Good day, and welcome to the Inuvo First Quarter 2022 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Natalya Velez, Investor Relations. Please go ahead.

Thank you, Operator. And good afternoon, everyone. I'd like to thank everyone for joining us today for the Inuvo first quarter 2022 shareholder update call. Today's presenters are Inuvo's Chief Executive Officer, Richard Howe, and Chief Financial Officer, Wally Ruiz. We would also like to remind our shareholders that we anticipate filing our 10-Q with the Securities and Exchange Commission this evening. Before we begin, I'm going to review the company's safe harbor statement. The 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 used in this call, the words anticipate, could, unable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to Inuvo Inc. 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 on www.sec.gov. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events, or circumstances after the date hereof that bear upon forward-looking statements. In addition, today's discussion will include references to non-GAAP measures. The company believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. With that, I'll now turn the call over to CEO, Richard Howe. Please go ahead, Rich.

Thank you, Natalya, and thanks everyone for joining us today. We had another very strong quarter where for the three months ended March 31, 2022, we delivered $18.6 million in revenue, which was up 75% year-over-year. Our trailing 12-month year-over-year growth rate now stands at an impressive 69%. Both product lines experienced significant growth in the first quarter, with IntentKey and ValidClick up roughly 280% and 24% respectively. To put this growth in perspective, in the prior year period, the IntentKey was roughly 20% of overall company revenues and ValidClick was 80%. In the current period, that split was 44% and 56% respectively. For those shareholders new to our story, the ValidClick platform delivers ads principally through social and search channels, while IntentKey delivers mostly connected television, online video, and display channels. Increasingly, the two platforms are used to deliver multichannel media solutions to joint clients. Our artificial intelligence technology influences decisions across channels. Typically within our industry, there is seasonality associated with media budgeting that generally leads to less advertising spending in the first half of the year versus the second half. Delivering $18.6 million in the first quarter sets the foundation for yet another strong year overall in 2022. Unaudited April revenues are coming in north of $7 million, which, if continued, would set the second quarter up nicely for a continuation of our strong year-over-year growth. As was mentioned on the year-end conference call, we have significantly reduced our revenue concentration risks. In Q1, our largest client represented 22% of our total revenues. In fiscal year 2019, 65% of our revenue was concentrated in a single client. Gross margins remained healthy in the first quarter at roughly 53.5%. Adjusted EBITDA was a loss of roughly $703,000. With the strong demand we are experiencing, the 2022 plan is to optimize for growth while keeping gross margins steady throughout the year to produce an overall positive adjusted EBITDA, which should also keep our cash and marketable securities roughly flat throughout the year. A positive adjusted EBITDA for the year would be a material improvement over the $2.1 million adjusted EBITDA loss we experienced in 2021. The balance sheet remains strong on March 31, 2022, with no debt and approximately $9 million in cash and marketable securities. The company is also in the final stages of securing an $8 million financing facility. The combination of cash, marketable securities, and financing availability means we are well-positioned to internally fund our growth and are therefore not currently in need of additional capital. Strategically, we could not be in a better position. The advertising market we serve is on the verge of a significant change. The consequence of which is almost certainly to be diminishing returns on approximately $200 billion worth of annual