Richard Howe

Thank you, Natalya and thanks everyone for joining us today. We are pleased to report that for the quarter ended September 30, 2024, we delivered 23% sequential growth.
We were down roughly 9% year over year. Having come off of the strongest quarter in our history in the third quarter of fiscal year, 2023.
And that quarter was driven in large part by our largest platform client, for the nine months ended September 30. We are up approximately 9% year over year.
The fourth quarter is shaping up nicely with the first five days of November having averaged roughly $290,000 per day in revenue.
We are currently estimating double digit year over year growth in the fourth quarter, adjusted EBITDA improved $310,000 sequentially. At a loss of $357,000. In the third quarter of this year, we expect adjusted EBITDA to be near break even in the fourth quarter.
We have no outstanding debt at the end of September, and we have cash and availability from our $10 million receivables facility sufficient to meet our working capital needs.
In the second quarter. I had mentioned that we were in the process of completing a master services agreement with a large retailer, and I'm pleased to report that we signed that agreement.
We have consistently delivered exceptional results for this client. And consequently, we do expect this relationship will continue to thrive well into the future as we have discussed in prior calls, the process for approval by this client was extensive having taken approximately 1.5 years from the initial interest. Let me now provide some information about our industry, our clients and our products.
Let's begin with the industry, our platform products and the services we deliver are focused on a very specific component to the advertising ecosystem.
This market is roughly $6 billion annually. And typically, it's designed to extend the reach of these platforms to niche websites, they do not themselves own or control. Over the past year and a half, this large market has experienced changes, and those changes were driven have been a driver of the growth within our platform clients.
These platform companies we work with have had a concerted effort to improve the return on advertising spend resulting from this marketplace on behalf of their advertisers.
Now to accomplish this goal, this platform companies have reduced the number of companies they work with choosing instead to focus with a finite set of partners on improving quality through better technology, better content and compliance.
Inuvo is one of those partners.
The shift towards prioritizing quality over quantity along with the finite nature of the players in this marketplace, (Gives) us confidence that this component of our revenue has significant potential to scale.
Among our agency and brand clients, the major shifts continue to center around consumer privacy, the browsers that enable that privacy and an advertising industry that has long, some would say too long relied on a business model dependent on the exchange and sale of a consumer's private information.
As a reminder, our AI was designed to find audiences without using this consumer data.
The debate within the industry on this issue is probably best summarized by a statement that goes something like one person's tracking, consumer tracking is another person's consumer personalization.
Regardless of the debate, the movement towards a digital advertising marketplace where tracking consumers is no longer possible, continues to accelerate both legislatively and technologically. Apple with their Safari browser is already there, and as I've mentioned on prior calls, they control over 50% of mobile browser (or) market share.
Google with their Chrome browser has been slow to change.
In August of this year, they announced a shift in their approach to consumer privacy, stating their intention to empower consumers to make their own choices.
They have yet to announce exactly how they plan to do that.
Moving now to our clients, across our platform, agency and brand clients. We are now actively working with over 100 small and medium sized agencies. As it relates to the agencies and brands we serve as part of our AI intent key products. We signed four new agencies and two new direct clients within the quarter, while also adding six new brands with existing agencies.
These new clients were in sectors that included health care, entertainment, education, some nonprofit and technology. Across those agency and brand clients, we outperformed our KPI's for those clients on average by 43% in the third quarter, growing this component of our revenue by 15% year over year. One of our larger clients, an auto manufacturer is currently forecasted to be up roughly $1.3 million this year.
The large retail client I had mentioned earlier will be up tenfold in the fourth quarter as compared to the first quarter of 2024 which is when we first started working with them. Based on our current booked business, we are forecasting this agency and brand component of our revenue to be up sequentially, in the fourth quarter.
Our platform relationships remain a strong driver of our growth and working capital for our company. While revenue from these clients was down 12% this quarter compared to last year's strong performance.
This part of the business is scaling well, and as we head into Q4 is also forecasted to be up sequentially in that quarter. We also made progress selling our intent key self-service product during the third quarter.
This aspect of our product strategy allows clients to generate and target audiences within their own campaign platforms.
While this remains a small component of our overall revenue today, in the quarter, we secured a number of notable brands within hospitality, technology and the auto sectors.
As we have mentioned in prior calls along with growth, this self-serve product is an important component of our drive towards being cash flow positive, because the margins in this part of our business are significantly higher than when we deliver our technology along with campaign services.
Let me turn now to our products.
Early in the first quarter of 2025 we plan to announce and launch enhanced capabilities within this self serve AI product offering media buyers an unprecedented set of tools and an ease of use within advertising.
These new capabilities should allow a new vote to scale more easily across both the upper and lower ends of the ad tech market.
As I have discussed on prior calls.
Our AI is a disruptive technology within advertising. It's an intelligence that has and continues to capture the wisdom of humanity as represented in the billions of pages of content available across the internet.
Consequently, it already knows things about any product service or brand. However, to implement this technology, the AI also needs to be seeded with information that guides but does not define ultimately its audience choices. Prior to this new launch, which is being tested now, when a self-serve client has signed up, the Inuvo itself would have to seed the AI with information captured as part of the discussions with the client.
This not surprisingly caused some bottlenecks. In this latest version of the self-serve product, clients will now be able to themselves either describe the audience they wish to target verbally and or provide the AI with a series of URL's that have content in them, that may describe their product, for example, or the competitive landscape or for that matter, any other contextual information that they can provide related to the target markets they want to attack.
With this information alone, which is captured, now in this new version of the self-serve product in an easy-to-use interface, the intent key will now be able to immediately generate an audience for the for any product service or brand.
And be instantly able to action that audience within the client's platform of choice.
There is simply no other ad tech competitor even close to providing this level of efficiency, flexibility, ease of use and as we've seen now for quite some time with the performance of the intent key and market the actual performance for those clients. We will definitely talk more about this on our year end call.
At this time, I would now like to turn the call over to Wally for a more detailed assessment of our financial performance within the quarter. Wally.

