Good afternoon ladies and gentlemen and welcome to the Inuvo, Inc. Second Quarter 2023 Conference Call. At this time, note that all participants are in a listen-only mode. But following the presentation, we will conduct a question-and-answer session. Also note that the call is being recorded on Thursday, August 10th, 2023. And I would like to turn the conference over to Natalya Rudman, Investor Relations. Please go ahead.

Thank you, Sylvie. Good afternoon everyone. I'd like to thank everyone for joining us today for Inuvo's second quarter 2023 shareholder update call. Today, Inuvo's Chief Executive Officer, Richard Howe; and Chief Financial Officer, Wally Ruiz, will be your presenters on the call. We would also like to remind our shareholders that we filed our 10-K with the Securities and Exchange Commission this afternoon. 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, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to Inuvo Inc. are, as 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 US Securities and Exchange Commission, which can be reviewed at 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 out of the way, I'll now turn the call over to CEO, Richard Howe. Go ahead, Rich.

Thank you so much, Natalia. Thank you everybody for joining us today. We are pleased to report that for the quarter ended June 30th, 2023, Inuvo revenue has grown 40% sequentially, having delivered $16.7 million in revenue as compared to $11.8 million in the first quarter. On a year-over-year basis, Q2 2023 was down roughly 26%. However, as I will discuss later in my closing remarks, current trends suggest that we could be back to year-over-year growth within the third quarter. We had a roughly $1.8 million adjusted EBITDA loss in the quarter and while it's yet not audited, the July and August trends for revenue and adjusted EBITDA have continued to improve as we head into the typically stronger second half of the year. At 86%, gross margins were quite strong at the end of the quarter. Also, as reported at the end of May, we raised an additional $4 million within the quarter. As a result, we have a strong solid balance sheet with approximately $5 million of cash and cash equivalents, no debt, and an unused borrowing facility of $5 million, which provides us with the resources to support our aggressive growth strategy. Let me now turn to some of the operational highlights. In 2021, we began working with one of our larger indirect clients on a new product they were planning to launch. Throughout 2022, we were beta testing media performance associated with that product and building out the various custom capabilities required to support the anticipated growth and deliverables associated with the launch. The project was launched at the beginning of 2023. The scalability potential of this initiative is now reflected within the increase in our indirect sales, which represented roughly 80% of overall revenue in the second quarter. Included in this development project for Inuvo was the design of a system for the customization and enhancement of landing pages that has led to improvements in conversion and performance. Concurrently, and also as part of this initiative, we made investments that have improved our media buying tools and supporting infrastructure. These collective capabilities become increasingly important, as the demand for these kinds of marketing services continues to grow. Client inquiries have also required the scalability of content and ad copy, including video. We have adopted several AI-based third-party tools for these services that have significantly decreased the resources required to deliver these capabilities, while also allowing us to leverage this development for future customers. Across our client base and excluding our largest customer, we are currently delivering roughly 80 revenue-generating campaigns, 20 of which are new in the quarter. Performance against client KPIs remains very strong across these campaigns. We added 10 new advertisers to the Inuvo roster in the second quarter, across industries that include financial services, entertainment, government, and travel and tourism. As we have stated in the past, we've yet to find an industry where the IntentKey has not been able to perform. Notably, we also had two clients return to Inuvo during the quarter. Those clients cited the insights generated by our AI, combined with our support as the key reasons behind their return. Throughout 2023, we have seen a steady increase in the frequency of articles and interviews that feature Inuvo. Most recently, we were interviewed for a national segment on Artificial Intelligence within advertising, on Yahoo Finance. Collectively, we have been interviewed and/or cited at least a dozen times already this year in notable publications like AdExchanger, Digiday, MediaPost, and more. In our home state, Arkansas business had an excellent cover story about our company and how we are changing the advertising paradigm. We've continued to increase the number of associates within the sales, marketing, and account management teams; the total number within that organization now stands at 21. At the end of the second quarter, we had 84 associates. Leading our go-to-market strategy and execution, and a member of the executive team is our newly appointed President, Barry Lowenthal. Barry brings a significant collection of knowledge, experience, and relationships across the advertising industry, having most recently been the CEO of the agency The Media Kitchen. Among various considerable successes includes the distinction of having been a founding member of one of the industry's first programmatic advertising trading desks. As mentioned in the announcement regarding Barry's appointment, Inuvo is at an important milestone in its evolution. We were well ahead of the competition with our vision that using consumer data and identity for advertising was to become obsolete. In the nearly six years since we started building out our large language model generative AI to meet that future, various governmental and technological changes have made this prediction a virtual certainty. Technologically, Apple has been systematically incorporating changes designed specifically to eliminate all methods used to identify consumers. They now, for example, allow their users to access a private VPN, which obfuscates the consumer's IP address. They have completely eliminated third-party cookies, which has been the place where identity has historically been stored. They now allow their users to generate Alias email addresses. And in their latest iOS release, have now also added changes that prevent consumer tracking within the URL address. Legislatively, the general data protection regulations in Europe were enacted in 2018, followed shortly thereafter by the California Consumer Privacy Act, and now there are at least 11 states with consumer data privacy laws and in other states with five of them actually with active bills heading through the legislature. Barry's short-term mission is to ensure we have the pipeline, organization, products, and services to meet the growing demands of this changing industry. Specifically for the identification and targeting of audiences without identity, we remain many years ahead of any other comparable solution. As a technology company at the forefront of artificial intelligence, we continue to make significant product advancements. We launched an enhanced version of our client that includes an integration with ChatGPT. We launched the first online portal, where any audience can be generated on-demand for any product, service, or brand. We designed the first-of-its-kind AI system that predicts suitable television programs based on the reasons behind why audiences are interested in any brand, and we made generally available a significant advancement in machine learning, wherein our AI can now predict and report the performance contribution of media across channels. This latter development addresses the number two industry challenge behind finding and targeting audiences, facing marketers in a keyless privacy-first future. All of these developments and many more to come are increasing the technological barriers between Inuvo and its competitors. I would now like to turn the call over to Wally for a more detailed assessment of our financial performance within the quarter. Wally?

