Inuvo, Inc.

Good day, ladies and gentlemen, and welcome to the ANUVO Incorporated 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 Natalia Rudman. Please go ahead.

Thank you, Keith, and good morning. I'd like to thank everyone for joining us today for the ANUVO Third Quarter 2022 Shareholder Update Call. Today, ANUVO's Chief Executive Officer, Richard Howe, and Chief Financial Officer, Wally Ruiz, will be your presenters on the call. We'd also like to remind our shareholders that we filed our 10Q 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 using this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to a new bill are 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 new bill at this time. In addition, other risks are more fully described in a new bill's public filings with the U.S. Securities and Exchange Commission. which can be reviewed at www.scc.gov. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events, or circumstances after the date zero 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 measures 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 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 nine 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 a 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 valid click platform principally serves advertising within the search and social channels, while the intent key principally serves the connected television, online video display, cable television, and native channels. Through the first nine months of 2022, both platforms experienced strong growth, with the intent key and valid click 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 intent key represent 33%. For the third quarter of 2022, intent key revenue increased 12% and ValidClick decreased 3% year-over-year. As was mentioned in the second quarter transcript, Revenues in that quarter were seasonally higher than expected, and as such, we messaged that Q3 could be impacted by a seasonal trend change in 2022 and the potential economic conditions that were looming, which turned out to partially be the case. Gross margins remained healthy in the third quarter at roughly 60% and 58% for the three- and nine-month periods. Adjusted EBITDA was a loss of roughly 2.6 million, and while this was more than expected, we would expect this to improve heading into the fourth quarter. Adjusted EBITDA in the quarter was impacted mostly by lower revenues. The company's core strategy continues to be a growth-oriented strategy. As we have messaged on previous calls, we believe the industry we serve is not prepared for the implications of a consumer privacy-led future. In fact, McKinsey and Company reported on this issue as early as April of 2021, where they suggested that this shift would begin to threaten the $152 billion annual U.S. digital advertising industry starting in 2022 because that industry would lose access to consumer data. It is well known that incumbents rarely make the transition from one technological paradigm to another. Rather, they continue to hang on and or adapt the services and technologies they currently use, invariably leading to lost market share to companies like Anuvo, who are not burdened by using outdated methods not aligned with the future. The next few years will define the winners from the losers within the advertising industry, and Anuvo is well-positioned to be among the winners. Our opportunity remains to take market share during this period where these incumbents continue to use outdated technologies and therefore why growth remains our number one priority. We have continued to deliver exceptional results for clients within the IntentKey platform where in the third quarter we performed on average 44% better than our client's KPIs. We have yet to lose a client due to performance. When we do lose a client, it is almost always related to campaigns we are providing to an agency who owns the client relationship. Most of US digital advertising spend occurs through these agencies. In Q3, we lost an estimated $2 million because of such a situation. In this case, our client, the agency, lost accounts we were servicing to a competing agency. The frustration associated with this case was that one of the brands in question experienced the best month's performance in the history immediately preceding the transition to the new agency. That performance was the result of the intent key, and yet the account was still lost. We have remained in contact with the brand directly, and while they signed a 12-month agreement with the new agency, we may yet have an opportunity to win this brand back directly in 2023 as the performance delivered by the new agency continues to decline alongside the changes that are occurring within the advertising industry overall. On the sales and marketing front, we continue to build out a team of go-to-market executives capable of capitalizing on the opportunities resulting from a changing industry. We are supporting their efforts through marketing activities that raises the ANUVA profile within that industry while aligning our brand with this privacy future. Universally, we see growing concern related to performance within prospects, particularly those who rely heavily on traditional platforms for that performance. We increased the size of the sales and account management teams by approximately 20% in Q3, and they have been busy submitting proposals in preparation for next year's media cycle. As our brand is becoming more recognized, we are seeing larger potential deal opportunities emerge. We noted in our Q2 call how we had started to deploy yet another artificial intelligence-based technology designed to solve an industry challenge, itself an additional consequence of privacy, and the deprecation of the cookie. We now possess and make available generally to our clients technology that can determine the contribution of each channel being used as part of the overall media mix to the performance metrics being optimized. This technology can find the patterns in the historical performance related to individual channels and then suggest for any given future period what the optimal mix of media should be without using any consumer identity-based mechanisms. This inability to understand and improperly measure the interactions between channels is a common reason brands fail to expand and why they choose to limit the number of channels they use. For example, We currently have clients for whom we are using this technology who market their products across as many as 10 different advertising environments, both online and offline. The complexity of determining how to optimize across these channels is beyond the scope of most of our industry because it requires significant data science and data warehouse competence disease, which Inuvo possesses. For a brand, it is imperative in this multi-channel advertising world that they can move advertising budgets away from channels where the demand and supply characteristics are not optimal to channels where they are, and then back again when those demand and supply metrics return. This must be done scientifically and just in time. We see this new capability as a significant investment within the industry and as a substantial differentiation as we continue to build an advertising and technology services company capable of meeting the needs of the future. I would like to turn the call now over to Wally for a more detailed assessment of our financial performance within the quarter.