Inuvo Q1 2026 Earnings Call Transcript

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May 14, 2026

Key Takeaways

  • Positive Sentiment: Audience Modeling revenue grew 13% year over year, making IntentKey the company’s primary growth engine in the quarter. Management said the pipeline is building and expects strong double-digit growth in Audience Modeling throughout 2026.
  • Negative Sentiment: Legacy Search revenue fell 81% after the Q4 Bonfire reset, and management said this business is still weighing heavily on margins and cash flow. The company also described the broader search market as structurally disrupted.
  • Positive Sentiment: Inuvo highlighted new DSP and SSP integrations, plus an integration with FreeWheel’s Buyer Cloud, which it says expands its addressable market and is already helping win larger enterprise conversations. The company also said it launched pilot programs with two major logos and added five new IntentKey customers in Q1, including three Fortune 500 companies.
  • Positive Sentiment: The company emphasized its push to upgrade go-to-market execution by adding enterprise sales talent, sharpening lead generation, and creating a dedicated IntentKey website to raise brand awareness. Management believes these efforts should help convert pilots into larger, longer-term contracts over the next several quarters.
  • Neutral Sentiment: First-quarter revenue was $7.9 million, gross margin fell to 43% from 79% a year ago due to mix shift, and operating expenses dropped sharply to $7.5 million. The company ended the quarter with $2.9 million in cash and no borrowings on its $10 million working capital facility, aided by a $6.2 million settlement receipt and a $3.3 million convertible note.
AI Generated. May Contain Errors.
Earnings Conference Call
Inuvo Q1 2026
00:00 / 00:00

There are 6 speakers on the call.

Speaker 3

This call is being recorded on Thursday, May fourth in 2026. I would now like to turn the conference over to Katie Cooper, Head of Brand and Communications. Please go ahead.

Speaker 2

Thank you, operator, and good afternoon. I would like to thank everyone for joining us today for the Inuvo first quarter 2026 shareholder update call. Today, Inuvo's Chief Executive Officer, Rob Buchner, and Chief Financial Officer, Wallace Ruiz, will be your presenters on the call. We would also like to remind our shareholders that we plan to file our 10-Q with the Securities and Exchange Commission this evening. 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 historical facts are forward-looking statements relating to future events. As such, all forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risk and uncertainties, and actual results may differ materially.

Speaker 2

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 Inuvo at 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 day hereof that bear upon forward-looking statements. In addition, today's discussions will include references to non-GAAP measures. The company believes that such information provides an additional measurement and consistent historical comparison of its performance.

Speaker 2

A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. Before I turn the call over to CEO Rob Buchner, a quick housekeeping note. As you will see in our release today and in our 10-Q, we are reporting our results in 2 business product lines: Audience Modeling and Legacy Search. The Audience Modeling business is anchored by IntentKey, our AI Audience Modeling intelligence platform, and is what we formerly called Agencies and Brands. The Legacy Search business we formerly referred to as Platforms and encompasses the Bonfire platform and our legacy search-based ad placement business. We will be referencing these product lines throughout the call today, and we encourage our listeners to review the more complete descriptions for these product lines in our 10-Q. Rob, over to you.

Speaker 4

Thank you, Katie Cooper. Good afternoon, everyone. Thanks for joining the call. I'll begin today with brief remarks on the first quarter and the strategic progress we're making. I'll hand over the call to Wallace Ruiz for a review of the financials. I'll close with a few thoughts. I'll open the call for your questions. Turning to our first quarter results. Our first quarter results tell a diverging revenue story. Audience Modeling revenue increased 13% from a year-ago, driven by deepening investment from existing IntentKey clients and meaningful early wins from our sharpened go-to-market strategy. Legacy Search, meanwhile, continued to absorb the aftershocks of our fourth quarter system reset, which weighed heavily on both revenue and margins. None of this was surprising. We signaled these dynamics on our March call.

Speaker 4

As we head into the second quarter, the sales pipeline for IntentKey continues to build while recovery of Legacy Search revenue remains constricted. Specific to Legacy Search, this isn't just an Inuvo phenomenon. It mirrors the fundamental disruption playing out across the search ecosystem at this point in time. Conversely, the Audience Modeling product line, powered by IntentKey, is proving our forward thesis. With 13% year-over-year quarterly revenue increase, this product line is now our primary growth vehicle. I believe the momentum we're experiencing with IntentKey, cornerstone clients, and new brands we're onboarding are indication that our audience modeling AI is set for scale. In March, I laid out my plan for ensuring Inuvo cements its position at the forefront of this changing landscape, and I'm pleased to say that we're making good early progress against those four strategic pillars.