Thank you, Rich. Good afternoon. I'll recap the financial results of our second quarter of this year 2023. As Rich mentioned, Inuvo reported revenue of $16.7 million for the quarter that ended on June 30, 2023. That is $6 million lower than the $22.7 million reported in the second quarter of last year. As has been discussed in prior calls, the lower revenue this year was due mostly to the loss of a direct customer in the fourth quarter of last year. Due to the loss of that customer, and as Rich discussed, the launch of a new product with an indirect customer, the revenue mix has changed. This year's second quarter revenue was composed of 80% from indirect customers compared to 46% last year. The change in revenue mix has had a positive impact on gross margins. As we expect revenue from our indirect customers to continue to grow, this revenue mix should persist for the remainder of the year. Cost of revenue was $2.4 million in the second quarter of 2023 compared to $9.3 million in the same quarter last year. Cost of revenue is predominantly payments to advertising exchanges that provide access to a supply of advertising inventory into which we serve advertisements using information predicted by the IntentKey artificial intelligence. These advertisements are placed on behalf of our clients. Gross profit for the second quarter that ended June 30, 2023, totaled $14.3 million as compared to $13.4 million in the same period last year. Gross profit margin for the second quarter of 2022 was 86% as compared to 59% for the same period last year, reflecting the higher margins of the indirect customer business. We expect Inuvo's gross margins for the remainder of the year to be roughly in line with the results of this quarter. Operating expenses were $17.6 million in the second quarter of 2023 compared to $16.2 million in the prior year, an increase of $1.4 million. We had roughly $1.6 million of these operating expenses that were non-cash-based expenses. The largest component of operating expense is marketing costs. Marketing costs are predominantly traffic acquisition costs, which were $12.1 million in the second quarter of this year compared to $11 million in the same quarter last year. Going forward, we expect marketing costs as a percentage of revenue to continue at a similar pace as in the second quarter of this year. Compensation expense was $3.3 million in the second quarter this year compared to $3.2 million in the prior year, primarily due to higher employee salary costs. Our full-time and part-time employment was 84 individuals on June 30, 2023, compared to 83 at June 30 of last year. The majority of the increase in headcount occurred within sales, sales support, account management, and corporate administration with the hiring of a President. General and administrative expense increased by $301,000 in the second quarter of this year compared to the prior year due to higher doubtful account allowance depreciation, amortization expense, and professional fees. This was partially offset by lower marketing expenses and lower travel and entertainment expenses. Net financing costs were $38,000 in the second quarter of 2023, compared to $3,000 of income in the same quarter last year. The expense is primarily associated with the maintenance of the line of credit that we have and various IT equipment leases that we also have. We reported a net loss of $3.4 million or $0.03 per basic share, compared to a $3.2 million net loss or $0.03 per basic share in the same quarter last year. As of June 30, 2023, we had cash and cash equivalents of $5 million and net working capital of $2 million. In addition, we have a $5 million working capital line of credit that had no outstanding balance at June 30. During the quarter, we raised $4 million in gross proceeds in a registered direct offering through the sale of an aggregate of 16 million shares of our common stock. In addition, in April, we sold 174,000 shares under an at-the-market agreement with an investment banking firm. We maintain a simple capital structure with 138 million common shares outstanding, 6.9 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 for closing remarks.

