INUV - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Inuvo 2019 Second Quarter Results Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Valter Pinto, Managing Director of KCSA Strategic Communications. Please go ahead, sir.

Valter Pinto

Thank you, operator, and good afternoon. everyone XXXX us shareholder thank Inuvo’s for to quarter second update like for today joining the I’d conference call. Executive will Chief Officer, Inuvo’s Officer, and Howe; Today, Chief Wally Ruiz be presenters. your Richard Financial

I’m begin, statements of future The historical conference Harbor this are forward-looking we the statements company’s going Before in not are events Safe that call facts statement. review descriptions to to relating subject forward-looking Securities These all such, materially. statements risks are Litigation forward-looking Act as pursuant differ the are and and, to uncertainties XXXX. Reform of statements may actual to and made results

are call to When Inuvo, time. that used to Inuvo similar differ involve statements in results enable, words uncertainties, all this project, at by as this potential, expressions the are believe, as intend, may forward-looking will, and cautioned should, cause and estimate, actual Investors risks from expect, such relate could, which anticipated a they those anticipate, statement. forward-looking

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

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

Richard Howe

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

the $XX.X For and $XX million to months we $XX XXXX, delivered and the revenue, March compared million XXXX, ended three in XX, ended respectively. June XX, three for XXXX XX, months million June

were million margins For the gross six XX, ended of June for XXXX, $XX.X XXXX. June compared quarter. the Overall, to for months $XX.X months six we the reported million, revenue XX, second ended XX.X%

planned support certain prior in the it three of the was wherein in disruption with first as XXXX, which associated second about over revenues in relates QX terminated have decline the for quarters been a XXXX, X% and the sequential Lower has years. the part the fiscal and to of averaged result year-over-year seasonality, products, June merger, reduction

issues, later of of front larger comments. these I’ll in we us, explain which this indicative quarter not the realized is have my we that Given opportunity in

with associated the the products. impact the of certain on briefly touch defocusing and terminated now me Let merger

termination time of $X.X expenses majority and first In can the of with we associated merger between to roughly we total, and impact agreement, time a in the attributed the talks revenue the ValidClick close year the to energy. The be had and the of incurred started business. merger million

we our core the While shift, impact, quantify companies this with e-commerce of had proposition technology. the the core And of the cannot integration along combined planning, business. value impact with certain on focused an this merger involved IntentKey

the conducted in parties its one road merits. shows all and resonated we the for IntentKey, with While investors combined which and disruptive was foundation companies’ did the the were the deal. disappointed, well as offering recognized analysts, thing but clear transaction the The we involved transformational become of

have share about tremendous made shortly. area progress of will that I We more and the in business, this

the to the negotiated business $XXX,XXX of to part approximately legal As included a that a cover of of termination, settlement cash in about in forgiveness obligations $X.X million we the acquisition loans, and the that certain has existing integrated rate you where $XX,XXX per the website now would I retargeter.com acquired additional run business. has month. for a roughly about of it current the information been into IntentKey, direct revenue

to Now expect strong that we came the Platform, clients benefit from business building delivering capabilities that the with margins. of the gross this acquired audience can acquisition that while IntentKey grow, also

additional support support this that I reduced transcript XXXX base in At XXXX. reduced had details. in fiscal $XX.X had that call rationale recall we revenue Our discussed our we early explained generated for that a will defer million you and to product would for in the QX shareholders XXXX a time, for market year

first-half the XXXX. revenue and million of in of in year-over-year thus, period contributed the $X.X the first-half XXXX, quarter of That the It product nearly $X.X specifically. of generated million second $XXX,XXX same delivered in and revenue in million decline $X.X the

had of result second partly been the the we just we quarter adjusted covered. XXXX, of and merger making $XXX,XXX have in EBITDA of result the changes part in and roughly data investments the platform We product-related an within of loss the IntentKey

segment we for revenue, purpose was While today, QX revenue will discussion $X our I that IntentKey our do XXXX million. not the disclose overall of

