Inuvo (INUV) 25 Mar 202019 Q4 Earnings call transcript

Good day, and welcome to the Inuvo 2019 Year End Financial Results Call. Today‘s conference is being recorded.

At this time, I would like to turn the conference over to Valter Pinto, Partner at KCSA.

Thank you, operator. And good afternoon. everyone and us Update Full thank Inuvo for Conference to Quarter Fourth Year like for today joining the Call. I’d XXXX Shareholder Financial be Chief Wally call. Inuvo’s Executive Richard and Today, Officer, Ruiz, presenters your Chief will on the Howe; Officer,

closed by closed to listeners our stay in home due of to start a in San place know our order COVID-XX Little the in employees pandemic, instituted where California I’d potential is office California co-workers. Arkansas as Jose, for consequence letting like policy that and the our among California for we is at our work protect Rock, home And families from virus a transmissions office residents. to their

quarter the our discussed of completing XXXX in and and today audit are also preliminary, the to process full for and audit adjustments. unaudited year XXXX, We’re fourth subject for results announced

end XX-K our today, earnings substantially While COVID-XX. Form related of year and audit finalization to due unaudited the numbers the the are discussed impact the we has delayed is of been and issuing audit of complete our

Form currently anticipate on of Commission the our Securities a the regulatory an days and working XX statement. taking COVID-XX of auditors Form basis and including audited a remote external assessment financial taking detailed audit with complete business. internal XX-K our the of our We’re on relief our We on file to to Exchange of review XXXX and XX-K, advantage our impact our provided process by of an more additional in and

are are and differ to such, to are may to not are risks are historical statements Securities company’s expressions all results believe, and will, harbor materially. made When enable, should, estimate, statements and Litigation involve call, actual XXXX. The expect, could, similar statements by at that the subject time. to such These forward-looking as this forward-looking to review as which a uncertainties, anticipated are Reform forward-looking that future Inuvo, and in statements from conference used those differ facts the to this anticipate, Inc. they statement. forward-looking intend, call all Act of potential, going events, as this cautioned safe Investors uncertainties, now and in results statements Inuvo cause relating actual risks may the relate project pursuant I’m of descriptions words statement. forward-looking

described addition, fully in with sec.gov. Inuvo’s at Exchange filings U.S. which In Securities the risks are can be other public Commission, and reviewed more

call CEO, With Howe. that, I’d the now turn to Richard over to like

Valter, Thank you, today. for us and joining thanks, everyone,

December sequentially million ended increase we in year-over-year. of $XX.X an months XXXX, X XX, delivered the revenue, XX% For and X%

million, the approximately year, For XX% down $XX.X year-over-year. full we was delivered which

the for and revenue $XX.X ValidClick and and the million fourth $X.X IntentKey million million, the and was respectively. full in approximately $X.X $XX year, quarter million;

factors. two impacted results by year were Full

the X Firstly, the consummate. we we lost not certain throughout occurred business ValidClick with momentum during which IntentKey let associated process month within secondly, And associated merger XXXX. roughly publisher with a the revenue stream activity, did technology reengineering overall attrite that

$X.X approximately while decline $XX.X the reductions publisher by partially was were year. attrition the offset was year-over-year of revenue million, in in million of ValidClick’s technologies roughly IntentKey the XXXX. the These growth

excuse $XX.X in - ValidClick delivering the XX quarter XXXX, fourth XXXX. increase me, in to of million, revenue an period approximately the started of same X%, recover over

XX%, revenue. and were ValidClick in quarter the year-over-year principally in respectively. roughly declines profit with year year fourth associated full decreased the profit Gross increased gross Full XX%, and decline

contributions quarter reflects and revenue earlier the Fourth related from recovery margins quarter IntentKey. the comment ValidClick gross in profit increase within and that gross the strong to

a in of loss quarter the was Adjusted $XX,XXX, EBITDA in period. million year-over-year the which fourth from was $X.X up

mentioned, the costs adjusted loss year-over-year. of We first associated loss a terminated which to of XXXX. in $X.X of $X.X year, full of had majority was merger a occurred compared of $XXX,XXX the For three million EBITDA with the million quarters the

overall of in we in that XXXX number be a an was had revenue margin spite primary We of growth XX% The basis. of things from strong with its had and potential. both taking ValidClick proud a decline. to XX% greater made progress strategy of believe overall revenue approximately products diversify here We to revenue partner to entering year-over-year XXXX ValidClick’s company on

time. gross ValidClick is capitalize growth our possible forward, Looking occur on where acquisition just net of that mission costs, with margins, in to and might improve opportunities traffic

it The when capital category, not low ValidClick which least of themselves. online the business scale marketing the positive receivables largest with is positive present And quickly opportunities it serves attributes, has working can risks. spend many because

