Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Inuvo Incorporated First Quarter 2013 Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Alan Sheinwald. Please go ahead, sir.

Thank you, operator. Before we begin, I'm going to review the company's Safe Harbor Statement. Statements in this conference call that are not descriptions or 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. And 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 a forward-looking statement. 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. So with that, I'd like to introduce Mr. Richard Howe, Chief Executive Officer. He will also be joined on the call today by Mr. Wally Ruiz, our Chief Financial Officer, today. And so with that, I'd like to congratulate management on improving their cash flow dramatically during the first quarter and introduce Mr. Rich Howe, CEO of Inuvo. Rich, the floor is yours.

Thank you, Alan, and thanks, everyone, for joining us today. We are pleased to report that revenue for the first quarter of 2013 was $15.9 million, a significant increase over the $8.8 million reported in the first quarter of 2012. We are equally encouraged by the improvement in our adjusted EBITDA for the quarter, which at $1.4 million, was meaningfully better than the comparable period in 2012 where adjusted EBITDA was $212,000. On today's call, I'd like to provide a brief overview of the first quarter, discuss where we are headed for the year and offer some updates on information communicated recently on the March 13 year-end call. Following my opening statements, I will turn the call over to Wally for a more detailed accounting of our financial results, after which, I will have some closing remarks for us. As a reminder for those of you who are new to the company, we organize our business and report along 2 segments. Our Network segment, which includes all the revenue from the delivery of ads into our partners, ad mobile and desktop websites and applications, as well as the revenue from our owned and operated websites. And the Applications segment, which includes the revenue from the company-owned applications, which are marketed directly to consumers through various online marketing methods. The growth year-over-year was driven principally from within the Network segment, which now makes up roughly 68% of overall revenue and contributed $10.8 million in the quarter. The Applications segment delivered $5.1 million or 32% of overall revenue in the quarter. The increase in contribution to overall revenue from the Network segment reflects our focus on this part of the business and the opportunity we see within the mobile space. More on that later. On our year-end call, we had anticipated revenue…

Thank you, Rich. Good afternoon, everyone. Thank you for joining us today to discuss the company's financial results for first quarter of 2013. My comments will refer to the press release in the 10-Q, which we are filing today. I would like to remind everyone that for comparison purposes, the first quarter of 2012 included 1 month's worth of the acquisition that we made in that quarter. Throughout my talk today, I will compare the first quarter of this year with the first quarter of last year and, where relevant, to the immediate prior quarter, the fourth quarter of 2012. As Rich mentioned, Inuvo, today, reported net revenue of $15.9 million in the first quarter of 2013. This is a 82% increase over the same quarter of last year. Both the network and applications segment contributed to the higher revenue of the current year quarter. The Network segment reported $10.8 million of revenue in the current quarter, an increase of 59% over the same quarter last year. The Network segment represents 68% of the company's total revenue. The increase in the first quarter of 2013 over the same quarter last year is due to the strong increase in the delivery of advertisements to partner websites and to our own websites. Revenue from partners' websites increased 60% compared to the first quarter of 2012. The result of expansion across publisher segment and improvement in quality and growth in mobile. Revenue from our owned and operated websites increased nearly eightfold compared to the first quarter of 2012, largely due to the expansion of websites, particularly, the local search directory at local.alot.com. All other revenue in the segment, non-core operations, declined $230,000 in the first quarter compared to the same quarter of last year. The Applications segment representing 32% of the company's total…

Thanks, Wally. In closing, I would just like to summarize. We really did have a great first quarter and while we did experience a slowdown in mid-March and into April, we see plenty of opportunity within our business right now as we look out towards the end of the year. We made significant improvements in revenue, gross profit, cash flow, expenses, income and debt and we continue to measure our efficiency as a company against our peer group. We've already secured 75% of the monthly benefits that we had hoped we would get from the move and we expect to realize the entire benefit starting towards the end of June. We do continue and do plan to continue to expand our owned and operated website properties. They're currently generating about 12% of our overall revenue from this strategy and we saw that in Q1, and has been trending towards more like 18% in the second quarter already, a good indication of the growth of this part of our strategy. We continued to aggressively exploit the mobile growth curve and we've already seen, coming out of the first quarter, about 15% of our traffic actually sort of managing ourselves towards this direction, we see 15% of our traffic coming from mobile and we're already trending towards 20% as we're heading into the second quarter. And finally, our move to Arkansas is almost completed and despite some minor disruptions in the business, we are exceptionally pleased with the quality of the new employees and our original decision to move the company here. And with that, I'd like to now turn the call over to the operator for questions and answers. Operator?

