Greetings. Welcome to the Inuvo Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Natalya Rudman. You may begin.

Thank you, Holly, and good morning, everyone. I'd like to thank everyone for joining us today on Inuvo's third quarter 2023 shareholder update call. Wally Ruiz, CFO, had a family emergency, so on today's call, it is going to be Richard Howe, Chief Executive Officer; and Aleesha Parris, Corporate Controller. We would also like to remind our shareholders that as today is the Friday holiday, we plan to file our 10-Q with the Securities and Exchange Commission on Monday. 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, 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 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 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 additional measurement and consists of historical comparison of its performance. Reconciliation of non-GAAP measures to the most directly comparable GAAP measures available on today's news release on our website. With that out of the way, 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 are pleased to report that for the quarter ended September 30, 2023, Inuvo delivered the highest quarterly revenue in its history, growing 44% year-over-year and 48% sequentially to $24.6 million and that compares to $17.1 million and $16.7 million for the prior periods, respectively. We delivered roughly $32,000 of adjusted EBITDA in the quarter, following a $1.8 million adjusted EBITDA loss in the second quarter of 2023. On a cash flow basis, the company has been generating free cash flow for the last five months, averaging roughly $800,000 per month or approximately 11% of average monthly revenue for that period. As we've leaned into our indirect channels in 2023, our gross margins have consequently increased to 91% in the third quarter of 2023. Our cash and cash equivalents position remains strong, measuring roughly $7 million at the end of September. Additionally, at the end of the quarter, we had no debt and a $5 million unused borrowing facility. During the quarter, we also resolved a dispute with a large advertising platform that was first disclosed in the second quarter of 2022. Aleesha will talk more about the quarter's financial results in her section of the call. Let me now turn to some of the operational highlights. As mentioned earlier and on previous calls this year, we've leaned into our indirect channels at the beginning of 2023. As we have also described on previous calls, an indirect channel is one where we gain access to advertisers through that advertiser's platform and/or its service providers. We continue to see strong demand through this go-to-market channel as evidenced in the revenue mix change year-over-year between indirect and direct as disclosed within our financial statements. We have a number of potentially significant initiatives underway with a few of the larger clients within the indirect channel that we believe will continue to contribute to strong revenue growth into Q4 and 2024. Our sales team was very active in the third quarter, adding roughly a dozen new advertisers to the roster across industries that include the nonprofit sector, entertainment, oil and gas, consulting, and retail. The sales team has narrowed its focus to the empowerment of midsized agencies through the incorporation of our technology and services. This strategy allows these agencies to better serve their clients with improved performance and differentiation while mitigating the current and future privacy risks associated with using consumer data. We currently have 21 total associates within our go-to-market team. Our awareness and marketing outreach activities have continued to increase throughout 2023, driven principally by our attendance at industry conferences and the increase in media coverage related to our proprietary artificial intelligence ad-targeting technology. More specifically, we have seen an uptick in media coverage since March, having appeared in various publications roughly 20 times. This has included well-respected industry journals like Advertising Week, Digiday, and Media Post. In the last four months, we have also announced enhancements to our Audience Discovery Portal, an enrichment to our Safari targeting capabilities, and a significant augmentation of our AI-generated client dashboard. Each of these technological advancements represents never before delivered features and/or capabilities by any ad tech company and are the direct result of our proprietary large language generative artificial intelligence. At the end of Q2, we reported that we had delivered roughly 80 different campaigns in the year. As of the end of Q3, we are projecting to have delivered roughly 100 campaigns by year-end. Performance against client KPIs remain strong across those campaigns, as was the case in the second quarter. We also had two former clients return in the third quarter. As we have continued to message for the better part of two years, our industry is in the midst of a transformation that will impact every single aspect of how marketing has been done for generations. This transformation at its foundation is all about how our industry uses consumer identity and data for ad targeting. This change mostly impacts the non-walled garden Open Web. Apple's latest iOS release in September included yet again, changes that will port conventional identity-based advertising technology. Google has already stated they will begin disabling third-party cookies in the first quarter of 2024 and have recently also stated they are working on IP blocking technology, which they plan to release within Chrome in February of 2024. The IntentKey, artificial intelligence technology we have developed could not be better positioned given the series of significant technological and legislative events all occurring simultaneously. As a solution for marketers who want to target the Open Web outside the walled gardens, we continue to have the best future-proof offering available within the market. Our AI locates and targets audiences for any product, service, or brand without identity or consumer data. It predicts just in time, which channels and campaigns will perform, so media budgets can be adjusted in real-time. It generates detailed insights that highlight the reasons why audiences are actually interested. It generates demographic information and it informs cable television buying in ways never before possible. I would now like to turn the call over to Aleesha for a more detailed assessment of our financial performance within the quarter.

