Good day, ladies and gentlemen, and welcome to the Inuvo, Inc. First Quarter 2025 Earnings Call. At this time, note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If during this call you require immediate assistance, please press 0 for the operator. Also note that this call is being recorded on Friday, May 9, 2025. I would like to turn the conference over to Katie Cooper, Director of Marketing. Please go ahead.

Thank you, operator, and good morning. I'd like to thank everyone for joining us today for the Inuvo, Inc. First Quarter 2025 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-Q with the Securities and Exchange Commission this morning. 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. 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 the call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to Inuvo, Inc. are 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. 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 discussions will include references to non-GAAP measures. The company believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. With that, I'll now turn the call over to CEO Richard Howe.

Thank you, Katie, and welcome, everyone. We're thrilled this morning to be able to announce yet another record-breaking quarter ended March 31, 2025, where we achieved a 57% year-over-year growth rate, generating $26.7 million in revenue, our largest quarter ever. Equally compelling about this result is that it occurred in what is typically our weakest seasonal quarter. Trailing twelve-month revenue for Inuvo is now $93.5 million, putting us on track to beat and break through the $100 million barrier this year. Once again, in this quarter, virtually all the important financial metrics improved year over year, including our adjusted EBITDA, our operating cash, and gross profit, which was up 41% year over year. Both the platform and the agencies and brands product lines were up materially in the first quarter. It may also be appropriate to note for our shareholders that over roughly the last five years, Inuvo has had a 6.8% compounded quarterly growth rate. For reference, the average for public companies between $50 and $200 million in annual sales by our analysis is about 3.4%. Wally will share more details about our financials in his discussion. Inuvo's financial strategy for 2025 is to grow both platform and agencies and brands revenues at double digits, keeping product margins steady while generating cash from operations. The product strategy is to accelerate platform growth through automation, and within agencies and brands to support growth through AI performance enhancements and self-serve functionalities. The people strategy is to end the year at no more than 90 people, adding engineers and data professionals within platform and in agencies and brands to continue building out our sales and account management teams. At roughly $1 million of annual revenue per employee, for a technology company, Inuvo is operating at the high end of the comparable efficiency curve. The valuation strategy for the company includes items on the proxy that I will touch on in my closing statements. Within platform, we grew 61% year over year. As we had mentioned on previous calls, we began reengineering technologies and services within this product line in 2023, anticipating market changes, which have now come to fruition. We see continued strong demand here and a healthy pipeline of new business opportunities. Campaign volume within platform was up 100% year over year and is reflective of the adoption of our capabilities by media buyers and an indication of the scalability of the platform product line. The more ads we show and the higher the quality of leads we deliver, the more revenue we generate. Within two of our key platform clients, we actually saw a 200% year-over-year increase in ad impressions. One of the technological bottlenecks within this product line is our ability to onboard new websites and to monitor existing websites within the overall network. In this regard, we have reduced by 50% the time it takes to onboard these new sites. We have significantly enhanced our reporting, monitoring, and quality control capabilities. As we had mentioned on our year-end call, the market we serve with our platform technologies and service is roughly a $10 billion annual market. This market is in the midst of undergoing significant changes that we are in a unique position to capitalize on at this point in time. We have three large paying clients for these services, two of which have grown materially year over year, and the third is roughly flat. But that's only because the growth opportunities in the others have had our focus, and we'll continue to have our focus in 2025. For our agencies and brand clients, we experienced a 31% year-over-year growth rate within the first quarter of 2025. We entered the year with a strong pipeline of new business opportunities. Our client base has grown 23% year over year, and we've added roughly 20 new clients thus far in 2025. We have roughly 15 clients using self-serve capability now that have the potential to scale, among which include a large technology and automotive company. Our two largest clients are both up year over year. Roughly 80% of the clients who were running in Q1 of 2024 are currently running in Q1 of 2025. Within the first quarter of 2025, we beat our KPIs on average by a significant 61%. These are the KPIs that we track for our clients. We provide this measure so our shareholders can understand generally how much better the performance of the IntentKey is compared to our competitors. Because, ultimately, the KPIs that we get from our clients are, in fact, the best competitor that they are using. Since launching the enhanced self-serve version of the IntentKey earlier this year, we have seen a considerable increase in the number of visitors to our corporate and self-serve website, up roughly 430% sequentially. Self-serve revenues, while still a small component of our overall revenue, have grown steadily month over month so far this year. As a reminder, this self-serve product has the highest gross margin of any product Inuvo sells. We continue