Good day, everyone, and welcome to the Inuvo, Inc. Third Quarter Financial Results Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Valter Pinto, Managing Director of KCSA Strategic Communications. Please go ahead.

Thank you, operator, and good afternoon. I'd like to thank everyone for joining us today for the Inuvo Third Quarter 2020 Shareholder Update Conference Call. Today, Inuvo's Chief Executive Officer, Richard Howe; and Chief Financial Officer, Wallace Ruiz, will be your presenters on the call. I would like to start by letting listeners know that as a consequence of the COVID-19 pandemic, our office in San Jose, California has remained closed. Our Little Rock facility, we are rotating teams in and out of the office on a voluntary basis in a manner that leads to potential risk of infection through interaction with colleagues. We would also like to remind our shareholders that we anticipate filing our 10-Q with the Securities and Exchange Commission tomorrow, Tuesday, November 10, 2020. Before we begin, I'm going to review the company's safe harbor statement. Statements in this conference call that are not description 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 using this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions, as it relates 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 of public filings with the U.S. Securities and Exchange Commission, which can be reviewed at sec.gov. With that, I'd like to now turn the call over to CEO, Richard Howe.

Thank you, Valter, and thanks, everyone, for joining us today. For the 3 months ended September 30, 2020, we delivered roughly $9.2 million in revenue with approximately $6.2 million coming from the ValidClick platform and $3 million coming from the IntentKey platform. Sequentially, Inuvo grew 21.4%, ValidClick grew 10.4% and the IntentKey grew 53.4%. We think these sequential growth rates are a strong signal that we are coming out of the COVID-19-related downturn that hit us hard in the second quarter of 2020. Year-over-year, while we are still down 33% this quarter, the decline has been significantly curtailed from the 46% we experienced in Q2. And we anticipate this will be further reduced in the fourth quarter. For the 9-month year-over-year period, we are down roughly 27%. As we have mentioned on previous calls, COVID-19 impacted both the IntentKey and ValidClick. The pandemic resulted in significant reductions in advertising budgets across the industry. However, we have been able to continue to grow the IntentKey through these difficult times, and that platform is now up 16% year-over-year, both within the third quarter and through the first 9 months of 2020. For the IntentKey, the consequence of COVID-19 has been more about a slowdown in the 2020 expected growth that was forecasted to come from new accounts. The existing IntentKey clients have continued to grow in spite of COVID-19, which we think is a strong indication of the performance we've delivered for clients. On an adjusted EBITDA basis, while we lost $1.3 million in the quarter, both revenue and margin trends heading into the fourth quarter are pointing towards improvements here. As a result of progress in the third quarter, we have recently started hiring, again, with active searches underway for campaign managers, account managers and sales professionals. We currently have 66…

Thank you, Rich. Good afternoon, everyone. I'll recap the financial results of the third quarter. As Rich mentioned, Inuvo reported revenue of $9.2 million for the quarter ended September 30 this year. This compares to $13.8 million reported in the third quarter of last year. The decrease in this year's revenue is due to lower ValidClick revenue, partially offset by higher IntentKey revenue. ValidClick revenue in the third quarter this year was $6.2 million, and that compares to $11.2 million in the same quarter last year. This lower ValidClick revenue was primarily due to reduced advertising budgets associated with the COVID pandemic. In spite of reporting lower year-over-year revenue, ValidClick's recovery began in June following May's low. And as of October, as Rich mentioned, we're up 115% of that low. IntentKey revenue was 16% higher in the third quarter this year compared with last year. Inuvo gross margins increased in the third quarter to 82% compared to 64% in the same quarter of last year due to the IntentKey, where gross margins had increased to 49% in the third quarter compared to 29% in the prior year. The IntentKey represented 32% of the overall third quarter revenue this year compared to 19% last year, resulting in its higher margin having a greater weight on the overall Inuvo gross margin this year. ValidClick revenue is generated predominantly from ads served to websites, and therefore, as a result, there's only a small loss associated in the cost of revenue associated with ValidClick revenue. Operating expenses were $1.2 million lower in the third quarter of 2020 compared to the prior year. The largest component of operating expenses is marketing costs. Marketing costs are primarily traffic acquisition costs associated with ValidClick. It is the largest expense associated this service. Marketing costs were $5.7 million…

Thanks, Wally. We've seen a steady upwards trend in our business since its COVID-impacted low point in May of this year. The IntentKey platform has continued to grow throughout 2020 despite COVID. And while ValidClick is down year-over-year, it is expected to be up in October roughly 115% of its low point in the year, which was May. Strategically, Inuvo has been using this time to develop the technologies necessary to facilitate our transition into a technology-enabled services and, ultimately, SaaS-based business model. Now while COVID continues to make forecasting difficult and unpredictable, based on the revenue run rate coming out of October, we would expect sequential growth in the fourth quarter between 25% and 40%, which, in turn, should also improve adjusted EBITDA heading into 2020. And with that, I will turn the call over to the operator for your questions. Christy?

