Ladies and gentlemen, thank you for standing by. Good day and welcome to the Inuvo 2017 Year-End Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Valter Pinto of KCSA Strategic Communications. Please go ahead, sir.

Thank you, operator, and good afternoon. I’d like to thank everyone for joining us today for the Inuvo Fourth Quarter and Full-Year 2017 Shareholders' Update Conference Call. Today, Mr. Richard Howe, Chief Executive Officer; Mr. Wally Ruiz, Chief Financial Officer of Inuvo will be your presenters on the call. 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, and as such, all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially. When used in this call, the words anticipate could, enable, estimate, intent, expect, belief, potential, will, should, project and similar expressions as they relate to Inuvo 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 sec.gov. I would like to now congratulate management on an outstanding year that included strong fourth quarter growth and profit. With that, I would like to turn the call over to Mr. Richard Howe, CEO of Inuvo. Rich, the floor is yours.

Thank you, Valter, and thanks, everyone, for joining us today. 2017 was another strong year for Inuvo, having now delivered a compound annual growth rate of 17% since 2014. Leading into 2017, we had prepared for an acquisition that was strategically designed to fuel continued growth in revenue and in margin, while also enhancing our overall platform, which we are now calling the Inuvo exchange. This acquisition significantly enhanced both our demand side and machine learning technologies. Important components in our strategy to own the end-to-end technology foundation necessary to disintermediate smaller niche players and compete with the bigger players. The rationale for this strategy has been based on the maturing nature of our market where clients are now looking to reduce the number of suppliers they work with and opting for those suppliers with the broadest and best performing product suite. Financially, Inuvo had a strong finish with fourth quarter revenue up 21% year-over-year to $23.8 million. This performance helped propel us into year-over-year double-digit growth of 11% and 27 revenues of $79.6 million. Now we were not far off our long-term $25 million target for the fourth quarter having opted earlier in the year to optimize slightly for adjusted gross profits at the expense of revenue. You will no doubt recall that when we set that target some three years ago now quarterly revenues were only $10 million. As it relates to gross profit, we also made strong progress here in both the fourth quarter and full-year. After adjusting for traffic acquisition cost, those adjusted gross profits were up 30% and 66% for the year-over-year quarter and year respectively. Traffic acquisition costs are those variable marketing operating expenses deployed to attract audiences to our portfolios owned website. Further, with the current full-time headcount of about 80 people at…

Thank you, Rich. Good morning, everyone or good afternoon, everyone. We reported today the results of our 2017 fourth quarter and full-year financial results. Inuvo reported revenue of $23.8 million for the quarter that ended December 31, 2017, a 20.8% increase from the $19.7 million reported in the same quarter last year. For the full-year of 2017, net revenue totaled $79.6 million or 11.2% ahead of last year. Of note in the fourth quarter, we have reported the highest revenue Cyber Monday in our history. And for the four-day period from Black Friday, November 24 through Cyber Monday, November 27 they were the highest four days of revenue in our Company’s history. Inuvo reported a net income for the fourth quarter of 2017 a $1 million or $0.04 per diluted share compared to a net loss of $309,000 or $0.01 per share loss in the fourth quarter of 2016, more on that on net income later in the call. EBITDA adjusted for stock-based compensation expense, a non-GAAP financial measure was $758,000 in the quarter ended December 31, 2017, compared to $612,000 in the same quarter of the prior year. All Inuvo business lines increased year-over-year in the fourth quarter other than the digital publishing business. As mentioned in our last call, we have reduced marketing spend on the digital publishing business and redirected resources to our higher margin advertising technology business line. We believe longer-term profitability and better shareholder value will accrue from this rebalancing. The February 2017 acquisition and this rebalancing of revenue has also reduced the Company's concentration risk, where our two largest customers represented approximately 98% of all of our revenue in 2016. Those same two customers now represent 77% of total revenue in 2017 with other direct and indirect relationships making up the difference. We expect…

