Good day and welcome to the Inuvo Inc.'s 2020 Year End and Fourth Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Valter Pinto, Managing Director of KCSA Strategic Communications. Please go ahead.

Thank you, operator. Good afternoon. I would like to thank everyone for joining us today for the Inuvo fourth quarter and full year 2020 shareholder update call. Today, Inuvo's Chief Executive Officer, Richard Howe; and Chief Financial Officer, Wally Ruiz will be your presenters on the call. I'd like to start by letting listeners know that as of today and as a consequence of the COVID-19 pandemic, our office in San Jose, California remains closed. The Little Rock facility will continue to rotate small groups in and out of the office on a voluntary basis in a manner that permits the potential risk of infection through interaction with colleagues. We would also like to remind our shareholders that we anticipate filing our 10-K with the Securities and Exchange Commission this evening. Before we begin, I'm going to review the company's Safe Harbor statement. Statements in this conference call that are not descriptions of historical facts are forward-looking statements relating to future events and, as such, all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. When using this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions, as they relate to Inuvo, are such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ from those anticipated by Inuvo at this time. In addition, other risks are more fully described in Inuvo's public filings with the U.S. Securities and Exchange Commission, which can be reviewed at sec.gov. With that, I would now like to turn the call over to CEO Richard Howe.

Thank you, Valter, and thank you everyone for joining us this afternoon. For the three months ended December 31, 2020, we generated approximately $12.9 million in revenue, reflecting a 40% sequential increase. This continues the strong quarterly performance following Q3's 21% sequential growth, demonstrating the business's recovery from the impacts of COVID-19, which affected Inuvo significantly at its lowest point in May of the year. Of the $12.9 million, ValidClick contributed $9.3 million, a 48.5% increase sequentially, while IntentKey brought in $3.6 million, marking a 22% sequential rise. Although ValidClick was still down 40% year-over-year for the quarter, IntentKey saw a notable growth of 34% year-over-year in Q4. For the entire year, the company reported $44.6 million in revenue, representing a approximately 27% decline year-over-year. As previously highlighted, ValidClick, which accounted for about $34.2 million of the annual revenue in 2020, was the most affected by COVID-19. Nevertheless, as shown by the improvements in Q3 and Q4 trajectories in 2020, it is rebounding strongly. With no unforeseen COVID impacts expected, we anticipate ValidClick will return to its pre-COVID 2019 revenue run rate sometime in 2021. IntentKey achieved $10.4 million in revenue for the year, demonstrating a 22% growth year-over-year despite COVID-19, and we expect this segment to maintain double-digit growth rates into 2021. However, COVID-19 likely restrained IntentKey's growth rate in 2020. Both product lines cater to the marketing and advertising sector, which has experienced varying success across different sectors—some, like insurance and home refinancing, continue to thrive despite COVID, while others, like travel and entertainment, are lagging. We anticipate a return to a more stable market in the latter half of 2021 as vaccinations are administered widely. ValidClick's gross profit after traffic acquisition costs fell approximately 35% in 2020 due to the impact of COVID on revenue from that product line. In contrast, IntentKey's gross profit surged by nearly 90% in 2020, reflecting a steady growth in gross margins throughout the year. Adjusted EBITDA for the fourth quarter of 2020 was around $340,000, with a full-year loss of about $2.4 million. Historically, ValidClick has contributed significantly to cash flow and operates within a marketing model where the risk of collections is quite low, as most payables come due after receivables have been collected. The business saw over 100% growth in December compared to its low in May 2020. Crucially, our primary partnerships with Google and Yahoo! are robust, with one renewal completed in 2020 and the other in the process of being finalized. The challenges of COVID-19 have given us the chance to reevaluate our go-to-market strategy and revenue concentration for ValidClick, allowing us to build a stronger business for 2021 with a forward-looking focus. As a result, we have enhanced our direct marketing capabilities, leading to better control over traffic acquisition, tighter integration with our publishing platform, and positioning the business for sustainable recovery at higher margins. The revenue mix in ValidClick has shifted significantly in 2020 and will continue to evolve into 2021. By December 2020, approximately one-third of ValidClick's revenue was sourced from Google, one-third from