Good day, ladies and gentlemen, and welcome to the Inuvo, Inc. Fourth Quarter 2024 Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, February 27th, 2025. I would now like to turn the conference over to Natalya Rudman of Crescendo Communications. Please go ahead.

Thank you, Andrew, and good afternoon, everyone. I'd like to thank everyone for joining us today for the Inuvo fourth quarter and year-end 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 plan to file 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. The statements in this conference call are not descriptions of historical facts or 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 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. Please go ahead, Rich.

Thank you, Natalya, and welcome, everyone. We're thrilled to announce a record-breaking fourth quarter ending December 31st, 2024. We achieved 26% year-over-year growth, generating $26.2 million in revenue, our largest quarter ever. Importantly, we also delivered positive net income and adjusted EBITDA within the quarter. This strong Q4 performance validates our continued investment in proprietary technologies, especially our large-language generative AI, the IntentKey. In 2024, Inuvo achieved a 13.4% revenue increase for the year, reaching approximately $84 million. As Wally will elaborate, the net loss, adjusted EBITDA, gross profit, and operating cash flows all improved year-over-year. This solid performance, capped by a strong finish, positions Inuvo for an even stronger 2025, which I'll discuss further in my later comments. Inuvo's success in achieving key objectives during 2024 has laid the foundation for continued growth into 2025. For platform clients, the focus in 2024 was on enhancing the support and technologies we provide in a manner that aligns with their evolving marketplace. By late 2023, this roughly $10 billion market that we serve was undergoing major shifts, changes we had anticipated and prepared for as early as 2022. Many of our competitors had built their businesses around advertising policies that were being phased out. As a smaller, more agile company, we had the advantage of innovating for the future as opposed to overhauling technology and infrastructure designed for the past. This forward-thinking approach fueled our growth throughout 2024. As we entered 2024, our platform clients began prioritizing richer, more engaging experiences for both users and advertisers. Our background in publishing gave us a unique edge in helping them achieve these goals. We integrated AI tools into our internal systems to streamline and enhance how these experiences were created and delivered. With a long history of shaping high-quality digital environments, we moved quickly to provide relevant, immersive, and in-market experiences that connect our clients' advertisers with engaged audiences. Beyond delivering better experiences, our deep expertise in behavior analytics and artificial intelligence further strengthened our position. By analyzing how users interact with websites designed to meet our clients' requirements, we were able to refine our approach and optimize engagement, navigation, and interaction. These insights translated into stronger outcomes for our platform clients and ultimately better quality leads for advertisers and higher revenues for Inuvo. This fusion of experience design and behavior analytics positions us as a key player in a rapidly transforming market, and the results speak for themselves. In 2024, for our platform clients, we successfully delivered roughly 89 million ad clicks, an increase of 60% year-over-year. The largest industries served for our platform clients included travel, e-commerce, automotive, and business and software tools. As the market continues to realign, our 2024 investments in services and technology will drive even greater opportunities into 2025 and beyond. With strong momentum behind us, we are well-positioned to capitalize on these shifts and further expand our market share. For our agency and brand clients, the focus was on enhancing our go-to-market strategy, growing our client base while strengthening our AI's competitive advantage. In 2024, we deepened engagements with existing brands while onboarding 33 new brands and achieving exceptional results across the board. Our retention rate for existing agency and brand clients year-over-year was 85%, and performance across those clients exceeded KPIs on average by 42%. We successfully contracted with, served, and are scaling on one of the largest retailers in the world. We also realized a 40% increase in our average order size. In 2024, we streamlined operations and empowered clients and prospecting teams. We reorganized client-facing personnel into dedicated pods, each comprised of a campaign manager, an account manager, and a solutions engineer, who collectively now provide clients with a better experience. We made significant investments in education, empowering our teams at every level. Sellers became smarter and better equipped to provide consultative selling support, while account managers evolved beyond performance recaps, delivering true campaign insights that help clients make better decisions. Additionally, we doubled down on the marketing of Inuvo, ensuring that our brand was at the center of discussions around AI, advertising, and programmatic media. By actively engaging in industry conversations, we strengthened our position as a thought leader and reinforced our competitive edge. We had over 3,000 media mentions in 2024, including a recent exclusive article written by AdExchanger related to the enhancements of our IntentKey self-serve platform. Our subscriber base also grew to nearly 10,000 for our twice-monthly newsletter. We made a number of significant technological advancements in 2024, most notably with the enhancements to the IntentKey self-serve platform. This groundbreaking innovation democratizes advertising by allowing anyone to describe their target audience in simple terms. Our AI then instantly builds and executes a custom audience model. Forget about complex analytics and data segmentation and cookies and onboarding. Simply tell our AI what you want, and it intelligently fans and adapts your audience in real-time. This is truly the most empowering innovation in advertising to date. Addressing the