Inuvo's Q3 2025: Contradictions Emerge on Revenue Targets, Margins, Seasonality, and Sales Cycle

Date of Call: November 6, 2025

Financials Results

• Revenue: $22.6M, flat year-over-year (1% increase), down from $18.8M in prior year for Platforms, up from $18.7M in prior year for Agencies and Brands (7% increase)
• EPS: $0.12 per share, a narrowing of the loss from $0.15 per share in prior year
• Gross Margin: 73.4%, down from 88.4% in prior year due to accounting for new Platform client campaign
• Operating Margin: Not provided

Guidance:

• Revenue for 2025 expected to meet goals, with 25% growth through first 9 months and strong Q4 expected.
• Top 5 Agency and Brand clients projected to grow over 65% year-over-year.
• Government contract pending, with payout expected in Q1 2026.
• Class action settlement expected to deliver significant payout in Q1 2026.
• Marketing and sales efforts shifting to target larger brand-direct deals with CXOs and C-suite leaders.

Business Commentary:

• Revenue Trends and Adjustments:
• Inuvo delivered $22.6 million in revenue for Q3 2025, staying flat year-over-year, with $71.9 million in revenue through the first 9 months, representing a 25% year-over-year growth.

• The Q3 decline was due to a deliberate reduction in advertising spend, aligned with updated requirements from their largest Platform client to sustain and scale their partnership.

• Segment Performance and Growth:

• Revenue from Platforms was $18.7 million, down from $18.8 million last year, while Agencies and Brands totaled $3.9 million, a 7% increase year-over-year.

• The decline in Platforms was due to scaling the largest client, while Agencies and Brands grew due to onboarding new clients, especially self-service brands, which now total 44.

• Financial and Operational Adjustments:

• Gross profit was $16.6 million compared to $19.8 million in the same quarter last year, and adjusted EBITDA showed a loss of $670,000 versus a loss of $357,000 in Q3 2024.

• Adjusted expenses, notably marketing costs, decreased by $3.6 million due to lower revenue from the largest Platform client, reflecting operational adjustments during the quarter.

• Product and Technological Innovations:

• Inuvo introduced Ranger, a next-generation compliance and quality capability within their Platform solution, addressing the threat of creative and media misalignment in digital advertising.
• Enhancements to the IntentKey product line, including predictive indicators and a trending geographical map, were noted as part of Inuvo's strategic focus on innovation and market leadership.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized strong 25% growth through first 9 months and confidence in achieving 2025 revenue goals. They highlighted new product innovations like Ranger and IntentKey enhancements, and stressed that Q3 performance was due to strategic alignment with clients, not reduced demand. The company expressed optimism about future growth, new contracts, and strong client adoption. The tone was upbeat, with clear forward-looking statements on revenue, product development, and market positioning.

Q&A:

• Question from Scott Buck (H.C. Wainwright & Co, LLC): When you onboard 23 new clients in the quarter, do they immediately start generating revenue? Or is there typically a 30-, 60-, x-day lag before you start to see like a real ramp?
  Response: Clients start spending soon after onboarding, but in small amounts as they test the platform. Revenue ramps gradually as they become more confident and active users.

• Question from Scott Buck (H.C. Wainwright & Co, LLC): On self-service, you're up with 44 clients there. I'm curious, as that business is scaling, what feedback you're getting from those clients and whether or not it's changing the way that you go and market the product to new Brands or Agencies?
  Response: Client feedback is driving product improvements and marketing messaging changes, including a complete overhaul of the self-serve portal to improve usability and efficiency.

• Question from Scott Buck (H.C. Wainwright & Co, LLC): I would assume that sales and marketing expense is kind of moving back to kind of previous run rate here in the fourth quarter from the dip you had in the third quarter. Is that fair?
  Response: Yes, sales and marketing expenses are expected to rise in direct relation to Platform revenue ramping up in Q4.

• Question from Brian Kinstlinger (Alliance Global Partners): How is Rob thinking about new advertising and marketing ideas, and what held back greater adoption of IntentKey thus far?
  Response: Rob is focusing on thought leadership, leveraging key industry figures, and emphasizing economic advantages like incremental return on ad spend. Adoption was previously hampered by the market's saturation with inferior AI tools and brand awareness challenges.

• Question from Brian Kinstlinger (Alliance Global Partners): Can you talk about the advertising and marketing budgets, what they look like maybe in '25 and how you're thinking about 2026?
  Response: No specific budget numbers are provided. Marketing focus is on thought leadership and visibility through conferences and industry conversations, with a strong emphasis on the user experience and data visualization tools.