[Operator Instructions] And our first question comes from Paul [indiscernible] who is a Private Investor.

I have a couple of questions here. The first one I'd like to talk about would be the patent. We haven't heard much about that. I know it took you folks many years to get that patent granted to you, there wasn't really a lot of fanfare about it or anything. It's been several months since you made the announcement. So I guess the basic question would be, in what way is that going to add value to Inuvo?

You want me to answer that question first or you want me to answer the other one?

Yes, go ahead.

Okay, so clearly, we wouldn't have chased the patent down if we didn't think there was some value in it. And just as a reminder, I mean, the patent is a patent against -- is for the detection of fraud in a click. And this is something in technology that we've had operating on our network for many, many years and goes back, in the case of our patent, to 2004, which is a long time in Internet years. Those of you who can remember back to that timeframe can probably recall that the bigger company who now dominate, were a lot smaller then. So we did chase the patent, we think it's a valid patent, but maybe perhaps unlike others in our marketplace, we're not just big fans of coming out and telling everybody that we might be able to yield a benefit from something before we have done everything we need to do to evaluate the real value of it. And so the short-long answer is, we chased the patent because we think there's value in it, we're exploring how that could bring value to Inuvo shareholders and if and when we determine that there is value from that, we will let people know about it.

Okay, well that's good. The next question I have is, you may have touched on this briefly already, but I mean, we know about BargainMatch, LocalXML, Yellowise, et cetera, et cetera. Is there anything new that we haven't heard about, like something that you folks are working on, for example?

Yes, there's a few of them, Paul, but we have not put a press release out on them. So I think I mentioned in my call script, the owned and operated website component of our business has been growing. All 3 names you mentioned, BargainMatch, shopping comparison websites, local -- a local search directory; Yellowise, another local search directory, are all web properties that you do know about and in the case of the locals, this has, like, been growing very, very nicely for us as I've just suggested. But we have a whole other group of web properties that we are in the process of completing development on that we will make some announcements about, probably starting in Q2.

Okay, well that's great. I think I read somewhere also where Google is sort of getting out of the affiliate network business, I believe. Is that going to affect Inuvo in any way?

The answer is no. It won't affect us and here's why. We're really not in the affiliate marketing business. Now that being said, we do have a small component of our business that would be in that same marketplace that Google now exited. But the revenue we generated from that part of the business is very small, Paul. At this point, it's down to $1.5 million, maybe, a year. So that has not been a focus of Inuvo for at least the last 3 years. We do have it. It's there. And by the way, the nature of the business that we run there, the $1.5 million is really not at all like the affiliate network business that Google is exiting now anyhow. The business we do have is mostly directed to business, so we have customers like MGM, for example, who is a customer on that part of the business. So the long-short answer is, there will be no impact to us from that move.

Okay, well that's good. The last 2 questions are brief. What is going on as far as the AMEX listing situation? And the second question would be, how about analyst coverage, do we have any covering the company now?

Wally, do you want to take both of those?

Yes, sure. So on the New York Stock Exchange, we have -- they asked us to submit a plan for returning to compliance during 2013, which we did last December and which they approved. So at this point we are tracking to that plan and they'll be monitoring it throughout the year. So we expect to be back in compliance with the stock exchange and to continue to be listed. But at this point, we're tracking to the plan that we submitted to them. As far as analyst coverage, we have very little at this point. We have 1 analyst that just changed hands recently, left the Craig-Hallum, and Craig-Hallum suspended analyst coverage until they hired a new analyst. So we expect that to be covering us very shortly, in the next several months, as they hire somebody new. But other than that, we have not -- that's just the extent of our coverage at the moment.

[Operator Instructions] And the next question comes from Eric Martinuzzi with Lake Street Markets.

The mobile business that you talked about, good growth there, and I think on a percentage basis, the best upside. Is that $1.6 million, where do you think that can be either in the coming quarter or maybe by the end of the year on an annualized basis? Do you have anything you can tell us there?

We can't tell you anything that would sound like were giving guidance, but the fact that we've been talking about mobile quite a bit, Eric, I think suggests just how quickly that part of what we're doing is growing for us. So like I mentioned on the call, I mean network traffic, which we've kind of been -- it's one of the reasons why network traffic is at 15% of the overall traffic to begin with because we're focused on this area. But we just see so much more opportunity there and every time, when we start moving in this direction either through the placement of ads into mobile application or as we see how much traffic is coming to a mobile-based version of the website as opposed to a desktop-based website, we start to convince ourselves that this is the direction that we need to be moving and we've got to be moving faster. So it's going to be a big part of the growth we experienced this year based on the trends we're seeing right now.