second most important challenge facing marketers in 2024, we worked on automating and deploying our proprietary AI for media measurement. With growing privacy concerns, identifying and targeting the right audience across channels while accurately measuring campaign effectiveness is now paramount. Applying proven algorithms provides a solution to these challenges and is now integrated directly into our product suite. Another key achievement in 2024 was expanding the revenue potential of our AI through an internal project we called Concept Bricks. This initiative structured our AI's knowledge into modular bricks that could be associated with each concept the AI understands, enabling flexibility through the development of an API. We are currently exploring some potential beta clients for this promising new revenue stream, but in the interim, it has facilitated product launches like our recent self-serve platform enhancements and will further enable a number of technological enhancements within our core market in 2025. Finally, for the past two years, we've discussed the growing trend towards consumer privacy in our industry, driven by both legislation and technology. While these changes are likely to accelerate the demand for privacy-focused solutions like the IntentKey, our success has never been dependent on them, given our performance relative to conventional ad tech. The remaining holdout on privacy has been the Chrome browser, where tracking remains prevalent. While Google hasn't officially announced its plans, industry consensus suggests they may offer users a one-time opportunity to opt into cookie tracking sometime in 2025, in a similar manner to how Apple did with app tracking. This shift, if enacted, is likely to strengthen the opportunity for the IntentKey. At this time, I would 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. We delivered an outstanding quarter, marked by significant revenue growth, new clients, and improved cash efficiency. Our continued focus on innovation, client partnerships, and financial management drove strong performance across all key metrics. Inuvo reported revenue of $26.2 million in the fourth quarter of 2024, a 26% increase over the $20.8 million in the fourth quarter last year. We saw growth in both client categories, agencies and brands, and platforms. We had strong demand for our services from platform clients. Platform revenue was approximately $21 million. New products that launched last year, emphasizing improved technology, quality content, and compliance fueled the revenue growth. Agencies and brands' revenue was approximately $5 million in the fourth quarter of 2024. The growth in revenue was driven primarily by the signing of 33 new clients during 2024, the reorganization of our go-to-market efforts, and support for the higher agencies' and brands' revenue in the fourth quarter. We expect the revenue mix from agencies and brands and platforms to continue relatively stable throughout 2025. The cost of revenue increased to $4.4 million, up from $2.6 million in Q4 of 2023, primarily due to higher agencies and brands revenue and a new campaign with one of our platform clients. Cost of revenue is primarily composed of media payments made on behalf of our agencies and brands clients and to a lesser extent includes payments made to website publishers and app developers that host our advertisements. We reported a gross profit of $21.8 million, 20% higher compared to $18.2 million for the same quarter last year. However, gross margin declined a bit to 83.1% in Q4 of 2024 compared to 87.3% last year. The decrease in gross margin was due partially to a new campaign with a platform client. We anticipate a small decline in gross margin in 2025 due to the increasing revenue from that platform client. Operating expenses for the fourth quarter of 2024 totaled $21.5 million compared to $20.6 million for the same period last year. Marketing costs, primarily media costs incurred on behalf of clients, were $17.1 million in the fourth quarter of 2024 compared to $15.2 million in the same quarter last year. Marketing costs were higher because of revenue. Compensation expense decreased in the fourth quarter of 2024 to $2.7 million compared to $3.6 million in the same quarter last year. The lower compensation expense was due primarily to a lower incentive accrual and to a lesser extent, lower commission expense and to lower payroll. At the end of the second quarter in 2024, we streamlined operations by eliminating 13 redundant positions. Our total employment, both full and part-time, was 81 at the end of the fourth quarter in 2024, compared to 93 at the end of 2023. Our 2025 budget includes hiring seven additional employees to support growth. General and administrative expense for the fourth quarter of 2024 declined slightly to $1.7 million from $1.8 million last year, reflecting lower travel and entertainment expenses and lower amortization expenses. Net interest expense was approximately $103,000 in the fourth quarter of 2024 compared to a net interest income of approximately $8,000 last year. The interest expense this year is due to higher borrowing within the quarters or within the fourth quarter. Net income for the fourth quarter of 2024 was $141,000 compared to a net loss of $2.4 million for the fourth quarter of last year. Adjusted EBITDA in the fourth quarter of 2024 was $1.2 million compared to a loss of $1.2 million in the prior year, an improvement of $2.4 million. As of December 31st, 2024, we had cash and cash equivalents of $2.5 million. In July 2024, we secured a $10 million asset-based working capital line of credit, and as of December 31st, there was no debt outstanding. Our capital structure is composed of 141 million common shares outstanding and 13 million restricted stock units outstanding. Effective cash management allowed us to reduce the cash burn by $2.6 million in 2024 over the prior year, and we expect to generate cash in the second half of 2025. Before I return the call over to Rich, I'd like to point out that for the full year 2024, revenue increased 13%, gross profit increased 13% also, net loss decreased 45%, adjusted EBITDA loss improved sixfold, and the net cash provided by operating activities was $230,000. That's a $2.8 million improvement over the net cash used by operating activities in 2023.

