Greetings, and welcome to the Inuvo, Inc. Fourth Quarter and Full Year 2022 financial results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to hand over to Natalya Rudman of Investor Relations. Please go ahead, ma'am.

Thank you, Sonia, and good afternoon. I'd like to thank everyone for joining us today for the Inuvo's fourth quarter and full year 2022 shareholder update call. Today, Inuvo's Chief Executive Officer, Richard Howe; and Chief Financial Officer, Wally Ruiz, will be your presenters on the call. We would like to also remind our shareholders that we will file our 10-K with the Securities and Exchange Commission this afternoon. Before we begin, I'm going to review the Company's safe harbor statement. The same is 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 are, as such, forward-looking statements. 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. 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 references 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 directly comparable GAAP measures 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, Natalia, and thanks, everyone, for joining us today. We are pleased to report that for the fiscal year 2022, Inuvo grew 26.4% having delivered $75.6 million in revenue as compared to $59.8 million in the prior year. Our growth rate over the last two consecutive years has now averaged 30%. Fourth quarter revenue was $17.3 million, which was roughly flat sequentially and down year-over-year from the $19.7 million reported in Q4 2021. We have observed an economic softening, which began for us in December of 2022. With that said, our 2023 pipeline of business opportunities is as robust as we have ever seen it, which we attribute to the growing demand for audience discovery and targeting solutions that do not depend on identity in the wake of the cookie and other identity-based advertising technologies fast becoming obsolete. Gross margins increased throughout the year, rising from 53.5% in Q1 to 68.2% in Q4 and averaging 60% on the year. Year-over-year for the fourth quarter, gross margins improved 11%. On an annualized basis, gross margins declined roughly 13%, which reflects the growth of the Company and the change in revenue mix associated with the breadth of services and technology that were delivered directly to clients in 2022. To reflect better this shift in revenue mix that started in 2022, we have reclassified revenue into the two categories of direct and indirect. We have also retired the ValidClick classification within our financial disclosures in lieu of these more descriptive categories and the annual products that support them. Direct revenue is advertising-related revenue generally from relationships we have either with agencies or brands. Indirect revenue is advertising-related revenue generally sourced through companies or platforms that have direct relationships with agencies or brands. Our Google client would, in this regard, be considered indirect.…

Thank you, Rich. Good afternoon, everyone. I will recap the financial results for the full year of 2022 and the fourth quarter. As Rich mentioned, Inuvo reported revenue of $75.6 million for the full year of 2022, a 26.4% increase over the prior year. For the fourth quarter ended December 31, 2022, we reported $17.3 million of revenue 12% lower than the $19.7 million reported in the fourth quarter of the prior year. As we mentioned throughout 2022, the services we provide our customers identifying audiences and presenting advertisements across marketing channels has increasingly blurred the line that distinguishes our products. Consequently, we began to classify revenue by type of customer rather than by product line. Revenue is reported by direct customers, indirect customers and consulting and other services. During the full year 2022, revenue from direct customers was $36.2 million, a 73% increase over the prior year. Revenue from indirect customers was $39.2 million, a 2% increase over the prior year. Consulting revenue for the full year of 2022 was $129,000 compared to $416,000 in the prior year. For the fourth quarter of 2022, revenue from direct customers was $6.2 million, a 39% decrease from the prior year 2021. The Revenue from indirect customers was $11.1 million, a 17% increase from the prior year. Consulting revenue for the fourth quarter of was $15,000 compared to $72,000 in the fourth quarter of the prior year. The increase in revenue from direct customers in the full year 2022 was primarily due to new customers and the expansion of media spend by existing customers. This was also true for the higher revenue associated with indirect customers in spite of having to absorb a $1.5 million refund provided to one of our indirect customers in the second quarter of 2022 because of a…

