Good day, and welcome to the Inuvo 2019 Year End Financial Results Call. Today‘s conference is being recorded. At this time, I would like to turn the conference over to Valter Pinto, Partner at KCSA.

Thank you, operator. And good afternoon. I’d like to thank everyone for joining us today for the Inuvo Fourth Quarter and Full Year 2019 Shareholder Update Conference Call. Today, Inuvo’s Chief Executive Officer, Richard Howe; and Chief Financial Officer, Wally Ruiz, will be your presenters on the call. I’d like to start by letting our listeners know that as a consequence of the COVID-19 pandemic, our office in San Jose, California is closed due to the stay at home order in place in California for California residents. And our Little Rock, Arkansas office is closed where we instituted a work from home policy to protect our employees and their families for potential virus transmissions among co-workers. We’re also in the process of completing our audit for 2019, and the results announced for fourth quarter and full year 2019 discussed today are preliminary, unaudited and subject to audit adjustments. While the audit of our year end numbers is substantially complete and we are issuing the unaudited earnings discussed today, the finalization of our audit and related Form 10-K has been delayed due to the impact of COVID-19. We’re currently in the process of working with our auditors on a remote basis to complete our audit and our internal and external review of our Form 10-K, including a more detailed assessment of the impact of COVID-19 on our business. We anticipate taking advantage of regulatory relief provided by the Securities and Exchange Commission and taking an additional 45 days to file our Form 10-K on an audited 2019 financial statement. I’m now 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 sec.gov. With that, I’d now like to turn the call over to CEO, Richard Howe.

Thank you, Valter, and thanks, everyone, for joining us today. For the 3 months ended December 31, 2019, we delivered $18.2 million in revenue, an increase of 32% sequentially and 7% year-over-year. For the full year, we delivered $61.5 million, which was down approximately 16% year-over-year. ValidClick and the IntentKey revenue in the fourth quarter was approximately $15.5 million and $2.7 million; and for the full year, $53 million and $8.5 million, respectively. Full year results were impacted by two factors. Firstly, we lost momentum within the ValidClick business during the roughly 8 month process associated with a merger that did not consummate. And secondly, we let attrite certain publisher technology revenue stream associated with the overall IntentKey reengineering activity, which occurred throughout 2018. ValidClick’s year-over-year revenue decline was roughly $11.2 million, while the attrition of publisher technologies was approximately $3.5 million in the year. These reductions were partially offset by the growth of the IntentKey in 2019. ValidClick revenue started to recover in the fourth quarter of 2019, delivering $15.5 million, an increase of approximately 14 - 4%, excuse me, over the same period in 2018. Gross profit in the fourth quarter and full year increased roughly 42%, and decreased 11%, respectively. Full year gross profit declines were principally associated with the year-over-year decline in ValidClick revenue. Fourth quarter gross profit increase reflects the earlier comment related to ValidClick recovery in that quarter and the contributions from strong revenue and gross margins within the IntentKey. Adjusted EBITDA in the fourth quarter was $47,000, which was up from a loss of $1.2 million in the year-over-year period. For the full year, adjusted EBITDA was a loss of $2.3 million compared to a loss of $1.4 million year-over-year. We had $991,000 of costs associated with the terminated merger mentioned, the majority…

Thank you, Rich. Good afternoon, everyone. I’ll recap the financial results of our fourth quarter and full year 2019. As Rich mentioned, Inuvo reported revenue of $18.2 million for the quarter ended December 31, 2019, and $61.5 million for the full year of 2019. This compares to $17 million reported in the fourth quarter of last year and $73.3 million reported in the full year 2018. The revenue increase of approximately $1.2 million in the fourth quarter year-over-year was primarily due to IntentKey revenue growth and to about $0.5 million increase in the ValidClick business year-over-year, offset by the attrition of revenue associated with the supply side of our business, which I’ll comment on in just a moment. The revenue decrease of approximately $11.8 million in the full year 2019 was principally due to the ValidClick business. As mentioned earlier, we invested resources and capital throughout the first half of the year on integration planning associated with the merging of the company. The merger was terminated in June 2019. Additionally, ValidClick monetization was lower earlier in the year as a result of lesser quality advertising supply from our primary partner. Further, we made and announced the decision last year to reduce emphasis on the supply side of the business in favor of focusing IntentKey resources and capital on the demand or advertiser side where the IntentKey data platform reengineering in 2018 was designed to have its market advantage. This change resulted in a reduction of revenue in the current year fourth quarter of over $500,000 compared to the same quarter last year and $3.5 million for the full year of 2019 compared to the full year of the prior year. Gross margins increased in the fourth quarter to 70% compared to 53% in the same quarter last year due primarily…

All right, Wally, thank you very much. Operator, I think we can turn it over to questions and answers now.

