Good day everyone. And welcome to the Inuvo's 2016 First Quarter Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Alan Sheinwald, Capital Markets Group. Please go ahead.

Thank you, operator and good afternoon. I'd like to thank everyone for joining us today for the Inuvo first quarter 2016 shareholders update conference call. Today, Mr. Richard Howe, Chief Executive Officer and Chairman; and Mr. Wallace Ruiz, Chief Financial Officer of Inuvo will be your presenters on the call. 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 as 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. While, with that out of the way now, I'd like to congratulate management on an outstanding quarter and turn the call over to Mr. Richard Howe, CEO of Inuvo. Rich, the floor is yours.

Thanks, Alan and thanks everyone for joining us. We another terrific quarter growing revenue 40% year-over-year to $18.7 million. The company's average year-over-year growth rate over the last five quarters is now been a very healthy 42%. We're also pleased we had delivered yet another profitable quarter with GAAP income of $374,000 or $0.02 a share and non-GAAP income of $710,000 or $0.03 a share. Non-GAAP last year was $0.01 a share. Wally, will explain this new non-GAAP measure during his presentation. With positive earnings again this quarter, we've now been income positive for nine - eight quarters with an average gap net income over that period of $535,000 and an average non-GAAP income of $706,000. Our financial objective remains to grow as quickly as possible while maintaining a positive income and investing back into our business to fuel growth and product development that will help us in the future. Our balance sheet has continued to improve and we ended the quarter with $4.4 million of cash and of course we've debt free now since the third quarter of 2015. And we typically experienced a run rate revenue decline in the first quarter and this is often the result of lower demand for ad placement following the holiday season and is quite common across our industry. The typical trajectory associated with this seasonality typically begins in January it carries through February, flattens in March and then rises again in April. Historically, going back as far as 2011 at least we've seen month over month decline during the period of between 5% and 25%. This year the seasonal changes in demand shifted to later in the quarter. We started seeing the impact only in March as opposed to the more typical January and the delay in demand is one the reasons…

Thank you, Rich. Good afternoon everyone. Today we reported another consecutive quarter of strong revenue growth, profitability and cash flow. Inuvo reported its highest ever first quarter revenue of $18.7 million, this compared to $13.4 million in the first quarter of last year, a 40% increase. $5.3 million came from the partner network and $13.4 million from the owned and operated network. The partner network delivers advertisements to our partners’ websites and applications. It reported $5.3 million in the first quarter of this year compared to $7.6 million in the same quarter last year. As Rich mentioned the sites we acquired from a partner earlier this year now has its revenue recorded in the owned and operated segment, which has the effect of lowering the partner segment revenue while increasing the revenue of the owned and operated segment. Starting with next quarter, we will have had the acquired sites ready in entire year and we will be comparing apples-to-apples. Between the growth of the core business and the increasing acceptance of SearchLinks we expect the partner network to grow this year. The owned and operated network is made up of a collection of websites and apps we own and where income is derived from advertisement. The owned and operated network represented 72% of the company's total revenue in the current year quarter. The owned and operated network reported $12.4 million of revenue in the first quarter of 2-16, a 137% increase over the same quarter last year. The growth in this business segment is aided by the new sites acquired as I just mentioned. The average quarterly growth of the owned and operated network from the second quarter of last year through the first quarter of this year was 90%. Going forward, the year-over-year growth rate will be lower than…

Thanks, Wally. In summary, we had an exceptional first quarter of 2016, where we delivered record revenue growth while also maintaining our goal of profitability. At March 31, 2016 mobile revenues for the most part unchanged over the fourth quarter of 2015 at about 42% of total. Our bank debt was zero, the cash balance was $4.4 million and cash flow from operations remained strong. We experience a traditional softness in the first quarter however occurred later this than had been typical. We benefited first quarter performance but is likely to result in a weaker second quarter. We expect the first half of 2016 growth rate to be in the 15% to 20% range year-over-year. we expect to good third and fourth quarter that has happened historically. We renewed an important business agreement and we signed numerous brand name digital publisher SearchLinks that are in various stages of implementation in accordance with our client intimate business model for this platform. With that, I'd now like to now turn the call over to the operator for questions.

Thank you. [Operator Instructions] And we'll take our first question today from Amit Dayal with Rodman & Renshaw. Please go ahead.

Thank you. Good afternoon, guys. I am sorry if I missed this…

Hello.

Did you provided any guidance for the second quarter?