Yahoo!, and one-third from other demand sources, compared to December 2019 when Yahoo! represented 70% of revenue for this product line. This is a substantial and positive diversification for the business, designed to allow scalability and improved margins. To execute these strategies effectively in 2021, we have assigned our chief operating officer a more hands-on role in the business and its key partnerships, making this one of his primary responsibilities this year. The market for our services is valued in the tens of billions of dollars annually, indicating significant growth potential and underscoring our capability to scale and exceed pre-COVID cash contributions. The IntentKey has continued to perform impressively for our clients throughout 2020. Our competitive tests indicate we are likely winning against competitors, and our objective now is to develop a world-class sales and account management team around this unique product. Our AI identifies audiences in near real-time that only we know exist, enabling us to engage those audiences on behalf of our clients ahead of the competition, resulting in superior performance. In 2020, we conducted 251 campaigns for clients, with around 40% stemming from new business this year. In the fourth quarter, we surpassed client campaign goals by 36% and exceeded the average goals by 46% for the year. These metrics indicate how much better the IntentKey performs compared to competitors. Throughout 2020, we attracted numerous new brands across various industries, showcasing our technology's versatility in identifying and reaching audiences regardless of client offerings. The launch of our software service version of the platform in 2021 significantly broadens the IntentKey's market potential, enabling clients who don't need fully managed services to utilize essential AI modeling and data aspects of this platform. We have since gained new clients in diverse sectors such as retail, nonprofit, automotive, casinos, pharmaceuticals, and tourism. The third and fourth quarters of 2020 yielded a record number of RFPs, and our pipeline looks robust in 2021. The ongoing COVID impact remains uncertain, but we expect Q1 to be our slowest period as marketers reassess their yearly budgets. Since our previous experiences have not accounted for combined business cycles and pandemic effects, we lack definitive guidance for this situation. Notably, we achieved significant technical advancements in 2020, putting us in a prime position for the future. One advancement was our real-time solution launch. Initially, while our AI could quickly identify audiences, the infrastructure supporting that AI needed enhancement for ad delivery to clients. We have now improved this connection, allowing us to process up to 100 billion transactions daily, enabling us to act on identified in-market audiences within five minutes, well ahead of competitors. Our technology was designed to be anonymous and independent of third-party cookies for targeting, although they remain in use. In 2020, we successfully tested and deployed a cookie-free version of our core AI engine, and we did not observe any significant changes in overall platform performance, which is promising and ensures our readiness for evolving privacy regulations. We anticipate these changes will emerge in 2022 but are well-prepared regardless of future developments. Additionally, we surpassed our projections with the launch of the SaaS version of IntentKey in January. Previously, we sold IntentKey as a managed service, which limited market access and excluded prospects wanting to run their own campaigns. Now, the SaaS version is set to expand our market potential and achieve higher gross margins. This product was tested with clients at scale in Q4 2020, prompting us to accelerate its launch in 2021, equipping our sales team to promote this alongside the managed service. Lastly, regarding our company strategy, we currently have about $18 million in cash, no debt, and an unused credit facility of up to $5 million. Our market capitalization has been around $200 million. Strategically, we aim to leverage our strong financial position to bolster the IntentKey's growth. To this end, we have engaged an investment banking firm to identify and evaluate potential acquisition candidates, including digital advertising agencies and consulting firms whose clients could benefit from the performance of the IntentKey. Many of our clients today are also digital marketing agencies, providing us valuable insights into their operations, making client-based acquisitions a strong strategy. This approach not only fosters client relationship growth due to expected performance improvements but may also enable us to eliminate costs tied to outdated technology in the acquired firms. This is likely to enhance margins in those businesses as well. We've validated this model on a small scale with a business we acquired in 2019, where we saw improvements in client retention and margins. Now, I will turn the call over to Wally for a detailed review of our financial performance in the quarter.