[Operator Instructions] We will go for our first question from Eric Martinuzzi of Lake Street.

Congrats on the good finish in Q4. Obviously, it feels like a long time ago now, I’m sure, given the recent events, but it certainly should be recognized the hole you guys were in post-conversion point and then what you accomplished subsequent to that. So I want to recognize that. I do have a question about the recent happenings as far as the outlook for Q1, though. I thought I’d start with March 16 when you talked about the IntentKey expectation for a 50% increase, and then today, the expectation is 48%. Is that due - specifically due to the two customers who you signed in March and then who paused in March?

Yes. Yes, Eric. So it’s a combination of the three things I mentioned that have happened, since the virus, for us. Those two clients, one of them hadn’t even started, okay? So just so we’re clear on that, but we expected them to. They were the airline client. So there’s probably no surprise there given what’s happening with the airlines. The other one was a hotel chain. And they had started - just recently started when, of course, the virus sort of propagated, and they sort of paused their campaign. And then we had one other client, like I said in my script, who didn’t stop or pause their budget but did reduce their budget just kind of waiting and seeing. And so the combination of those things, some of them happening - at least one of them happening after we first announced the 50%, caused us to redo the math. And at this point, with our current forecast, we’ll do 48%, so we gave the number we think it’s going to be at this point.

Okay. And then I wanted to better understand the issue on the ValidClick side of the house. You talked about a number of suppliers, potential impact from a number of suppliers. Is this reduced traffic or a shift in the mix of traffic at these publishing partners?

Yes, it’s traffic-related. So again, the coronavirus has an effect on, I guess, the entire business value chain in America right now. And we have people that we work with, and they, themselves, are starting to figure out what to do and not to do in light of the changes going on. So we haven’t seen a lot of disruption there yet as is evidenced by the fact that we stated we’re pretty much where we thought we would be on our plan overall for Q1. So most of my commentary are related to unknowns at this point that may or may not materialize in the next quarter or two, depending upon what happens.

But specifically, are these publishers unable to publish the normal content they do due to maybe their own workforce issues? Or is it something you decide?

Yes, I think it’s generally the same issue for them that is the issue for just about every, I guess, smaller business in America right now. They’re thinking about how they should cut staff, which reduces focus. They can’t publish content. They can’t drive advertising, right? These are all it, the whole thing, Eric.

Okay. And just to recap, you said the guidance for Q1, your expectation was to be flat. But I don’t know, is that what you’re thinking, and that’s not going to happen or that’s what you’re thinking and that may happen with six days to go?

No, I think we’ll be pretty close. Wally can comment better on this, but I think we’ll be pretty close to flat year-over-year, which is where we want it to be. We’re only down 1% or 2% off of what our internal plan was for 2020, recognizing that our first quarter is always our weakest quarter and recognizing that in 2018, we had revenue streams that we had discontinued, right? So just - so flat year-over-year was good for us coming into 2019 - 2020, excuse me. I still think we’re pretty close to that, and I think we’re a percentage or 2 percentages off of it. I don’t know what last year was, I’ve forgotten, but maybe Wally knows what last year’s Q1 was.

Wally, would you care to comment? Is it 15.265?

Yes.

That’s it.

Okay. So I wanted to focus on the operating expense side. It sounds like you had some progress adding salespeople. I think you said you were at four finishing out 2019, and you’re currently at nine. Do I have those numbers correct?

That’s correct.

Okay. And then the intent here, given what’s happened in the last couple of weeks, are you going to pause there? Do we continue to kind of invest into the headwind? What’s the strategy on sales hiring for IntentKey?