Hi, Amit. So what we did is just – the guidance that we did provide is that we believe the first half of 2016 will grow 15% to 20% over the first half of last year. I think that should help, knowing that the first quarter grew 40%.

Okay. Thank you. This is [indiscernible] I guess, in the ad tech space, things move really quickly more positive into the market, you assume to be taking full and steadier growth, a little bit comparing, is there a risk of other technology and other offerings coming in and looking at these publishers a sort of you know, doing things that SearchLinks potentially cannot do and this delay or this go and steady approach it potentially hurting you guys in some sense?

We don’t think so, Amit, and when say slow and steady it doesn’t really apply to the technology that we developed and or implementing on behalf of those clients. In that regard we're moving as fastest we can with the various technologies we're deploying. I think that’s evidence by the some of the hiring we've been doing. Most recently of course having added a Phd mathematician to the team, so I think its two way to look at it. The slow and steady is more about the market, the part of the market that we are going after, which is the high end of the market. And again, these are the biggest digital publishers in the world. And you really don’t get second or third chances to do it right with accounts like that. You have to take a very attempt intimate approach, if you just throw yourself out there, there is higher probability it’s not going to work and that’s with any competitors in ad tech. That’s not what those clients want, they want – they want a off the shelf piece of technology, the would prefer having now been in market long time seeing all of the competitors to have some one who they can work with who can bring all of the technology to bare but maybe adapt it in a ways that are suited to their particular site expectation and that means you k now going slowly at first and then accelerating later on. So we think its absolutely right way to do it, we have a plus of experience in similar technology adoption with large clients like this and so we're really just taking the pages out of our old playbook dealing with these big clients that were successful in past and replicating it. And we feel really good about it. As I said on the call, I mean, I am very excited about some of the clients that we've got in the process right now.

Right. Can you share how much [indiscernible] revenues this quarter?

We're not compared to – we don’t give sub segment reporting, at this point we don’t we're not prepared to do that. But we will at some point down the road. What I can tell you , still we continue to do better.

Got it. In relation to you renewal with Yahoo! you indicated there were some give and take tension, can you just give some high level of how favorable the peers contract, the new agreement?

Its hard to tell you that without disclosing again things that are competitive with regard to the negotiation, so what I can say is what I said on the call, which is we feel good about where we ended in our negotiation with the company in question and at this point for us its behind us and we're really we've got what we need to execute on our forward-looking business plans. So we feel good about it.

And I guess this is one is for maybe Wally, given some of the weakness that you mentioned, with migrating expense seems to stay in business relatively aggressive, so we will be potentially be spending the sort of lower marketing dollars and not getting as much yield out of it, over the next quarter or two, or fourth quarter?

Yes. So if you noticed the marketing expense there is a direct correlation between ED and the O&O, the owned and operated revenue. And we think that that correlation will persist at that current rate and improve. But certainly not be less.

Okay. Got it. That’s all I have here. Thank you so much.

We'll take the next question from William Gibson with Roth Capital Partners.

I am following up just a little bit on the previous questions, so is the second quarter seasonality is that more in the partner network because of the O&O spend space there it seems like its just all tricky for me to understand giving the given the first quarter number and the partner network?

Right. So it impacts both and the way to look at it, it’s a macro issue, think of it like advertisers demand for clicks or consumer diminishes, and that impact advertising everywhere, so from our businesses perspective since we make money in both segments almost identically meaning there is ads on pages and people click on those ads whether that’s a partner site where we're providing the ad tech or whether its our own site, where we're providing the ad tech so remuneration is the same when there is drop in the amount of money that we get paid for those ads is a result of seasonality it affects both sides of the business.

Got it.

And Bill, as far as the spend associated with it, the way to track that is to track it as a percent of the owned and operated revenue so it will grow in tandem it wont grow, so as I mentioned the percentage will remain the same improve.

Yes, I noted that, the first quarter was better than the fourth in that regards. Thank you.

Welcome.

Next is Lisa Thompson with Zacks Investment Research. Please go ahead.

Hi, there. So just going through the – the risk that you said, it looks like then you are talking about down sequential revenues from Q1 to Q2 and flat year-over-year is that kind of ballpark?

Depend on the ramp where you are in the range, Lisa.

Kind of the middle?

At the bottom of the range it would be flat and top of the range it would be higher.

Okay.

We said 15% to 20% for the first half, right.