Speaker 4

Let me take a moment to walk you through where we stand. Before I do, let me remind you of my four strategic pillars I laid out earlier in the year. One, go-to-market focus. Two, raising IntentKey's profile. Three, continuing product innovation. Four, high margin growth. Turning to our go-to-market focus. Over the last couple of months, we've made meaningful strides in aligning and upskilling our sales teams, sharpening our lead generation strategies, and ensuring these strategies are well supported by the solutions engineering team. We recently added enterprise-grade sales talent to our team.

Speaker 4

These are individuals who possess experience and relationships needed to elevate our conversations further up the value chain, selling directly into brand organizations and pursuing commercial integrations with stickier evergreen revenue streams. As we announced on our March call, we completed DSP and SSP integrations that meaningfully expand our addressable market, opening our sales aperture to privacy-sensitive verticals like government, pharmaceuticals, and healthcare. These integrations are already paying off. I'm excited to share that we've already launched pilot programs with two major logos utilizing these integrations, with yet more logos in queue for next quarter. These pilots are valuable proof points of our product roadmap and further validate that the market is coming to us. As the industry pivots toward distributed intent and agentic workflows, there will be growing demand for IntentKey's data proposition.

Speaker 4

In total, during the first quarter, we added 5 new logos to IntentKey, including 3 in the Fortune 500. As we enter the second quarter, we continue to see opportunities with large privacy-sensitive companies and government organizations, and we expect to add some large brand names to the growing list of logos on our platform. We continue to see strong momentum in our IntentKey pipeline. That said, the sales cycle from test to scale for larger integrations can be 6 to 9 months. Revenue builds as new customers typically run smaller pilots and test campaigns before deepening budget commitments. Case in point, we continue to play the waiting game on the large government contract we signaled last fall. We remain optimistic this will close in the weeks ahead, although the government's internal procurement process has moved much slower than we had anticipated.

Speaker 4

However, we find it encouraging that while we wait, this opportunity is already sparking interest from other government and government-adjacent players, giving us greater conviction that the opportunity in the government vertical is meaningful. Turning to the next strategic pillar, raising our industry profile. We recently launched intentkey.com, a dedicated website that showcases the IntentKey platform through user tutorials, live test drives, and a clearly articulated value proposition. It's designed to make IntentKey more accessible, compelling, and referenceable for the enterprise conversations that we're having. This is the first step in a larger effort to bring greater brand awareness to what is, in our view, a defendable strategic advantage for IntentKey. Our aim is to translate that to sustainable high retention revenue growth for Inuvo. I encourage you guys to go to intentkey.com and give it a try. Turning to continuous product innovation.

Speaker 4

We've made great progress this quarter enhancing the IntentKey platform with several new integrations and product updates. As I mentioned previously, we completed SSP and DSP integrations during the 1st quarter. These were immediately impactful to our IntentKey sales pipeline and our ability to secure conversations with large marquee brands, many of whom could not have worked with us under our old platforms. More recently, we announced the integration of IntentKey into FreeWheel's Buyer Cloud. This integration gives advertisers direct, customized control over how they buy ads while leveraging IntentKey's AI-driven models directly into the bidding logic. This enables advertisers to drive greater performance for every $ spent through a platform that offers customized model agility at speed. We also announced an updated version of the IntentKey platform, introducing more intuitive AI modeling, enhanced contextual analysis, and sentiment understanding.

Speaker 4

Also more flexible workflows and additional capabilities, including enhanced iterative model building. These enhancements are designed to drive more precise audience discovery and messaging insight, which can be activated the moment signals are identified. The industry is experiencing a surge in advertiser demand for connected TV media buys as brands continue to shift budgets from linear television to connected TV, which is growing 15% annually. Inuvo is in the midst of integrating our algorithm into the premium supplier of connected TV inventory to extend our reach into this critical media channel. Lastly, our fourth strategic pillar is high margin growth. The moves we made to better align our business to support higher margin growth are producing real results. A strong IntentKey pipeline and a healthy revenue growth for Audience Modeling in the first quarter.

