Inuvo Reports Wider Losses in Q4, Touts AI Advancements

Inuvo Reports Wider Losses in Q4, Touts AI Advancements
Inuvo CEO Richard Howe (Karen E. Segrave)

Marketing technology provider Inuvo Inc. of Little Rock (NYSE American: INUV) reported widening losses in the fourth quarter of 2022 and the full year, but said it was well-positioned for growth thanks to advancements in its artificial intelligence-powered platforms.

Fourth-quarter losses totaled $4 million, or 3 cents per share, compared to a loss of $1.2 million in the same period a year ago. Revenue in the period fell 12.2% to $17.3 million, which the company attributed to softening demand and the loss of a client.

For the full year, losses came to $13.1 million, or 11 cents per share, compared to a loss of $7.6 million in 2021. Annual revenue totaled $75.6 million, up 26.4% from $59.8 million.

Operating expenses increased 27.6% in the fourth quarter to $15.7 million, primarily due to higher traffic acquisition costs and corporate branding expenses. For the full year, expenses were up 12.2% to $58.0 million.

The expenses include $1.4 million in client refunds that came after Inuvo purchased invalid clicks from an advertising platform it did not name. The company said it expects the adversting firm to refund that money.  

CEO Richard Howe told investors in an earnings call that demand has continued to soften in the first quarter of 2023, which is already a seasonally slower period, but that the company's business pipeline is "as robust as we have ever seen it." He said the company sees a growing need for audience discovery and targeting solutions as cookies and other identity-based advertising technologies become obsolete.

The company's biggest growth obstacle, Howe said, is simply awareness. "It’s like even though we’re not a small company anymore, at roughly $80 million in revenue," he said, "relative to the kinds of companies that are in the media and ad tech space, we are small."

In the earnings call, Howe drew comparisons between OpenAI's ChatGPT and Inuvo's IntentKey, its AI-powered platform that delivers connected television, online video and native advertising campaigns. The company in 2022 sharpened its capabilities to determine the "optimal mix of media spend across advertising channels" without using consumer identity. 

Howe said Inuvo also empowered its AI to include consumer sentiment in its understanding of audience concepts.

"The power in our AI lies in its immediate ability to associate and action things that are important to consumers as part of their purchase decision," he said. "Often, these associations are not obvious to the marketer."

The company is in the early phases of launching a new tool in which product category, product design and product advertising will all be done with Inuvo artificial intelligence. Inuvo described the product as the first of its kind and said it's expected to debut in the first half of 2023.

"With the push of a button, the IntentKey can provide product, market research that is not only more accurate, but more insightful and ultimately reduces the cost and accelerates the time to market," Howe said.

Inuvo has reclassified its revenue into two categories, direct and indirect, and retired the ValidClick classification in its financial disclosures. Direct revenue includes advertising-related revenue generally from agencies or brands. Revenue generally sourced through companies or platforms that have direct relationships with agencies or brands is classified as indirect revenue.

Inuvo finished 2022 with $4.5 million in cash, cash equivalents and short-term marketable securities, $2.8 million of working capital, an unused working capital facility of $5 million and no debt.

The company's strategy has been to grow as quickly as possible while breaking even on adjusted earnings before interest, taxes, depreciation and amortization.

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