Good day, ladies and gentlemen. Welcome to the Inuvo, Inc. First Quarter 2024 Conference Call. This call is being recorded on Tuesday, May 7, 2024. I'd now like to turn the conference over to Natalya Rudman of Crescendo Communications. Please go ahead.

Thank you, everyone, and good afternoon. I'd like to thank everyone for joining us today for Inuvo's first quarter 2024 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 will file our 10-Q 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 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 reference to non-GAAP measures. The company believes that such information provides an additional measurement and consists of historical comparisons of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available on today's news release on our website. With that out of the way, I'll now turn the call over to CEO, Rich 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 March 31, 2024, we delivered a strong 44% year-over-year quarterly growth with $17 million in revenue. This builds on the 32% growth rate we experienced in the second half of 2023 and provides us with continuing confidence in growth expectations for the remainder of the year. Our financial goals as a corporation have not changed. Our objective remains to grow revenues above $100 million annually, which is approximately the revenue level at which we expect to become adjusted EBITDA and free cash flow positive. As Wally will point out in his summary of the quarter, we also saw improvements year-over-year in adjusted EBITDA and free cash flow. We aren't yet where we want to be, but we are on the right path. In the first quarter, the revenue split was 16% for agencies and brands and 84% for platforms. We tend to lead into our platform relationships in the first quarter where the number of end clients is larger and because the agencies and brands tend to still be reviewing annual budgets in the first quarter. We generated $165,000 in revenue from the newer higher-margin products we discussed on the year-end call in the first quarter. What I'd like to do now is spend my time bringing you up to speed on our industry, our products, and our clients. Let's begin with the industry. In the first quarter, Google delayed again the elimination of third-party cookies within their Chrome browser. This is the third time Google has delayed this inevitable change. The takeaway from this delay is how dependent the advertising industry and, by extension, the Internet is on the use of these cookies. As we have mentioned on previous calls, there are virtually hundreds of companies that serve the advertising industry whose business models have been built around and depend on these cookies and the consumer information that these cookies provide access to. These are the very companies lobbying to delay this Chrome-related change and, in many ways, signal just how far ahead Inuvo is of these advertising-related competitors and indirectly how serious an issue this is within the advertising industry. Google has been working hard to satisfy these positions, having created the Privacy Sandbox as an alternative approach to the use of third-party cookies within Chrome. The IAB, which is the industry organization that provides advertising standards, has been testing along with no less than 65 companies this new approach. The first task force report released earlier this year stated that most of the necessary advertising use cases were either explicitly not supported or had been degraded to the point of being untenable. Our position remains that there is no turning back from a future devoid of the technological mechanisms that have supported identifying and tracking consumers around the Internet. Apple put the nail in that coffin when it introduced intelligent tracking prevention in its browsers in 2017 when it blocked third-party cookies in 2020 and when it introduced app tracking transparency in 2021. They have subsequently embedded into their browsers many other features that prevent determining a consumer's identity. And as we may have stated in the past, Safari now holds 55% of the U.S. mobile browser market share. And despite the recent delay for Chrome, we observed that only 33% of the remaining third-party tracking cookies in circulation are actually useful after one day. You simply can't track people around the Internet or measure the actions they are taking when their cookie tracker is no longer stable. Let's shift now to products and clients. In 2023, we made significant progress towards being able to widely distribute a self-service version of our artificial intelligence. This was a natural evolution of our managed services business model where we typically use existing campaign management systems powered by our AI to deliver media services to our clients. What we haven't discussed previously was that as part of this exercise, we also significantly re-architected the foundation of our AI. We wanted to not only provide a simpler way to deploy the audience selection and targeting capabilities but also an easier way to access the rapidly expanding knowledge and insights our AI possesses. While the work for this is ongoing, we ultimately have a vision that would allow third-parties to use an API into our AI from which they themselves could build applications. While it remains very early in our efforts, we have reason to believe because of our own internal usage that the knowledge our AI possesses could, for example, be predictive of all sorts of future events or even things like product sales. This new foundation for our AI could open new use cases for the insights generated by our proprietary AI. Our three largest client categories remain auto, retail, and technology. The retail client we referenced signing in our year-end call is scaling. And we've had several similarly larger prospects in our pipeline. Within the quarter, we are seeing an acceleration in requests for proposal demand. Our performance for existing clients remains strong, and we signed three new brands in the quarter. We continue to hire new salespeople. We've also had an expansion in the clients we serve within the non-profit sector. Industry conferences remained a great place to generate leads, and we've already attended seven of those so far this year. Concurrently, we continue