We this for XXXX. are business growth in a currently single-digit this as and had pursuing a opportunities quarter within number result of forecasted such

XX% IntentKey gross margins in had the over $X.X up first the in of delivering in second year with in XX% XXXX terrific saw the million of revenue, the the December. of The year half a rise year. to half XX% We January from business

this margins and held XXXX XXXX IntentKey where XX%, the now up be has QX XX%. gross quarter approximately through about Fourth to we averaged year-over-year expect up revenue

our the a have our having sales insurance, nine to added team salespeople. recently in been the We XXXX two of entertainment four automotive, QX XXXX. count latter has been from strong approximately increased clients, across industry board. retention in And care, leaders clients performance people industries now within among of IntentKey health count current we and and travel,

respond We proprietary new that as suited when clients’ platform we we encounter are the data continue IntentCloud objective. than well we is audiences can to against by online to AI in the part which business, the disclosed technically produced in marketing release, marketing because XXXX the information, and, because IntentKey have perform can we competition our faster for November large press competition

income IntentKey had its when and we XXXX a had the Prior burn of cost had attained run recent XXXX messaged month forecasting that coronavirus and rate ValidClick in with associated doubling $XXX,XXX operating a on basis. been outbreak, margins a to the we through to already modest IntentKey growth We the within business average expected year-over-year. roughly of on QX July over

manage in We the continue approximately objective, for with to a at $X.X this quarterly overall occurring revenue. breakeven to IntentKey million

we weakest our quarter, and forecasting performing typically loss. is adjusted QX EBITDA are an as such, Seasonally, currently

been longer-term We will impacts unknown discuss virus. how the we have associated with ahead supplementing liquidity of later the

recently activity some economy. us and with virus predict stimulus As outcome in happen among ValidClick to eradicate mid the see is, and started to for the last into it to programs large virus-related takes certainty how clients. suppliers will still what as how depends early flow the part week, government It long IntentKey given this we however, too on any

in business, the IntentKey, business. we’ve virus. clients hotel existing surprisingly, other only new of expected that the marquee quarter, their the both QX. more airline signed budget the far, had had in client the IntentKey case deliver In two revenue one short-term because Thus paused Not in to one reduce campaigns in have of the the we

a cost impacts, this revenue with of decreased these which opposing had following has seen on turn, those associated We at staying have has is of increasing advertising the and of the business people the of the reduced California we websites. mandatory that, in cost Now websites, to quarantines and traffic in result believe home, York. also IntentKey New the benefit

currently information throughout directly XXXX. QX yet to Overall, longer-term be for forecasting with I March plan modest virus. predict had impacts related a the as XXXX our flat XXXX have to the completed, And are earlier, We do QX almost we enough reduction year-over-year. plans in to mentioned now not roughly

decline. times economic in Generally, to would we marketing expect of contraction, budget

However, management this current situation of taking we is as to approach are our such, company. the unprecedented, and a just-in-time

insider proactive participated. purchases with I have closed we said, balance worth Last one that respect been purchased offering, our that members of and every sheet. stock. we week, With worth to Board $XXX,XXX personally our of $XXX,XXX our of of roughly

announced facility, believe which refinancing working additional throughout credit receivables of We our we year. should the a also provide capital recently

board trim may local, America, Now across virus also for like Concurrently, applying the while already exploring state programs we expenses the to determine or the ways based processes. better and current other we congressional federal impact that materialize companies on to have of are in may operating economy. started not on wait the we

the expect IntentKey the more sustained clients that in the business. large have greater we advertiser plan a be in of because diversity has to might three a ValidClick currently plan, ValidClick downturn, part we market as Generally, than in result large the impacted serves

that, turn I’d over year. to financial for performance like for our of the assessment now call to the detailed With Wally a more