We’ve held hiring across the company. At this point, we’re not hiring anybody across the company until we, like everybody else, see what’s going to happen in the market. So the answer is we had planned - well, maybe I’ll say it differently. We hired a person in March, which brought us up to nine, and we had planned on hiring another salesperson in June, July and August. And at this point, we have put all hiring on hold.

Okay. As far as cost measures, I understand you throttled back on travel and people are working from home, but have there been any - is the headcount unchanged since you first started taking those measures?

So far.

Right. And lastly is on kind of share count and balance sheet, some housekeeping items. The share count, I think, exiting the year was 46 - at 46 point something, and then we did sell shares here in March. So as far as kind of a pro forma shares to use for the second quarter and the third quarter, Wally, do you have a ballpark there for me?

Yes. So figure is about 57 million shares outstanding. And at this point, other than RSUs that are - that divest in the future, probably bring it to 57.5, 57.75, something like that, by the end of the year.

Okay. And then the last question for me on the cash - current cash situation. You talked about being - I think you said negative adjusted EBITDA for Q1. Cash is pretty tight as it stands. I know you did do the $688,000 raise. But where do we come out on cash kind of pro forma exiting Q1? You got the influx from the insiders, but we also burned a little bit. What’s the expectation for March 31?

Yes. So the expectation is to have cash relatively flat from December. And the available cash that we have is used to run the business and keep that as low as possible. So as long as we have availability on our credit line, we can continuously keep cash flow and pay off existing debt.

Understand. Okay, I appreciate it. Thanks for taking my questions.

Thank you, Eric.

Our next question comes from the line of Darren Aftahi of Roth Capital Partners.

Hi. This is Dillon on for Darren. Thanks for taking my question. First one for me, have you been in direct contact at all with some of your bigger advertising partners as far as what they’re seeing in the advertising space and how that can sort of relate to contextualizing the environment going forward? I mean I guess that it’s pretty fluid, just trying to see what kind of visibility you have with sort of where advertising may or may not be pulling back. And then as a follow-up, on IntentKey, have you seen any sort of new contextualization across your customers given, I guess, towards the dynamics around the virus outbreak, maybe what behavioral patterns or new targets given sort of search habits?

Okay, Dillon. So we haven’t met, so pleasure to meet you. So let me talk a little bit about advertising pullback. So the answer to that is we haven’t seen a lot of it other than the ones I mentioned. And like I said, the ones I mentioned, particularly the airline and the hotel chain, are kind of obvious first-line impacted by the virus. We are in conversations with all of our advertising partners on a regular basis. I guess the good news is we don’t have a high concentration in travel and entertainment other than the clients I just mentioned, so that’s a good thing. However, like I said in my script, I think marketing is always kind of a leading indicator through a recession, hopefully, we won’t have a recession. So if things did go poorly, and the U.S. economy started to slug down, I think, yes, I think we would probably start to see pullback in advertising budgets, I think that happens universally. I’m not sure I can add to the issue of intent online. I don’t think anything’s changed with regard to, let’s say, the way the technology handles people’s interests online other than there is definitely an increase in volumes online. So clearly, people who are at home now are spending more time than they would normally in their workplace on the Internet, either doing searches or reading content or visiting their favorite sites, and we are definitely seeing that occur.

Got it. Thank you. And then I guess last one. Of the incremental sales force that you’ve hired like the one in March, how quickly can they get up to speed into sort of helping build some of the funnel?

Yes. So the way our experience with salespeople has gone with respect to the IntentKey, generally, Dillon, follows - kind of following high-level path. For the first three [ph] months of their tenure with us they don’t really close any business. So they’re effectively getting trained and learning and trying to figure out who to target within their clients they already know or any new clients that we’re finding for them. They start to deliver results in the next six months, but it’s not massive amounts of money. And then it gets better in the next three month or the nine month period, and then it gets better in the 12 month period. We do have a quota that we assigned to our salespeople, and that quota runs -- about $1.5 million annually is what we assign.

Got it. Thank you.

Thank you, Dillon.

Ladies and gentlemen, that concludes the question-and-answer session. I would like to hand the call back to Richard Howe for any additional or closing remarks.

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

Ladies and gentlemen, that concludes today’s conference call. Thank you for participating.