to gain more brand recognition. In the quarter, we had roughly 25 Inuvo media mentions. We recently made a significant update to our portal, which, as you know, is a scaled-down version of our AI for public consumption. This portal also serves as a source of leads for Inuvo. The ability for our AI to generate audiences instantly means we can message prospects on LinkedIn and immediately send them a model representative of the audience associated with their product, service, or brand. This kind of instantaneous audience generation has never been possible before. We've seen a growth in both our LinkedIn followers and in the consumption of our LinkedIn newsletter. This new version of the portal and our client-facing AI can now better and more timely associate transient trends within audiences in a manner that has never been possible before. Today, for example, we posted on LinkedIn how the Inuvo AI was able to predict both the sentiment and audience changes associated with the bourbon brand, Woodford Reserve, recognizing that they were a premier sponsor for the once-yearly Kentucky Derby. In that post, we showed the influence of the Derby on Woodford's brand according to our AI. You can access that post at the Inuvo company page on LinkedIn. The ability to understand and generate the influence of events on brands in real-time has never been possible before with this level of accuracy. At this time, 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, everyone. I'll recap the financial results of the first quarter of 2024. As Rich mentioned, Inuvo reported revenue of $17 million for the first quarter of 2024 that compares to $11.8 million for the same period last year, that's a 43.7% increase year-over-year. The higher revenue this quarter compared to the prior year was due to accelerating growth with our largest platform client and to a new platform client we signed on at the end of last year. This accelerating growth with our largest platform client is a result of the strategic initiative brought to market in 2023, which we mentioned in our last call. Strategically, we continue to focus on scaling revenue from platform clients and signing new midsized agencies as well as brands directly. 84% of the first quarter of 2024 revenue was from platform clients and 16% from agencies and brands. That compares to 66% from platform clients and 34% for agencies and brands in the first quarter of last year. For the full year of 2023, approximately 80% was from platform clients and 20% from agencies and brands. Cost of revenue was $2.1 million for the first quarter of 2024 compared to $3.2 million for the same period last year. The increase in the cost of revenue for the three months ended March 31, 2024, as compared to last year was due to revenue mix, where revenue from platform clients was a greater percent of the overall net revenue in the current quarter. Cost of revenue is primarily composed of payments to advertising exchanges that provide access to digital inventory where we serve advertisements. To a lesser extent, the cost of revenue includes payments to website publishers and app developers that host advertisements. Gross profit improved in the first quarter of 2024. We reported a gross profit of $14.9 million compared to $8.7 million in the same quarter last year, a 72% increase. The gross profit margin in the first quarter of this year increased to 87.7% compared to 73.1% last year. The higher gross margin in the current year as compared to the prior year is due to the change in revenue mix, where a greater percentage of the revenue this year was from platforms, which has a higher gross margin. Operating expenses for the first quarter of 2024 totaled $17 million compared to $12.1 million for the same period last year. The increase was due to higher marketing costs. Marketing costs were $13.1 million in the first quarter of this year compared to $7.1 million in the same quarter last year. Marketing costs increased primarily because of media expenses associated with higher revenue from platform clients. Compensation expense for the first quarter of 2024 was $3.2 million compared to $3.4 million in the same quarter last year. Compensation expense was lower for the first quarter this year compared to last year due primarily to lower commission expense and lower incentive accrual expense, partially offset by higher payroll. Our total employment, both full and part-time, was 93 in the first quarter of this year compared to 85 at the same quarter last year. General and administrative expenses for the first quarter of this year were $688,000 compared to $1.6 million in the prior year. General and administrative costs were lower in the 2024 quarter compared to the same quarter last year, primarily due to an adjustment to expected losses from accounts receivable for a balance that was due from a former client that now pays consistently and has significantly reduced its outstanding amount owed. Net financing expense was approximately $20,000 in the first quarter of 2024 compared to an expense of $19,000 in the same quarter last year. There was no other income or expense in the first quarter of this year, and that is compared to $14,000 of other income in the first quarter of last year. The income last year was due to an unrealized gain in trading securities. Net loss improved in the first quarter of 2024 where it was $2.1 million or $0.02 loss per basic and diluted share compared to a net loss of $3.4 million or $0.03 loss per basic and diluted share for the same period last year. Adjusted EBITDA loss also improved in the first quarter of 2024 where it was a $1 million loss compared to a $2.3 million loss in the same period last year. On March 31, 2024, we had cash and cash equivalents of $2.4 million. In addition, we maintained a $5 million working capital line of credit, which has no outstanding balance. Our capital structure is composed of 139 million common shares outstanding, 8.4 million employee restricted stock units outstanding, and 108,000 out-of-the-money warrants. The company cut its cash burn by 50% in the first quarter compared to the first quarter last year and by 27% compared to the fourth quarter of last year. We expect to continue to see improvement throughout 2024. Now with that, I'd like to turn the call back over to Rich.