Wallace Ruiz

Thank you rich. Good morning.
I'll recap the financial results for our third quarter of 2024. Inuvo reported revenue of $22.4 million for the third quarter of 2024. Down from $24.6 million for the same period last year. That's a 9% decrease year over year as we had expected.
However, revenue in the in the current quarter is 23% higher than the previous sequential quarter through the first nine months of 2024. We're up 8.5% year over year.
The higher revenue in the third quarter last year was due to a new product launch with our largest platform client which experienced rapid growth during the third quarter last year before being scaled back in the fourth quarter in an effort to improve advertiser performance.
We continue to focus on scaling revenue from platform clients as well as signing on new midsized agencies and brands. In the third quarter of 2024 83% of our revenue came from platform clients with the remaining 17% from agencies and brands.
This represents a slight shift from the third quarter of last year where 87% of the revenue was from platform clients and 13% from agencies and brands. We expect revenue from agencies and brands to increase as a percentage of the total for the remainder of this year.
Cost of revenue was $2.6 million in the third quarter of 2024 compared to $2.3 million for the same period, last year. Cost of revenue is primarily composed of media payments made on behalf of our agency and brand clients and to a lesser extent includes payments made to website publishers and web developers that host our advertisements.
We reported a gross profit of $19.8 million compared to $22.3 million for the same quarter, last year. The gross profit margin for the third quarter of this year was 88.4% compared to 90.7% for the same period last year.
The decrease in gross profit this year was mainly due to lower revenue.
We anticipate a slight decline in gross margin in the fourth quarter of this year due to a higher proportion of revenue coming from agencies and brands. Operating expenses for the third quarter of 2024 total $21.7 million compared to $23.5 million for the same period last year. All components of operating expenses were lower this year compared to last year.
Marketing costs were $17 million in the third quarter of 2024 compared to $17.6 million in the same quarter, last year. Marketing costs were lower primarily because of lower revenue from platform clients.
This quarter's marketing expenses included a onetime non-cash charge, impairment charge of $600,000 related to a 2021 referral and support services agreement that it's no longer in use.
Compensation expense for the third quarter of 2024 was $3.1 million compared to $3.5 million in the same quarter of the prior year. Compensation expense was lower in the third quarter of this year compared to the same quarter last year, due primarily to lower stock based compensation, lower incentive expense and lower commission expense.
At the end of the second quarter, we eliminated 13 positions in an effort to reduce expenses through the elimination of redundant roles.
Our total employment both full and part time was 82 for the third at the end of the third quarter of 2024. And that's compared to 86 people, at the end of the third quarter of the prior year. We plan to add three salespeople by year end. General and administrative expense for the third quarter of 2024 was $1.6 million compared to $2.3 million in the prior year.
The reduction reflects collections resulting in lower doubtful account expense improved collections along with lower professional fees and amortization expense, lower amortization expense.
Net interest expense was approximately $101,000 in the third quarter of 2024. Compared to a net interest income of approximately $20,000 in the third quarter of last year.
Net loss in the third quarter of 2024 was $2 million or $0.1 per basic and diluted shares compared to a net loss of $1.2 million or $0.1 per basic and diluted shares for the same period last year.
The net loss includes one point. The net loss this year includes $1.6 million of non-cash expenses, for the first nine months of 2024 compared to last year, the net loss (has been) improved by $2.1 million. Adjusted EBITDA loss in the third quarter of this year was $357,000 compared to an income of $32,000 in the same period last year for the first nine months of 2024, compared to last year adjusted EBITDA has improved by $2.4 million.
As of September 30, of this year, we had cash and cash equivalents of $2.6 million, and in July in the third quarter of this year, we secured a $10 million asset based working capital line of credit, and as of September 30, there was no debt outstanding.
Our capital structure is composed of 140 million, approximately common shares outstanding and 12 million employee restricted stock units outstanding.
The company has reduced its cash burn during the nine months of 2024 compared to the nine months of last year by 227,000 and expects further improvements in the fourth quarter.
With that, I'd like to turn it back to rich for closing remarks.