First half, right. So if I add the two half subtract the first quarter I get the numbers that’s kind of the same as last Q2 last yea, right?

Yes.

Okay.

I think what's important and also Lisa in that statement is to you know, is that Q3 and Q4 are historically close for us, no reason we believe they wont be this year but really just is seasonality issue that happened later they are normal.

So it’s not due to decline in prices for ads?

No it is that, but that’s what the seasonality issue is, that are happening in January and February and March occurring in March, April and May. So its just a skewing of the seasonality that has sort of the consequence of creating a little bit of we've had steady growth obviously about 40% for the last I don’t know five or six quarters. So just call it that graph to have dividend, but likely to return like the path that we're on continue to go out when you look at Q3 and Q4.

So is that – having it later in the year is seasonality, does that have anything to do with the - your verticals that happen, okay. Do it’s the economy?

We're not quite sure why it’s happened later this time, but it’s the first it’s ever happened Lisa, so its not…

Right.

So I guess normally it happens – always the same time, the amount of decline, there is always a decline right, the amount decline there is somewhere between 5% and 25% of what we've seen over the last few years, but this is the first time it happen later. So we're trying to in many ways we're looking at a dozen things what causing this at this point and asking the same question that you did Lisa.

Do you think that anything happened competitively out there?

No I don’t think its competitive issue I mean, pretty sure there is seasonality issue just pushing off later in the cycle.

Okay. And then back to SearchLinks, you talk about getting targeting bigger and bigger clients do you think then SearchLinks is going to have like a few big client that are lot of the revenue, how do you think this is going to play out?

I think we're going to top down market strategy with SearchLinks so yes, initially we will have a finite number large publishing partner, if you know the if the number that we have close was an indication of that will have a finite number of exceptionally large publisher. And we will focus on them because the amount of page views that they have is staggeringly large and so of course we would have the objective to try to get our product on as many of those pages as we can and we think the better use of our sales resources and creates longer term thick year value proposition. One of the benefit is the model we're taking and as we build custom ad juniper, one of these publishers buy its very definition it means that nobody else has it. And so that also creates a competitive barrier, right because a company wanting to just wait, then have to replicate what we've done and that’s harder to do than just putting one of the standard banner right, that are out there that everybody provides. So what we'll do is we'll continue to focus on that part of the market and then we'll move down trend and as opposed to may be starting with a smaller end and moving up scale we think that’s harder to do.

Now for what they are using it for, is it special projects or promotions meaning is this going to be kind of lumpy or does this stuff rollout throughout the whole west side?

No, they have ad tech partners today that they are using to help monetize content and really were displacing some of them.

So this would be recurring steady revenue its not like we got a new drug coming out we're going to do something crazy for six months and then we [indiscernible]

No, they did work it should continue to work and as a result there should be long-term steady good clients in revenue.

What kind of advice does that give you in the mix compared to what your other business?

That will vary over time, increasing obviously with the duration of time that we have the client initially lower longer term higher, you could use the average of being the current partner segment gross margin, we're trying the range of 20, that’s an average for you, right, so the lower early on and better we hope better later on because the technology is better so.

Okay. So if we see margins coming down that could actually be a good sign?

I think so because we're really…

Ramping through…

Correct.

All right. okay. Is there anything else new about any verticals or anything you are looking at?

I think we've got plenty of good things going on, we don’t need any new product. We've got…

All right…

Products that were kind of good in market.

Great, okay. Good, just checking. Thank you.

Next is Eric Martinuzzi with Lake Street Capital Markets. Q – Eric Martinuzzi: Thanks I want to get into the SearchLinks first, just to clarify on the guide, this phenomenon of skewing of the offset of seasonality, just curios do you have purchase orders or buyer intent some kind of visibility that make you comfortable that we do start to see return a lift in June with after this kind of slowdown in April may or is that just kind of gut feel?

No, it’s more then gut. We monitor our business just in time because we have the ability to do so, and so we have reporting that allows us to see how revenue is progressing and we're already seeing some turning around of that so we already know it’s headed back in the right direction. Q – Eric Martinuzzi: Okay. And then just you've technically given guidance for the first half of 2016 to '15 to 20%. The overlay or the additional track to SearchLinks, I am not asking you to give guidance for the back half of the year, but is your assumption that SearchLinks would be incremental or additive to that kind of growth rate, in other words, the growth in the back half of your 2016 would be better than the growth in the front half?