Thank you, Rich. Good afternoon, everyone. I will recap the financial results of our fourth quarter of 2020. As Rich mentioned, Inuvo reported revenue of $12.9 million for the quarter ended December 31, 2020, compared to $18.2 million reported in the fourth quarter of last year. The decrease in this year's revenue is due to lower ValidClick revenue, which in the fourth quarter of this year was $9.3 million, compared to $15.5 million in the same quarter of 2019. The lower ValidClick revenue was due to reduced advertising budgets associated with the COVID pandemic. Despite reporting lower year-over-year revenue, ValidClick's recovery began in June, following May's low, and by December of 2020, it was up 116% off that low. IntentKey revenue was 34% higher in the fourth quarter of this year compared to the same quarter last year. The IntentKey represents 28% of the overall fourth quarter revenue, compared to only 17% of the overall revenue in the fourth quarter of 2019. Inuvo gross margins increased in the fourth quarter to 83% compared to approximately 70% in the same quarter last year, due primarily to a decision to bring in-house historically outsourced campaign delivery services for ValidClick, which both improved cost-effectiveness and control. Additionally, IntentKey gross margins increased to 45% in the fourth quarter, compared to 41% in the prior year, contributing to the higher overall gross margin improvement. Going forward, we expect IntentKey gross margins to continue to improve, as we launched the SaaS version of the IntentKey, with margins expected to be in the neighborhood of 90%. Operating expenses were $12.6 million in the fourth quarter of 2020, compared to $14.1 million in the prior year’s quarter, a decrease of $1.5 million. The largest component of operating expense is marketing costs. Marketing costs are predominantly traffic acquisition costs associated with ValidClick, which is the largest expense associated with the ValidClick platform. Marketing costs were $8.3 million in the fourth quarter of this year, compared to $10.1 million in the fourth quarter of last year. The $1.8 million lower expense this year compared to last year is primarily due to lower ValidClick revenue, as well as to a decision to bring in-house traffic acquisition services to enhance control. Compensation expense was $2.4 million in the fourth quarter of this year compared to $2 million in the prior year’s quarter, due to higher employee salary costs. Our full-time employment was 71 employees at December 31, 2020, compared to 61 employees at December 31, 2019. The increase in the year-over-year headcount is due primarily to hiring traffic acquisition professionals as a result of bringing that function in-house, as already mentioned. This added cost is expected to be made up in the improved ValidClick net margin. We are actively recruiting for various positions with a focus on sales and account management professionals for the IntentKey, and we expect compensation expense to increase in 2021 as a result of that. Selling, general and administrative expense decreased to $80,000 in the fourth quarter, compared to the prior year, primarily due to $259,000 lower IT costs, where we completed the first phase of our computing facilities' consolidation program, saving over $600,000 for the entire year. We now have three data centers and are in the process of further consolidation with another data center closing very soon. The savings are related to the real-time project that Rich referenced in his remarks. This saving was partially offset by higher public company and legal expenses due to holding two shareholder meetings: a special meeting in October and a regular meeting in December. For our facilities, the pandemic has allowed us to reconsider our work policies and since our Little Rock facility was expiring, we recently decided to reduce the square footage by half to structure a go-forward model for employees that incorporates in-home and at-work components. We believe this is going to be the future for us. Net interest was $2,000 income in the fourth quarter of 2020, compared to $29,000 expense in the same quarter in 2019. We had other income of $1.1 million in the fourth quarter of this year, primarily due to the Small Business Administration forgiving our PPP loan, which we had acquired in April. Other income in the fourth quarter of 2019 was $92,000, associated with the change in the fair market value of the derivative liability associated with convertible promissory notes at that time. We reported a net loss of $715,000, or $0.01 per basic share, compared to $859,000, or $0.02 per basic share, in the fourth quarter of 2019. For the year, we had a net loss of $7.3 million, including $4.5 million of non-cash items like depreciation, amortization, and stock-based compensation. The adjusted EBITDA for the quarter ended December 31, 2020 was $347,000, compared to a loss of $574,000 in 2019. For the full year, we had an adjusted EBITDA loss of $2.4 million. As of December 31, 2020, we had cash and cash equivalents of $7.9 million and a net working capital of $5.8 million. The only debt at December 31 was $150,000 with an SBA loan, which we have since paid off. In addition, we have a $5 million working capital line of credit, which currently has no outstanding balance. We maintain a very simple capital structure with only common stock and employee restricted stock units granted through an equity incentive plan. In January, we completed two underwritten public offerings for $19 million shares of common stock, raising gross proceeds of $14,250,000. The additional funds will be used for working capital, building the IntentKey salesforce, and facilitating the acquisition strategy that Rich described. Recent capital raise activity has brought new institutional shareholders to the company, replaced all of our debt, and at the same time, our shareholders have enjoyed a rising stock price. With that, I'd like to turn the call back over to Rich.