Thank you, year results full Rich. the financial recap XXXX. afternoon, everyone. Good quarter fourth I’ll of and our

the for the Rich As million the in ended year of reported of fourth revenue XX, the XXXX. to and $XX year full mentioned, $XX.X XXXX. Inuvo million million December $XX.X reported year $XX.X and full This million of XXXX, compares in last reported for quarter quarter

and was of ValidClick business, I’ll offset $X.X to attrition associated in a in the in increase revenue moment. of to $X.X The increase million the IntentKey the our growth fourth primarily on business year-over-year due of side supply just comment revenue million with the quarter by year-over-year, revenue which approximately about

The was million XXXX full the of due revenue year approximately in principally $XX.X the decrease ValidClick business. to

the associated earlier, in the of the integration resources on terminated throughout XXXX. and invested June with merger company. capital the first half mentioned As of we planning year merging The was

in lesser earlier result a quality partner. monetization ValidClick Additionally, of year supply our as primary the lower advertising was from

platform advertiser and reengineering reduce the demand supply made decision capital favor side of to have business and of the its the announced in we in XXXX on the the resources was IntentKey to side market IntentKey where year Further, or advantage. data last emphasis focusing designed on

million XXXX revenue resulted of current and quarter fourth $X.X to to of over year the quarter compared for year. last change the in of reduction This a full full prior the year same year in compared the the of year $XXX,XXX

revenue in increased ValidClick to compared primarily recorded higher particularly Gross in where to same XX% year due to due we XX% revenue quarter cost quarter as in the cost marketing mix, the the expenses. margins the operating display last fourth to

to the and XXXX million costs, Overall expenses selling same prior quarter of $XX.X last higher in operating is, compared comprised fourth fourth were of the year. That $X year. Operating or quarter administrative of - marketing $XX.X versus compensation it and XXXX the the are year the million prior in million was quarter and expense expense. general in

year traffic revenue acquisition primarily the are costs in $X.X Marketing XXXX. ValidClick the costs million higher prior with higher this in were associated to due ValidClick. costs quarter compared year to Marketing fourth

associated mostly with cost therefore expense as revenue as predominantly revenue ValidClick websites an or it recorded the a is and costs is is from ads small traffic operating marketing served generated acquisition and of to expense. has

year in in of December end December headcount the grants of was XXXX. The the accrued and compared prior year. at of reversal the XX time fourth quarter pay accrued an $XXX,XXX XX of prior was in higher stock That the a incentive to to to full higher fourth stock-based that payroll. year compared to modifications expense restricted this from expense quarter through outstanding the despite a compensation lower Compensation due is

Selling, general merger we and the prior terminated administrative expense in from in June which year XXXX. to due quarter compared incurred in this the XXXX expenses to year fourth the decreased $XXX,XXX primarily arising agreement,

income of borrowing $XX,XXX $XXX,XXX and of rates evaluation in in the was note of to the primarily due the This derivative. of discount in of convertible fourth the Interest the to was XXXX quarter original prior amortization associated year the partially issue offset expense same higher to quarter in XXXX. the compared by

year a other was income to the $X.X income including fourth of the million of to primarily full this the canceling outstanding, had fee with $X.X year XXXX that received, a that June $XX,XXX settlement XXXX. customer. a agreement merger We primarily the resulting quarter Other due termination in composed for And of due million note was the interest. we’ve in termination of of

class the of of that XX% repaid $X.X suit a had at valued customers filed of merger. resulted the action a that Inuvo. $XXX,XXX transferred million Additionally, initially finally, And and was settlement business to a our for we as result assets - was

$X.X performed value business, credited fee greater an We and was what’s originally than was that other income. subsequently at was million. assessed received in determined the third-party had the to independent on valuation termination it merger The transferred

$X.XX the to primarily reported We liability. per loss recorded or basic change a of net deferred in We tax due benefit of XXXX, quarter the share. the of a tax fourth $XXX,XXX in $XXX,XXX

