This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: And welcome to the INUVO, Inc. 2020 Year-End and Fourth Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Walter Pinto, Managing Director of KCSA Strategic Communications. Please go ahead.
spk01: Thank you, Operator, and good afternoon. I'd like to thank everyone for joining us today for the INUVO Fourth Quarter and Full Year 2020 Shareholder Update Call. Today, the Midwest 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 listeners know that as of today, and as a consequence of the COVID-19 pandemic, our office in San Jose, California, remains closed. In our Little Rock facility, we continue to rotate small groups in and out of the office on a voluntary basis in a manner that permits the potential risk of infection through interaction with colleagues. I'd also like to remind our shareholders that we anticipate filing a 10-K to the Securities and Exchange Commission this evening. Before we begin, I'm going to review the company's safe harbor statement. 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 using this call, The words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to a NUVO 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 a NUVO at this time. In addition, other risks are more fully described than NUVO's public violence, which is the U.S. Securities and Exchange Commission, which can be reviewed at SEC.gov. With that, we'll now turn the call over to CEO Richard Howe.
spk02: Hey, thanks, Walter, and thanks, everyone, for joining us this afternoon. For the three months ended December 31st, 2020, we delivered roughly $12.9 million in revenue, which was up 40% sequentially, and yet another strong quarterly indicator following Q3's 21% sequential growth that the business was and that's continued to recover following the impacts of COVID-19, which for a new vote hit us at a low point in May of the year. Of that 12.9 million, ValidClick delivered 9.3 million, which was an increase of 48.5% sequentially, and the intent key delivered 3.6 million, which was an increase of 22% sequentially. ValidClick was still down, 40% year-over-year in the quarter. However, the intent key was up significantly at 34% year-over-year in the fourth quarter. For the full year, the company delivered $44.6 million, which is down roughly 27% year-over-year. But as we've mentioned in the past, the Valiclick business, which contributed roughly $34.2 million of the annual revenue in 2020, was hardest hit by COVID-19. But as can be seen from the third quarter and fourth quarter trajectories in 2020 have been recovering strongly. And barring any unforeseen additional COVID issues in 2021, we would expect to be roughly back in that business to its pre-COVID 2019 revenue run rate sometime in 2021. The intent key delivered $10.4 million of revenue in a year, growing 22% year-over-year despite COVID. And we would expect this product line to continue its double-digit growth rates overall into 2021. For the intent key in 2020, we believe COVID effectively constrained the growth rate of the product. Both of our product lines serve the marketing and advertising industry. These are pocket products. excuse me, there are pockets within this industry, notably like insurance or home refinancing that have continued to do well in spite of COVID. And then there's others like travel and entertainment that have lagged. We expect to return to a more predictable market sometime in the second half of 2021 after, you know, the vaccines find their way into the population. Valid click gross profit after traffic acquisition costs was down roughly 35% in 2020, and this is a consequence of the COVID impact on the revenue from that product line. However, the intent key gross profit was up almost 90% in 2020, and this is a reflection of the steady increase in gross margins that have occurred throughout the year in this product line. Adjusted EBITDA in the fourth quarter of 2020 was approximately $340,000, and for the full year was a loss of roughly $2.4 million. Now, the value-to-business has historically been a strong contributor to cash flow, and it is in a rare category of marketing and advertising business models where there are risks of collections is relatively low and the majority of the payables in the business go out after receivables are collected. The business is actually up over 100% in December and compared to its low point of May in the 2020 year. Most importantly, the primary relationships within the business, which are with Google and Yahoo, are secure. with one of them having been renewed in 2020, and the other is in the final signatures renewal process as we speak. For ValidClick, COVID really has offered the company the opportunity to rethink both the go-to-market and the revenue concentration for the business while going through COVID in 2020, so that we could redesign a better business to come into 2021 with, a business better focused maybe on the future as opposed to the past. Consequently, we have increased our direct marketing capability within the business, which in turn has provided greater control over our traffic acquisition, has allowed us to have a tighter integration with our publishing platform, and we believe positions the