to add salespeople, most recently to handle the Texas region. We have a number of major holding companies testing the new platform, and anecdotally, the Inuvo brand awareness appears to be rising. We've had three recent client feedback notes that emphasize the superior performance, transparency, and insights associated with our artificial intelligence. One of those clients reported seeing three times the number of conversions after activation. Another reported our AI was outperforming their other campaigns. And the third commended our technology's ability to signal purchase intent ahead of the implementation of the tariffs. Technologically, in addition to the launch of the enhanced self-serve platform, we also began testing our newest ZIP code level targeting features using a number of channels, including the difficult-to-measure digital out-of-home channel, which is the modern digital version of the billboard, only dynamically targetable. As a reminder, when we empower our clients with our AI for discovering and targeting audiences, we also provide them with the reporting that measures the effectiveness of those audiences predictably using our proprietary machine learning technology, which works even for hard-to-find channels like digital billboards. On a sequential basis, we've seen a 21% increase in our Inuvo newsletter subscriptions and a 4% increase in our followers on LinkedIn. 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, and good morning. We delivered another 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 $26.7 million in the first quarter of 2025, a 57% increase over the $17 million in the first quarter of 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 $23.7 million. New products that launched last year emphasizing improved technology, quality content, and compliance fueled the revenue growth in platforms. Agencies and brands revenue was approximately $3 million in the first quarter of 2025. The growth in revenue was driven primarily by the signing of new clients. The reorganization of our go-to-market and support teams last year contributed to the higher revenue in agencies and brands in the current quarter. We expect the revenue mix from agencies and brands and platforms to remain relatively stable throughout 2025. Cost of revenue increased to $5.6 million, up from $2.1 million in the first quarter of 2024, primarily due to higher agencies and brands revenue and to a new campaign with one of our platform clients. Cost of revenue is primarily composed of payments made to website publishers and app developers that host our advertisements, as well as to media payments made on behalf of our agency and brand clients. We reported a gross profit of $21.1 million, 41% higher compared to the $14.9 million for the same quarter last year. However, gross margin declined to 79% in the first quarter of this year compared to 87.7% last year. The decrease in gross margin was due primarily to a new campaign with a platform client. We anticipate a small decline in gross margin in 2025 as revenues from this client scale. Operating expenses for the first quarter of 2025 totaled $22.9 million compared to $17 million for the same period last year. Operating expenses include marketing costs, compensation expense, and general and administrative expense. Marketing costs, primarily media costs incurred on behalf of clients, were $17.5 million in the first quarter of 2025 compared to $13.1 million in the same quarter last year. The marketing costs were higher because of higher platform revenue. Compensation expense increased in the first quarter of 2025 to $3.6 million compared to $3.2 million in the same quarter last year. The higher compensation expense was due to a benefit obligation arising from the death of an employee and to higher incentive accrual. Our total employment, both full and part-time, was 81 at the end of the first quarter of 2025 compared to 93 for the same time last year. Our 2025 budget includes hiring of seven additional people, including engineers, data scientists, sales personnel, and account managers, of which three have already joined the company. General and administrative expense for the first quarter of 2025 increased to $1.7 million from $700,000 last year, due to a $1.1 million adjustment made last year to reduce the allowance for expected credit losses for an amount due from a former client that has been paid in full now. Other income was $541,000 for the three months ended March 31, 2025, and it was zero for the same period last year. In March 2025, the company received a refund from the Internal Revenue Service totaling $610,000 in connection with an amended form that we filed in May 2023 for the employee retention credit. Of the total refund, $533,000 was recognized as other income, while $77,000 was recognized as interest and included in net financing expense. Net financing or interest expense was approximately $28,000 in the first quarter of 2025 compared to $20,000 last year. The net interest expense this year is higher due to higher borrowing within the quarter and is net of the $77,000 of interest income that I just mentioned. Net loss in the first quarter of 2025 was $1.3 million compared to a net loss of $2.1 million for the first quarter of last year. Adjusted EBITDA in the first quarter of 2025 was nearly breakeven at a $22,000 loss compared to a loss of $1 million in the first quarter of last year. As of March 31, we had cash and cash equivalents of $2.6 million and no outstanding debt. During the quarter, we raised $1.2 million at an average price of $0.73 per share through the sale of stock with an at-the-market agreement. Our capital structure is composed of 144 million common shares outstanding and 11 million employee restricted stock units outstanding. Effective cash management has allowed us to reduce cash burn by $1 million in the first quarter of this year over the same quarter in 2024. We expect to generate cash in the second half of this year. In Rich's closing remarks, we will touch upon proposals in the proxy. This is merely a reiteration and explanation of what is included in the proxy statement and is not meant to be a solicitation.

