Good day, ladies and gentlemen, and welcome to the INUVO, Inc. Third Quarter 2022 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Natalya Rudman. Please go ahead.

Thank you, Keith, and good morning. I'd like to thank everyone for joining us today for the Inuvo Third Quarter 2022 Shareholder Update Call. Today, Inuvo's Chief Executive Officer, Richard Howe and Chief Financial Officer, Wally Luis will be your presenters on the call. We'd also like to remind our shareholders that we filed our 10-Q with the Securities and Exchange Commission yesterday. 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 the 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 new 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. 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 discussion will include reference 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 direct comparable GAAP measure is available in today's news release on our website. With that out of the way, I'll now turn the call over to CEO, Richard Howe. Please go ahead, Rich.

Thank you, Natalya, and thanks, everyone, for joining us today. We are pleased to report our sixth consecutive quarter of year-over-year revenue growth for the third quarter of 2022. Year-to-date, revenues have increased 45% to $58.3 million for the 9 months ended September 30, 2022 as compared to the same period last year. On a trailing 12-month basis, revenues have increased 47% to $78.1 million. For Q3 2022, we delivered $17.1 million in revenue. We experienced modest revenue growth for the third quarter year-over-year, which we believe was due in part to a deceleration in consumer spending, the carryover effects of an unknowingly purchased invalid advertising from a well-known platform that we disclosed in the second quarter and from whom we are now seeking full reimbursement and the loss of an agency client, which I will discuss in more detail in a few minutes. As it relates to the invalid traffic, Inuvo has reimbursed affected clients, and we are withholding the payment due the platform until such time as the issue is resolved. In the interim, the platform has shut down our accounts, and we estimate that this contributed roughly $1 million in lost revenue in Q3. We are currently in an arbitration proceeding with the platform regarding the dispute. As you know, Inuvo provides digital advertising, technology and services across channels. Our ValidClick platform principally serves advertising within the search and social channels while the IntentKey principally serves the connected television, online video, display, cable television and native channels. Through the first 9 months of 2022, both platforms experienced strong growth with the IntentKey and ValidClick up roughly 121% and 20%, respectively, year-over-year. The social and search-related revenues from ValidClick represent roughly 67% of revenues, while the programmatic revenues associated with the IntentKey represents 33%. For the third quarter…

Thank you, Rich, and good morning, everyone. I'll recap the financial results for our third quarter of 2022. As Rich mentioned, Inuvo reported revenue of $17.1 million for the quarter ended September 30, 2022, an increase of 1% compared to $16.8 million reported in the third quarter last year. Both platforms, ValidClick and IntentKey serve our multichannel solutions for our clients. IntentKey revenue exceeded the prior year by approximately 12%, primarily due to new customers expanding their media spend. ValidClick revenue declined by 3% compared to the prior period of 2021 due to incidental issues resulting from the invalid advertising media acquired in the second quarter of last year. Revenue split between the IntentKey and ValidClick was 33% and 67%, respectively, for the quarter that ended in -- third quarter that ended September 30, in 2022, and that compares to 30% and 70%, respectively, for the same period last year. Our revenue is less concentrated in 2022 than before. Our largest client represented 33% of the total revenue. And in the same quarter last year, our largest client, a different client than from this year represented 36% of our revenue. Gross profit for the third quarter ended September 30 of this year totaled $10.3 million as compared to $13.1 million for the same period last year. Gross profit margin for the third quarter this year was 60% as compared to 78% for the same period last year. The IntentKey platform has a lower gross margin than the ValidClick platform, but it has a greater overall net margin. The Inuvo gross margin decreases as IntentKey revenue becomes a greater percentage of the total revenue. In quarters past, cost of revenue was predominantly payments to website publishers and app developers that hosted advertisements that we serve through the ValidClick platform, yielding a…

Thanks, Wally. At 45% year-over-year growth through the first 3 quarters of 2022, we anticipate delivering solid revenue growth for the year on a year-over-year basis and believe 2023 will be even more transformative for the company. Consequently, we remain laser-focused on increasing the brand awareness and adoption of our IntentKey AI technology, which is garnering extremely positive feedback and is gaining traction within a market where current identity-based targeting technologies can no longer scale. Overall, we are building a highly scalable model and expect to generate positive cash flow during the latter half of 2023 as we continue to grow revenue. We believe our balance sheet remains strong enough to accommodate the working capital needs of the growing business. Should current fourth quarter trends continue, we would expect revenue to be between $19 million and $20 million. I will now turn the call over to the operator for questions. Operator?

Thank you -- ladies and gentlemen. [Operator Instructions] We'll take our first question from Brian Kitslinger with Alliance Global Partners.

This is Sherman on for Brian. I have a few questions here. I want to start with if you could talk about the pressure on advertising budgets. And if it's turning both of your segments for IntentKey, is it small campaign sizes or fewer campaigns? And on ValidClick, does the pressure on ad search budgets, are you seeing more or less pressures than the corporate overall ad budget?