business well as it continues to recover to do so at higher margins. Revenue mix within the business has, by design, changed dramatically in 2020 and will continue to change into 2021. As of December 2020, revenue generated within ValueClick was roughly a third of from each of Google, Yahoo, and then a third from a collection of other demand sources. Now this compares to December 2019 where Yahoo was 70% of the revenue of the product line. So this represents quite a significant and we believe a positive diversification change in this business. designed to put the business in a position where it can scale and scale at higher margins. In 2021, and to ensure that these strategies are executed on, we have assigned our chief operating officer a more direct day-to-day role in the activities of the business and its important partnerships. And so that will be one of his primary responsibilities in this year. The market for the services of this business measures in the tens of billions of dollars annually. And as a result, you know, we've never not believed that there was plenty of market share here. There are no issues with respect to the business's ability to actually scale and ultimately return and surpass its pre-COVID cash contributions to the enterprises. The intent key has continued to deliver outstanding results for clients throughout 2020. We now know in head-to-head tests against the competition we are likely to win. Our job really now is to continue building out a world-class sales and account management team around what is truly a unique and proprietary product. The reason we win is because our AI creates audiences in near real time that only we know exist. And therefore we have an ability to message those audiences on behalf of our clients before our competitors can. And this results in better performance for our clients. We ran 251 campaigns for clients in 2020. with approximately 40% of those campaigns coming from new business within the year. In the fourth quarter, we exceeded our clients' goals on campaigns by roughly 36%. Now, for the year, we exceeded client goals by 46% on average. Now, since these goals our clients give us are likely based on the performance of our competitors, these accomplishments are really a proxy for how much better the intent key is versus that competition. Throughout the 2020 year, the sales team closed many new brands across a variety of industry verticals, which itself is a testament to the technology's ability to identify and reach audiences. regardless of the product or service being offered by that client. With the launch of our software as a service version of the platform in 2021, we significantly expanded the market size for the intent key by allowing clients who do not require a fully managed service to adopt the core differentiating components of this platform, which are really the AI modeling and data components. Coming out of 2020, we now have new clients in retail, nonprofit, automotive, casinos, pharmaceuticals, and tourism. We did source a record number of RFPs in the third and fourth quarters of 2020, and the pipeline thus far in 2021 looks healthy. Now, COVID's impact remains unknown to us. But typically, the first quarter of a new year is our slowest quarter. Marketers tend to reassess their budgets for the year in that quarter. Now, since we've not gone through a quarter where we have a business cycle combined with lagging impacts of a pandemic, we don't really know how this will impact the distribution of client media spend throughout the year. You will recall that COVID's impact last year for Renewable really began in April and May of the second quarter, and as a result, we really have no past experience beyond that to guide us here. Technically, we made a number of major advancements in 2020, and we believe that this positions us well and was designed to position us well for 2021 and then beyond. The first of these advancements was the launch of our real-time solution. Now, while our AI was always able to identify audiences quickly, the infrastructure that supports that AI and the delivery of our clients' ads was not. So what we had to do was we had to significantly improve this connection between the hardware technology and the software technology. And I'm pleased to report that we can now process up to a staggering 100 billion transactions per day and have the capability to actually act on in-market audiences within five minutes of the AI identifying them, which we believe is well ahead of any of our competitors. Our technology was designed from the get-go to be anonymous and not dependent necessarily on third-party cookies for its targeting, albeit while they remain, we will use them and do use them. In 2020, we successfully tested and have now deployed a version of of the core artificial intelligence engine that does not use those cookies and we did not see a material change in the overall performance of the platform which is good news it signals that we are well positioned for any coming changes in privacy as that situation evolves we expect um that those changes to to not uh come into play in 2021 but moreover probably in 2022 but either way we have our technology in a position where it can it can work regardless of