Richard Howe

Alright, thanks Wally. We grew roughly 9% in the first three quarters of 2024 compared to the prior year and while we were down year over year in the third quarter coming off a strong prior year comp, we expect to be back up year over year at double digits in the fourth quarter.
Over the first five days of November, we have in fact averaged unaudited over $290,000 per day.
We continue to execute on a multifaceted strategy that includes the expansion of our markets, which is noted in my earlier remarks, we are achieving by offering both self and full service offerings.
We continue to lean into our market advantage, which is the ability to quickly identify and target audiences without using a consumer's personal information.
Additionally, we continue to enhance our sales and service teams by upgrading the former and better organizing the latter, in a manner that incentivizes both growth and retention.
We have strengthened our enablement and marketing functions putting ourselves in a stronger position to support sales and better communicate our value proposition.
Furthermore, we have refined our messaging to clearly highlight our strength and value proposition to clients and investors alike.
I will now turn the call over to the operator for questions, operator.

Question and Answer Session

Operator

Thank you so much
(Operator Instructions)
Our first question comes from the line of Brian Kinger of alliance global partners.
(Operator Instructions)

Brian Kinger

Great. Thanks so much. I have a bunch and maybe I'll ask a few and they get back in the queue. You talked about the retailer and the car manufacturer, you touched on them. But last quarter, you also mentioned a large technology company as a new mega brand customer. Can you provide any updates on that third customer that you discussed?

Richard Howe

Give me some more context on the technology.

Brian Kinger

With the three mega brands using intent key and so you were kind of highlighting how you had to penetrate those and that was the key. So, you know, I think we talked about two of them, which I'll get to, but I kind of wanted to understand, if there was any progress on that large technology brand.

Richard Howe

Yeah, so Brian, I have to go back and, and look exactly what my comments were there, but based on the way you're phrasing it, I think I was really referring there to, our largest platform client, which is a large technology company, one of the largest in the world.

Brian Kinger

Got it. Okay?

Richard Howe

Now, with that said, you know, we are making progress. And we have signed up actually some other what might be called, you know, in fact, they more than be called, they are large technology companies. They're still small, you know, in terms of their, let's call it revenue contribution to Inuvo. But we are definitely working in the technology sector.

Brian Kinger

Well, then let's touch on the retailer or the car manufacturer which you kind of touched on their growth and kind of expectations, what are they communicating on performance? And if it's going really well, which I assume it is based on the metrics and KPI's you're performing against, are they already from a high level? Talking about increased market share in the years ahead.