Thanks, Wally. We had a strong year, growing 26.4% year-over-year. We made and continue to make significant advancements both in the technology and the services that are required to meet the needs of our advertiser, clients and prospects. While we saw a softening of advertising spend in December that has continued into the seasonally lower first quarter. We do have a pipeline of potential new business in 2023 that looks very encouraging. As a company, we believe we have three things going for us that can be tailwinds. First, we have an artificial intelligence technology purposely built for a consumer privacy based advertising future that is significantly ahead of any competitor. Second, we have a market catalyst in the obsolescence of the cookie that will force changes in buyer behavior that align with our technology. And thirdly, we have a significant market interest in artificial intelligence technologies that has now made its way into our prospects boardrooms. We will continue to invest in sales and awareness programs so that we can capitalize on these tailwinds. I will now turn the call over to the operator for questions. Operator?

[Operator Instructions] The first question comes from Brian Kinstlingler from Alliance Global Partners. Please proceed with your question, Brian.

This is Sharmin on for Brian. Thank for taking my question. Can you provide an update on the Google search contract renewal? I think you have a few more weeks to get that done. And in addition, do you expect any prices -- any changes to pricing?

So the -- as has happened historically. Sometimes the renewal date gets pushed out most of the time by Google just because they're busy and so they can't get to it. So, there's no issues associated with the renewal, but I think we did extend the renewal date, perhaps for a month, Wally, maybe you can do that. We've done that before. We don't see any issues. We don't talk about whether or not we have pricing advantages or disadvantages on these calls associated with that agreement as there's a lot of proprietary aspects and disclosure requirements associated with doing business with that company that we have to be careful about.

Yes, they did ask us to extend it 30 days. Apparently, their legal department is busy, and they have bigger fish to fry right now. But we have indications that there are no significant changes in the offering.

All right. Thank you. Next question. In terms of IntentKey, can you talk about how the more challenging ad market is impacting the business? Is it smaller campaign sizes, fewer new customer wins, less usage by existing customers, et cetera, et cetera?

Can you just ask that question again? I'm sorry, I look at you broke up a little bit, so I didn't hear it...

Yes, my fault. Talk about how the more challenging ad market is impacting the business in terms of IntentKey. Are we seeing smaller campaign sizes, fewer new customer wins, less usage, anything along those lines?

Yes. I think the general answer to that question is in times of uncertainty, and I think we kind of are in that -- Well, we'd probably get in that period in the United States here now for a little while. But in those times, typically, advertisers tend to be a little bit more cautious with regard to the amount of money they're looking to spend and wait and see attitude. And we do see that generally.

So in regards to customer acquisition, new customer win trends, sales cycles, you see a little bit of lengthening in those, a little bit more difficulty

I don't think we're seeing any material changes in our, let's say, win rates or the number of prospects. And as I said, I think in my script at one place, the pipeline, the risk-adjusted pipeline that we manage on a regular basis actually is larger right now than it's ever been. So it's not -- that's not the issue. I think it's more like when you do signed clients, let's just say they're probably going to spend -- and when -- for clients we already have, they're spending perhaps a little less than they would normally, that may change, of course, as the seasons change here because our advertising obviously has seasonality associated with it to the larger spend in Q3 and Q4.

Makes sense. Pivoting towards advantages IntentKey which you talked about a lot, what do you think your results will be going to be impacted and your revenue growth would accelerate given your advantage in a cookie-less environment?

I think the only thing between us and that, let's call it, hyper accelerated growth is awareness. One of the good things about being in the industry that we've designed our technology to service that it's a gigantic industry, one of the downsides is you have to get awareness to get yourself known to even be considered cost a lot of money, and we spent more money on marketing last year than we have probably in the history of the Company. And it's really -- that's the only thing between us and I think, continued and maybe accelerated growth is just trying to get our awareness spend more time at conferences, get our names and publications be proactive with our outreach for marketing is a big part of this.

All right. And one last question. Whereas fourth quarter revenue is usually seasonally strong for both businesses, should we expect the first quarter will be seasonally light?

Our first quarter is typically lighter right? Wally, go ahead, but...

