Good day, ladies and gentlemen. Welcome to the Inuvo, Inc. First Quarter 2024 Conference Call. [Operator Instructions] This call is being recorded on Tuesday, May 7, 2024. I'd now like to turn the conference over to Natalya Rudman of Crescendo Communications. Please go ahead.

Thank you, [indiscernible], and good afternoon, everyone. I'd like to thank everyone for joining us today for the Inuvo's first quarter 2024 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 also like to remind our shareholders that we will file our 10-Q with the Securities and Exchange Commission this afternoon. 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 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. 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 consists of historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available on today's news release on our website. With that out of the way, I'll now turn the call over to CEO, Rich Howe. Please go ahead, Rich.

Thank you, Natalya, and thanks, everyone, for joining us today. We are pleased to report that for the quarter ended March 31, 2024, we delivered a strong 44% year-over-year quarterly growth with $17 million in revenue. This builds on the 32% growth rate we experienced in the second half of 2023 and provides us with continuing confidence in growth expectations for the remainder of the year. Our financial goals as a corporation have not changed. Our objective remains to grow revenues above $100 million annually, which is approximately the revenue level at which we expect to become adjusted EBITDA and free cash flow positive. As Wally will point out in his summary of the quarter, we also saw improvements year-over-year in adjusted EBITDA and free cash flow. We aren't yet where we want to be, but we are on the right path. In the first quarter, the revenue split was 16% for agencies and brands and 84% for platforms. We tend to lead into our platform relationships in the first quarter where the number of end clients is larger and because the agencies and brands tend to still be reviewing annual budgets in the first quarter. We generated $165,000 in revenue from the newer higher-margin products we discussed on the year-end call in the first quarter. What I'd like to do now is spend my time bringing you up to speed on our industry, our products and our clients. Let's begin with the industry. In the first quarter, Google delayed again the elimination of third-party cookies within their Chrome browser. This is the third time Google has delayed this inevitable change. The takeaway from this delay is how dependent the advertising industry and by extension, the Internet is on the use of these cookies. As we have mentioned on previous…

Thank you, Rich. Good afternoon, everyone. I'll recap the financial results of the first quarter of 2024. As Rich mentioned, Inuvo reported revenue of $17 million for the first quarter of 2024 that compares to $11.8 million for the same period last year, that's a 43.7% increase year-over-year. The higher revenue this quarter compared to the prior year was due to accelerating growth with our largest platform client and to a new platform client we signed on at the end of last year. This accelerating growth with our largest platform client is a result of the strategic initiative brought to market in 2023 last year, which we mentioned in our last call. Strategically, we continue to focus on scaling revenue from platform clients and signing new midsized agencies as well as brands directly. 84% of the first quarter of 2024 revenue was from platform clients and 16% from agencies and brands. That compares to 66% from platform clients and 34% for agencies and brands in the first quarter of last year. For the full year of 2023, approximately 80% was from platform clients and 20% from agencies and brands. Cost of revenue was $2.1 million for the first quarter of 2024 compared to $3.2 million for the same period last year. The increase in the cost of revenue for the 3 months ended March 31, 2024, as compared to last year was due to revenue mix, where revenue from platform clients were a greater percent of the overall net revenue in the current quarter. Cost of revenue is primarily composed of payments to advertising exchanges that provide access to digital inventory where we serve advertisements. To a lesser extent, the cost of revenue includes payments to website publishers and app developers that host advertisements. Gross profit improved in the first…

Thanks, Wally. We had a year-over-year first quarter growth of 44%, which is a strong start to the 2024 year. From a development perspective, we continue to innovate in a manner that makes the bar high for our competition. From a market perspective, we continue to increase the size of our go-to-market and marketing organizations to both increased the awareness of our solutions and our pipeline of prospects. As we have mentioned in previous quarters, Inuvo's financial metrics begin to change at a threshold of roughly $100 million in annual revenue. At this level, we anticipate gross margins would absorb much of our fixed costs and, therefore, generate positive adjusted EBITDA and cash flow. I will now turn the call over to the operator for questions. Operator?

[Operator Instructions] Our first question comes from the line of Brian Kinstlinger of Alliance Global.

Can you talk about revenue growth in terms of new logo revenue versus increased wallet share from existing customers, at least at a high level.

Well, I mentioned that we signed some new brands up in the quarter. And the lion's share of revenue is recurring again this year. I don't think we provide that have provided historically that split, but that's the answer, Brian.

Well, I guess, as you look at the last 4 quarters of customer additions, which that will be part of my next question, is that a meaningful piece to revenue? Is it 10% of revenue comes from new customers at in the last 4 quarters? Is it a much smaller share given they're generally smaller new programs and be trying to gauge the contribution without exactly?

Yes. I'd have to go look at the numbers myself. But I can do some mental math in my head just based on what I know. And it's probably 10% to 20% is the new piece.

And then can you guys provide you added 3 customers count today versus last year? And then I know you mentioned conferences more advertising, more press coverage. All great things you've talked about getting your brand out there and you clearly are doing everything to do that. Are you able to identify which avenues of marketing are driving more success in which maybe -- are having less success early on in these changes in these new avenues.