Hi, Eric. Its Wally. Yes, I think so I mean, we're looking at the first half as we mentioned 15% to 20% and we're looking at a stronger second half of the year. And SearchLinks should be a very important contributor to that, yes. Q – Eric Martinuzzi: Okay. And then on the publishers you are talking about I know you are not ensuring a lot of the brand name the - I guess household name publisher that you are working with but you did talk about them having millions of page views and you are sort of test driving SearchLinks right now, and you had any initial expansions, in other words they gave you a slipper of traffic to monetize well and you've already seen that delivery expand in size?

The answer is yes. And in fact the case study that presented in my script was designed to answer that great question Eric and so the answer is yes. and it’s going well, we're really pleased. Q – Eric Martinuzzi: Okay. And then staffing, you mentioned you have 71 full time or full time equivalent working at Inuvo, what's the expectation between that number I assume is a March quarter end what's the expectation between now and year end to support the revenue growth?

Yes, so between now and the year end we expect to have - by year end we expect to have an additional six and of that six two probably two will be quite time. Q – Eric Martinuzzi: Okay. And I assume this is in sales or this is development as well as…

Yes, it’s all around SearchLinks its developers that account managers and sales people. Q – Eric Martinuzzi: Okay. All right. Thanks for taking my questions.

Welcome

And Jon Hickman with Ladenburg Thalmann is next.

Hi, Rich and Wally. Can you – I got on the call little bit late, and I apologize, could you breakdown like mobile versus desktop?

Yes, we did Jon, so yes, in my final comments I mentioned that mobile was in the first quarter of 2015 was 42% of total revenue and that’s roughly about the same as it was in the fourth quarter. So we're kind of at a stable place with the split between desktop and mobile. That doesn’t mean by the way that we don’t see increasing demand on the product consumers for access in anything through a mobile device, but we make money both on desktop and on mobile and to some degree we manage that to try to get the balance right so that we can grow and make money because some parts of desktop monetize better than mobile.

And from a competitive standpoint are you seeing the rise in social kind of monitor culture, or social marketing, cut-ins anything that you are doing? And then I have more question after that.

I don’t I think what you are asking, we don’t see the social channels in a competitive way quite candidly it’s the contrary the social channel is become opportunities for us to do media buys to drive consumers to our content on the lot properties. So right now at least we view it that way. Sort of another source of advertisers who just don’t happen could be in the social platforms that we think we can get access to and get those most come out and read our stuff

Okay. And so when - your last question [indiscernible] talks about your employee you ar e not adding people to generate content for you, you haven’t…

No, we're kind of saying, that part of the business that and I was kind purposeful about my comments related to the own and operated business saying that we feel pretty good about where we are with that business from a critical math perspective. And so we're really refocusing I wouldn’t say refocusing, we'll just the people that we're adding to the business now are being added on the SearchLinks side because now we're starting to seeing traction there and we see opportunities to build a really great and potentially big business there. So that’s taken us a while to get there as you all know but that’s how long it takes to get you know ad tech like we're developing to market and haven’t work with all of the complications associated with it. So that’s why we're doing that now focusing there.

Okay. Thank you.

You bet.

And William Gibson with Roth Capital Partners, has a follow up question.

Hi, thank you. I want to go back over two numbers you threw out just to make sure I've got them correctly, and that was the partner gross profit and the owned and operated gross profit?

So well, it was in the first quarter the partner was 19% and the gross profit and the owned and operated were like 99?

Okay. I though you do have a dollar amount, at least I had it written down. Okay, thank you.

Welcome.

We'll now go to Mike Schellinger with MicroCapClub. Please go ahead.

Yes I know that your targeting growth in the business right now above greatly increased profitability but and as you get scale your profitability should improve, do you have some sort of metrics like operating margins that different levels that you can share with us, tell us how profitable the business might be in the future as you grow?

Yes. So at the current level that from about $50 million to about $75 million our adjusted EBITDA is running somewhere between 5% and 7% in that range. and when we forecast out and we look at when we exceed a $100 million its growing beyond 10% are adjusted EBITDA and so we think that eventually when we reach scale which might be $150 million plus we could be in that 15% to 18% maybe little bit higher adjusted EBITDA as a percent of revenue. Does that help?

Yes. that’s very helpful. Thank you.

And there are no other questions. So I'd like to turn the call back over to Richard Howe for any additional or closing remarks.

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

Thank you very much. And that does conclude our conference for today. I'd like to thank everyone for your participation.