Thanks, Wally. We've seen a steady upward trend in our business since its COVID impacted low points in May of this year, which gives us confidence that 2021 could be a good year for Inuvo. We've seen the ValidClick business recover quite strongly in Q3 and Q4 of 2020. It's not where we want it to be yet, but we would expect that business to be back to its 2019 financial performance in 2021, barring any remaining unforeseen COVID issues. And the IntentKey business continues to grow in 2020, despite COVID, and we would expect that business to continue growing into the future. We couldn't be more excited about the collection of technologies, results, and clients that we've amassed associated with that business. Finally, we see an opportunity to accelerate growth within the IntentKey while also taking advantage of our strong financial position by exploring acquisitions that might bring with them clients who meet the IntentKey Client Profile and we've retained an investment bank to help us execute on this strategy. With that, I would now like to turn the call over to the operator for any questions.

Thank you. We will take our first question from Brian Kinstlinger with Alliance Global Partners.

Hi, everyone, thank you for taking my questions. I have quite a few from the last few discussions, and then I’ll let someone else ask before I jump back in. My first question is about your mention of returning to pre-COVID levels with ValidClick this year. The comparisons for ValidClick have not improved much, as you are still down 40% year-over-year in December, which is a peak season similar to September. Will those year-over-year trends change during the current quarter, and what gives you confidence that the markets will return to pre-COVID levels quickly rather than gradually?

The trajectory of the business gives us the confidence that it will get back to where it was. The interesting thing about the COVID situation is it dropped quickly, but it doesn't recover as fast as it drops. But that being said, as I stated in my prepared remarks, the December revenue that businesses have seen is up 100% over the May low period. So that's a pretty steep trajectory for the business, and that's what gives us the confidence that it can get back to 2019 numbers, which I think were somewhere around $50-plus million for that business, again, with strong cash flows. This business has always been a very strong contributor to cash flow, so we feel pretty good about it.

But the current quarter should be weaker than December quarter, given the seasonality, right?

Well, the seasonality in that business has tended to be, the first half lower than the second half. It's a marketing-oriented phenomenon more than it is that business; it's an industry that is generally cyclical as well.

And then in past discussions, we've talked about your growth in IntentKey mostly coming from existing customers' increased usage or increased quiz campaigns. With ad budgets beginning to improve, are you finding new customers beginning to evaluate new ads? I know you mentioned that you're starting some new logos. When do you see that new customer acquisition beginning to improve?

It's starting already. I referenced the increase in the RFP productivity that we saw in Q3 and Q4, and then we're seeing that again here in Q1. It makes sense. If you think about 2020 with COVID, a new client for us who already has a provider might want to, in a COVID world, stay with what they have to mitigate risk and not take a look at something new, despite the fact that that new might be so much better. So there were two phenomena happening; they were using existing providers to mitigate risks while also trying to reduce budgets. This led to less new sales in 2020 than we had expected when we were projecting back in 2019 before we knew about COVID. But despite that, we signed a whole bunch of new clients. There was interest to get the best performance we could provide. And as things improve, we expect similar trends to continue.

Are some of those new clients starting to launch new campaign ads? And once you have a reasonable growth rate, should we see acceleration in that business?

I mean, I mentioned that we ran 250-something campaigns in 2020, with 40% of them being new campaigns. Those new campaigns are a result of both new clients and existing clients requesting new initiatives. That's a pretty healthy number in this environment. We couldn't be more bullish about this platform now that we've seen enough clients, case studies, and performance results as indicated in my prepared remarks. We continue to go head-to-head and win.