XX% the June However, in of alone, AppNexus, revenue. that media of data roughly XXXX XX,XXX risen Platform in business, over where integrated January. June IntentKey the our is IntentKey delivered having $XXX,XXX revenue from component with of was the platform Overall, that

component culmination almost after technology the began when two through core QX media shortly that announced IntentKey right we business marketplace work intelligence the platform, we for the years investments integration XXXX acquired advertising. of of the into of underpins open up This QX digital largest of the in and artificial the the worth AppNexus, XXXX, is hard that

are we that studies, the capabilities. published verticals, available anonymous website. our across numerous of Since differentiating IntentKey’s time, multiple approved engagements over studies through online audience-building XX quantifiably at case covering the These power

to of identify audiences. needs the audiences those The this core achieve has marketers sources cornerstone so help Every to been available data their slowest data the to marketer to gets technologies target planet the the Modern that have, and on used isolate of in their digital do ability online. among evolving ecosystem. objective resides components they and

from today both the data and audiences used being limitations online in compiled that is to manner online. delivered which that typically information result The has build

overused, means subject data stagnant often the conversion categories, is across privacy generally it’s and rates to marketers, potentially outdated, limited Board. For the broad concerns result their to

differentiated, converting to IntentKey audiences media compliant achieved notable for is our remedy current delivering by was create were strongly the the being growth the a the problems rate, clients. and for XXst performance privacy century and product designed client and base that These suggest transformational to vision statistics

seen those and XXXX, our from IntentKey July in XX% number have XX% the XXXX through over XXXX we increase for, the in gone RFPs Year-over-year rate greater that than through a is has on RFPs in win July. to competing XXX% of

$XXX,XXX provider, insurance on a IntentKey. with spending average is in about They June. month client, per current major largest $XXX,XXX Our spent the

this perform that client, the in to land tends can within We budget past, then the of expand upwards. starting gets the within discussed market, business industry. revised get the a model typically size small accounts. the expansion a significant be for and scale as It strategy a due we is test budget, to As where we

important budget targetable of What the clients. we just client build advertising information to are The millions This annually. has we the appreciate that, is mentioned for of that critical the is to anonymous our dollars many use audiences these only hundreds a is company of we our do market more It’s solution information third our advantage parties. gives mention not why as our competitive we to speaks broadly to to to rise, that us sell win IntentKey direct sales. tremendous also continue and rates deal through

our the rationalizes audiences. is other Intent is suppliers, solution powered the Our most service build we artificial do when This power ingest not by unlike intelligence. we the marketing way a information proprietary of these because of our information And any consumer information. technology third-party IntentKey

technologies We to sources. within the audiences believe for is literally granularity build at the is marketers data a that just a IntentKey that paradigm data conventional provides conventional unavailable in means platform shift simply

largest ever is not marketers margin, handcuffs highest IntentKey, XX%. month now par or In scaled. is only this to Siri which was the This speech. that removes a be content, only that Not products technology business with for June for have This gross also decades. it the can revenue Alexa, was approximately regard, like the delivered on applied constrained it data its

the have the to and aligning size, IntentKey. to we the expenditures business resources expenses Strategically, continues its capital support information. been resources current the At cash monthly to the towards being with and its technology business required largest information infrastructure burn two update

is to flow the business growth contribute XXXX in to cash expected current flow thereafter. pace, the major and contributor to be As cash

of Platform ValidClick category for with stable main largest be ad the cash flow core serving the major in an our the what to a important objective single The will spend enterprise three search. company, remains remain clients part generator

we Given see opportunities this to within pursue will size media, we case-by-case here that on industry’s a basis. disproportionate continue

July, million funding principally the IntentKey’s came common funding to of $X.X new the participation working of with notable and of including from shareholders hiring additional expenses In technology sales sale fees insiders, successfully we and capital, after existing fund The the professionals. from underwriting the through growth, investors. stock raised

call now performance in the quarter. that, to reporting I more of a the for financial will detailed Wally With turn