Okay. And this is you inside of other people's apps or this is you in Inuvo apps on mobile devices?

Both.

Would you care to take that a little deeper, or...

I don't know how. Probably more in other people's apps than in our own, from a revenue growth perspective. I think I've said in my script, I mean, we're already working with over 150 application owners and we have a pipeline that's at least 2x that big that I'm aware of. It could be probably -- could be 5x that big.

I just come at the business, I guess, from a virtual frame of reference from a little over a year ago and in that scenario, it's about kind of a desktop world and people downloading apps, downloading the toolbars and then searching using those toolbars, either using it as their Home Page or using as the toolbar inside of Internet Explorer. So that was the background for that question.

And then just on the pricing change. This is not the first time that Microsoft and Yahoo! have sort of tweaked their business model and it's had an impact on you guys. How is this different? I can't recall when it was, it might have been 2010 or so, 2011, but it was a pretty significant disruption. How is it different this time as far as maybe advanced warning or the scale of the change, the impact to your business?

I'll answer the second one. So the scale is less. The warning is the same. Eric, you've been tracking a lot of companies in this space before. The simple answer is, the marketplace is controlled by a set of algorithms and they routinely change -- they, the owners of the marketplace, which is in this case, Microsoft and Yahoo!, routinely change their algorithms, most of the time because they're trying to improve the results for themselves and their advertisers. They don't forewarn that they're making those changes and so what happens is, because we have quite a sophisticated technology in the company, we see the change happen in realtime and usually, you can see it happen very quickly. So the problem for us is that we have to adapt to it. Since we're not given any prewarning that there's a change in the company, we don't have the ability to adapt ahead of time, so it means we have to react. The good news is, though, we've done this long enough and we know how to do that, that we can adapt quickly and that's what happens. And probably one of the best measures to determine whether or not we're reacting quickly enough is, well revenue, because this revenue is holding up and second is quality. And as I mentioned, in our case, in the second quarter, we're already seeing that we bounced back from the changes quite quickly.

All right, and then on your European investment. As far as either a physical presence or European employees, is there any of that or is this all kind of getting a virtual footprint, so to speak, in Europe? Because I do know, again, from my history with the company, the costs of standing up, that physical presence can be quite burdensome, just wondering what we should expect there?

It's the latter and I concur with you, having run a number of business that had physical presence in Europe, I have no plans to do that.

Okay, All right. And then the balance sheet, plenty of cash to run the current business. But just curious to know what your expectations are for cash needs as far as investing in people, products, partnerships?

Yes. We don't have any plans to raise, if the question's related to whether or not we're going to raise capital, the answer is we have no plans to raise capital in the near-term, either equity or debt based. We feel like the cash flow that the company's generating in our current debt financing arrangements provides sufficient capital to achieve the objectives we have set for ourselves for this year.

All right, and where will those investments be primarily?

Mostly on the network side of our business. Reflecting where we think the growth opportunities are.

And our next question comes from Dave Sokol, he is a Private Investor.

Looking at the daily revenues. In the first quarter, I believe you mentioned that they were averaging somewhere in the area of $185,000 per day and you're currently projecting, during this quarter, that we're averaging in about $155,000 per day. Is that correct?

I didn't say that, but your numbers are right. So we did average roughly about $185,000 a day in Q1. And what I said was the last 7-day average for May was $155,000 and, in fact, what I said was, in the second quarter, we've already hit a high day of $170,000.

Okay, and with regards, so it sounds like there's somewhat of a falloff anticipated there during this quarter. How does that impact your overall anticipation of that being net-income positive for 2013? Any changes to that anticipated goal?

No. We still believe that -- and are striving to be net-income positive for the year.

Okay. One other question. With regard to the Network side of the business, what's the accelerating revenues there? Where do you see margins going with that part of the business?

It's been improving. And we believe they will continue to improve. Wally, it might be a question for you to show the comp on that one but the margins have improved and I think they will continue to improve. They're not going to dramatically improve, but we do and are forecasting some improvements there.

That's right. As the revenue increases, we get a better margin, we get a better rev share. So, yes.

There are opportunities of scale in that business.

One last question. You mentioned that you have begun to recover roughly 75% of the savings from the lease arrangements. So I take it that you would currently be looking at experiencing about $90,000 per month and then getting that up to $120,000 goal by the end of the second quarter?

Actually by the end of June, I guess that would be -- is that the end of second quarter? Yes, that's the end -- yes, the end of June. And candidly, it would be earlier if it were not for the fact that we've got growth initiatives that are development-oriented that we need to get out. And so we're kind of putting off the data center reload date because we don't want to put the growth initiatives at risk. Because when you move from one to another, you kind of have this other one, call it a week period where things are down. And based on what we see ahead of us right now, we don't want to do that. So we're not going to take that -- we don't want to take that risk and put our growth at risk just for 1 month. We'd rather not have $30,000 of savings for a month than lose the growth initiatives. So that's why it's the end of June and not the end of May.