XX, it had bank number balance also XXXX of notes of and $XXX,XXX. December impacted of had and that to debt a at equivalents and events Subsequent $XXX,XXX, of sheet the had year-end, balance sheet. Our cash cash $X.X outstanding we million

that $XXX,XXX In of we conversion, original million principal under all a of common notes into After noteholder outstanding our converted X.X this due principal January, $XXX,XXX amount stock. the remains issued. shares of convertible had convertible

than us security March XX, with Inuvo facility $X the availability a up XX% XXXX, receivables more the of and and loan aggregated to prior provided On with borrow Bank. terms million And of the of the accounts XX% credit. line Capital to receivable. with Under now Hitachi agreement Corp., our up facility, with aggregated closed existing Hitachi Bridge America uninvoiced we the eligible a agreement, can replacing of

a placement our company’s closed million, $XXX,XXX. $XXX,XXX ValidClick March, we XX, receiving use of common in of we March private which In an Rich as was closed On also received platform the of our stock mentioned, $X.X for to agreement March. directors, for

turn I’ll closing remarks. Rich for call over that, to With the back

All we can much. I and Operator, think turn now. right, over Wally, thank very questions you to it answers

[Operator will go Street. question first Martinuzzi Lake Instructions] We our Eric from for of

point long hole QX. guys the should recognized what be events, given on time then in Obviously, subsequent a Congrats post-conversion ago now, sure, good certainly the and feels I’m in that. accomplished finish recent the you but it like were to it you

that. recognize to want I So

March March? QX, outlook the I when for due talked you a the customers thought specifically with recent then March and about as question in today, who the a start as XX% and the expectation Is for far who have the is I’d IntentKey then in you that XX%. though. to do increase, - signed expectation due paused XX I happenings about two

Eric. Yes, Yes.

happened, the a that, started, three the to. that so we’re them of us. mentioned two clients, them we Those virus, combination of for expected on clear it’s the one I even were just since So hadn’t things So They airline client. but okay? have

happening surprise given So there there’s the probably airlines. no what’s with

The a hotel was other one chain.

campaign. sort And and course, had one waiting they of of did their we script, started I - said didn’t of then who client, their other budget they their the recently pause like but seeing. sort had started paused when, And in stop my and or just propagated, just virus kind of reduce budget

XX%, the things, point, current happening those gave at the some this them combination we it’s the after happening redo to math. the so do we number at caused first And announced with be we - going to us one of them so of forecast, least we’ll point. And think of XX%, our this at

on of wanted Okay. the issue ValidClick the I then And to the understand better house. side

You Is reduced talked these of mix suppliers. at of about partners? traffic in from or a impact suppliers, the of potential this number shift number traffic a a publishing

Yes, it’s traffic-related.

are to do an out to effect changes with, And the to business figure So again, light in now. the going have right on. we work has and in on, chain that the they, guess, I coronavirus value we America do themselves, entire not starting people of what and

we So that be is haven’t yet overall lot of seen we QX. we’re a there plan disruption much on stated we as evidenced we would by where fact our pretty thought for the

of or not related point to in upon at the quarter unknowns that depending what next or happens. this most commentary may my are materialize may So two,

specifically, their do you issues? But publish these the publishers they Or it are normal maybe something unable content is to own due to workforce decide?

now. in can’t them all Yes, that for issue content. America guess, think can’t for cut right? business These same I drive right how smaller they should They focus. the the generally staff, publish is reduces every, thinking about thing, They’re They which advertising, are Eric. it, just issue whole I it’s the about

to just you thinking guidance And may go? to for that’s with QX, But expectation that know, you’re happen to what be the what your six you’re days don’t that’s recap, was Okay. going and flat. to thinking, is or happen I not that and said

I No, to think comment which Wally we to I think this, can we’ll year-over-year, it we’ll close want is be be. flat better pretty on close. pretty where but be

had right? for our our streams down in always recognizing internal quarter only discontinued, X% quarter that what first we XXXX, that we plan or our that and had weakest of recognizing revenue XXXX, X% was We’re off is

knows So coming year’s pretty me. percentages Wally last just it. we’re flat for year-over-year what X excuse into XXXX, a good think so XXXX was, to I us I I’ve still - know was. think what maybe don’t was but last forgotten, I and we’re off year QX - close or of that, percentage

to care comment? you XX.XXX? it would Wally, Is

Yes.

That’s it.