Yes. Yes. So yes, there is seasonality. You're absolutely right, right? So what historically we've seen with -- in recent memory, the only exception to that I can think of was in 2022. But other than the 2022, typically, we see the first quarter lower than the fourth quarter.

[Operator Instructions] The next question comes from Jack Vander Aarde from Maxim Group. Please proceed with your question, Jack.

Okay, great. Appreciate the update guys. Encouraged to hear your pipeline, Rich, I believe, is the strongest it's ever been. I'll get into my questions with that kind of opening statement. So Rich, can you just talk about the pipeline in a little more detail? Or how granular you can get with it? Can you just help me maybe understand if you provide a breakout of how -- what you point to indicate that as the strong as it's been? How do you calculate that? And is it really on the IntentKey side or, I guess, direct and indirect and maybe consulting as well? Anything you could provide regarding the pipeline.

Well, yes, sure, absolutely. I guess like most companies, maybe it's a stretch to say even that. But we track our pipeline quite meticulously, which means that every opportunity that we think exists, gets entered into, we use Salesforce. And then that opportunity is -- has a cycle to it that we attribute some probability in terms of where it is relative to its cycle to a likely close. And of course, the probability either goes up or down depending upon how much we're advancing within the sales cycle. And so there are literally, I don't know how many of the -- Jack, there are in that pipeline, but I'm trying to think in my head because I do look at it on a regular basis, but there's at least 40 things in there. And so -- and many of them -- and they canvass a lot of ranges. I mean they can be as small as $20,000, and they can be as much as million, right, is probably the biggest one I can remember just thinking about it that's on the pipeline. So the answer is we track it. We track it very carefully. We've always tracked it. So we know relative to other years where we stand relative to that. And right now, there's a lot of really nice opportunities.

Great. No, that's helpful. I appreciate that. And maybe just in regards to kind of what you're talking about with there's an overall industry kind of buzz or market appetite for AI technologies in general. Obviously, ChatGPT come into the marketing causing quite a stir. I imagine is a benefit to you guys. You're ramping up your headcount, added some more salespeople. How much of your pipeline is growing now from your own sales efforts and headcount expansion versus maybe word of mouth of just more educated market environment where people are coming to you now? Is that pipeline coming from a mix of both your own headcount and also word of mouth?

Yes, that's a good question. And I think it parlays into what I said as an answer to the last question, it's more of the former and less of the latter. It's all of our pipeline, for the most part is -- well, maybe other than -- I shouldn't say all because it's not that black and white Jack. But I'd say less than 10% of the pipeline is inbound from somewhere that there's nobody really was talking to the person. So that means, of course, we're in the field talking to people with our salespeople, and that's where most of our leads come from. It's this awareness piece that we're trying to improve. And I think as I alluded in my script, we have a construct for this. And I guess, to some degree, it was designed and is designed around the huge success we've seen with ChatGPT. So if we accomplish what we would like to with this initiative, coming soon. And by soon, I mean, maybe before the end of the first half of the year, you'll be able to go online and going in an interface, much like you do with ChatGPT. And instead of asking general questions, you can ask questions about audience, tell me about my electric bike audience, tell me about a home mortgage audience, tell me about the checking account, mortgage, checking account product market, anything. Tell me about German Shepherd audience. There's really no limitation to what the IntentKey can do because it doesn't think in those contexts. And we think that could be a powerful way for us to build awareness much in the same way we've seen ChatGPT be successful with it.

Okay. That's helpful. And maybe a question for both Rich and Wally, just in terms of -- I see your current liquidity. It seems like you guys are confident you have at least 12 months of runway. You have a lot of new products that you're in development and planning to launch and you've also made some headcount ramp as well. Can you maybe just talk about, I think, the prior quarter or maybe two quarters ago, you had comments around how you were thinking about managing growth versus close to adjusted EBITDA positive. Can you just provide an update on the puts and takes there? I'm sure some of it is in your control, how fast you want to ramp up development or certain expenses to drive growth. But I don't know, can you just help us understand where we are in terms of setting expectations for revenue and EBITDA in that trade-off?