Speaker 4

That growth, however, was overshadowed by continued pressure in our Legacy Search business, which generated and continues to generate negative net margins and a net cash burn. As I said previously, this is a systemic issue. Legacy systems are failing to generate historical velocity and predictable returns. Advertisers we serve downstream in the supply chain are frustrated with the rigid compliance standards that are choking normative returns, this in spite of the compliance tools we've brought to market. In light of this reality, we've taken steps to rationalize the business to focus on more promising relationships and service lines and lower costs, including eliminating certain non-performing services and lowering headcount in our Legacy Search product line by nearly two-thirds. As I said in March, our industry is rife for disruption. While advertisers lament diminishing returns they're experiencing with legacy tech, our IntentKey sales pipeline continues to strengthen.

Speaker 4

Our first quarter results underscore this dynamic. Through disciplined execution of our strategy, I believe we're well-positioned to not just perform through this period of rapid change, but to emerge as the preeminent AI within Audience Modeling and real-time activation. With that, I'll hand the call over to Wally.

Speaker 5

Thanks, Rob. Good afternoon, everyone, thank you for joining us today. I'll begin with a review of the quarter financial results. We'll touch on liquidity and the outlook, then I'll turn the call back to Rob for questions. Results for the first quarter came in largely as expected after the reset of the Bonfire operations last year. Revenue for the first quarter was $7.9 million, down $18.8 million year-over-year, due entirely to Legacy Search or what we used to call Platforms. Legacy Search was down 81% in the quarter as a result of the fourth quarter Bonfire reset. Revenue for Audience Modeling or what we used to call Agencies & Brands, was up 13% in the first quarter. The resulting change in revenue mix drove gross margins lower to 43% from 79% a year ago.

Speaker 5

As we have discussed in the past, Legacy Search historically has had higher gross margins than Audience Modeling due to the fact that most of its expense is recognized in marketing cost. On a net margin basis, Audience Modeling is more profitable than Legacy Search. Operating expenses were $7.5 million in the first quarter, $15.3 million lower than a year ago, driven by lower Legacy Search costs for traffic acquisition due to the lower Legacy Search revenue. During the quarter, compensation costs were up 2.5%, primarily driven by severances that offset lower salary expense due to headcount reductions in the quarter. As we reported to you on our last call, in January, we received $6.2 million in connection with a class action settlements claim.

Speaker 5

These proceeds offset the operating loss in the quarter, resulting in a net income of $1.9 million in the current quarter, compared with a loss of $1.3 million during the same period last year. In January, we entered into a $3.3 million subordinated convertible note. These liquidity events have helped us navigate the cash consequences of the pullback in Legacy Search revenue. We ended the quarter with $2.9 million in cash and cash equivalents, with no amounts drawn on our $10 million working capital facility. Looking ahead, though we expect Legacy Search to gradually recover through the year, we will continue to closely monitor its margin and expenses and make further adjustments as necessary.

Speaker 5

For our Audience Modeling business, we continue to forecast strong double-digit year-over-year growth for each quarter in 2026, driven by a very healthy sales pipeline. With that, I'll turn the call back over to Rob.

Speaker 4

Great. Thanks, Wally. Against the backdrop of growing demand for privacy-led intent signals, Inuvo will accelerate our investment in our proprietary algorithm for Audience Modeling. Using the same development methods of general purpose AI systems, we continue to advance our large language model to discover and target net new customers for brands. By mapping intent and real-time engagement patterns on the open internet, we deliver valuable marketing intelligence. In so doing, our system bypasses the failings of media targeting infrastructure. We believe the data generated by our algorithm is the currency our future will trade upon in the agentic era. Our data is our data, our models, ours. The more signals processed, the faster the learning accelerates. The broader the integrations, the greater the reach. No other ad tech does precisely what IntentKey does. That's why more prospective buyers are leaning forward during our demos.

Speaker 4

It's why our pipeline is so robust, and it's also why our cornerstone clients have upped their spend in the first quarter. The intrinsic value of IntentKey lies within a data created through our AI, the pace of adoption, and the scale of the integrations across a broader ecosystem. I look at this next phase, I'm committed to fortifying our competitive positioning. Our four strategic pillars keep us focused through the industry's state of flux. Programmatic stakeholders are either wed to the past or are ready to embrace dynamic technologies that adapt as culture moves. The recruitment of progressive talent who share my ambitious vision is a vital component of my plan. This extends to the board level. Earlier this month, we announced the addition of Sanja Partalo to our board slate.

