credit Facility is 10.81% (SOFR + CSA + 5.25%). The SLR Credit Facility is guaranteed by us and certain of our direct and indirect subsidiaries and is secured by substantially all of our assets and those of certain of our direct and indirect subsidiaries, including Fluent, LLC.
For the year ended December 31, 2022, our cost of revenue increased $23.8 million, or 10%, to $267.5 million, compared to $243.7 million for the year ended December 31, 2021. Our cost of revenue primarily consists of media and related costs associated with acquiring traffic from third-party publishers and digital media platforms for our owned and operated websites.
Our cost of revenue primarily consists of media and related costs associated with acquiring traffic from third-party publishers, digital media platforms, and influencers for our owned and operated websites and purchasing media from syndicated publisher partners. The costs also include enablement costs associated with our call centers and tracking costs related to our consumer data.
The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions with respect to intangible assets.
Business combinations We record acquisitions pursuant to ASC 805, Business Combinations, by allocating the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and estimated fair values of intangible assets acquired. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.
This remained true in 2022, with digital media spend driven by strategic test and learn initiatives that began in the second quarter of 2022. The mix and profitability of our media channels, strategies and partners is likely to be dynamic and reflect evolving market dynamics.
The mix and profitability of our media channels, strategies, and partners is likely to continue to be dynamic and reflect evolving market trends and the regulatory environment.
Further details of the Company's accounting policies are available in Item 8, Financial Statements and Supplementary Data, Note 2, Summary of significant accounting policies , in the Notes to Consolidated Financial Statements.
Further details of the Company's accounting policies are available in Item 8, Financial Statements and Supplementary Data, Note 2, Summary of significant accounting policies , in the Notes to Consolidated Financial Statements. 31 Table of Contents Revenue recognition Data and performance-based marketing revenue Revenue is recognized when control of goods or services is transferred to customers, in amounts that reflect the consideration we expect to be entitled to in exchange for those goods or services, based on our performance obligation.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 35 Item 8. Financial Statements and Supplementary Data. 35 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 35 Item 9A. Controls and Procedures. 35 Item 9B. Other Information. 35
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The Company is not required to provide the information required by this Item as it is a "smaller reporting company," as defined in Rule 12b-2 of the Exchange Act. Item 8. Financial Statements and Supplementary Data.
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Our Consolidated Financial Statements and the Notes thereto, together with the report thereon of our independent registered public accounting firm, are filed as part of this report, beginning on page F-1. 33 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable.

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