Inuvo, Inc. Reports Third Quarter 2012 Revenue of $15.5 Million and Adjusted EBITDA of $1 Million

 

New York, NY – Inuvo, Inc. (NYSE MKT: INUV) (the "Company" or "Inuvo"), an Internet marketing and technology company that manages a network of websites and builds and markets browser based consumer applications today announced third quarter 2012 financial results including revenues of $15.5 million and gross profit of $8.7 million, increases of 89% and 145%, respectively, over the third quarter 2011.

Third Quarter 2012 Highlights

  • Net revenue was $15.5 million, an increase of $7.3 million or 89% compared to third quarter of 2011, and an increase of $2.6 million or 20% compared to second quarter 2012.
  • Gross profit was $8.7 million. An increase of 145% compared to $3.6 million in third quarter of 2011.
  • Adjusted EBITDA, a non-GAAP measure, increased 1,070% to $1 million compared to $87,578 in third quarter of 2011.
  • Net revenue for the Software Search business segment was $7.9 million and gross profit was $6.8 million, an increase of 6% and 18% from second quarter 2012, respectively.
  • Net revenue for the Publisher Network business segment was $7.6 million and gross profit was $1.9 million, an increase of 40% and 98% from second quarter 2012, respectively.

"Management is pleased with the operating and financial results achieved in the third quarter of 2012,” stated Peter Corrao, Chief Executive Officer of Inuvo. “Revenue for the quarter increased 20% sequentially while Adjusted EBITDA increased five-fold sequentially.  We expect positive revenue trends to continue into the fourth quarter. Our improved financial results can be attributed to increased Tier 1 market search queries from our alOt users, the restructuring of the ValidClick business to focus on smaller publishers, and increased revenue from our owned and operated properties. Looking forward, we plan to continue increasing our more profitable Tier 1 search queries, profitably growing our Publisher Network, and launching new enhancements to our BargainMatch platform, all of which we expect to contribute to increased revenue in Q4 of 2012.”

The Company's consolidated financial statements as of September 30, 2012 include the financial results of its Vertro subsidiary from March 2012 forward, prior year periods do not contain financial results of the Vertro subsidiary. In addition, after seven months of combined operations, management has modified the reported operating segments into two segments; Software Search and Publisher Network, rather than the former three segments; Software Search, Publisher and Partner Programs. The Partner Programs segment, is absorbed into the other two segments for all periods presented.


Three month financial results for the period ended September 30, 2012

Net revenues for the three months ended September 30, 2012, were $15.5 million, up 89% compared to the three months ended September 30, 2011. Gross profit increased 145% to $8.7 million in the three months ended September 30, 2012 compared to the same period of 2011.  These increases were due primarily to revenue from the Company’s Software Search segment as a result of the merger with Vertro.  

Net revenue from the Software Search segment was $7.9 million, or 50.9% of total revenues. 

Revenue from the Publisher Network segment decreased 6.7% to $7.6 million for the three months ended September 30, 2012 compared to the same period of 2011. This decrease was primarily due to a decline in the number of transactions driven through our owned and operated websites and through third party affiliates using the ValidClick platform. Revenue from the Publisher Network is dramatically improving since the merger with Vertro. Revenue improved $2.2 million or 40% from the second quarter of 2012.

The Company reported a net loss of $1.3 million, or $0.06 per share, for the three months ended September 30, 2012, compared to a net loss of $1.4 million, or $0.14 per share, for the corresponding period last year.


Nine month financial results for the period ended September 30, 2012

In the nine months ended September 30, 2012, net revenues increased 27% to $37.1 million compared to the same period in 2011. Gross profit increased by 45% to $18.9 million in the nine months ended September 30, 2012 compared to the same period of 2011. These increases were due primarily to revenue from the Software Search segment as a result of the merger with Vertro. 

Net revenues from the Software Search segment were $17.7 million for the nine months ended September 30, 2012

Net revenue from the Publisher Network segment were $19.4 million for the nine months ended September 30, 2012, accounting for 52.3% of total revenues for that period and decreased 33.4% compared to the same period of 2011. This was primarily a result of a decrease in the number of transactions driven through the Company’s owned and operated websites and through third party affiliates using the ValidClick platform.

The Company reported a net loss for the nine month period ended September 30, 2012, of $6.2 million, or $0.30 per share, compared to $4.6 million, or $0.50 per share for the same period in 2011.


Balance Sheet as of September 30, 2012

Cash and cash equivalents totaled $3.2 million at September 30, 2012. As of September 30, 2012, the working capital deficit was $3.0 million compared to $2.0 million on December 31, 2011. Current assets and total assets were $11.5 million and $31.7 million, respectively and current liabilities and total liabilities were $14.6 million and $26.6 million, respectively.