Speaker 4

For those of you who are familiar, unfamiliar with her credentials, Sanja Partalo is arguably one of the most influential voices in AdTech today. She consistently identifies not just trends, but the underlying systems that power them. I've had the pleasure of knowing Sanja Partalo for the past decade, and have done some work with her. I can attest that she's one of the brightest minds in our space. At a time of profound structural transformation, we're honored to bring her ever poignant voice to our board. We are clear-eyed about the structural challenges facing the broader search marketplace. As our Legacy Search business faces continued pressure, we've taken appropriate measures to align our costs on this side of the house. Our investment focus is squarely focused on extending the momentum of IntentKey.

Speaker 4

The sweeping changes in our industry have created a clear divide between legacy tech and the future of AI-driven media. While our financial results reflect a reduction in Legacy Search revenue following the Bonfire reset, we believe the actions we're taking today position Inuvo for a more scalable and higher quality revenue mix. Our 2026 priorities are centered on increasing adoption and scaling IntentKey. We are well-positioned to capture growing demand for intent-based Audience Modeling. This is a rapidly evolving space, and we remain at the forefront of this movement. We have built a foundational, proven algorithm that we believe will translate to resilient growth and long-term shareholder value. I look forward to updating you on our progress. Operator, I'll now turn it over to you for Q&A. Thank you.

Speaker 3

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press the star followed by the number 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number 2. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Brian Kinstlinger from Alliance Global Partners. Go ahead.

Operator

Thanks so much. Rob, how has the go-to-market process changed, if at all, since you joined? What is Inuvo doing differently, and what are prospective customers' feedback regarding IntentKey?

Speaker 4

Well, listen, we've got a warm, receptive audience. We've done a lot of work on the product as it relates to go to market. You know, I'm not casting any shade on the past, but we're in service of a lot of smaller budgets and clients regionally, and we've, you know, we've kind of upskilled our team and we're going after bigger budgets, more prominent brands for bigger prizes. All in all, you know, we're getting the meetings, and getting the meetings is really hard to do when you're trying to penetrate brand direct opportunities, major blue chip brands with sizable budgets. We're making some good progress there.

Operator

As you said, it would take six to nine months to go from kind of small pilots to larger share of the wallet. Should we begin to see the evidence of some of these larger customers in either the December quarter or the March quarter of next year? How should we evaluate the flow-through?

Speaker 4

Brian Kinstlinger, I think a lot of the foundational work that we're doing on go-to-market, the meetings that we're getting, the pilots that are going to market, the sales cycle's long. It's a 6-9 month kind of time horizon. You know, given that we've had a good pipeline in Q1, Q2 it looks even better. You're gonna start seeing some velocity and impact to our revenues in the back end of the year, and it sets us up for a great 2027.

Operator

Great. My last question is, you put out a press release, I think it was just a week ago, maybe it was a little longer, of three key new executives to help with brand recognition, I think sales execution. Maybe talk about these strategic hires and why they're important for shareholders to understand.

Speaker 4

Well, I look, Katie Cooper actually is an existing employee within who's been elevated as I'm raising the profile of marketing and the brand to within our industry. You know, the other two hires are really to help us with business development. They're accomplished salespeople who have had success in the programmatic arena and with larger scale clients. Not to in any way discriminate the difference between salespeople who maybe work regionally with smaller budgets because that's important too. I'm just going after people that are more confident in higher pressure environments and bring to the party a network of clients and agencies of scale. It's not more complicated than that, Brian.

Speaker 3

Great. Thanks so much, Rob.

Speaker 4

Yeah. Got it.

Speaker 3

Your next question comes from Jack Vander from Maxim Group. Go ahead.

Speaker 1

Okay, great. Thanks for taking my questions, guys. Rob, I just wanna kinda double-click on your update about the 5 new IntentKey logos. I think you said 3 of them were Fortune 500 companies. Can you just talk about how does this actual contract duration and sort of ASP compare to maybe thing IntentKey was doing last year?

Speaker 4

I think if you look at our client portfolio really over the last couple of years, it tends to be relatively small and fleeting. You know, they come on, they come off, people get fired at agencies, brands get removed from. You know. The brands that we're bringing on now are doing pilots with larger budgets. They're bigger brands. When we move, first of all, performance is everything. We've got to perform, and we tend to perform very well. That's why we've got really big cornerstone brands that have been with us for years who up their spend in Q1 as well. You know, when you do bigger pilots with greater outcomes on the back end, when they up their spend, you know, it can lead to $7-figure renewable contracts year-over-year.