Thank you, Rich, and good morning, everyone. I will recap our third quarter financial results. As Rich mentioned, Inuvo reported revenue of $24.6 million for the quarter ended September 30, 2023, a 44% increase or $7.5 million higher than the $17.1 million reported in the third quarter of the prior year, the highest quarterly revenue ever achieved by the company. As Rich also mentioned, this year, we changed our go-to-market focus to pursue indirect channels. During the year, we launched new products and enhancements directed at these indirect customers. And as a result, the revenue mix has changed. This year's third quarter revenue was 88% from indirect customers compared to 55% last year. An agency customer may have multiple advertisers we can serve. Our sales team, now composed of 10 team members, have contracted with approximately 40 new customers, both direct and indirect since the start of the year. We believe this momentum will give us a strong head start into next year. We expect revenue from our indirect customers to continue to grow, and this revenue mix to persist for the remainder of the year. Cost of revenue was $2.3 million in the third quarter of 2023 compared to $6.8 million in the same quarter last year. Cost of revenue is predominantly payments to advertising platforms that provide access to supplies of advertising inventory. These advertisements are placed on behalf of our clients. Gross profit for the third quarter ended September 30, 2023, totaled $22.3 million as compared to $10.3 million for the same period last year. Gross profit margin for the third quarter this year was 91% compared to 60% for the same quarter last year. The change in revenue mix has had a positive impact on gross margins where indirect customers generally have higher margins. We expect Inuvo's gross margin for the remainder of the year to be in line with the results of this quarter. Operating expenses were $23.5 million in the third quarter of 2023 compared to $14.1 million in the prior year, an increase of $9.4 million, which reflects higher marketing expenses associated with the indirect channel. The largest component of our operating expenses is marketing costs. Marketing costs were $17.6 million in the third quarter of this year compared to $8.6 million in the same quarter last year. Going forward, we expect marketing costs as a percentage of revenues to continue at a relatively similar pace. During the quarter, we settled an outstanding dispute with a large advertising network that was first reported in June of last year. We are satisfied with this settlement, and it has been recorded as an offset to marketing expenses. Compensation expense was $3.5 million in the third quarter of this year compared to $3.2 million in the prior year due to higher employee salary costs, commissions, and accrued incentive expense. Our full-time and part-time employment was 86 on September 30, 2023, compared to 92 on September 30, 2022. General and administrative expense increased by $129,000 in the third quarter this year compared to the prior year due to higher doubtful account allowance, depreciation expense, and IT costs partially offset by lower professional fees and travel and entertainment expenses. Net financing costs were $20,000 income in the third quarter of 2023 compared to a $37,000 expense in the same quarter last year. This year's income is due to a decrease in utilization of our line of credit and an increase in our bank interest income. We reported a net loss of $1.2 million or $0.01 per basic share compared to a $3.8 million net loss or $0.03 per basic share in the same quarter last year. We had a positive adjusted EBITDA for stock-based compensation expense. And as Rich mentioned, we have also had positive monthly free cash flow since May. We define free cash flow as net cash used in operating activities less capitalized costs. On September 30, 2023, we had cash and cash equivalents of $7 million and net working capital of $1.7 million. In addition, we have a $5 million working capital line of credit, which had no outstanding balance. 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 $107,000 of out-of-the-money warrants. Now I'd like to turn the call back to Rich for closing remarks.

Thank you, Aleesha. We had an exceptionally strong year-over-year and sequential growth for the quarter, up 44% and 48%, respectively. At $24.6 million of revenue for the quarter, we are now approaching the revenue run rate at which generating free cash flow becomes more typical. Through the first nine months of the year, we have continued to make significant advancements both in the technology and the services that will be required to continue scaling our company. We also have numerous initiatives underway that provide us with a positive outlook for the future of our business. We 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. The growth rate in the third quarter was significant. Consequently, our client support organizations are first and foremost focused on client satisfaction. As a result, we are forecasting to be up between 30% and 40% year-over-year in the fourth quarter of 2023. I will now turn the call over to the operator for questions.