Richard Howe

Budgeting for clients that tends to happen in the fourth quarter, late in the fourth quarter, early in the first quarter for any given year.
So, yeah, there's always ongoing dialogue with clients about what could be, let's just say in 2025 as compared to 2024. But most of the time at this time of the year, you know, everybody is just focused on maximizing the return on investment associated with the, you know, the so-called Halloween, Thanksgiving and Christmas seasons which you know, are typically the largest parts of the year for people.
What I will say is what I've said continuously, the KPI's we're delivering for clients, including the, you know, these ones that you're mentioning are outstanding. And I will go on record once again in head-to-head in fair head-to-head testing against any capital, any other technology used to find and target audiences, we will win.

Brian Kinger

So it begs the obvious question. I think I've asked so many times, what will it take for your client base that's already using Inuvo and outperforming the competition to dramatically increase their usage of your technology?
What do you think when and how does that happen?

Richard Howe

2 things are necessary to accelerate that.
One is relationships.
So, you know, in spite of the fact that we're living in a digital world, you know, and consequently, people are less likely to want to have face to face meetings, the relationship with a client. You know, it's probably the biggest catalyst to, you know, accelerating the relationship.
So that's why we've been investing in that with our sales teams. And with other relationships, we know if we can get, you know, in with people and build a relationship with them, (where we're) not being thwarted, you know, by the plethora of competitors, you know, those relationships will grow.
And then the second thing is fear of change, you know, whenever you've got, you know, a disruptive new technology and whenever you got markets changing, you know, the people involved in those decisions, you know, have this aversion to change.
So those are the two things Brian, and we're working on both.

Brian Kinger

So that leads to the obvious next question and then I'll get back in the queue because I do have other questions. But you talked about, looking to hire three new sales people. Have you hired any yet in the fourth quarter and talk about the ideal candidate and how you find that person.

Richard Howe

I'm not sure if we've hired one in the fourth quarter. I think we probably did, Wally might know the answer to that. So, after I'm done talking, he can opine on that. But we've hired, you know, a number of new ones and we've changed out some other ones, you know, as I mentioned we've been trying to do the best we can to get the best people possible.
The combination of skills, you know, that we look for. Well, there's a plethora of things you look for when you're trying to hire the right, you know, the best salesperson. But, going back to the prior question, you asked one of the things that, you know, that we look for quite extensively is, you know, what kind of relationships do they possess? You know and are those relationships long standing and trusted because those matters.
So, you know, we care a lot about those relationships that the salesperson, you know, comes to the table with. And then the second one, you know, would probably be categorized in the bucket of skills, you know, that I'll describe as being, you know, consultative. if you're going to position, technology within the ad tech world,
it's unfortunately for salespeople complicated, you know, there's data and there's analytics and there's segmentation and there's, you know, there's campaign platforms and there's IP addresses and cookies and I mean, the list goes on and on and on. And so, to do a really good job, you know, selling any product in this industry, sort of demands that you understand how things work, and those skills are hard to come by.
So, we kind of look of the two is the answer, the long answer to your question is, you know, a strong relationship and an individual who has a strong understanding of how things actually work.
That would be the two main characteristics.

Brian Kinger

Great. Thank you. I'll get back in the queue.

Operator

Thank you so much. And your next question comes from the line of John Hickman of Flaen.
(Operator Instructions)

John Hickman

Hold on.
Yeah, I was just wondering like what the I don't know, like the M&A landscape looks like in your portion of the ad tech world.
Is there a lot of activity going on? Do you feel like there's targets for you to acquire or are you a target?

Richard Howe

I'll answer the last first. I think it's, it could be both. You know, if we, of course, the sort of limitation for us to be an acquirer is, you know, our balance sheet doesn't allow us you know, freely to be able to do that. And there of course, would be dilution associated with that, which we're very sensitive to on behalf of our shareholders.
So acquiring things. Yes, we look and there are targets out there that are interesting and, well, you know, we're having ongoing dialogue all the time with potentials for that.
The latter you know, us being acquired, I think is also a possibility. So, you know, if you look at the capability we have and the disruptive nature of it and quite frankly, the patents we've got and the reality that we're the only large language generative AI built for this use case solving probably the industry's biggest problem.
Yes, I think, you know, in the next, whatever period and however a person wants to define it and they'll probably be increased interest. With that said, you know, there's been, companies that we talk to all the time who, you know, want to talk to us, you know, or trying to learn about what we have. So I think it's both John there's nothing imminent, right. But, as you would expect as our shareholders would expect us to do, we're always having those conversations.