what occurs there and finally in terms of technological advances within the year that were significant we were well ahead of our projections when we launched the SaaS version of the platform in January of this year. Up through the end of 2020, we really had been selling the intent key as a managed service. And while this had the benefits of giving us greater control over the campaign since we were running them, it did limit the market for the sale of the product, essentially by excluding sales to prospects who perhaps wanted to run those campaigns themselves. This is now no longer the case. The SaaS version is expected to expand our market potential, and while doing that, it will do it at higher gross margins. The product was successfully client tested at scale in the fourth quarter of 2020. And this is the principal reason why we decided to accelerate the launch of the product in 2021 and effectively put it in the bags of our salespeople so they could get out there and start promoting this version of the product alongside the managed service product. Now, before I turn the call over to Wally, I also want to address strategy, company strategy. As you all know, we now have roughly $18 million of cash, we have no debt, and we have an unused credit facility we could draw on at any time up to $5 million. And our market capitalization has been hovering somewhere around $200 million. Strategically, our focus is to consider using our strong financial position to accelerate the growth of the intent keys. As such, we have retained an investment banking firm to help us identify, qualify, and hopefully purchase acquisition candidates, including possibly digital advertising agencies and consulting firms, which have clients that could benefit from the insights and performance gains that existing Intente clients have experienced. I should note that many of our intent clients today are in fact themselves digital marketing agencies. So we've learned a lot about what they do and how they do and we see this as a strong fit where we're acquiring first and foremost clients and don't have a lot of technology to have to deal with in those acquisitions. It's really more of a client-based acquisition strategy. Now, not only would these potential acquisitions get us client relationships that we would be expected to grow because of improved performance, but we believe it would also allow us to eliminate the costs within the acquired business that are related to technology, technology the intent key would replace, and the result would likely lead in an acquisition to increased margins within that acquired business. Now, interestingly, At a small scale, we've already proven this model out with a business that we acquired in 2019, albeit it was a small business, where we saw in this particular small acquisition both an improvement in client retention and in margins. Now, with that, I'd like to turn the call over to Wally for a more detailed assessment of our financial performance within the quarter. Wally?
spk01: Thank you, Rich. Good afternoon, everyone. I will recap the financial results of our fourth quarter of 2020. As Rich mentioned, Inuvo reported revenue of $12.9 million for the quarter ended December 31st, 2020. And this compares to $18.2 million reported in the fourth quarter of last year or the prior year. The decrease in this year's revenue is due to lower valid click revenue, which in the fourth quarter of this year was $9.3 million compared to $15.5 million in the same quarter of 2019. The lower Valiclick revenue was due to reduced advertising budgets associated with the COVID pandemic. In spite of reporting lower year-over-year revenue, Valiclick's recovery began in June following May's low, and by December of 2020, it was up 116% off that low. intent key revenue was 34% higher in the fourth quarter this year compared to the same quarter last year. The intent key represents 28% of the overall fourth quarter revenue compared to only 17% of the overall revenue in the fourth quarter of 2019. The nouveau gross margins increased in the fourth quarter to 83% compared to 70% in the same quarter last year, due primarily to a decision to bring in-house, historically outsourced campaign delivery services for ValorClick, thus improving cost effectiveness and control. In addition, intent key gross margins increased to 45% in the fourth quarter compared to 41% in the prior year, contributing to the higher overall gross margin improvement. Going forward, we expect intent key gross margins to continue to improve as we have launched the SAS version of the intent key, where margins are expected to be in the neighborhood of 90%. Operating expenses were $12.6 million in the fourth quarter of 2020, compared to $14.1 million in the prior year quarter. That's a decrease of $1.5 million. The largest component of operating expense is marketing cost. Marketing costs are predominantly traffic acquisition costs associated with ValidClick. It's the largest expense associated with the ValidClick platform. Marketing costs were $8.3 million in the fourth quarter this year compared to $10.1 million in the fourth quarter of last year. The $1.8 million lower expense this year compared to last year is primarily due to lower