Thank you, Wally. We achieved a 26% growth in the fourth quarter of 2024 and almost 13.5% growth for the fiscal year 2024. Over the last 18 quarters, we've had a roughly 7% compounded quarterly growth rate. All financial metrics improved year-over-year, and we hit another all-time revenue high of $26.2 million in Q4 2024 with positive net income, and we entered 2025 with trailing 12-month revenue of roughly $84 million. Our upgraded self-serve platform now puts the vast knowledge of our AI directly into the hands of marketers of any caliber. Trained on hundreds of billions of pages of content, this enhanced capability has the potential to significantly boost our bottom line as we scale its adoption. Building on strong momentum, unaudited January and February results point to continued strength. Consequently, we are projecting first quarter 2025 revenue growth to be roughly 40% year-over-year. Finally, I'd like to take a minute to thank Charles Morgan, who has decided to retire from our Board of Directors. Charles has been a Director since 2009 and remains a renewable shareholder. Charles has also been an instrumental voice in the strategy and vision of this company. His judgment and counsel will be missed. I am also delighted to announce that Rob Buchner will be joining our Board. Rob's successful entrepreneurial ventures, his vast relationships, and impressive leadership background at prominent agencies, including Campbell Mithun and Fallon Worldwide, where he was CEO and CMO, makes him a strong new addition to the Board. And with that, I will now turn the call back over to the operator, Andrew, for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question is from Brian Kinstlinger from AGP. Please go ahead.

What an outlook for the first quarter, too, on top of everything else. Can you discuss the progress for both the large retailer and car manufacturer you discussed on a few recent earnings calls? Has there already been a significant contribution from these customers in the fourth quarter? Is there going to be a ramp in the first quarter? And maybe talk about anything you can as it relates to 2025.

Yeah, Brian. I think they're two separate issues. I think we've said on prior calls that we do have a large automotive client and a large retail client. And yes, in the fourth quarter, both were up year-over-year. Well, actually, I should say in the auto case, it was up year-over-year. In the retailer case, it was the first year of activity with them. We expect based on our discussions with these two clients that both will be up in 2025 over 2024.

And minus their large search engines, will these be your two biggest customers, do you think, in 2025?

No. Our biggest client will stay the same client, which we disclose in our K's and Q's.

Well, I'm staying outside of those. Those are always going to be on the search side. There's so much. I'm wondering outside of that.

Yeah, Brian.

From a brand perspective.

Yes, completely. Yes, they will be our two largest clients in 2025 as well.

Great. And then can you talk about business development outside of that? Are you beginning to attract more brands? It sounds like 40% higher average deal sizes. I assume that's because of these two customers. But is business development of new logos continuing to be solid in the last few months? I'm just thinking about how your adoption of technology is going.

Yes. As we said on the call, we signed 33 new brands in the year, and so those are all opportunities to expand. And as I said, we spent a lot of time in the year, the best I can define it as, professionalizing our go-to-market organization and we retooled some salespeople and other various roles, and I think we're in a really good shape right now to be able to scale as a consequence of that professionalism and the investment in that professionalism in 2024. That's what we're counting on. And there's enough in the pipeline to give me that.

And that 33 new brands, what was that in 2023, if you could remind us?