• Question from Brian Kinstlinger (Alliance Global Partners): Can you expand a little bit on the advertising and marketing rewards from the largest Platform provider?
  Response: The client is rewarding high-quality performance, and Inuvo has adapted to meet quality standards. This may lead to higher take rates for quality, though exact terms have not been specified.

• Question from Brian Kinstlinger (Alliance Global Partners): Can you quantify what that class action payout is?
  Response: The payout is significant and in the millions, but no specific amount is provided.

• Question from Jack Vander Aarde (Maxim Group): Are there any opportunities you see to expand the use case of IntentKey beyond AdTech?
  Response: Some use cases are already being explored, including hiring and government employee matching. However, the focus remains on advertising, with innovation being carefully managed to avoid straying from core markets.

• Question from Jack Vander Aarde (Maxim Group): Do you have any comments on digital assets, cryptocurrencies, NFTs?
  Response: Only a cursory interest; no formal plans or structures in place to enter the space.

• Question from Jon Hickman (Ladenburg Thalmann & Co, Inc): Is the payout from the class action money you're receiving or money you have to pay in penalties?
  Response: The payout is money being received as a plaintiff in the class action.

• Question from Jon Hickman (Ladenburg Thalmann & Co, Inc): Can you elaborate on the revenue goal comment in prepared remarks?
  Response: Revenue is on track with a 25% growth rate through the first 9 months, and Q4 is expected to be the strongest quarter, potentially exceeding prior performance.

Contradiction Point 1

Revenue Growth and Targets

It involves the company's revenue growth trajectory and targets, which are critical for investor expectations and strategic planning.

Can you explain your progress toward revenue goals? - Jon Hickman(Ladenburg Thalmann & Co.)

2025Q3: We're trying -- yes, I mean, I think the best way to answer this question is we do have a 25% growth rate through the first 9 months, right? - Richard K. Howe(CEO)

Have recent developments in the market or related to Inuvo over the past 3-4 months affected your confidence in achieving the $100 million annual target this year? - Brian Kinstlinger(Alliance Global Partners)

2025Q2: We feel pretty good about the $100 million. We've got a pretty good view of where our clients are and their growth rates. The $100 million target looks good this year. - Richard K. Howe(CEO)

Contradiction Point 2

Gross Margin and Revenue Mix

It pertains to the company's gross margin performance, which is crucial for financial forecasting and investor analysis.

Can you provide the gross margin guidance for Q4 and full year? - John Egbert(Stifel Financial Corp.)

2025Q3: Gross margins have recovered due to changes in our product mix being in line with expectations. - Wally Ruiz(CFO)

Why has the operating loss increased despite higher revenue? - Brian Kinstlinger(Alliance Global Partners)

2025Q2: Gross margins are lower due to product mix and higher marketing costs. - Wally Ruiz(CFO)

Contradiction Point 3

Seasonality in Revenue

It involves the company's expectations regarding seasonal fluctuations in revenue, which is a crucial factor for financial forecasting and investor expectations.

Was Q4 more or less seasonally strong than usual? - Brian Kinstlinger (Alliance Global Partners)

2025Q3: I don't think we're seeing any systemic seasonality differences year-over-year. - Richard K. Howe(CEO)

Will there be typical seasonality changes in 2025? - Scott Buck (H.C. Wainwright)

2025Q1: Richard K. Howe mentioned that Q1 results suggest they are already out of typical seasonality. The current strong momentum and Q2 guidance indicate that traditional seasonal patterns may not apply this year. - Richard K. Howe(CEO)

Contradiction Point 4

Sales Cycle and Customer Onboarding

This contradiction involves the sales cycle and customer onboarding process, which directly affects the pace of revenue growth and customer acquisition.

When onboarding new clients, do they generate revenue immediately, or is there typically a 30- to 60-day lag (or longer)? - Scott Buck (H.C. Wainwright & Co)

2025Q3: It's -- they get on pretty quickly and they start spending, but it's typically small amounts. So they're sort of testing the wires, I guess, and the plumbing and seeing how it works. And then you see it ramp. - Richard K. Howe(CEO)

As you expand new platform customers, do you have a clearer sense of the sales cycle timeline? - Jack Vander Aarde (The Maxim Group)

2024Q4: We get access to advertisers through them... The sale cycle on the agency side is typically six to nine months. - Richard Howe(CEO)