valid click revenue as well as to a decision to bring in-house traffic acquisition services, to bring those services in-house. Compensation expense was $2.4 million in the fourth quarter this year compared to $2 million in the prior year quarter due to higher employee salary costs. Our full-time employment was 71 employees at December 31st, 2020, compared to 61 employees at December 31st, 2019. The increase in the year-over-year headcount is due primarily to hiring traffic acquisition professionals as a result of bringing that function in-house, as I just mentioned. This added cost is expected to be made up in the valid click net margin, in the improved valid click net margin. We are actively recruiting for various positions with a focus on sales and account management professionals for the intent key. And we expect compensation expense to increase in 2021 as a result of that. Selling general and administrative expense decreased $80,000 in the fourth quarter compared to the prior year due primarily to $259,000 lower IT costs. where we completed the first phase of our computing facilities consolidation program. The IT savings for the entire year was over $600,000. We now have three data centers and are in the process of further consolidation with another data center closing very soon. These savings are related to the real-time project that Rich was referencing in his remarks. The saving was partially offset by higher public company and legal expense due to holding two shareholder meetings, a special shareholder meeting in October and a regular meeting in December. For our facilities, the pandemic has allowed us to reconsider our work policies. And since our Little Rock facility was expiring, we recently decided to reduce the square footage by half. So as to structure a go-forward model for employees that has an in-home and at-work component, we believe this is going to be the future for us. Net interest was $2,000 income in the fourth quarter of 2020, and that's compared to $29,000 expense in the same quarter in 2019. We had other income of $1.1 million in the fourth quarter of this year, primarily due to the Small Business Administration for giving our PPP loan, or the Payroll Perception Program loan, that we had acquired in April. Other income in the fourth quarter of 2019 was $92,000, and that was associated with the change in the fair market value of the derivative liability associated with convertible promissory notes that we had at that time. We reported a net loss of $715,000 or one cent per basic share, and that's compared to $859,000 net loss of two cents per basic share in the fourth quarter of 2019. For the year, we had a net loss of $7.3 million, which includes $4.5 million of non-cash items, like depreciation, amortization, and stock-based compensation. The adjusted EBITDA for the quarter ended December 31, 2020, was $347,000, and that compares to a loss of $574,000 in 2019. For the full year, we had an adjusted EBITDA loss of $2.4 million. At December 31, 2020, we had cash and cash equivalents of $7.9 million and a net working capital of $5.8 million. The only debt at December 31 was a $150,000 SBA loan, which we have since paid off. In addition, we have a $5 million working capital line of credit, which currently has no outstanding balance. We maintain a very simple cap structure with only common stock and employee-restricted stock units that are granted through an equity incentive plan. In January, we completed two underwritten public offerings for 19 million shares of common stock. raising gross proceeds of $14,250,000. The additional funds will be used for working capital, building the intent key sales force and facilitating the acquisition strategy that Rich had just described. Our recent capital raise activity has brought new institutional shareholders to the company. It's replaced all of our debt and at the same time, our shareholders have enjoyed a rising stock price. With that, I'd like to turn the call back over to Rich.
spk02: Thanks, Wally. We've seen a steady upward trend in our business since its COVID-impacted low point in May of this year, which gives us confidence that 2021 could be a good year for Anubo. We've seen the Valiclick business recover quite strongly in Q3 and Q4 of 2020, and It's not where we want it to be yet, but we would expect that business to be back to its 2019 financial performance in 2021, barring any remaining unforeseen COVID issues. We'll continue to grow in 2020 despite COVID, and we would expect that business to continue growing into the future. We couldn't be more excited about the collection of technologies clients that we've amassed associated with that business. And finally, we do see an opportunity to accelerate the growth within the intent key while also taking advantage of our strong financial position by exploring acquisitions that might bring with them clients who meet the intent key client profile. And we've retained an investment bank to help us execute on this strategy. With that, I would now like to turn the call over to the operator for any questions.
spk00: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 for questions. And we will take our first question from Brian Kitzlinger with Alliance Global Partners.