Conference Call Information

The Company will host a conference call at 4:30 PM EST on Thursday, November 8, 2012. Participants can access the call by dialing 1-877-941-1428 (domestic) or 1-480-629-9665 (international). In addition, the call will be webcast Live webcast: http://public.viavid.com/index.php?id=102245

as well as on the Investor Relations section of the Company's website at http://investor.inuvo.com/events_and_presentations where it will also be archived for 45 days. 

A telephone replay will be available through Monday, November 19, 2012. To access the replay, please dial 1-877-870-5176 (domestic) or 1-858-384-5517 (international). At the system prompt, enter the code 4572449 followed by the # sign. You will then be prompted for your name, company and phone number. Playback will then automatically begin.


About Inuvo, Inc.

Inuvo®, Inc. (NYSE MKT: INUV), is an Internet marketing and technology company specialized in marketing browser-based consumer applications, managing networks of website publishers and operating specialty websites. To learn more about Inuvo, please visit www.inuvo.com.


Forward-looking Statements

This press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words or expressions such as "anticipate," "plan," "will," "intend," "believe" or "expect'" or variations of such words and similar expressions are intended to identify such forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of the Company's future Adjusted EBITDA, growth rate, and user base.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including, without limitation, statements made with respect to expectations with respect to: the strategy, markets, synergies, costs, efficiencies, and other anticipated financial impacts of the proposed transaction; the combined company’s plans, objectives, expectations, intentions with respect to future operations, fluctuations in demand; changes to economic growth in the U.S. economy; and government policies and regulations, including, but not limited to those affecting the Internet. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of Inuvo and are difficult to predict. Inuvo undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Additional key risks are described in the filings made by Inuvo with the U.S. Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2011 and most recent Form 10-Q.


INUVO, INC.

 CONDENSED CONSOLIDATED BALANCE SHEETS

 

September 30,
2012

December 31,
2011

 

(Unaudited)

 

 

 

 

Assets

 

 

Current assets

 

 

Cash

$ 3,200,464

$ 4,413

Restricted cash

301,083

475,586

Accounts receivable, net

6,562,452

5,426,865

Unbilled revenue

35,350

49,196

Intangible assets - current, net of accumulated amortization

598,419

947,882

Prepaid expenses and other current assets

829,024

433,601

Total current assets

11,526,792

7,337,543

Property and equipment, net

2,671,277

1,590,011

Goodwill

6,005,309

1,776,544

Intangible assets, net of accumulated amortization

11,366,830

390,000

Other assets

 164,187

 2,243

Total other assets

 17,536,326

 2,168,787

Total assets

$ 31,734,395

$ 11,096,341

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (Deficit)

 

 

Current liabilities

 

 

Term and credit notes payable - current portion

$ 1,333,333

$ 452,000

Accounts payable

9,689,189

6,198,921

Accrued expenses and other current liabilities and Deferred revenue

3,535,417

1,611,831

Deferred Compensation

 

929,428

Current liabilities of discontinued operations

160,000

Total current liabilities

14,557,939

9,352,180

Deferred tax liability

4,543,000

— 

Term and credit notes payable - long term

6,522,222

2,454,303

Other long-term liabilities

1,000,132

2,754,427

Total long-term liabilities

12,065,354

2,754,427

 

 

 

Total stockholders' equity (deficit)

5,111,102

(1,010,266)

Total liabilities and stockholders' equity (deficit)

$ 31,734,395

$ 11,096,341

 

INUVO, INC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

Three Months Ended

Three Months Ended

Nine Months Ended

Nine Months Ended

Sept 30, 2012

Sept 30, 2011

Sept 30, 2012

Sept 30, 2011

Net revenue

 $ 15,481,425

$ 8,203,116

$ 37,122,558

$ 29,209,646

Cost of services

 6,745,028

 4,635,908

 18,190,120

 16,106,187

Gross profit

 8,736,397

 3,567,208

 18,932,438

 13,103,459

Operating expenses

 

 

Search costs

 5,832,243

 1,959,042

 13,098,236

 6,749,115

Compensation and telemarketing

 1,649,063

 1,481,007

 4,571,418

 6,367,437

Selling, general and administrative

 2,378,826

 1,363,385

 6,734,383

 4,018,959

Total operating expenses

 9,860,132

 4,803,434

 24,404,037

 17,135,511

Operating loss

 (1,123,735)

 (1,236,226)

 (5,471,599)

 (4,032,052)