Speaker 4

There is a little bit of a compounding effect, with more dollars in our coffers as a result. That's really important.

Speaker 1

Excellent. Okay. No, I appreciate the color there, it just sounds like that segment that we're renaming now is ramping. It sounds like the larger government contract and a few others in the pipeline. I know you've been targeting upstream deals a bit with bigger ASPs. Have you seen If this is the baseball analogy, what sort of inning are we in there for these sort of IntentKey or the modeling run rates?

Speaker 4

All right. Well, I guess, we're in the baseball season. I would say that I think we're still in the early innings. Call it the second inning. I think, you know, the outlook, if I was to, you know, go forward beyond 2027, this is a, this is a sizable business. It should compound upon itself. It's like success begets success. You hire 5 good people, their networks bring in bigger clients. Clients like to see other blue chip brands that have already been on the platform. You know, it's always been that case, I think. I think we'll continue to attract better talent, bigger brands with better budgets. The performance of IntentKey historically delivers, that helps us on the retention side.

Speaker 4

I think it's, I think all those vectors coming together will take us into deep innings in the years ahead. I'd say we're in inning 2.

Speaker 1

Excellent. I appreciate you entertaining that. That's good to hear. Maybe just a follow-up for Wally on the financial kind of OpEx run rate. Definitely substantial reductions in the 1st quarter to operating expenses with the headcount reductions. Just wondering how much of that's severance and how much of this is a normalized go forward OpEx. I know it's kind of a loaded question, but is anything spill over severance-wise into the 2nd quarter?

Speaker 5

So-

Speaker 1

-depending on segment revenue mix, it can fluctuate.

Speaker 5

Yeah. In these numbers, there's over $900,000 in severances in the compensation number. The headcount has come down almost 33, almost a third. Almost a third. Right? It's all associated around Legacy Search. Going forward, you're going to see. Well, you can see in the first quarter here. In the first quarter here, you can see that the marketing costs are substantially down from the prior year. You can anticipate it being lower than 2025 for the rest of this year.

Speaker 1

Okay. Excellent.

Speaker 5

Okay.

Speaker 1

Maybe just one more. Yep. Sorry. Go ahead, Rob.

Speaker 4

Yeah. Jack, I wanted to just add that. The emphasis toward more self-serve data deals, and that's kind of why I added that point. You know, our data is our data. Our algorithm is the currency which we trade upon. When you're a data play, for every $1 million of revenue, it doesn't mean that we have to add 10 more bodies. We've taken friction out, we scale faster, and we don't have the same kind of overhead with The IntentKey business. It's not gonna be labor-intensive, it's data-centric.

Speaker 1

Absolutely. One more just kind of follow up to that, and then I'll hop back in the queue. In terms of the self-serve clients that you have, and there's a lot of testing going on, I'm sure, with clients, do you feel like it's making an impact? Do they get it? Do they understand the value it's providing, where you'll see this sort of self-market itself to open up the funnel? Just curious to hear what you're finally hearing from your client base that are using it. Is it game changing to them? Do you see expansion with the existing clients? Thanks.

Speaker 4

We live and die by performance and the outcomes. Since you know what IntentKey does like no other is we help identify net new customers. Upper funnel activity and engagement in concepts related to the client's business. That's always gonna be in demand. That's like an evergreen proposition, and that's where IntentKey shines. There's a lot of noise. This is a highly fragmented marketplace. You know, once the clients are on, they start seeing results. They want more, they build confidence. When we start getting higher up the food chain within branding companies, they get it because it's a strategic integration versus a transactional expendable, another AdTech that's come and gone. You know, I'm really proud of the major brands that we've served in the last couple of years.

Speaker 4

I just wanna grow on that foundation and get better. Yeah, they see the value for sure.

Speaker 1

Okay. Fantastic. I appreciate the time, guys, and look forward to watching you execute. Thank you.

Speaker 4

Cool. Thanks, Jack.

Speaker 3

As a reminder, if you wish to ask question, please press star one on your touch-tone phone. There are no further questions at this time. I will now turn the call over to Rob Buchner, the CEO. Please continue.

Speaker 4

That kind of concludes our session today. Unless anyone has any other questions, we look forward to seeing you in a few months. Feel free to contact me if anyone has questions between now and then. Thank you.

Speaker 3

Ladies and gentlemen, this concludes today's conference call. Thank you for participation. You may now disconnect.

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