spk02: Hi, guys. Thanks for taking my questions. Got a whole bunch, so I'm going to ask a few, and then I'll let someone else ask before I get back in, please. The first question I have, you mentioned getting back to pre-COVID levels and valid at some point this year. Comparison's invalid, but, you know, haven't recovered much. You're still down 40% year over year in the seasonally, just the seasonal business in December, which is similar to September. So, Has that changed during the current quarter, those year-over-year trends, and what gives you the confidence that the market's going to return to pre-COVID levels so quickly instead of gradually? The trajectory of the business that gives us the confidence is going to get, you know, back to where it was. You know, the interesting thing about the COVID situation is, you know, it dropped quickly, but, you know, it doesn't recover as fast as it drops. But with that being said, as I said in my prepared remarks. I mean, you know, the December revenue for that business is up 100% over the May low period. So that's a pretty steep trajectory on the business. And it's that that's giving us the confidence that that business can get back to its 2019, you know, numbers, which I think 2019 was somewhere around 50 plus million dollars for that business. Again, with strong, you know, strong cash, you know, that business has always been a very strong contributor to cash. So we feel pretty good about it. The current quarter should be weaker than the December quarter given the seasonality, right? Well, the seasonality in that business has tended to be, you know, first half lower than the second half. You know, that's a marketing-oriented phenomenon more than it is that business. You know, it's the industry that it's in. It's true of the intent key as well. And then in past discussions, we've talked about your growth in intent key and is mostly coming from existing customers' increased usage or increased campaigns. With ad budgets beginning to improve, are you finding new customers beginning to evaluate new ads? I know you mentioned you're signing some new logos. And I guess, you know, when do you see that new customer acquisition beginning to improve? It's starting to already. That's why I referenced the increase in the RFP productivity that we saw in Q3 and Q4 and And we're seeing that again here in Q1. So I think it made sense, you know, if you think in 2020 with COVID, that a client, a new client for us who already has a provider, you know, that they've been using might, you know, want to, in a COVID world, stay with what they have to mitigate risk and not, you know, take a look at something new in spite of the fact that that new may be so much better. So there was sort of two phenomenon going on, you know, one, they were reducing the budget, two, they're trying to mitigate risks, you know, as a result of actually reducing the budget. So that was kind of, you know, that caused us to, I would say, have less new sales in 2020 than we had expected when we were, you know, projecting 2020 and 2019 before we knew about COVID. But despite that, we did sign a whole bunch of new clients. So there was a bunch of them that you know, wanted to take, you know, to go ahead and, you know, and go ahead and get the best performance they could get. And the 2020 seems to be abating. It's not over. You know, I'll say that. It's not like the budgets that the brands were working with are back to 100% of what they used to be. It's just coming back is probably the answer. I guess the second part to that question is, are some of those new logos – who may have delayed using some new technology. Are you starting to see more campaigns from those new customers? And do you have a range of a reasonable growth rate in 10K, given you've got the existing customers, more campaigns, and you have campaigns now from new customers as well? Should it accelerate? I'm just trying to get a sense of the growth. Yeah, so I think, as you know, Brian, COVID – and we're not trying to avoid this question, but it's really difficult. You know, nobody's ever been through a scenario like this with the pandemic. And I still, you know, we still don't know. We're still in it, you know, to some degree. So I know it's hard for me to project the business, but I do know this. I mean, and I said it in my remarks. I mean, there's no reason why that business isn't going to continue at a double-digit growth rate. And things are abating. So it should grow, you know, technically faster than it did in 2020, right, in 2021, right? And to answer your question specifically, I mean, I said it in my notes, but look, we ran 250-something campaigns in 2020, and 40% of them were new campaigns, right? So those new campaigns are a function of new clients and existing clients who gave us new things to do, right? But that's a pretty healthy number, right, on the top of the population. um you know look i don't i've said it and i'll say it again but i i we could not be more bullish about you know this platform um now that we've seen you know enough clients and case studies and results and performance um like i said in my prepared notes we go head to head and where the head-to-head is fair meaning everybody's got the same metrics it will win every time right one more question then i'll get back in the queue with my others um Of course, we've talked, obviously, the ad market seasonal. As you're ramping off smaller numbers on Intenkey, notwithstanding COVID, do you think we'll see the seasonality in this business as well in the first quarter? Or because you're increasing the number of campaigns, you're increasing usage, you're getting new customers, is this business small enough right now to grow through seasonality as we head into 2021? Hard to tell. But the high-level question, forget about the size of the business, is this business like every other marketing or advertising-oriented business has uncertainty in the first quarter. You don't know whether the brand internally has finished their own marketing budget allocations and gotten approvals for them. And again, with the pandemic still on, you know, does that mean that where they would normally get through that process and not have to worry, you know, about the pandemic in the first couple of weeks or the first month of 2021? Now it's maybe in March or February. I don't know. I mean, I just don't know. I've never been through it. Right. So we'll see. We do know this, though. I mean, overall, regardless of whether or not there's a you know, a week or a quarter or somewhere, you know, in a year, you know, we'll end up, you know, better than we did last year with this product. And certainly, probably, you know, the good news is, you know, the pandemic's likely, you know, to have abated, you know, provided we can get these vaccines distributed in the U.S., you know, by the summer. And that means we come into the, you know, the highest quarters of our year, Q3 and Q4, you know, with a bunch of hopefully pent-up demand for spend. you know, from RFPs that we're actually responding to now. And we do that. You know, the bulk of our RFPs, interestingly, for the second half of the year with the intent key are occurring right now. You know, we're negotiating, you know, and involved in prospecting for RFPs that have budgets for them, you know, in Q3 and Q4. Great. Okay. I'll get back in the queue with my other questions. All right. Thanks, Ben.