advertising spend that occurs across the open web. The catalysts for this change is privacy. The real issue behind privacy is the use of consumer data for target and brand marketing. This consumer data is the cornerstone of virtually every competing service and/or technology provider that serves this industry. This consumer centered view of marketing permeates every aspect of advertising. From what we can tell, the market remains ill-prepared and confused about the technical implications of this ensuing change. If you can't identify an individual, you can't attach data to that individual. And therefore, you can't make an advertising decision about that individual. This new paradigm for advertising is already playing itself out across Safari and Firefox, whose browsers control roughly 40% of the market. The advertising community is largely ignoring media within these browsers encountering web content. The reason they aren't bidding is because these browsers have already eliminated the cookies. In some cases, they have defaulted their browsers to hide IP addresses, which again means our competitors' technology can no longer identify the consumer. This, in turn, suggests our competitors' advertising technologies still lack the means to make educated decisions about whether to show their clients ads when these browsers are present. In many cases, they are simply opting to ignore the ad inventory entirely. This is a precursor for what will occur in 2023 when Google, who owns roughly 50% of the U.S. browser market, follows suit. The IntentKey is already taking advantage of this disruption by purchasing iOS inventory at attractive prices on behalf of our clients. Optimizing our business for growth now allows us to capture as much of this early adopter market share prior to the industry change, while also setting ourselves up for the more important post-change period, when we believe advertisers will be experiencing significant performance degradation that we can then capitalize upon competitively. We continued to add new clients in the quarter while growing existing clients. Performance has now exceeded, on average, client goals by over 50% for the last nine straight quarters. We ran our largest campaign to date in the first quarter, and we rolled out a custom performance dashboard reporting capability for many of our key clients. The growth and the demand of an increasing client base have identified product and process opportunities. One of the challenges with our technology is succinctly presenting in an automated fashion the insights being generated by the artificial intelligence. The product team is in the process of rolling out a graphical user interface into these insights in the second quarter that we believe will be a game-changer for our clients and prospects, ultimately making it easier to visualize and action the audience groups the AI is exposing as potential opportunities. We hired an experienced head of sales in the first quarter, and we recently had our first company-wide sales rally in two years, the delay being a consequence of COVID. Our sales teams have once again started attending more in-person events. We are the premier sponsor for our first-ever conference on artificial intelligence in advertising, which is now scheduled for June 8 at the brand new Hard Rock hotel in New York City. We have also been invited to and will be attending the prestigious Cannes Lions Festival of Creativity in late June. Collectively, these tactics are designed to raise the awareness of our company and its solutions within our markets ahead of the 2023 date when Google makes the final changes to its browser. As was mentioned on the year-end call, we now have many clients where we are the multi-channel advertising product and service provider. The ability to meet this market need is only possible because of the skills we have developed within ValidClick. In the fourth quarter, 11.5% of overall revenues were generated because of the ValidClick services offered to IntentKey clients. That number has risen to 14% in the first quarter. I would now like to turn the call over to Wally for a more detailed assessment of our financial performance within the quarter.