Thanks, Wally. We had a year-over-year first quarter growth of 44%, which is a strong start to the 2024 year. From a development perspective, we continue to innovate in a manner that makes the bar high for our competition. From a market perspective, we continue to increase the size of our go-to-market and marketing organizations to both increase the awareness of our solutions and our pipeline of prospects. As we have mentioned in previous quarters, Inuvo's financial metrics begin to change at a threshold of roughly $100 million in annual revenue. At this level, we anticipate gross margins would absorb much of our fixed costs and therefore generate positive adjusted EBITDA and cash flow. I will now turn the call over to the operator for questions. Operator?

Our first question comes from Brian Kinstlinger of Alliance Global.

Can you talk about revenue growth in terms of new logo revenue versus increased wallet share from existing customers, at least at a high level.

Well, I mentioned that we signed some new brands up in the quarter. And the lion's share of revenue is recurring again this year. I don't think we have provided that split historically, but that's the answer, Brian.

Well, I guess, as you look at the last four quarters of customer additions, which will be part of my next question, is that a meaningful piece to revenue? Is it 10% of revenue comes from new customers in the last four quarters? Is it a much smaller share given they're generally smaller new programs and I'm trying to gauge the contribution without exactly?

Yes. I'd have to go look at the numbers myself. But I can do some mental math in my head just based on what I know. And it's probably 10% to 20% is the new piece.

Can you provide the count of new customers added today compared to last year? You mentioned conferences, increased advertising, and more press coverage, all of which are great for promoting your brand. It seems like you're actively working on that. Are you able to determine which marketing channels are generating more success and which ones might be underperforming as you explore these new avenues?

I don't think we've given specific client counts in the past, and I don't have them available at the moment. Generally, we have provided some idea of how many clients make up the agency and brand section. We can address that later, Brian. Regarding our marketing efforts, we’re focusing on three main areas to support our field sales team, which is our primary method for closing deals. First, the portal we created serves as a lead generation source, allowing our AI to be accessible online for anyone to use and solicit feedback. The second area is attending conferences, which we've found to be useful because they allow us to meet more potential clients in one location rather than through individual field efforts. Lastly, we are experiencing increased media interest, especially as we approach the end of third-party cookies. More media outlets are seeking information about artificial intelligence, which we are well-positioned to provide, and they are also following the developments related to the cookie situation in advertising. All these efforts aim to enhance brand awareness for our salespeople in the field.