Thank you, Wally. We achieved 57% year-over-year growth in the first quarter of 2025, hitting yet another all-time revenue high of $26.7 million and trailing twelve-month revenues now standing at $93.5 million. All our important financial metrics improved year over year. Building on strong momentum, unaudited April results point to continued strength. Consequently, we project second quarter 2025 revenue growth to be no less than roughly 25% year over year. I'd like to close by saying something about our annual shareholder meeting scheduled for May 22. This year, we are asking shareholders to vote for what we expect will be a 10-for-1 reverse split of our stock. We've long known that at roughly 150 million shares outstanding, we are outside the normal range for public companies of our size. We've recognized that having so many shares outstanding results in a share price that prevents some buyers from owning our company, can lead to greater volatility and potentially manipulation, and impacts our earnings per share, potentially undermining investor confidence. As part of this decision, that's on the proxy, we analyzed public companies with revenues up to $250 million and settled on shares outstanding of approximately 15 million or the 10-for-1 that's on the proxy statement. This reverse split is unrelated in any way to our New York Stock Exchange listing requirements, nor is the company currently working on any capital raise activities. I will now turn the call over to the operator for questions.

Thank you, sir. Star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, we ask that you please lift the handset first before pressing any keys. Please go ahead and press star one now if you have any questions. Your first question will be from Brian Kinstlinger at Alliance Global Partners. Please go ahead, Brian.

Hey, guys. Thanks so much. Outstanding results. We've heard demand from the automotive sector has dropped significantly since tariffs were implemented. Has there been any meaningful changes from your new anchor customer that you've discussed over the last few quarters since April? What's the percentage of revenue from automotive as a percentage of the first quarter revenues?

I don't know what the answer to the last one is, and I don't think we provide that as a rule. But I will speak to the primary question about tariffs. We've been thinking about this a lot as well, Brian, probably in the same way every company in America is right now. We have not seen the decline in our largest automotive client. In fact, we've seen the opposite. We've seen an increase. Now, I mean, that could partly be related to the fact that they're trying to move inventory that's already here ahead of the tariffs. But it's also interestingly for us, a consequence of this customer consolidating the various vendors they use to help them with finding and targeting audiences. So we've benefited from consolidation a little bit. But, yes, for us, as it turns out, it's up.

Great. That's good to hear. I guess I'd ask the same question not only on that other large new anchor customer retail, but in general, has there been any changes in your customer base's demand for advertising since April, of course?

I have to say, generally, no. And particularly not in the large customer. So the other large customer you're talking about, everything is going very, very well. There's no change there. In that particular client, we've already got a budget that we've discussed with the client, obviously, coming into the year. Right now, there's no changes being made to that budget. In fact, we're already talking with them about how the budgets might change for next year and anticipate growth there.

Great. One more tariff question. Sorry. But it seems to be the hot topic obviously of this earning season. As it relates, you talked about new logo wins year to date. It was solid. But I'm wondering again, oftentimes, since I've been covering Inuvo, in times of uncertainty, business development mainly new logo wins, has slowed. Customers tend to not look for new technology in uncertain times. Is that something you're experiencing now? Or as you discussed, the brand is improving for Inuvo, has that been unchanged as well?