Thank you, Rich. Good afternoon. I'll recap the financial results of our first quarter of 2022. As Rich mentioned, Inuvo reported revenue of $18.6 million for the quarter ended March 31, 2022, an increase of 75.3% compared to $10.6 million reported in the first quarter of the prior year. Both platforms, ValidClick and IntentKey, exceeded the prior year. ValidClick revenue exceeded the first quarter of last year by 24%. And the IntentKey revenue exceeded the prior year quarter by approximately 280%, primarily due to the addition of new customers. Revenue split between IntentKey and ValidClick was 44% versus 56%, respectively, in the current period and that compares favorably to the 20% and 80%, respectively, in the same period of last year. We expect the IntentKey revenue to continue to grow as a percent of total revenue. Our revenue was less concentrated in 2022 than ever before. Our largest client represents 22% of our total revenue in the quarter and is a retail consumer product manufacturer and marketer. The same quarter last year, our largest client, Google, represented 40% of our revenue. Though Google remains an important customer, in the current year quarter, it represented only 14% of the total revenue. Gross profit for the first quarter ended March 31, 2022, totaled $9.9 million as compared to $9.2 million for the same period last year. Gross profit margins for the first quarter of 2022 were 53.5%, as compared to 86.3% in the same period last year. The IntentKey platform has lower gross margins than the ValidClick platform, but has a greater overall net margin. The Inuvo gross margin decreased as IntentKey revenue became a greater percentage of the total revenue. In quarters past, cost of revenue was predominantly payments to website publishers and app developers that hosted advertisements we serve through the ValidClick platform, yielding a very high gross margin. Though this continues to be the case, serving ads to web publishers is a significantly smaller percent of our business today. As the IntentKey gains market recognition and share, it becomes a larger percent of our revenue and cost of revenue. IntentKey cost of revenue was predominantly payments to advertising exchanges that provide access to a supply of advertising inventory, where we serve advertisements using information predicted by the IntentKey platform. This is a greater cost than payments to publishers, but at the same time, it is more profitable. The very high ValidClick gross margin serving publishers comes at a high cost of traffic acquisition that can be found in the marketing costs. The IntentKey is not burdened by such costs. Our gross margins are also dependent on the advertising channels serving the client. Many of our clients require a multi-channel digital media solution. One of our advantages is the ability to serve highly targeted prescriptive ads across multiple channels, such as video, mobile, connected TV, linear TV, display, social, search, and native. Each of these channels yield varying gross margins depending on supply and demand. The optimization of the media mix for clients can vary from client to client and vary over time. Generally speaking, search and social are lower-margin channels, as we have to work within the walled gardens of large internet platforms. We have better opportunities for margin expansion in other channels in the open web. We expect Inuvo gross margins for the remainder of the year to be roughly in line with where we are today in the first quarter. Operating expenses were $12.1 million in the first quarter of 2022 compared to $11.8 million the prior year, an increase of $285,000. The largest component of operating expenses is marketing costs. Note that as I previously mentioned, marketing costs are predominantly traffic acquisition costs associated with our owned and operated websites. Marketing costs were $7.2 million in the first quarter of this year compared to $7.3 million in the same quarter last year. Marketing costs as a percent of revenue will continue to decline as serving ads to owned and operated properties will be a lower percent of Inuvo's operations going forward. Compensation expense was $3.2 million in the first quarter of this year compared to $2.7 million in the prior year, primarily due to higher employee salary costs and higher stock-based compensation expense. Our full-time and part-time employment was 84 at the end of March of this year. That compares to 77 at the end of March of last year. The majority of the increase in head count occurred in sales, sales support, and account management for the IntentKey. As anticipated, selling, general, and administrative expense remained flat in the first quarter this year compared to the same quarter last year. Net interest expense was $1,000 in the first quarter of this year compared with $22,000 expense in the first quarter of last year. We had other income of approximately $18,000 in the first quarter of this year due to an unrealized gain in marketable securities. We reported a net loss of $2.1 million or $0.02 per basic share compared to $2.1 million net loss or $0.02 per basic share in the same quarter last year. Non-cash expenses totaled approximately $1.4 million in the quarter. The adjusted EBITDA loss for the quarter ended March of this year was $703,000, compared to a loss of $878,000 last year. The prior-year period included a one-time other income benefit of $470,000. On March 31 of this year, we had cash and cash equivalents and marketable securities of $9 million. We have a networking capital of $11.2 million. Additionally, we have a working line of credit of $5 million, which we currently have no outstanding balance. We maintain a simple capital structure with 119.8 million common shares outstanding, 5.3 million employee restricted stock units outstanding through an equity incentive plan, and 300,000 warrants to purchase common stock. With that, I'd like to turn the call back over to Rich.