Yes, absolutely. Yes. We do have capital at the end of December. We are -- the focus -- and I think what you're alluding to, the focus for us has been to be -- grow as quickly as possible and yet maintain a breakeven adjusted EBITDA or as close to it as we possibly can. That pretty much still sums up the -- our strategy. We're going to grow at a rate -- look, if we had more capital, we would try to grow even faster. But we're going to try to grow at a rate that makes sense in terms of capital preservation. So we have no plans of going back to the capital markets right now. We do have a line of credit that we have that's been unused. And so it gives us some leeway. So it's going to be a balancing act to how fast can we grow and at the same time, have adequate cash to fuel that growth. Right now, as you said, we do have sufficient capital to get us through 2023. So, it's something that we watch. We're being very careful with our expenses and our hiring. I think we're pretty excited about our pipeline. Our sales force has been doing a very good job. As Rich mentioned, the pipeline has probably never been as strong as it is now. There's just a lot of new names on it and increasing budgets on some of the existing names that we think will come to fruition over the next several quarters. And our business development efforts also have been producing nice results in terms of new customers and new revenues. So we're very excited about '23. We're going to have to be careful with our capital. We're going to have to grow as quickly as we can see that this pipeline gets turned into revenue.

Excellent. And maybe just one more follow-up from me. Another analyst asked about the Google relationship and something I just want to touch on another key partner of yours is Xander as well as Yahoo. Can you maybe just provide just a quick update on how those relationships are going today and.

Yes, there's no issues associated with either of those. The relationships are strong in place, have been, obviously, for many years. I can tell you, Wally and I don't lose any sleep over thinking about those relationships we're executing -- they're making money off of us. That's why they're partners, right? So it's not something I spend time too much time worrying about.

Excellent. And maybe just one more, actually, Rich, just if you were to look two years ago, put yourself back in your shoes two years ago or so and you look at where Inuvo was. And now today, when you look at the technology you have in the current market environment. A lot of things have played out that no one could predict in the world. How does kind of your outlook for Inuvo, the products you have, the team you have in the market environment that we're in. how does it kind of compare in terms of, I guess, how you see success going forward relative to where you were two years ago? Are you on track? Are you ahead of schedule? Is it a different game than you were expecting? I'd just be interested to hear your thoughts.

Technologically, it's not even close between our nearest competitor and us. So in that regard, I mean, I could not be more excited about our opportunities. So what we're trying to do is make sure we can maintain our competitive advantage. But as I said, the single biggest thing -- obstacle between us and, I think, accelerated -- significant accelerated growth is just awareness. It's like even though we're not a small company anymore, at roughly $80 million in revenue, relative to the kinds of companies that are in the media and ad tech space, we are small. So oftentimes, we do interact with prospects. And sometimes they might say, yes, I think I've heard you Inuvo, but a lot of times, it's the first time they're encountering us. And so that's what I lose sleep over is there's hundreds if not thousands of RFPs going out today, and we may not even be included in some of them simply because people don't know who we are. They would -- if they knew who we are and what we can do because a lot of the RFPs or RFIs speaking of which a few of them we're working on right now are coming out these days where the clients, the prospects are specifically looking for companies that have technologies that don't require the use of cookies or identity or first any kind of data. So that's my feeling. It's like I guess that's where my anxiety comes, not related to our ability to deliver not our technology, not how much advanced. Our AI is those things I know are incredible. It's how do we make sure that we're in the game, so to speak, in the big game right?

Well, if I call it a problem, that's the best problem to have, it sounds. So I'm encouraged by your guys' momentum, and I look forward to keeping track.

Thank you. There are no further questions at this time. I'd now like to turn the call over to Rich Howell for closing remarks. Thank you, sir.

Thank you, operator, and thanks, everyone, for joining us today on the call. We appreciate your continued interest in our company.

Thank you. Ladies and gentlemen, that does conclude today's teleconference. Thank you very much for joining us. You may now disconnect your lines.