[Operator Instructions]. And we'll go first to Brian Kinstlinger from Alliance Global Partners.

This is Jacob on for Brian. You mentioned 25% to 40% sequential growth for IntentKey in 4Q. Can you give us an idea of where this is coming from? Is there a reason that new customer wins have been slower in 3Q? Also, can you give the average campaign size compared to the year ago period?

There was quite a few questions in there. The growth rate that we're seeing is coming both from new clients and from existing clients. I don't know what the exact distribution is between those two, as I'm sitting here on this call, but I can tell you that the majority of it is coming from existing clients that we had leading into COVID, which, as I mentioned, in our minds, given the way budgets had been declining across the industry for marketing probably is greater testament to the performance of the technology as anything. And so what was the second question, Brian? I'm sorry.

Yes, this is Jacob. But yes, is there a reason -- can you give -- no, that's okay. Also, can you give the average campaign size compared to a year ago?

I don't have that number hanging here. But we can certainly get that to you. What the average number is that I would -- just as a general statement, like a lot of companies, I mean we have a number of customers who are on the high end, meaning we've got some large customers, and we've got some smaller customers. I don't -- yes, we'll have to get it to you offline. I don't know the number off the top of my head to get it to you.

That's okay. And then is there a reason that new customer wins have been slower just because of advertising budgets?

So was the question is there a reason why new clients being signed has been slower than expected? Was that the question, Jacob?

Yes.

Yes. Yes, I think the answer to that is quite simply COVID. When COVID hit, what happened was people who had budgets paused them and started to think about what they're going to do. And so that impacted our sales efforts that I'd point one. So just the natural cost related to marketing budget constraints. And the second one was, in a COVID world where you're no longer face-to-face trying to sell directly to clients, which, in our case, with the technology we have, is required to some degree, you're forced to have to try to do the same through video conferencing and that's had an impact as well given just the nature of people adapting to a new model. So the combination of those two things definitely reduced what we were forecasting to have been what we thought was going to occur with new sales related to the IntentKey. But we kind of made up for it and then some, given the growth rate with COVID -- within COVID within IntentKey on growth of new clients, existing clients, sorry.

Okay. And a few more. Have you been -- have you begun seeing a recovery in advertising budgets? And if so, what industries? And what are customers communicating about new campaigns?

Yes. The answer is yes, and that's probably more evident on the ValidClick side of our business, given ValidClick serves a much larger audience of brands and advertisers because our 2 biggest clients there are among the 2 biggest marketing platforms on the platform, Yahoo! and Google. So the answer is yes, we've definitely seen an increased -- an increasing number of budgetary movements upwards and money coming back into marketing. And so, again, sorry, Jacob, what was the second part of the question?

Just what are customers communicating about new campaigns?

I think we're seeing customers revisiting their marketing budgets and preparing, I guess, inevitably for a world less dependent on what's going on with COVID. And we think, actually, today's announcement with Firefox is probably a good indication that 2021, maybe at least partially back on track. I'm not sure. It's -- we would say it's going to be on track, back to normal. But I think these are good indications that marketers will start spending money again given that there's some hope at the end of the tunnel, if you would, as it relates to COVID.

Yes. And you talked a little bit about political contributions, political ads. Can you give a little idea of how that's contributed to each segment? And yes...

Yes. So the political work that we did was entirely related to the IntentKey. We get it indirectly through ValidClick, but we don't track it that well. So when I was making that statement, it was really related to the IntentKey. We know for a fact that the IntentKey is a powerful tool for politics. And so the campaign that we ran this year, which was small, just reinforced enough that we have a product there that we can sell to whatever party it is that wants to use it. And so the next time around, when the budgets become available, we'll be actively recruiting for that given we have now some history of success and some results they can point to.

Okay. And can you quantify year-over-year revenue trends in last couple of months, August, September, October for both segments?

I don't have it handy on me. Wally, I don't know if you know what those numbers are off the top of your head. We typically, Jacob, don't give it on a month-by-month basis, I think we typically give it on a quarterly basis. But I would say, if it's revenue -- well, actually, I'll take it one step further. Both -- as far as I know -- as far as I can recall, both revenue and margins have gone up steadily since the low point in May every month.

Okay. And then one last one. How do you expect the holidays to impact revenue?

Typically, you see an increase in demand for advertising during the holidays, and that seems to be happening again this year, albeit with the COVID backdrop, you're not quite sure is it budgets coming back in because of the holidays? Or is it just budgets coming back in because people are starting to think that there's an end to COVID in sight. But generally, the fourth quarter tends to be up, which we are seeing.

And that's the end of our questions today. Thank you so much for participation today. We do appreciate your participation, and please you may now disconnect.

Thank you, operator, and thank you, everyone.