Do you think we'll see seasonality in this business as well in the first quarter, or because you're increasing the number of campaigns or increasing usage, is this business small enough right now to grow through seasonality in 2021?

It's hard to tell. At a high level, this business exhibits uncertainty in the first quarter, especially as brands finalize their marketing budget allocations. Given the pandemic's impact, it’s uncertain if this will affect their internal decision-making process. Regardless, we can confirm that we anticipate ending the year better than last year with this product.

We will take our next questions from Gary with ROTH Capital.

Hi, this is Dillon on behalf of Gary. Thank you for taking my questions. I wanted to inquire about the SaaS aspect of the IntentKey. Can you provide any insights on expanding your market reach? Additionally, what do you expect the balance of SaaS compared to your managed clients to be in 2020 in terms of percentage of revenue?

The first question is the quantification of the marketplace, you know, that we can play in, for both SaaS and managed service pieces somewhere near a $100 billion market. So, that’s a massive market. Clearly, having both a SaaS version and a managed service version opens us up to clients who wouldn't have bought it due to wanting control over their campaigns. I think in the future, it’s reasonable to expect that we might see a business where half the revenue is managed services and half is SaaS. This is typically how it goes when a SaaS version is offered. It tends to attract clients who prefer to manage it themselves, while still retaining many large clients for managed services.

What is the timeframe look like for monetizing some of those clients that you talked about being in beta? Is it few months? Is that ramp a second-half nature of ‘21?

We're done with the beta program now. We just completed the beta program in Q4, which is why we're excited. We got through it much quicker than expected. Our shareholders will remember that I had previously indicated we wouldn’t be marketing with our SaaS product until the second half of 2021. With the opportunity we seized in Q4, we were able to accelerate the launch. It’s ready to go, we know it works, and it scales effectively. We still have some internal work to do to support the SaaS product with training, but we are working on that now.

Are you seeing any specific strength in clientele connected to the giving sector, just where that market's been going over the past year?

Yes, we have seen strength and increased activity in connected TV RFPs, delivering quite a number of connected TV campaigns. This is a growing channel for us. The good news about connected TV is that it is one of the few products we know of where we can actually build audience capabilities. There are technical challenges with connected TV due to the way devices are designed, but we've worked around those challenges with our AI, data modeling, and have proven those capabilities in video and display as well. We believe this gives us an advantage, and we've seen strong results on those campaigns. We've also run our first connected radio campaigns, seeing good results as well.

Alliance Global Partners.

Two follow-ups, the first on the SaaS offering as it relates to go-to-market strategy. If you're targeting existing customers, will that cannibalize your existing revenue? How should we think about the larger upfront campaigns versus the revenue impact of maybe doing a monthly service? Does that mean lower revenue but much higher margins?

We're not targeting existing clients with the SaaS offering to avoid cannibalizing our existing revenue. Our strategy is to address different audiences; some clients simply do not want the managed service. Many of our existing clients chose to work with us because we provide managed services. Thus, it won't cannibalize revenue but rather create a net new stream.

Should we see OpEx growing from the fourth quarter, should we see it shrinking, or is it kind of flag noise as you think about those two things?

There will be more new employees that we’ll be bringing on, especially salespeople, while working from home. So we factored that into our considerations. There are three major components to operating expenses: marketing, compensation, and SG&A. We expect compensation to increase in 2021 based on our investment in the Salesforce. However, SG&A should remain relatively flat throughout the year.

Do you think the marketing costs will fluctuate with IntentKey and possibly with ValidClick?

Yes, we made significant decreases in our overall IT expenses over the year, saving around $600,000. It’s important for shareholders to understand the competitive advantage we have, primarily due to our reliance on AI rather than third-party data, which generally incurs ongoing costs. We don't have those costs. Our SaaS products and competitive positioning allow us to operate at a lower cost compared to others and certainly enhances our profitability.

Great. Thanks for taking the question.

I would now like to turn the conference back to your host for any additional or closing remarks.

That's great. Thank you very much, operator. Thanks everyone for joining us on the call today. We appreciate your continued interest in the company and look forward to catching up in the future.

That concludes today's presentation. Thank you for your participation. You may now disconnect.