We signed up 20 new ones since the beginning of the year. So that's great. And the pipeline looks strong. I think my answer to this question is I just don't know. I mean, I think we're all kind of wondering how tariffs are going to impact, whether they're going to continue, what the outcome from it is. So at this point, we're not seeing, at least an impactful impact on our business. We are not.

Okay. Great. My last question, the numbers question. Revenue was less in the fourth quarter compared to the first quarter, yet you generated over $1 million of EBITDA in the fourth quarter. If we backed out other income of a half million in the first quarter, you lost almost $500,000 in the first quarter in adjusted EBITDA. So I'm wondering, has the breakeven point changed? I've already added back the nonrecurring $300,000 plus. So was there something else nonrecurring? I'm wondering, or has the breakeven changed for Inuvo?

Yeah, Brian. We had a couple of nonrecurring items. I think I referenced them in my discussion. But also, we have a new campaign with a platform client that's driving dollars, right, revenue and driving dollars in gross profit. It's a little bit lower margin. So it did affect the number that you're referring to, to some extent.

So just to be clear, $25 million, is that ongoing, or do you think $25 million a quarter should generally keep you at breakeven and higher than that profitable?

I would say, slightly higher than $25 million. You know, $26 to $27 million in a quarter.

Okay. Great. Thank you.

Thank you. Next question will be from Scott Buck at H.C. Wainwright. Please go ahead, Scott.

Hi. Good morning, guys. Thanks for taking my questions. Wally, to piggyback on that last question, that new platform client that's driving a bit of a headwind on gross margin, you expect that to improve throughout the year, though, correct? Is that business scales?

Yeah. It's actually not a new client. It's a new campaign within a new campaign client that we have. And, yeah, we expect it to scale. Yes. We do expect it to scale. And like I said, interestingly enough, it has an effect on the gross margin itself, making it lower. But it's driving a lot of gross margin, gross profit dollars. And, yeah, on the other side is that it has little to no marketing expense, which is different than the rest of the platform clients. So, yeah, we're very happy with that business.

Great. I appreciate that. And I'm curious, seasonality, should we expect typical seasonality to be maintained in '25, or has that changed a bit?

Hey, Scott. The reality of Q1 suggests that we're already out of what would be normal seasonality. Typically, Q1 isn't lower than Q4 simply because, as we've said in the past, marketing generally and marketing budgets get reassessed in the first quarter, and then they start spending them in the subsequent Q2 quarter slowly and then accelerating Q3 and Q4, although sometimes Q4 is a little bit lower than Q3. I don't know. It's kind of a crapshoot. Depends on the year and what's going on economically. Right now, we appear to be heading into this year strongly. And, of course, I just gave at least some indication of where Q2 might be over last year. So things look, right now, they look pretty good for the year.

Yeah. Okay. Perfect. And then last one, Richard, can we get a little bit of color on the initial feedback you're getting from the enhanced IntentKey self-service platform that you launched earlier this year? And how do you size that opportunity?

Well, we'd like to have that opportunity being many, many tens of millions of dollars in the next few years. And there's no reason why it can't be. The market is sufficiently large. The feedback is very positive, and generally, the positive feedback comes from the reality that, like other large language-based technologies, the ability to simply prompt our AI and have it generate an audience and then execute on that audience just has never existed before. Ever. In advertising. So, yes, the feedback's positive on it. And, at this point, we just need more salespeople, and we need more visibility, and we need more people knowing that this capability exists.

Great. Well, I appreciate the added color, guys. That's it for me.

Thank you. Next question will be from Jon Hickman at Ladenburg. Please go ahead, Jon.

Wally, could you give us some guidance about the G&A cost going forward? Without that million-dollar, I guess, bad debt reversal, should that expense line go back to what was kind of last year? Or should we go forward with the new number?

If you back out that $1.1 million reversal that occurred in the first quarter of last year, we've been running about $1.5 million to $1.7 million in G&A a quarter. Yeah. And we expect it to be in that $1.7 million range going forward. Yes.

Okay. So that was more of a one-time item?

Oh, it was definitely a one-time item.

Well, why you back that out in your EBITDA? I'm not sure. Did we back we did not, I guess, back then.