Other expense, net

 (202,379)

 (131,530)

 (473,801)

 (817,343)

Loss from continuing operations before taxes

 (1,326,114)

 (1,367,756)

 (5,945,400)

 (4,849,395)

Income tax expense

(8,690)

 (141)

 (70,667)

(141)

Net loss from continuing operations

 (1,334,804)

 (1,367,897)

 (6,016,067)

 (4,849,536)

Net income (loss) from discontinued operations

 14,121

 -  

 (142,821)

 257,136

Net loss

 $ (1,320,683)

 $ (1,367,897)

 $ (6,158,888)

 $ (4,592,400)

Other comprehensive income

 

 

 

 

Foreign currency revaluation

 6,084

 -  

 505

 -  

Total comprehensive loss

 (1,314,599)

 (1,367,897)

 (6,158,383)

 (4,592,400)

Per common share data

 

 

 

 

Basic and diluted

Net loss from continuing operations

$ (0.06)

$ (0.14)

$ (0.29)

$ (0.53)

Net loss (income) from discontinued operations

$  -  

$  -  

$ (0.01)

$ 0.03

Net loss

$ (0.06)

$ (0.14)

$ (0.30)

$ (0.50)

Weighted average shares (Basic and diluted)

 23,497,123

 10,035,791

 20,524,843

 9,137,659

By Segment: (unaudited)

Net Revenue

Three Months Ended Sept 30, 2012

Three Months Ended Sept 30, 2011

Nine Months Ended Sept 30, 2012

Nine Months Ended Sept 30, 2011

Publisher Network

 7,605,150

 8,153,116

 19,428,691

 29,159,646

Software Search

 7,876,275

 50,000

 17,693,867

 50,000

Total

 15,481,425

 8,203,116

 37,122,558

 29,209,646

Gross Profit

Publisher Network

1,895,189

3,517,250

 4,326,073

13,053,501

Software Search

6,842,208

 49,958

 14,606,365

49,958

Total

8.736,397

3,567,208

18,932,438

13,103,459

 

 RECONCILIATION OF NET LOSS FORM CONTINUING OPERATIONS TO ADJUSTED EBITDA

(Unaudited)

Three Months

Three Months

Nine Months

Nine Months

Ended

Ended

Ended

Ended

Sept 30, 2012

Sept 30, 2011

Sept 30, 2012

Sept 30, 2011

Net Income from Continuing Operations

$ (1,334,804)

$ (1,367,897)

$ (6,016,067)

$ (4,849,536)

Interest

127,379

53,169

399,801

263,437

Taxes

8,690

140

70,667

141

Depreciation

694,143

378,880

1,829,715

1,184,191

Amortization

1,283,226

660,738

4,104,037

2,018,956

Stock Compensation

245,614

362,548

632,477

1,339,060

 

 

 

 

Subtotal

2,359,052

1,455,475

7,036,697

4,805,785

Plus Merger Costs

0

0

436,458

0

Adjusted EBITDA

1,024,248

87,578

1,457,088

(43,751)

By Segment

   Publisher Network

$ 1,424,039

$ 1,799,155

$ 3,980,450

$ 5,143,901

   Software Search

       2,225,126

(42,330)

      4,177,803

(143,159)

   Corporate

(2,624,914)

(1,669,246)

(6,701,317)

(4,957,283)

Adjusted EBITDA

$ 1,024,251

$ 87,578

$ 1,456,936

$ (43,459)


Reconciliation of Net Loss from Continuing Operations to Adjusted EBITDA

In addition to disclosing financial results in accordance with United States generally accepted accounting principles (“GAAP”), our earnings release contains the non-GAAP financial measure “Adjusted EBITDA.”

Adjusted EBITDA is not a measure of performance defined in accordance with GAAP. However, management believes that Adjusted EBITDA is useful to investors in evaluating the Company’s performance because Adjusted EBITDA is a commonly used financial analysis tool for measuring and comparing companies in the Company’s industry in areas of operating performance.

Management believes that the disclosure of Adjusted EBITDA offers an additional view of the Company’s operations that, when coupled with the GAAP results and the reconciliation to GAAP net loss, provides a more complete understanding of the Company’s results of operations and the factors and trends affecting the Company’s business.

We present Adjusted EBITDA as a supplemental measure of our performance. We defined Adjusted EBITDA as net loss from continuing operations plus (i) interest expense, net, (ii) provision for taxes, (iii) depreciation and amortization, (iv) stock based payments, and (v) indirect costs incurred during the merger with Vertro. These further adjustments are itemized above. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same or similar to some of the adjustments in the presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.