I don't remember what it is. I think I'll get Wally to look that up. I don't remember what the number was.

Great. And my last question, before I jump back in the queue, is this: a 40% growth in the first quarter puts you at $23 million, which is quite impressive given that demand is very seasonal here, and that sets the revenue at a nice starting point for the year. Is there any reason to think that this year will be different, considering that the first quarter is usually your weakest season? Does that make sense? Was that too many words?

It's always hard...

Hi, Brian. I'll take it.

Go ahead, Wally.

No, I think the seasonality is going to continue to be there. But it may not be as steep as we saw this year or last year. But, yes, I think it will continue to have the second half of the year greater than the first half of the year.

Your next question is from Jack Vander Aarde from The Maxim Group. Please go ahead.

Congrats on a strong 4Q and full-year results. And I appreciate the comments on your 2025 outlook. It sounds like you're pretty confident in growth, ramping, momentum continuing to build. So, I guess, Rich, how do you feel entering 2025 just from a confidence and visibility perspective relative to when you're entering 2024? How would you compare and contrast? It seems like things are leveling up quite a bit here.

I feel real good, Jack, and optimistic, based on all of the signals that I have available to me. Not the least of the reasons why I'm feeling maybe more optimistic is, I've been saying for some two, three years now that the $100 million mark for us was really an important mark. It's just the level at which the inertia of our technological costs and our resource costs and computing costs kind of get overcome, and we've proved a few times now that when we get through that $25 million a quarter number, we start to generate cash and that provides a whole bunch of other, solves a whole bunch of other challenges for a business like ours. So, I feel good about that. I feel good about where we are. I feel good about our ability in 2025 to grow. Coming into the year with some confidence as we're, that we're obviously giving to you, I think does set us up pretty well for a year where we can start to get past those numbers that we've had as a ceiling. I'm optimistic.

You've mentioned in the past about testing the waters with new platform customers. Do you have a clearer understanding of the sales cycle timeline? Previously, we thought it was around nine months, but I'm sure things have evolved. Can you elaborate on your sales cycle process in general, especially in comparison to previous quarters and across both segments? I'm interested in how this is progressing with your current headcount.

You're asking about our direct sales efforts with agencies and brands, which involves recruiting brands or the agencies that manage them. We currently have three clients on the platform side, which are some of the world's largest companies, and we access advertisers through them. Our business model's purpose is to scale, but it faces limitations based on technology and the services we offer. The rapid scaling we are experiencing is due to the investments we made starting in 2023. This is purely a scalability issue, not a lack of demand, as there is significant interest in what we provide. The agency and brand segment typically has a sales cycle of about nine months, which has always been the case. We sell technological capabilities that empower agencies to serve their clients or to clients directly. Our technology, the IntentKey, aims to outperform existing media providers, thereby driving more sales for them. Since the market we are targeting is mature, the sales cycle can take some time—while we mentioned nine months, it can vary between three and twelve months based on different circumstances. Once we bring on a salesperson, they may start closing deals within six to nine months, as our sales process relies heavily on building relationships and consultative selling. This factor slows down the timeline.

Maybe just one more, maybe for Wally. Looking at the outlook and your comments to provide some new comments and more details than in years past. The cash generated, I think you said cash generating, you expect to be in the back half of 2025. Does that refer to adjusted EBITDA, free cash flow both, just to clarify that comment?

Yeah, actually, both. I was specifically referring to free cash flow, but certainly adjusted EBITDA also, or EBITDA itself. Yes.

And then you guys, you did mention, you expect the mix, the segment mix to be roughly similar in 2025 relative to 2024. If I kind of get ahead of myself here, looking further down the road, as your guys' strategies continue to execute and ramp in two years, three years out, how do you feel like the landscape of your mix is going to change? Is it still going to stay similar to this current mix or I'll just be curious to hear your thoughts.

Strategically, Jack, we want because the technology that serves the agencies and brand side, all the markets we serve is so revolutionary, and because we have such a commanding advantage and head start. We want and we think it's possible that we could command a bigger market share than we have, and the size of that market is bigger. These numbers are not perfect, Jack, but the agencies and brands market is roughly $150 billion market for us. So you can look at that and say we should be growing that side of our business, given the performance that we achieved to some significant numbers. The platforms side of our business, while the clients are big, the problem we're helping them with is only a $10 billion market. Now, it sounds like that's small, but it's still gigantic, and there are only a few players who do what we do in that area. So there's still plenty of upside there. And as you know, it's scaling right now. But we would prefer a mix closer to 50-50. That's what we're kind of trying to get. So we're trying to advance the agencies and brand stuff as fast as we can, recognizing that we can scale the other side too. And there are some real advantages to the scale on the platform side, not the least of which is the security of the receivables and the working capital that's generated from that side of that market.