[Operator Instructions] And our next question comes from Mike [indiscernible] , one of our Private Investor.

I had a quick question. Well, actually, I have a couple of questions for you. Rich, you had mentioned on the previous call that you guys were kind of looking around to possibly making some future acquisitions. Can you give any updates on that?

Yes, sure. I guess, I'm always looking for acquisitions. Just part of being diligent, I guess. There's nothing imminent. The short answer is, I'm always looking for acquisitions that might be accretive, synergistic, pick a word, a good fit with our business. So will I make one or will we do one before the year's out? Maybe. Is there one imminent? No.

My other question is, can you speak a little bit about, I noticed, and again, it's by no coincidence and you certainly make no apologies about stressing the fact that Inuvo seems to be shifting its business model to a mobile-centered company. The question here is, can you give us any insight into the relationships you are working with in terms of PrivacyStar?

Oh, sure. You bet. So PrivacyStar is a company-owned, in large part by Charles Morgan. Charles Morgan is on the board of Inuvo and also owns a part of Inuvo. So that's just, from a relationship perspective, that's the relationship. Now, as it relates to us doing any business with them we are doing something with them but it's very, very small in the context of what Inuvo does everyday. PrivacyStar is a mobile application developer. And as I mentioned earlier, we are already integrating our ad-based services into hundreds of mobile applications, one of them is PrivacyStar, to put that in context for you.

Okay, okay. And this is probably an oldie but goodie question. You probably haven't gotten it in a while. Can you talk a little bit about what your plans are to do with Kowabunga Daily Deals and also BabytoBee I haven't heard much and other investors, we haven't heard much about kind of what's going on with those websites in that sort of daily deals. Yes.

Yes, sure. So I'll start with the daily deals one, the Kowabunga. We launched that business model, I guess, at a time when I would say the marketplace for daily deals was more lucrative. So what we found after we launched it was the economics of the business model weren't great. So the good news was we didn't spend a lot of money to get into that business and the other good news is we decided to get out of it as soon as we figured out we couldn't make any money in it. So you can look at it that way and say that we just shut it down and decided not to do anything else with it anymore. On the BabytoBee side, actually, that one, so you're now getting at me telling you stuff that I wasn't going to get tell you, but I guess I'll tell you anyways. So on that one, there is a marketplace for prenatal information, which is what the BabytoBee site is, it's really a place where prenatal moms can come in and learn things about their pregnancy and so we are actually exploring an expansion, if you will, of that website in the context of our owned and operated web properties business but we have not made any announcements about it yet.

Okay. I mean, thinking for being an investor in the company for a little bit. You guys have some wonderful resources right on the website that I could think will be easily translated into a mobile application. And I'm wondering if you guys had any thoughts about that, if you can't talk about it, that's fine, but in terms of making that site more mobile friendly.

That's exactly what we're looking at doing.

Okay, great, okay. Last question. You guys have a posting about your Latin American campaign management job. And I asked this question because when you click on that website, and again, it's just a promo website announcing what you're trying to fill the position. When you look at that website, that's a beautiful website. When you guys -- can you just take this for what it's worth. The Yellowise website and the BargainMatch website, they don't seem to have the same sex appeal, if you will. Is there any way that you guys are thinking about or in the process of making your websites a little more sleek, a little more kind of grab-your-eye a little bit, like BargainMatch, you know what I mean?

I do, I do. And the answer is actually -- your comment's not taken negatively at all, by the way, so thank you for having the guts to ask it. The answer is yes. In fact, we have a whole new branding and website skinning strategy that we are planning to launch, hopefully, towards the end of the second quarter and it will all be based around the ALOT brand that we had built up a lot of name recognition on as a result of the toolbar business. But again, it's not a toolbar, right? It's now a web properties business. So the name is just a good name. A lot of search, a lot of finance, a lot of -- you can just use the brand in a lot of different ways and yes, we're re-skinning them, they look a lot better, they look a lot fresher, a lot more modern, that is the plan.

It doesn't look like we have any more questions at the queue this time, sir. I'd like to turn it back to management.

Thank you, operator. I'd like to thank everyone who joined us on today's call. We appreciate your continued interest to Inuvo and we look forward to reporting progress over the coming quarters.

Ladies and gentlemen, this concludes the conference call. We would like to thank you for your participation and you may now disconnect.