Thanks, Wally. We had another strong year in 2017 and a particularly strong fourth quarter. We are confident that we now have a business that can be scaled without material additions of new technology or infrastructure. If we consider more acquisitions in the future, those acquisitions will be floored more on the merits of their demand or supply relationships then they will based on their technology. Our core Inuvo exchange platform will most certainly require continual advancements designed to improve yield for publishers and to meet the changing needs of our advertisers. But at this point in our evolution, we see growth coming more as a result of direct sale to advertisers and publishers combined with additional demand side business development partnerships. You should also see us enter video advertising in 2018 having positioned for this in Q4 of 2017. Video advertising margins have tended to be higher than in other forms of online advertising. While the first quarter of new fiscal year for Inuvo has historically been volatile. January has come out very strong with revenue of roughly $7.7 million, up nearly 37% year-over-year. Without the acquisition, those January year-over-year comparisons of revenue are up 22%. So we are expecting another strong year with double-digit growth and positive adjusted EBITDA which should be in line or better than in 2017, and we should have greater visibility to 2018 growth rate following the first quarter which has typically been our lowest quarter seasonally. With that, I'd like to turn the call over to the operator for questions. Operator?

Thank you. [Operator Instructions] And our first question will come from Eric Martinuzzi with Lake Street.

Thanks. Congratulations on the 2017. It’s quite an accomplishment with everything you had going on between the acquisition and the shifting of the business model. I'm curious to know, you talked about the strength of the January numbers, but I don't think NetSeer was – obviously NetSeer is here in January 2018, but not in January 2017. Do you have any view on the organic in January 2018?

Yes. We're expecting that business to continue to grow this year. We’re not providing guidance on the magnitude of the growth rate associated with it. But like I said in my call notes, not specifically about the NetSeer acquisition, actually year-over-year, January-to-January we’ll be taking NetSeer out of the equation, itself was up 22%. But we do expect what was the core technology in clients that we acquired from that acquisition to continue to fuel our growth.

Okay. You answered my question about the 22% that’s were I was headed. As I look at the full-year now on 2018, you've given guidance here in the press release for double-digit revenue growth in 2018, obviously double-digit is pretty wide range, but let's just say it’s 10% for discussion sake that will mean you grow about $8 million, which is above what your grew in 2017. So 2017 revenue was up $8 million from 2016. The incremental expectation for profitability, could you comment on is this going to be sort of anything above a positive EBITDA number goes back into investing in the business or is there an expectation of a profit expansion at Inuvo in 2018?

Eric, we see ourselves as a growth company and every dollar that we have expert goes into our sales and marketing and our technology. So yes, we are – the philosophy that we have here is to grow as quickly as we can that have a positive cash flow in order to be able to service our debt and continue to grow the revenue and the technology. So I hope – does that answer your question?

Yes, it does. I was hoping to go a layer deeper on the Yahoo and Google. You did mention that between the two of them, big decrease there in the revenue concentration, which is terrific to see. They're now down to 77%. Do we have any contract renewal issues coming up with either one of those partners?

We do. I believe our contract with the Yahoo renews in May.

Okay. I assume those discussions are going on right now.

They are.

Google is out another year.

Okay. All right. And then lastly for me, I saw one of your partners or at least some – I think you plan to do more business within 2018 is Acxiom, specifically their LiveRamp business. Yesterday they talked about restructuring their own business. Could you give us your thoughts on what you see that as a positive, negative or neutral for the relationship between Inuvo and Acxiom?

I don't think I would want to comment on their restructuring strategy. But I can comment on the company itself and I think I guess it's pretty well known that many of the executives that we have here at Inuvo came from Acxiom. So we've got some pretty deep relationships there and some respect for that company having been the ones that were helping make it, what it was. But we have a good relationship with them, that relationship is expanding and I'm hopeful we can continue to do more together.

Thanks for taking my questions and congrats again.