Yeah.

No. You did not. Yep. Okay. Well, anyway, thanks for the color. So this new campaign that you've got with the platform customer, is that something that's, like, I mean, should that type of campaign, like, grow in the picture? Other Can you still hear me? Sorry.

Yes. We got you, Jon.

Okay. So that's new campaign. Yeah. That new campaign, is that a portent of what's gonna you know, of the future? Or is that just the brands and agencies are not in that category, so margins should be, I guess, more historical.

I think maybe I'll answer this just because there's a couple of questions in there, Jon. Hopefully, I get the answer you're looking for here. Right? But one is, the demand right now for, let's call it, campaigns within platform is strong. In fact, we've got a backlog we can't even fill right now because we want to make sure we have all the right processes and procedures in place for onboarding. So that's slowing us down a little bit, but demand's there. So the answer to maybe the first question you got is, yes. Would there be more of these campaigns that we're anticipating as the year progresses and as we start to onboard these campaigns? The second thing is, as is typically the case with any marketing activity, regardless of whether it comes from our agencies and brands or within the platform, it's always kind of the same. Campaigns usually start off less profitable, maybe than they do once they've been running for a while because that's when the optimizations kick in. It takes time and some history. So, yeah, when campaigns come on, they'll probably impact margins a little bit. But then as, you know, three, six months out, they start to improve.

But to expand on Wally's comment that if you x out the or if you add in the lower marketing expense, related to that, are they profitability-wise about the same as the brands and agencies?

Oh, you mean platform a platform campaign versus an agency's and brand campaign? Yeah. No. Agencies and brand campaign, if you net out the marketing costs for the platform business, then the margins on agencies and brands are higher. On campaigns within agencies and brands, it's higher. And certainly higher for anything self-serve within agencies and brands. That's a % margin.

Okay. Well, thank you.

You bet. Thanks, Jon.

A reminder to please press 1 should you have any questions. Next is Jack Codera at Maxim Group. Please go ahead, Jack.

Hi. Thank you. This is Jack Vander Aarde calling in for Jack Codera. To touch on the dynamic of the self-serve front again, you mentioned double-digit growth goal for agencies and brands and then obviously the new 15 new self-serve clients. Would you expect to scale? How do you explain kind of the scope of initial self-serve deployments compared to other campaigns? And how does that growth develop relative to other parts of the business? Thank you.

It's much easier. It's easier to onboard them. Was it Jack was asking this question. Right? Yeah. It's much easier, Jack, to onboard self-serve. There's less friction across the entire process. One of the benefits of this self-serve capability is we've basically embedded our AI into existing campaign systems, demand-side platforms. And all a client who wants to use this capability has to do is go into those platforms. Once they've built a model with our capability, which can take five minutes. That's the incredible part of this technology. They just execute against it. And the campaign system collects the money and just remunerates us. So it's as easy an onboarding and execution for a client product as exists. We don't even need to have a contract with the clients. We're already contracted with the campaign system. So I hope that answers you, but that's one of the reasons why we're excited about this. Just ease with which people can get up and running, test, you know, test lots of things, that is the value in this other than, of course, the capability to target audiences they could never target before.

Okay. That's helpful. And then, you know, given the strong quarter, you mentioned kind of seasonality is out of whack now, can you talk a little bit more about the broader market? What sort of sentiment are you hearing from agencies, CMOs? You know, what important factors do you think are gonna change as we progress into 2025? Thanks.

I think that one, Jack, is the discussion we had a second ago. I think everybody's sort of waiting to see how the current US strategy vis-a-vis world trade and tariffs is going to pan out. So there's some apprehension that we hear only because we're all talking about it, but we're not yet seeing the implementation of any major changes, at least in our business. Now that could change as we progress in the year. But at this point, that's the best I can tell you is everybody's talking about it, but we're not seeing anybody sort of act on it from an advertising perspective yet.

Okay. Thank you.

And at this time, Mr. Howe, we have no other questions registered. Please proceed, sir.

Thank you, Sylvie. And I'd like to thank everyone who joined us today on the call. We appreciate your continued interest in our company, and we'll talk again at the end of our second quarter.

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