John Hickman

Okay. And (one last one more for me), you know, you have 140 million give shares outstanding, give or take. Is there any discussion at the board level of maybe a reverse split? So that the share account was a little less than the share price, maybe a little higher?

Richard Howe

I think, as you would expect the answer is, yeah, we talk about these things on a routine basis, you know, in our board meetings and, the analysis for that is not simple. So, you know, contrary maybe to folks who haven't, you know, taken a look at this and looking at the history of it, you know, the history being defined by companies that have done it.
They're sort of mixed results in terms of, you know, whether or not it worked out in a positive way or in a negative way. So the answer to the question is if we ever do choose to do this, we would do it under the guise of, you know, very a comprehensive analytics that, sort of, you know, make sure that, when and if we do it, that it doesn't yield, you know, I guess you know, a bad outcome.

John Hickman

Okay. Thank you.

Operator

Thank you so much. And we have a follow up question from Brian Klinger. Please go ahead.

Brian Kinger

Yeah, great. Over the last few quarters, I think you and I in this call talked about advertising and obviously you have a limited capital but the importance of the effectiveness, I wonder looking backward if you could talk about maybe over the last 12 months, the effectiveness of your marketing and advertising and you need to make changes. Do you need to keep doing what you're doing because it's working, just maybe talk about that, please.

Richard Howe

Yeah, sure. So we've already talked about the fact that, you know, one of the key components to that is the people we have out in the field, and we brought, Barry, former CEO of an agency in to help us with that and he has done a great job at that, I'd say, improving the professionalism of this part of our go to market.
Now there are lots of other things we can be doing on the sales side that we are, in fact doing. You know, one of which, points back to the other question you asked about some of the things that matter and relationships matter.
So, I will say this, Brian, we have contracted with recently some other individuals, who, let's just say, have broad relationships within the advertising ecosystem.
And so, we brought them on as consultants to help us make introductions, you know, leveraging the strength of their relationships to help us do that.
Recognizing that that's so important to this scalability if you will of what we can do with marketing specifically, the marketing stuff. You know, one of the things that we've we find effective in this new world we're living in where as I said earlier, it seems like, you know, buyers don't want to have face to face meetings or at least not as many as they used to.
We have found that conferences, you know, work pretty well for us because, you know, while people don't want to have face to face meetings, they do attend the conferences. So these conferences, you know, become a really good place for us to network and make those relationships and I'm pretty sure we attended six of them in the third quarter just as a side note to give you some sense of the scale of the operation there and us leaning into that part of our marketing activity.
In addition to that, you know, we've been quite successful, at getting ourselves published, in reputable industry, trade magazines, who, you know, have a desire to talk about, you know, artificial intelligence and advertising and we're clearly, if not the, the (quintessential) company, one of the (quintessential) companies at that intersection.
And so, I think in the third quarter, if memory serves, we had three of those articles published about us. So, that's an increase.
We've also seen a pretty strong increase in the number of people who have subscribed to Inuvo on LinkedIn, we've been pretty active within LinkedIn and trying to reach marketing and advertising professionals. And consequently, that's working.
So, I think we have, I don't know, 7,000 ish subscribers now, you know, who we push, you know, information about a new vote to, I mean, in fact, we have a newsletter that goes out, I think it's monthly.
And there's 1,000 or so people, you know, 1,000 advertising and marketing professionals subscribe specifically to that newsletter alone that we push that to and both all those numbers are going up if you will. So, forgive the long answer, but I wanted to be thorough.

Brian Kinger

Right? The last question I have, I think you said you added 60 brand customers to agencies and two new direct logos.
How many customers or brands are you are you actively serving maybe on a quarterly basis right now?
Can you share that?

Richard Howe

Yeah, that's a good question. I'm not sure, I know the answer to that. We probably should follow up afterwards and tell you that. So, I don't say something wrong.

Brian Kinger

All right, great. Thank you

Richard Howe

You bet. Thanks Brian.

Operator

Thank you so much.
(Operator Instructions)
I would like to turn it back to Richard for closing remarks.

Richard Howe

Thank you very much operator and thank you everybody who joined us on today's call. We we appreciate your continued interest in our company.

Operator

Thank you so much, presenters and gentleman. This includes today's conference call. Thank you for participating and you may now disconnect. Have a great day.