Wally Ruiz

second you, Thank will the results our recap of financial I afternoon, quarter. everyone. Good Rich.

and As revenue first-half of reported million compares This mentioned, for XXXX previous million XX. first-half million the of of June in Inuvo second in $XX.X the year the reported $XX ended million XX, year. the last for reported quarter and $XX.X ended quarter $XX June the to

the merger in The revenue the decrease due the adapt approximately to that in million quarter. pending where in the was the the pricing and business, first-half quarter of $XX the ValidClick to company fluctuations $X with slow primarily associated million because disruption is was to during second transaction of

year business. on we reduce for the last reasons market the made Additionally, as mentioned, a to of supply decision side emphasis

year. year the quarter the million focus could in current data where IntentKey or second of $XXX,XXX last the in and IntentKey current the to to year of This last side, last we to in year compared a year revenue compared platform has the resulted advantage. considerable same quarter, a So compared in market the solution on the resources advertiser first-half $X.X reduction of demand

are equivalent just comprised quarter XX.X%, realizing lower in in described, lower to to administrative and Gross revenue due same year, selling, margins XX.X% decreased the marketing of Overall, not primarily costs, last operating expense general to cost. the expense. quarter an expenses and second compared the compensation yet

compared $X.X Operating same of year. $XX.X quarter quarter million year, the that second in versus lower in XXXX million million to the second the $XX.X in of quarter is prior this year expenses were the last

traffic small revenue to it, quarter year ValidClick ad to the acquisition this year is or revenue has lower of marketing associated serve is such, mostly and, compared costs. were prior expense to the the due XX.X% a in second generated The as with as of predominantly revenue. lower websites costs from marketing cost

June this to end Compensation payroll, in XX at the year, the The lower lower XX.X% headcount compared was second prior stock-based June the to quarter and was at year compared of XX, to pay. incentive of year. compensation due last expense

this the entertainment increased year, quarter general and the to partially this that due XX.X% expense Selling, by second offset IT were year. of and travel expense to $XXX,XXX administrative prior lower costs compared and cost year merger-related lower in

reason The for the we this fell this the $XXX,XXX derivative quarter the the to our notes the first as liability derivative quarter became was of liability below last XXXX, $XXX,XXX having expense this the the interest year. stock price liability feature year conversion quarter convertible in price. from of an the in year. arose in issued zero second March The The in of income XX,XXX of of year. quarter recognized reversal of income in of Interest was same compared second

million $X.X and June balance of Our equivalents of and at sheet $X.X XX, had million. and notes cash of cash bank outstanding XXXX $XXX,XXX debt

result a the the Inuvo termination agreement, As was of termination of obligated million. acquirer pay $X.X to a merger the of fee

million The customers to paying and three, fee Inuvo extinguishing retargeting the $X shareholder to November agreed in arose acquirer assets action first, from acquirer to a the to by convertible the to due note settle XXXX; Inuvo; by – suits that and two, settle customer settle shareholder by the transferring agreement. and $XXX,XXX their of business the class merger

recorded the note the receivable we we $X business. and extinguishment June fully XX, settlement assets $X.X the million obtained items. settled items above a June retargeting the pending reserved most receipt million the Subsequent of full of it to of – of of and At XX,

end at the be be and reserve to before receive quarter, entire will will time settlement third receivable reversed. the We amount the expect satisfied of items which the agreed the and