Thanks, Wally. We had strong sequential growth for the quarter, up 40% to $16.7 million. Within the first half of the year, we continued to make significant advancements both in the technology and services that will be required to scale our company. And we have an initiative with one of our larger clients that is scaling. Consequently, we are forecasting to be back to year-over-year growth within the third and fourth quarters of 2023, and we expect to turn the corner to positive free cash flow within the second half of the year. Both June and July unaudited revenue were up double digits year-over-year. We will continue to invest in sales and awareness programs so we can capitalize on the demand associated with the changing market, driven by privacy concerns from government, technology, and consumers. To this end, we've also recently retained a well-respected New York-based PR firm to help us capitalize on this growing demand for information related to artificial intelligence and its applicability to the privacy challenge facing the advertising industry. I will now turn the call over to the operator for questions.

Thank you, sir. And your first question will be from Brian Kinstlingler at Alliance Global Partners. Please go ahead.

Hi there. This is Sharmin on for Brian. Congrats on a nice quarter.

Thank you.

Could you talk about how the continued pressure in the ad market is impacting IntentKey? Is it translating to longer sales cycles still or smaller campaign sizes? And are you seeing any signs of improvement?

Brian, it's always difficult at our size to try to put your finger on whether this is a challenge for us or not. I mean by that it’s like whatever $80 million in revenue. We're not big enough, yes, where we can experience the kind of challenges you might, if you’re a $0.5 billion company with clients who are spending, who knows $50 million, $60 million. So we're not seeing much change at all with regard to what we're doing. The sales cycles are pretty much staying the same. It takes longer to sell direct clients. Indirect clients can take probably no less than three months, often six months. So yes, that's kind of our perspective on it right now. And we do have a bit of a unique position, and I spoke on this before, but the catalyst that is privacy is not going away. So regardless of what happens regarding media spend overall, advertisers have to solve this problem in the ensuing next, let's call it, 24 months. And we've always believed that this time would come and that should continue to create demand for us.

That makes sense. Next question. Last quarter, you underlined that your close rates are efficient, but the struggle is being able to get a foot in the door. How are things progressing in this space? With sales and marketing, you said remaining elevated, are you planning to increase your sales headcount in the coming quarters? And should we expect Barry’s oversight to drive an increased mix of direct sales starting next year?

Maybe I'll address the last question first. Our main focus from a sales perspective has always been to support the agencies with budgets, and Barry, as expected, has taken a deep dive into that area, which is why we brought him on board. He is very focused on that sales channel, which aligns perfectly with what we have established. But what was the first question? I apologize, Brian, I missed it.

Last quarter, you mentioned that getting the foot in the door in front of executives is the main issue. Closing is fine, but the main issue is being seen. So just looking to see what changes you've made and how you're progressing in this space if you've made any sort of progress?