Your next question is from Jon Hickman from Ladenburg. Please go ahead.

Hi. Rich, Wally, could you tell us what about the momentum or talk about the momentum on the self-serve side? I know it's only been a few months that it's really been up and running, but can you talk about that because isn't that aimed more at your brands and agencies?

Yeah. Thanks, John. We have, I think, last I checked, there was somewhere between a half dozen and a dozen clients that are signed up for that self-serve. It's really designed for anyone. So there's not one target audience for that. The agencies can use it, the ones that want to run their own campaigns, but yet have access to the AI's intelligence, have at it. And if the brand is doing the same, John, which some brands are starting to do where they want to run their own campaigns in-house now, they can do the same. So, yeah, we can sell to both categories, and we're starting to see some traction in both cases. The sweet spot for us has been up until now, agencies. Most, if not all of the revenue generated from agencies and brands market for us has been managed service to agencies serving agency clients.

Okay. And then Wally, so you said you're going to hire seven more people. I imagine that's mostly on the marketing side, but so other than that, operating expenses are going to stay about the same for the year?

Well, no, operating expenses will go up, right? Compensation will increase, certainly, because we will be hiring seven new people. By the way, two of them are engineers, one of them is a data scientist, and some are campaign and support people. So there will be an increase in compensation in 2025 over 2024. General and administrative generally increases modestly, but nothing significant, and, of course, marketing costs will increase as revenue increases.

Your next question is from Jack Vander Aarde from The Maxim Group. Please go ahead.

Hey, just sneaking one more in there. Maybe I missed this. I apologize if I did, but the IntentKey self-serve gross margin profile, is there any nuance to that? Did you guys talk about that a little bit? Is it higher margin than the managed service IntentKey, and does it depend also on the format of wherever those ads are being placed? Just touch on that to juxtapose. Thanks.

The margin on our highest margin product is over 90%. It's nearly 100% because the costs related to creating a targeting model have already been invested in our infrastructure and software. When a client utilizes the self-serve option, they are tapping into the AI, which advises them on when to purchase media placements, incurring minimal additional revenue costs. This is why we are enthusiastic about expanding this offering, as even a few million dollars in sales would significantly benefit our bottom line. We hope to see growth in this area this year. Regarding flexibility for clients with different campaign systems, we designed this product to be compatible with any system they choose to use, whether they are agency clients or brand clients. In fact, most users rely on a small number of systems, so we have those bases covered, ensuring that anyone interested can access our product on their preferred platform.

Yes, that was my question. Additionally, regarding the advertising channels, such as connected TV or short-form platforms like TikTok videos, does this have a significant impact on the margin profiles for the managed service solution? Is the same true for you?

CTV, connected television, online video display, advertising, streaming audio, and native advertising. All the formats are provided. AI provides recommendations across all those media channels and even provides offline recommendations like linear TV, for example, which is still a market with quite a lot of spend. It's a very sort of concentrated market, typically, older individuals, but that's a really good market, and it's a cheap market to buy. And the AI, when people are using it will, in effect, give a list of television programming that should be purchased in cable TV if one of our clients wants to do that. It's pretty impressive. It's amazing.

And maybe just one more. What expectations do you have for the self-serve solution, and how does that relate to your guidance for being cash generating in the second half of 2025? Are you expecting an incremental ramp, or are you just curious?

I would describe it this way: we haven't disclosed specific details, but we have a modest sales goal for 2025. The reason is that we haven't actively tried to scale the sales of that product yet. The sales we have made so far were primarily to beta clients, of which we had several. Overall, it is a modest figure within our strategic plan and budget for the year. That's the best information I can provide.

That's more than helpful. I appreciate the color and congrats again on the strong momentum. Thanks.

Thank you.

There are no further questions at this time. Please proceed with closing remarks.

Thank you, Andrew. And thank you, everybody, for joining us today on the call. We, as always, appreciate your continued interest in our company.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.