In capital of million $XX.X our mid-July, stock our addition, sold $X.X raising to we in needs, million. address common

have will an on principally designed funds focused these where to investment be we the IntentKey mentioned, accelerate As plan growth. business,

completion in Rich AppNexus comments, has since As revenue this out part in pointed his integration, the of accelerated. the business of the

through expect begin between hiring when and of lag sales their $XXX,XXX new gross through to and we burn average XXXX, costs of IntentKey the to the As sales personnel we an begin proceed margins quarter outpace revenue the third productivity. they per month period, additional the the ramp-up on

along us We resources levels. believe provide with revenue will with expect capital stable plans. credit, adequate raised, execute to ValidClick the these be current current We to bank at

that, the turn With call for closing I’d to to back Rich remarks. like

Richard Howe

returned artificial and the have the data build Thanks, IntentKey. focus, Wally. which is we transformational is base world-class client to our With us, around primary a merger now platform intelligence disruptive behind that a to

give to century Inuvo this the climb been never challenge XXst the built stronger, information service RFP IntentKey providers. will for been it clients benchmarks. margins continue unique We be win data never have marketing Within believe Platform line, anticipate, and product performance has the ability to to for exceed and rates revenue and existing better, powerful and a product continues to

the are on will IntentKey, a ValidClick and investments where resources opportunities case-by-case scaling plan towards business, ensuring while basis. strategic stable focus a Our evaluated

the like now the for that, With operator Operator? to I’d over to questions. turn call

Operator

Thank comes Please Capital go you. [Operator Gibson ROTH ahead, Instructions] Partners. from And our first sir. question William today with

William Gibson

process Thank person been wanted delve a each in? you. hiring little you salespeople. what hired yet? to timeline on to And new the the new I more Has into anyone getting do bit think

Richard Howe

no Yes. Thanks, Will. answer hires occurred. our The force in new is No. sales have

only the we then is the That mid-XXXX course, the here weeks. hire of there’s of August Of hires And few plan. XX and to just raise plan one year series and was the a last of capital salespeople. the between over closed roughly this in to tune August

William Gibson

IntentKey on you. ValidClick And there anyway to at leverage Thank is all? take the progress to

Richard Howe

towards it’s the focus we’re margin i.e., and it’s and – the use of focused growth but that’s IntentKey there. in, a so potential would Yes, do potential, higher higher better we resources can’t resources that rather market everything, though, we with

William Gibson

Thank it. Got you.

Richard Howe

Thank you.

Operator

question next with from our Capital. go Please And comes ahead, Eric Lake sir. Street Martinuzzi

Eric Martinuzzi

no Long guys. chat, time

Richard Howe

Hey, Eric.

Eric Martinuzzi

was parties ConversionPoint the get know finished. least, got it be able transaction disappointing to at for to we’ve clarity. I not But all

six up – forward-looking. the the you second first know, But contribution quarter the Certainly, you first I from quarter let’s moment. that did for IntentKey it’s disclose quarter. was IntentKey to that given here. on dwell saw IntentKey versus forward you’re wanted I say June, commenting or specifically first to So safe the you in look in in strength not months? a Did

Richard Howe

$XXX,XXX. think said and $XX it media but disclose did for in said that $XX,XXX that the did second June I million also quarter. materially we I January in the We million media was lower. was what I $X piece the of number that didn’t it piece number was the QX, was

of there. massive So you growth can kind occurred see the the that that’s rate

Eric Martinuzzi

Yes.

Richard Howe

be said, tend July August and are we and With that months to that. weaker seeing

$XXX,XXX off. see a So, but July, far it’s not I don’t

And so, it of because was expecting. lower hopefully rise bump and bit it’s we back up should with, and be because on it simply kind going to from little of kind on August we’re a to seasonality, there, of that again, business, growth and expect the summer July the then rate

Eric Martinuzzi

Yes.

You of were that correct? up you kind – that QX, next the business that of of to be in you kind question, QX answered expect which in my part do, versus is you was fact,

Richard Howe

Yes.

Eric Martinuzzi

your included employees. Okay. The headcount, part-time both press full that you mentioned and the headcount release in

part-time what the end December wondering at think the comparable says full XX, a number just XX? I full-time. Just XX-K How was of at it your and but that December? was was many

Richard Howe

do Wally, head. off you the those numbers? have I know numbers of And top my don’t those

Eric Martinuzzi

for Well, could give strip maybe out part-time? June, me you the full-time if just the

Richard Howe

Wally?