And then within your existing customer base, where they've already tested and are using the technology. What are they communicating about their future plans in a world without cookies and without the ability to track consumers? And is, there a concern and the reason they don't scale so much larger? Because I know their wallet sizes are larger. Is it the size of your company? Is it not allowing you to shift away from other ad-tech companies? I'm just trying to understand while you have fantastic growth, it sounds like you're solving a problem. Others aren't solving. So I'm wondering what the reluctance to use more is if they already understand your technology?

The size of our company, like the size of any company, does influence us, especially regarding larger clients. This has been a consistent reality for us and other companies alike. Additionally, the marketplace tends to be less informed about how tracking works online than we'd like. This gap in understanding can lead potential clients to stick with their current vendors, who may claim existing issues will be resolved in other ways. It's a mix of these factors that we're dealing with. There are always early adopters, while others wait for a solution to become proven before they start looking for alternatives. Of course, some are addressing the issue, but there are also those tackling the wrong challenges, convinced they're on the right track, which isn't always the case.

You mentioned a plan to hire more salespeople. Can you talk about how many direct sales folks you have and where you hope to end the year at?

You think we'd know the exact answer to this by now. I think it's been asked a few times, Brian. So I don't know what the exact number is, and I'd rather give you the exact number like what's in that organization. So maybe Wally can follow up and tell you exactly what it is, you go to accounts because we've been hiring and some people we've let go. And so I don't know where the net is on that right now.

Your next question comes from the line of Jack Codera of Maxim Group.

Congratulations on a strong quarter. This is Jack Codera, speaking for Jack Vander Aarde. I would like to discuss the DSP developments. In early March, you announced the self-serve availability of the service. Could you provide any additional insights? How has this evolved? How many platforms are you currently utilizing? Any extra information would be appreciated.

Any major demand-side platform can access our AI and run campaigns with it. There are many DSPs, but the key ones are not a problem for us. We have developed an integration for that, although it's progressing slowly. Until recently, we only had what I would consider beta clients. We really began signing significant beta clients for the self-serve option in 2023. This year marks the first time we're actually building a sales team to support it. In fact, we hired our first salesperson for this role in the first quarter of this year.

Okay. That's actually really helpful. And then kind of take the Google approach again, given that they started phasing out third-party cookies. Can you give any other additional color on how this is impacting conversations on the consumer decision-making side? Are you about to close deals? Is this a major lever? Can you give any additional color there?

Yes. Like anything, somebody as large and successful and powerful as Google is. It can complicate people's decisions and confuse potentially people's decisions. And I think that's probably the best way to look at it. Again, maybe pointing back to what I said earlier in that there are a lot of buyers we encountered who legitimately, in our opinion, don't understand all of the implications to their business. They can be maybe misread something like this and think it's like this problem is not going away at all. In which case, I can just keep going with what I've got. That's one potential thought that could go through the minds of someone.

Your next question comes from Jon Hickman of Ladenburg.

According to my historical numbers, and maybe I'm wrong here, but it seems like the media buying, the marketing expenses were somewhat higher than they have historically been for the level of revenues. Was there something going on in the first quarter that made that happen?

Wally?

I think if it's higher, it's just due to the cost of media, which is dependent on supply and demand. However, there was nothing in the quarter that would lead to an increase in media spending compared to previous quarters.

And we have a follow-up question from Brian Kinstlinger of Alliance Global.

Can you help us with what the expectation you might have or the impact on the election on your business? In which quarter also, if there is an impact, do you expect to begin to see it? And how will we see that?

At this point, Brian, and we may have answered this before. But there will be virtually no impact from the election on us, only because we purposefully try to stay away from the election area for now. There's plenty of other opportunities for us. With that being said, I should be clear about this. We have run some smaller states in local election media. But as a rule, as a company, it's not an area that we've chased actively, rightly or wrongly. We just haven't. So I don't expect any impact on us one way or the other from that.

And there are no further questions at this time. I would now like to turn the call back to Richard for closing remarks.

Thank you, operator. And of course, I'd like to thank everyone who joined us on the call today. We appreciate your continued interest in our company.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect. Have a good day.