Certainly. At this time we will be conducting a question-and-answer session. Your first question for today is coming from Brian Kinstlinger with Alliance Global Partners.

Great, thanks. Superb quarter which is amazing given today Trade Desk disappointed the market so badly. I want to better understand the drivers to the quarter's demand in such a challenging ad market. Is it existing customers getting more comfortable with IntentKey or your technology so the campaigns are much larger? Is it ad agencies seeing the benefits and so they're pushing your technology to their customer base? Just want a little bit more sense of what drove such dramatic growth.

Yes, Brian, it's both. We definitely have seen some scaling and as a result, increased demand from existing customers, and the second part of your question with ad agencies is true. I believe in the script, I said we've signed 12 new customers. New customers for us, by the way, are often either a new agency or a new brand within an agency. So it's both that we've seen strong performance within. I’ll just add because obviously, we're in November now, there are a lot of good things that are in the pipeline for us. We can't count on all of them, but coming into next year, I feel pretty good as we're starting to plan for our next year's business, just given sort of the plethora of potential opportunities that are floating around.

Inuvo has faced challenges in building its brand recognition in the market, as not everyone is familiar with it. However, the recent numbers indicate that there may be some improvement in brand awareness. Is this increase due to efforts at the agency level, or have you implemented any new strategies to enhance brand visibility?

We have indeed focused on improving our brand recognition. When Barry joined us in April, one of his first initiatives was bringing in a public relations agency, which we had not worked with before. This was largely motivated by the need to increase awareness of our company, especially given that we are still relatively small in a market valued at $150 billion to over $200 billion. We recognized the necessity of promoting our identity, our capabilities, our technology, and what makes us different. I am very satisfied with the number of publications, articles, and interviews that we have had, and I believe this will significantly impact our visibility. However, I think the more substantial change will occur when the advertising market shifts. Based on my experience, clients typically delay action until they are faced with a pressing issue. While there are some early adopters, most wait until a problem arises. As such, 2024 and 2025 could be pivotal years for Inuvo.

Trade Desk's comments this morning indicated a potential temporary weakness in the auto and media segments of their business, particularly due to the media strike in Hollywood. I'm assuming you don't have significant exposure to those areas right now, considering you are projecting a strong fourth quarter and the performance you've had this quarter.

We do have some larger clients in auto, but actually they grew and have grown in 2023. Media, we have, I would say, limited exposure. We've got some clients there, but not a lot of it. Brian, it could just be because Trade Desk is so much larger than we are. They see the influence more across their customer base. Our issue is we're kind of a $25 million company that's growing. We're not seeing those kinds of impacts, at least not at this size.

And then a few quarters back, your largest IntentKey user left Inuvo over what I believe was a disagreement on strategy. You mentioned some customers returned. Was that one of them?

No, it was not.

Okay. Last question I've got. Again, it's great to see the modest profit. I don't mean to underestimate the job you've done. But I'm curious, as the business scales here, how much of the incremental revenue falls to the bottom line? Is it 10% reasonable, given your cost structure on marketing costs? Just trying to think about, as you scale past $100 million, how much of that is EBITDA.

Yes. We've always stated that once we break through the $100 million run rate, we should begin generating cash. This quarter confirms that we were correct. It's not accurate to simply multiply our adjusted EBITDA by four to determine our annual adjusted EBITDA at the $100 million run rate; it will be higher than that. If we reach that $100 million plus run rate next year, it could be around 5%, but I'm not certain at this moment. This is our first time approaching this, and it doesn't scale linearly; it scales better, which I believe is your question. At this stage, we don't have a lot of additional costs associated with increasing revenue.

Great. Thanks so much for your answers, Rich.

Yes. Thanks, Brian.

We have reached the end of the question-and-answer session, and I will now turn the call over to Richard for closing remarks.

Thank you, Holly. And I'd like to thank everyone who joined us on today's call. We appreciate your continued interest in our company, and we look forward to speaking with you again following our year-end.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.