Well, the growth, as you know, tells us that we're making some progress. The challenge there remains. And so if I've spoken on this before, which I suspect I have, but maybe for people who might be new to the answer. In a mature industry, a version to change is not a simple thing to overcome. And that's probably the biggest challenge we have, is buyers not recognizing the challenge ahead of them. I would say, in the last year, that is getting easier, but I don't want that to be interpreted as easy. It's getting easier as the sort of D-day on identity approaches.

All right. Thank you. And one last question regarding the Google contract. I see renewals are coming every month. But has there been any sort of communication yet about a larger contract coming soon or?

Yes. So I think no. We don't like talking about our clients at all. In fact, in many cases, we don't have the right to. So my answer to this is, yes.

All right. I'll hop back in the queue.

Thank you. And your next question will be from Jack Vander Aarde at Maxim Group. Please go ahead.

Congratulations on the strong results, Rich. Thanks for taking my question. Can you provide more details about the 10 new clients and the two returning clients, specifically regarding the scale of the returning client campaigns compared to last quarter? Any information on the returning clients would be appreciated.

Yes, the two returning clients were away for over a quarter, so it's been quite a while. I don't recall the exact duration of their absence, but it has been at least a year, possibly even two. To answer your question, they are still small, but that's how most clients begin, right? Generally, clients start with small campaigns that grow as performance improves, which is a common trend. Most of the new campaigns and clients we have are focused on the programmatic side of our business, rather than open web connected television, display advertising, online video, and display. They are performing well, and there is potential for them to become significant accounts, but they don't start off that way.

Got it. No, that's helpful. And actually that's probably a positive size since there were clients over a year ago or so, and they came back, I must be doing something right. So that's good to hear. How many of the 10 new clients are expected to turn on in the third quarter? And then it sounds like that's kind of the driver of giving you confidence for year-over-year growth what's the likelihood of these 10 new clients turning on in the third quarter and then also the potential of them returning and increasing in scale in the near future?

I don't know for sure, Jack, but I think they're all on now. So the answer is, I guess, near 100% without me knowing exactly it's 100%, right, that they'll be on in the third quarter.

Fantastic. Okay. Great. And then, Richard, it sounds like you've really ramped up your sales and marketing hiring. Just based on your expectations, I'm curious, how long does it typically take from your perspective for your sales associates to achieve optimal productivity levels? Is it like six months a year it takes a year, I think, but I'd be curious to hear your thoughts?

The first three months consist of training and learning. Our method for finding audiences differs from what has been taught for the past 30 years, even through formal education. Therefore, there is an educational and acclimatization process involved. Typically, during this initial phase, they may not close any deals unless they have a long-standing connection that helps them secure a deal within their first three months as a sales executive. Productivity generally starts to increase in the three to six-month timeframe. If they are not productive by the six to nine-month mark, we begin to question their long-term potential for success.

Yes, I understand. Makes sense. I just have one more question because it was quite a setback for a while. Regarding that large direct customer, I didn't hear you mention if you've lost any significant clients or if there have been any new departures. It seems that this isn't the case, but I'd like your perspective. Was that situation truly an isolated incident, and are you confident that you've moved past those challenges?

We do lose clients, and I've spoken to this in the past. In most of those cases, not all of them, but in most of those cases, it's the result of an agency we're doing business with who lost the client. And so that's how we lose it. But there really aren't many of them and our client retention rate is quite high. I don't know the exact number, but it's way up past 80. It may even be in the 90s. I don't know. That's why I want to be careful that I don't give you a number that's not true, but the client retention rate is very strong. The technology works. And when it's implemented properly, when it's used properly, and when the client is educated about a new way to think about audiences, it always works.

Okay. Great. Well, fantastic results again and great to see you guys gaining momentum and bouncing back. That's it for me.

Thank you.

Thank you. At this time, it appears we have no further questions. Please proceed with any closing remarks.

Thank you, Sylvie. I would like to thank everyone who joined us on today's call. We appreciate your continued interest in our company.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.