Thank you, Eric.

Moving on, we will go to William Gibson with ROTH Capital Partners.

Rich, you talked about cutting back on the marketing spend this year, which we can see. Do you expect 2018 to be up from that or do we keep changing that number?

Thanks Bill. I actually expect that number to go up this year, and I'll tell you why. In 2017, as I said I think on a couple of the calls, we were sort of trying to find the right balance between the adjusted gross profit that we have which for us means, as I said in my call script an adjustment by taking out those marketing costs to take gross profit, to track the marketing costs, and then look at that number. And we're trying to make sure that that number was growing in the year. And as I said in my call script, we did a really good job of accomplishing that goal. Now with that said the implication for that was that the margins on that part of the business were lower than other parts of the business, which they were. Interestingly during the period where we were working on the reduction there, we were also behind the scenes trying to improve the technology that we have to support that business, so that we could start the margin enhancement on that business. And we did actually start seeing that in a pretty nice way in the fourth quarter. And as a result with that I have some renewed confidence that we can actually perhaps start growing that business again at our margin that makes more sense.

Okay. Thank you. And then just on the changes in the tax law, where do we currently stand with the net loss carry-forward?

Yes. So we have a net loss carry-forward of approximately $78 million, right. Now the value of that NOL has actually decreased because the tax rate has gone down. The tax rate has gone from 35% to 21%, but we still have a very, very substantial NOL and tax asset – deferred tax asset sitting on the – you don't see the deferred tax asset on the balance sheet because we have a valuation allowance against that for dollar for dollar, but it’s a very large number.

Okay. Thank you.

Moving on, we’ll go to Lisa Thompson with Zacks Investment Research.

Hi guys.

Hi Lisa.

This quarter looks fantastic. Can you talk a little bit about where you think margins are going to go after marketing cost? You went from 11% last year to 20.2% this year. Is that continued to increase as your software business growth or how do we look at that for the coming year?

Yes. So the answer is yes, Lisa, so we do expect this year to continue to see an increase in those, what we call adjusted gross profit. So our gross profit minus the marketing costs. Now it won't be – we don't think it'll be a material improvement as we saw this year, but we are planning on a point or two there higher.

Okay, great. And then compensation cost kind of bumped up in the fourth quarter compared to the third quarter. Is that a bunch of year-end bonuses or something? Is that going to stay up there over $3 million?

That was part of it, Lisa. Yes, there were some year-end incentive that needed to be accrued for, but we estimate that going forward that you should expect compensation expense to be less than $3 million.

Okay. And then I just thought could you describe a little bit more about how you invested in sales and marketing this year kind of like who got hired and when did they get hired and how was that going to play out this year?

I’ll do the best I can, given I have a bad memory. But we hired a Chief Revenue Officer in June and that was really the catalyst for the whole exercise because we need someone who could bring on a bunch of other executives and since that time we organized all of the income management functions under her on the existing sales resources under her. And then between her joining the Company in June and the end of the year, I believe Wally we hired another four seasons sales professionals right?

Mostly in the fourth quarter.

Yes, and so the total number of that entire group is now 15.

Great, so – and is that increase more this year or you just going to wait for them to kick-in?

I think the answer is what you say, yes. We would like to be hiring more, but we want to wait and see. So we've got a good team there now. We think we have enough people to hit the plan that we've laid out. If we see that team performing more successfully than we had forecast, I believe we will start adding additional resources to the team.

Great, I can't wait to see how it either turns out. Thank you. That's all my questions.

Thanks, Lisa. End of Q&A

And that will conclude our question-and-answer session. I’d like to turn the conference back to Mr. Richard Howe for any additional or closing comments.

Thank you, operator. And of course, I'd like to thank everyone who joined us today on the call. We appreciate your continued interest in Inuvo and we look forward to reporting up progress over the coming quarters.

And that will conclude today's conference. We would like to thank everyone for their participation. You may now disconnect.