Inuvo, Inc. (AMEX:INUV) Q3 2022 Earnings Call Transcript November 15, 2022
Inuvo, Inc. misses on earnings expectations. Reported EPS is $-0.03 EPS, expectations were $-0.01.
Operator: Good day, ladies and gentlemen, and welcome to the INUVO, Inc. 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 Natalya Rudman. Please go ahead.
Natalya Rudman: Thank you, Keith, and good morning. I’d like to thank everyone for joining us today for the Inuvo Third Quarter 2022 Shareholder Update Call. Today, Inuvo’s Chief Executive Officer, Richard Howe and Chief Financial Officer, Wally Luis will be your presenters on the call. We’d also like to remind our shareholders that we filed our 10-Q 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 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 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 new 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 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 measure 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.
Richard Howe: Thank you, Natalya, 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 9 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 $1 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 ValidClick platform principally serves advertising within the search and social channels while the IntentKey principally serves the connected television, online video, display, cable television and native channels. Through the first 9 months of 2022, both platforms experienced strong growth with the IntentKey and ValidClick 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 IntentKey represents 33%. For the third quarter of 2022, IntentKey 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 3- and 9-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,