Eric Martinuzzi

me move… let Well,

Wally Ruiz

of had it I you sorry, I’m last year? about on June, June mute. Oh, are talking

Eric Martinuzzi

December what I was XXXX? versus get was trying full-time of comparable – I June of No, was to employees the XXXX

Wally Ruiz

Okay.

had we year, this total full-time. of of were June at XX a which XX of So employees,

Eric Martinuzzi

Okay.

Wally Ruiz

you do December the – it? or in have number, you need And do

Eric Martinuzzi

the Yes, says it full-time I XX K. got but the K, December in the number from

Wally Ruiz

Okay.

Eric Martinuzzi

over to has question I commentary with your my then do the And next about wanted to – break-even. shift Okay.

about wanted to You it. to I sure getting break-even, talked make I understood

about XXXX, sorry, you commentary that expect XXXX, the to in flow that – QX positive to that, ValueClick business by through to of its Your is IntentKey? be entirety QX cash specific comment break or of with

Wally Ruiz

[Multiple No, Speakers] we the were about yes. talking

Richard Howe

Yes.

Wally. Sorry,

Wally Ruiz

Yes, company overall.

Eric Martinuzzi

And in – be XXXX. of July. business QX the overall next Well, did you the Yes. raise by question would

So for can forma number cash you give a me a forma XX, and debt Wally? July pro pro number

Wally Ruiz

Sure.

So is second. we were yes, one where

$X.X – So million. I’m approximately other was And in million. what And was debt question? notes July bank the were the debt sorry? – the were $X.X the

Eric Martinuzzi

cash XX? cash the but have had raise, looking for the of before, plus kind you July I if cash, for net forma pro the you number the cash post was the

Wally Ruiz

Yes. was I don’t $X.X number about it have million. the exact But here.

Eric Martinuzzi

Okay.

that and So we’ve correct? in you is debt. pro here forma, million XXXX, cash got of that $X million is $X.X assumption through of And million the QX $X.X roughly takes

Wally Ruiz

– through operating were yes, credit and our cash to with That able the yes. what with line, we operations, do

Eric Martinuzzi

parts can really the momentum the seeing IntentKey. of the the then, know and exciting didn’t And word was the hiring ability go in through this that merger of to appealing – that there Okay. for lastly, can get the quicker. of I acquisition one word is you’re that besides Rich, you IntentKey it direct out agencies? Are do on to brands the and what sales out get do other reps, things –

Richard Howe

Yes. to that The answer is yes.

itself planet, haven’t not We done any best in IntentKey audience a ourselves have believe as we – really of marketing is, but the one Eric, thing it. the money companies we didn’t – capital weird spent the have simply because about the our we we’re of in that building constraints, of significant any result

do more pretty to time it. we’re at our what Because get people ourselves need room our have. could is what exposure we’re when the and events the rate a we out winning obviously, seeing nice through we people to get So use we gets technology in we in is, where at it business there, that show who spend field salespeople

So we’ve through known. et just the not sales, got of No, to own but that, marketing through publications, do not direct our cetera, word more we’re out. get

Eric Martinuzzi

taking for Thanks good questions luck. and Understand. my

Richard Howe

Thanks, Eric.

Operator

the any there at back you are like further And to Howe, time. things remarks. queue to it closing turn for questions additional or Mr. I’d this appears in no

Richard Howe

results I’d and interest we like everybody today’s All sometime reporting appreciate November. to in joined us to on right. forward look QX Thank continued And your you, and operator. thank who call, our

Operator

Thank And you much this today’s so participation. call. your conclude for does

now disconnect. may You

Inuvo (INUV) 14 Aug 192019 Q2 Earnings call transcript