Thanks, Wally. At 75% year-over-year growth, we had a very strong start to the 2022 year. Our trailing 12-month growth rate remains robust. With April's unaudited revenue coming in north of $7 million, we would expect second-quarter growth year-over-year to also remain strong. With over $200 billion in annual advertising spend across the open web, we plan to capitalize on this unprecedented change that is underway within the industry as a means to rapidly gain market share and establish a dominant market position. We have proprietary technology that has proven itself to be superior time and again, complemented by a transformational market catalyst for which that technology was indeed designed. Our balance sheet is currently strong enough to accommodate the working capital needs of this growing business. As a result, we have no immediate plans to raise capital. I will now turn the call over to the operator for questions.

Thank you. Our first question comes from Jack Vander Aarde of Maxim Group.

Hi, this is Jack C. calling for Jack Vander Aarde. Thank you for taking my questions. On IntentKey, rather, I think in Q4, you referenced growth being accelerated by bigger clients with bigger budgets. Can you speak on that trend and give any color on client retention and renewal? Thank you.

That trend continues. Yes, we're signing clients up now who decide for which is material. By material, I mean, in the $250,000 to $1.5 million a month range, which is where we expected to be ultimately with the product as part of its evolution. That's a big positive. As we've said in the past, we rarely lose clients. When we do lose them, it's almost always because we were doing business with an agency that lost the client.

Yeah. That's amazing. I was kind of wondering how you're feeling on new customer orders coming in for Q2 '22 and the rest of '22. And also wondering if you're seeing any further pickup in terms of IntentKey SaaS revenue?

Yeah. Clearly, demand continues to be strong within the company. I think that's probably most notable by the performance that we saw year-over-year for the first quarter. As I pointed out in my script, April came in north of $7 million, which, if you just flatten it out, indicates that the growth trend year-over-year would continue compared to the $12.6 million we did in the second quarter of 2021. So that's the best indication I can give you about adding new clients and the demand for the products and services. The second question I forgot, forgive me.

Yeah. I'm just wondering if there are any material changes in the SaaS revenue part of the business?

No, nothing changing there. We're adding SaaS clients slowly. But there's so much demand for the full-service capability that we see a continuation of the majority of the growth, at least for the foreseeable next 12 months, coming from services. It’s not because we couldn't be selling the SaaS version of the product; it's just we can only focus our attention in so many places right now, and there's a lot of demand on the services side, so we're focusing there.

I understand. Can I ask one last question? Many tech companies are having difficulty finding talent. While it seems this is not impacting your revenue generation, are you experiencing any challenges in acquiring sufficient talent?

The labor market is tight and the salaries, all-in, with benefits and whatnot, for sure are moving up, and yes, it's harder to find and hire qualified talent. Probably about as hard as I've seen it in decades. That being said, it's not slowing us down, and we're still hiring. The good news with the way our model works right now, we've got a very strong overall engineering and data science team, and we really don't need a lot more people on those teams. Don't get me wrong. We're still hiring on those teams, but it's not a situation where we suddenly need 40 more data scientists or engineers. We can probably solve that problem. The place where we're growing our resources is really on the sales account management and marketing areas of the go-to-market component of our business, where we just need more bodies and more awareness in the marketplace. And those positions are also harder to find and hire right now, but they're not nearly as hard as the engineers. That gives you some perspective.

Yes, that's amazing. I appreciate the color, and I'll hop back in the queue.

Thank you.

And the next question comes from Nicole Kaufman, of Black Rich Capital.

Hi, guys. Thanks, and congratulations on the strong growth in the first quarter. So I know you talked about it a bit during the call, but how big is the problem when cookies go away? And specifically as it relates to Google, which is really the 900-pound gorilla in the space? Along those lines, can you talk about how companies are preparing?

Yes. Thank you, Nicole. The market problem is substantial, and it's a little bit like the ostrich with its head in the sand. As we canvas the marketplace and we talk to CMOs and heads of agencies, it doesn't seem they fully understand the implications of the changes that are coming. We surmise that this is in large part because the existing vendors that are serving those clients are telling them that they've got the situation under control, which we believe to not be the case, based on our experience. One reason people don't understand is that fundamentally, it's a very technical thing that’s going on. It very much attacks the foundation of the way marketing is done, which makes it a transformational change. We see acceleration of demand in part because the early adopters of change are starting to realize they should do something. And we expect in 2023 when Google finally does make the shift in their browser, that our demand will only increase at that point because all the companies that are being served by existing providers, who have been telling them they have it solved, will realize the truth. We expect the performance to degrade, and then we can step in and provide those clients with a solution that performs even better than what they used to have before the cookie and the IP address were relied upon.

Thank you, I appreciate that color. I'll hop in the queue if I have another question.

Thank you.

No further questions at this time.

All right. Thank you very much, Operator. And I'd like to thank everybody who joined us on today's call. We appreciate your continued interest in our company.

Ladies and gentlemen, that concludes today's conference call. We thank you for your participation. You may now disconnect.