spk00: We'll take our next question from Darren Aptai with Roth Capital.
spk03: Hi, this is doing off again. Thanks for taking my questions. Uh, I wanted to ask you about, yeah, I wanted to ask a little bit about the SAS component of intent key. Uh, I mean, you can talk about the extending of market reach. I mean, is there any way to sort of quantify that? And then I guess, where do you see the balance of SAS versus your managed clients? Uh, I guess in 2021 as, as a percentage of revenue.
spk02: Yeah, so the first question is, you know, the quantification of the marketplace, you know, that we can play in when you combine both the SaaS and the managed service pieces somewhere, you know, near a $100 billion market. So, you know, that's one of these gigantic numbers. So there's plenty of market. Clearly, having a SaaS version and a managed service business version opens us up to people who – would not have bought it because they wanted control over their clients. They were making money from running the services, so they wanted to do that themselves. And that's why we're excited about that. At the size that we're at, it's hard for me to quantify what the split's going to be. It's probably easier to conceive, having done this before, that we could be running a business here at some point in the future where half the revenue is services, managed services, and half is SaaS. And just, you know, as a side note, this is typically what happens, you know, when you do have a SaaS version of the platform. There's always clients who don't want to do it themselves. They want you to do it. And you're not going to turn them away. You know, you want those clients. Sometimes, by the way, they end up being the biggest of the clients. So, you know, if it's 50-50 like that, you know, which is probably where, you know, it sort of you know, ends up, you know, that would probably be about right, which, you know, we would expect, you know, if you can do the math, you know, the managed service piece of the business runs about 50% margin, and the SaaS version will probably run about 90, or if it's half and half, you know, we'd end up with a business here that's, I don't know, if I can do this in my head, 70% maybe, you know, gross margins, which is healthy, you know, on the combination.
spk03: Yeah, and then sort of as a follow-up to that, What does the timeframe look like for monetizing some of those clients that you talked about being in beta? Is it a few months? Is that ramped up a second half in nature of 21 at least?
spk02: Yeah, so we're done with the beta program. The beta program ended in Q4, and that's why we're excited because we got through the beta program way faster than we had expected. If our shareholders will remember that, I believe I had messaged that we wouldn't actually be to market with our SaaS product until the second half of 2021. And we just had, you know, an opportunity in the fourth quarter with clients to basically, you know, put the SaaS version to its, you know, its numbers, if you will, you know, to run it at scale and work out all the, the remaining issues. So there's no more beta. We're in go-to-market with this product. We know it works. We've proved it works. It scales. Now there's some things we have to do internally to support a fast product. There's some training and whatnot. We've got to gear up for that, but we're doing that now.
spk03: Last one for me. Are you seeing any specific strength in certain clientele, like something like Connected TV, given just where that market's been going over the past, I guess, basically 2020 and then sort of in the future?