Okay.

on you had sounds progress to expense operating I adding focus side. wanted It salespeople. the like So some

currently I Do XXXX, have correct? were nine. four think you those at you’re I you and out at finishing said numbers

correct. That’s

Okay. to Do And headwind? in we given last going of to What’s the then are couple on continue the hiring sales kind invest of strategy weeks, here, what’s there? happened for the into the you intent pause IntentKey?

the across point, the At until hiring hiring else, we’re to this see held company. across not We’ve company what’s the like going everybody in market. anybody we, happen

a hiring another differently. well, and it August. person this hired March, at is had had the So maybe on June, - planned brought have answer in hiring on which hold. all We July And and salesperson point, to planned we we us say nine, in up put we I’ll

Okay.

far cost As unchanged home, have throttled people the I - on any from you you first as are those headcount since started back understand working is been taking and measures, there travel but measures?

So far.

is share sheet, balance March. lastly XX and in items. And on Right. sell we count year XX was here something, then and count, at - think, point exiting kind of the I did some share housekeeping shares The

So as second me? quarter, pro you forma for shares to ballpark of and the far the use third as for kind quarter Wally, have a there a do

Yes.

of that about is something figure outstanding. million like divest it probably than the XX.XX, point, by bring And that that, this shares other in to So XX.X, are RSUs future, the - at year. the XX end

- Okay. And then me for on current the cash question last the situation. cash

you - raise. do adjusted tight as you know QX. You did $XXX,XXX I for EBITDA negative pretty is talked said stands. it being about the I think Cash

March XX? forma of influx QX? burned But You expectation the What’s little insiders, for also we where do we come but got out a kind on from exiting the cash the pro bit.

Yes.

as from that the to business used expectation we is the the that relatively is as So run possible. available cash to and cash keep have low And flat December. have

on keep credit we as availability our and off pay So we have can line, cash as long debt. flow existing continuously

Understand.

Okay, I taking my appreciate questions. it. for Thanks

Eric. you, Thank

Our Capital next of comes from question Partners. Aftahi of Darren the line Roth

Darren. for Dillon taking This question. for Hi. Thanks on my is

forward? First advertising at advertising advertising environment kind may visibility space fluid, contextualizing pulling guess that and one direct all as to what for me, have it’s the of have just to mean sort how in in they’re your as sort far the contact you see you bigger partners that not be where going back. relate trying with some been or of what can I I may pretty of with seeing of

then new customers given, sort have virus you towards And new the guess, of your I on dynamics what of contextualization IntentKey, targets maybe a seen sort patterns given habits? across outbreak, follow-up, any or as the around behavioral search

Okay, Dillon.

we So met, haven’t meet to you. so pleasure

pullback. let advertising talk a So me about bit little

So like haven’t airline lot the is particularly I impacted the the And I first-line to the virus. seen ones than answer it I the kind and by ones other chain, a mentioned, obvious hotel mentioned. that we the of said, of are

all with we conversations that’s just in than is concentration of the the clients our mentioned, in have a good news and I a partners I advertising travel regular other entertainment guess are good so thing. We don’t on high basis. a

is my marketing I I kind of recession, in like said indicator hopefully, have always recession. script, a However, a think a through won’t we leading

start budgets, did I think things I happens that slug pullback U.S. economy if universally. So we to see in and think, yes, go started advertising to would I the think probably poorly, down,

regard than there let’s don’t way the increase think the say, anything’s online. technology in an online volumes not with of is sure other definitely add intent changed the to, interests handles I’m I can issue online. people’s I to

either are are the visiting sites, searches people reading their doing we seeing time who or normally would home occur. or their they content that clearly, definitely more at now than in Internet, workplace So and on favorite are spending

quickly force the you. Of sales how some you’ve And they into then one. in guess of last Thank build to hired helping that the like one the incremental speed it. of I up can Got get March, sort funnel?

Yes.

of Dillon, salespeople the high-level respect - to path. experience has the IntentKey, So with with following kind way our gone follows generally,

business. three first tenure their For any months really of [ph] they don’t with close the us

for know getting effectively out clients their they’re who new to learning within figure So and they clients them. trying already that or and target we’re any finding trained to

annually next it’s of better in have runs to then start better $X.X assign. money. month it is and that or three to month period. months, the the we gets assigned We in our but what quota then nine deliver a quota massive six month period, They gets salespeople, we -- do it the amounts And that results the not and XX in about next million

it. you. Thank Got

Thank you, Dillon.

to Ladies Howe hand closing and question-and-answer to that the gentlemen, for or concludes remarks. session. back call would like I the additional any Richard

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

and call. Thank Ladies gentlemen, concludes participating. that today’s for conference you