I don't think we've provided specific client counts in the past and I don't have them at my fingertips right now. I think we've generally provided some sense of how many clients, let's just say, make up the agency and brand section. So we'd have to take that up afterwards, Brian. As it relates to the marketing activities, while we see -- we're kind of doing 3 things to support a field sales team which is primarily the method through which we closed the deals. One, I mentioned in the script, which is the portal that we created is itself a lead gen source us making our AI available online for anybody to use, does solicit input. So that's one avenue. The second is just we have found conferences to be useful, probably because you can meet more people in one place than hand-to-hand combat in the field. So those are good sources of leads for us. And the third is just being picked up, more generally, which, as we've said, has accelerated in the last year, mostly because the end of the cookie approaches. So more media outlets are hunting around, interested in 2 things: One, anything with artificial intelligence tied to it, which clearly we're a good candidate for. And the second is, yes, what's going on with, the cookie story in advertising. So those 3 things are all done to try to make our brand awareness easier for our salespeople in the field.

And then within your existing customer base, where they've already tested and are using the technology. What are they communicating about their future plans in a world without cookies and without the ability to track consumers? And is, there a concern and the reason they don't scale so much larger? Because I know their wallet sizes are larger. Is it the size of your company? Is it not [ allowing ] you shift away from other ad-tech companies? I'm just trying to understand while you have fantastic growth, it sounds like you're solving a problem. Others aren't solving. So I'm wondering what the reluctance to use more is if they already understand your technology?

I think size of our company -- size of anybody's company has an impact, particularly the larger the client is, so that definitely has an impact. But I don't know that that's a new phenomenon with Inuvo. I mean it's been the same with every company that started. So that does exist and it's real but it's no different for us than it was for anybody. The second question, part of that question, I think, is also a good one. Generally, what we find is the marketplace itself is less aware and knowledgeable about the underpinnings of how people actually do get tracked around the Internet than we might want them to be. A consequence of that is a lack of a thorough understanding of how that all works leads some potential prospects to be complacent in the decisions they've already made, where they're getting input from existing vendors who tell them the problems going to be fixed in some other way. So I think it's a combination of those 2 things that are still in front of us. And it's all it's kind of the same, Brian. It's like there's always a certain subset of people who are early adopters. And then there's everybody else to wait until it's already happened. And then they start scrambling around trying to find a solution that works. That's not a general statement because obviously, some people are working on this. But I will tell you, some people are working on the wrong problem, right? And so that happens too, right? They're convinced that there's a certain path that's going to yield the right outcome, and oftentimes, it won't. There's a lot of that going on.

You mentioned a plan to hire more salespeople. Can you talk about how many direct sales folks you have and where you hope to end the year at?

You think we'd know the exact answer to this by now. I think it's been asked a few times, Brian. So I don't know what the exact number is and I'd rather give you the exact number like what's in that organization. So maybe Wally can follow up and tell you exactly what it is, you go to accounts because we've been hiring and some people we'd let go. And so I don't know where the net is on that right now.

Your next question comes from the line of Jack Codera of Maxim Group.

Congrats on a solid quarter. This is Jack Codera calling in for Jack Vander Aarde. I wanted to touch on the DSP stuff. So in early March, you put out a press release announcing the self-serve availability of the --. I was wondering if you could give any additional color. How has this progressed? How many platforms are you on? Any additional color there would be helpful.

Any major DSP can access our AI and run campaigns against it. There's a lot of DSPs, but is it the ones that matter, there's no challenge with that. We have -- we've built an integration for that. It's still slow going. I mean we only really had what I would call beta clients. We really only started materially signing beta clients for the self-serve in 2023. So this is the first year we're actually populating a sales force to go do it. In fact, we hired our first salesperson to go do that I believe, in the first quarter of this year.

Okay. That's actually really helpful. And then kind of take the Google approach again, given that they started phasing out third-party cookies. Can you give any other additional color, how is this impacting conversations on the consumer decision-making side? Are you about to close deals and this is a major lever. Can you give any additional color there?

Yes. Like anything, somebody is large and successful and powerful as Google is. It can complicate peoples' decisions and confuse potentially peoples' decisions. And I think that's probably the best way to look at it. Again, maybe pointing back to what I said earlier in that there's, a lot of buyers we encountered who legitimately, in our opinion, don't understand all of the implications to their business. They can be maybe misread something like this and think, oh, it's like this problem is not going away at all. In which case, I can just keep going with what I've got. That's one potential thought that could go through the minds of someone, right?

[Operator Instructions] Your next question comes from the line of Jon Hickman of Ladenburg.

According to kind of my historical numbers and maybe I'm wrong here, but it seems like the media buying, the marketing expenses were somewhat higher than they have historically been for the level of revenues. Was there something going on in the first quarter that made that happen?

Wally?

I think it's -- no, if it's higher, it's just the cost of media. I mean it's, supply and demand. But no, there was nothing going on in the quarter that would increase the media spend, more than the prior quarters.

And we have a follow-up question from Brian Kinstlinger of Alliance Global.

Can you help us with what the expectation you might have or the impact on the election on your business? In which quarter also, if there is an impact, do you expect to begin to see it? And how will we see that?

At this point, Brian, and we may have answered this before. But there will be virtually no impact from the election on us, only because we purposefully try to stay away from the election area for now. There's plenty of other opportunities for us. With that being said, I should be clear about this. We have run some smaller states in local election media. But as a rule, as a company, it's not an area that we've chased actively rightly or wrongly. We just haven't. So I don't expect any impact on us one way or the other from that.

[Operator Instructions] And there are no further questions at this time. I would now like to turn the call back to Richard for closing remarks.

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

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect. Have a good day.