spk02: Yes, we have seen it. And we've had an increased number of Connected TV RFPs and have delivered on quite a number of Connected TV campaigns. So we do see That is a growing channel for us and really great news about the intent key as it relates to connected TV. It's one of few products that we are aware of where you can actually have this audience building capability. There's some technical features. challenges associated with connected TV because of the way that devices, you know, are technically designed and the apps on those devices. But we've worked around that solution, and so the AI and the modeling and the data, you know, that we've proven is so powerful in video and display, you know, is showing itself to be just as good with the connected TV side, which we believe will give us some advantage, and we've seen great performance. on those campaigns. So yeah, connected TV is a good channel. You know, we've run, just to add, it's not just connected TV, but we've run a couple of our first times ever connected, you know, equivalent connected radio. In fact, one of our casino customers, you know, was a connected audio. And we knew, you know, we had all the plumbing in place to make that work, and we knew it would work. But it was only in the fourth quarter where we started running some campaigns for various clients. And once again, you know, we're seeing Really strong results there, just as a compliment to the connected TV question.
spk01: Okay, thank you.
spk00: You bet.
spk02: I have two follow-ups. The first on the SaaS offering, as it relates to the go-to-market strategy, if you're targeting existing customers, will that cannibalize your existing revenue? And how should we think about the larger upfront campaigns versus the revenue impact on maybe doing a monthly service? Does that mean lower revenue but much higher margins? Yeah, so Brian, we're not targeting existing clients. And maybe to get your head around it this way is, like I said from the get-go, selling a managed service and selling a SaaS version, there really are kind of two audiences to that. Some people just don't want, you know, a managed service. So maybe you could take it this way. The ones that we've already sold, you know, who are running services for wanted a managed service. And that's why we were able to close them. So I don't see us cannibalizing those. It'll be a net new. Perfect. Yeah, that's good. And then lastly, on one hand, you mentioned less space working from home. It sounded like a bunch of cuts to operating expenses. On the other hand, you've got a slug of increased capital, and you talked about increasing the sales forces per intent key. So maybe how do we think about both of those? Should we see OPEX growing from the fourth quarter? Should we see it shrinking? Is it kind of flag noise? I think about those two things. I think that's Wally.
spk01: Yeah, I think that there's a lot of the new employees that we're bringing on can work from home, particularly the salespeople. So we factored that into our consideration for reducing the space in Little Rock. There's three major, as you know, three major components to operating expenses or marketing, compensation, and SG&A. So like we said, we expect compensation to increase next year in 2021 because of the investment we'll make in the sales force. But the SG&A, you know, it should stay relatively flat throughout the year, which includes facilities.
spk02: Great. And I like the marketing cost. I could move with that. And then I think the marketing costs will move up and down with Intenkey. I mean, not Intenkey, with ValidClick. ValidClick. Yeah, with ValidClick. Yeah, yeah. That's right. One of the things, Brian, maybe I'll just note, because it's related, and it's important for shareholders to understand the advantage we have here, particularly with the SaaS version of the platform compared to the competitive marketplace for that product. But, you know, we noted in our call, and Wally noted it in his financials, but we did make some significant, you know, decreases in our overall information technology, you know, expenses in the year, some $600,000. But what's important here is to recognize is the costs that we have related to how the intent key does what it does is, for the most part now, other than resources fixed, And this is not typical. Our competitors who use third-party data, which they bring together to offer people the ability to find audiences, have ongoing uptick costs associated with the purchase of that data. We have no such cost. Every additional dollar now that we bring in, we have no more costs associated with the productivity, if you will, of the machine. For us, we have an ability to not only go to market with our SaaS product, with a product that works better because of the artificial intelligence and because of the way that we manufacture information, but we can do it at a lower cost if we choose to because we can undercut the marketplace because we just don't have that cost burden. It's one of the advantages we have in our go-to-market. Great. Thanks for taking the question. You bet, Brian.
spk00: I would now like to turn the conference back to your hosts for any additional or closing remarks.
spk02: That's great. So thank you very much, operator, and thanks, everyone, for joining us on the call today, and we appreciate your continued interest in the company and look forward to catching up in the future.
Disclaimer