Could you ask the second question again, please? I got the first one, but I didn't catch all of the second one.

Yes. On ValidClick, do you see the pressure on search ad budgets? Do you see that as generally having more or less pressure than the overall corporate ad budgets?

Okay. So let me start with the first question, which was do we see pressure on budgets? And is that represented in the campaigns that we're running. And the answer is both yes and no. I think we see an economic situation that is uncertain, and we believe our clients see the same things that we see. Now as a consequence of that, we did start to see not in a big way, but in a smaller way, the number of campaigns being run actually dropping for clients. So the answer to that question is, yes, we did see fewer campaigns in the quarter relative to the prior quarter. As it relates to whether or not it's search or social or the other channels that we cover, we see it generally throughout. So, both -- all of them, if you will, are to some degree, being impacted by this. I don't want to mislead. It is an uncertain period. Like we're not quite sure if this is going to end, continue or go away at this point. But there are some, let's just say, some early indicators that potentially there's maybe something causing advertisers to pause for a second and see whether or not the economy is going to continue in an upward fashion or a downwards fashion related mostly to the issues related to inflation.

But for the most part of those, you said maybe slightly fewer campaigns is overall have remained consistent?

Yes. With the reduction.

That's helpful. Second was the percentage sorry, I misspoke. Could you share the number of new logo wins for IntentKey during the third quarter? And then at a high level, how is new logo wins trended in the fourth quarter? I guess I'm trying to get at, during a recessionary period, are enterprises -- will they be trying new ad tech? Or should we expect new logo wins to be modest in the near term?

The answer to the question is we haven't disclosed how many of the new logos that we have. So, I won't do so right now if I could have to go look it up to see what it is. But I will answer it generally. In almost every seasonal cycle within the advertising industry, you sign-up most of the new logos actually heading into the new year. Most companies do not want to make changes to whoever it is that's providing their advertising technology and services in the third and fourth quarters of the year because those are typically, especially in the e-commerce realm, the most significant quarters related to their financial performance. So, there is generally a slowdown in the number of new logos we signed in the back half of the year compared to the front end of the year.

That's helpful. So, the fourth quarter is usually seasonally strong. Can you provide anything to help us understand how you see this coming fourth quarter? Will the fourth quarter be the strongest of the year in terms of revenue? Or will there be that pressure from talking about so the fourth quarter will be below the third quarter? Any details would be helpful.

We -- in my comments summary I gave some guidance for this. So based on where we are today, November 15, with the revenue we've seen through November 15, we're projecting revenue in the fourth quarter somewhere between $19 million and $20 million.

And then you mentioned that your top clients, your largest client decreased from 36% of your total revenue to 33% of your total revenue. Have they communicated anything to you in terms of its near-term ad strategy related to IntentKey?

Well, we talk to them all -- So go ahead, Wally.

I was just going to say, Rich, that those are different clients, right? That wasn't the same client from last year --

But the general answer to the question is, we're in dialogue with our clients all the time about the various components of the medium mix associated with the deliverable. And of course, as I mentioned on the call today, which I highlighted, it's actually in the second quarter. I mean we have some incredible technology itself, again, artificial intelligence base that allows us to actually optimize media mix across channels in a way that as far as we can tell, has not been done before and the impact of it is yet again significant. Optimizing this media across channels is probably one of the hardest things to do in advertising, particularly as the number of channels grow.

[Operator Instructions] We'll take our next question from Jack Vander Aarde with Maxim Group.

This is Jack Kodera calling in for Jack Vander Aarde. I actually just had one question. I know you guys mentioned already, you're still focusing on growth, which is nice to hear. I'm wondering on adjusted EBITDA basis, is the goal to operate close to breakeven adjusted EBITDA? And I'm also wondering if you could share some color, if you think the macro environment adds any randomness to that? That's my only question. Thank you so much.

Jack, you kind of broke --

Wally, do you want to take the --

Yes, it kind of broke up. I didn't hear the entire question. What was it about adjusted EBITDA that you were asking, Jack?

Sorry. Yes. So, wondering if your operating goal is to operate close to adjusted breakeven EBITDA? And then also if there's any color on how macro affects any randomness to that --

Yes, absolutely. Thanks for the question. Jack, we're focused on growing as quickly as possible. As Rich had mentioned in his comments, this is an opportunity for us. It's a window that we see over the next 2 years, that's giving us an opportunity to get market share. So, we're growing as quickly as we possibly can within the constraints of attempting to be EBITDA neutral. We're at a negative now, but we have hit quarters where we have been positive, and we believe we can continue to be positive in the future. So, the focus is growing as quickly as we can, but to remain neutral to positive and adjusted EBITDA as quickly as possible also. So yes, that is our goal.

That's amazing goal. That's the only question I had.

Ladies and gentlemen, this does conclude today's question-and-answer session. At this time, I'd like to turn the conference back to Rich Howe for any additional or closing remarks.

Thank you, Operator. And of course, I'd like to thank everyone who joined us on this call today. We appreciate your continued interest in our company.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.