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Inuvo, Inc. (INUV)·Q4 2024 Earnings Summary

Executive Summary

  • Record quarter: Revenue grew 26% year-over-year to $26.2M, with positive net income ($0.14M) and Adjusted EBITDA of $1.2M; gross profit rose 20% to $21.8M though gross margin declined to 83.1% due to mix shift .
  • Q4 segment mix: Platforms ≈$21M and Agencies & Brands ≈$5M; management expects mix to remain relatively stable in 2025, while aiming longer term toward a 50/50 split as Agencies & Brands scale .
  • Forward look: Management projects Q1 2025 revenue growth of roughly 40% year-over-year and expects to generate free cash flow in 2H 2025; gross margin is expected to decline slightly in 2025 on rising platform revenue contribution .
  • Strategic catalysts: Self-serve IntentKey launched with highest-margin profile (>90%); large retailer and auto manufacturer relationships are ramping; platform relationships provide working capital advantages that can fund growth .
  • Operational discipline: Operating expenses were $21.5M in Q4; workforce streamlined in mid-2024 and 7 hires planned (engineers/data science/campaign support) to support growth .

What Went Well and What Went Wrong

What Went Well

  • Record revenue with profitability: “All-time revenue high of $26.2 million in Q4 2024 with positive net income” and Adjusted EBITDA turned positive ($1.2M) .
  • Client and product momentum: 33 new brands onboarded; retention 85%; average order size up 40%; platform ad-clicks ~89M (+60% YoY); self-serve platform launched and now accessible broadly .
  • Q1 outlook strong: “Unaudited January and February results point to continued strength… projecting first quarter 2025 revenue growth to be roughly 40% year-over-year” .

What Went Wrong

  • Margin compression: Gross margin fell to 83.1% (from 87.3% YoY) on a new platform campaign and is expected to decline slightly in 2025 as platform revenue rises .
  • Cost of revenue uptick: Cost of revenue increased to $4.4M (from $2.6M YoY), primarily due to higher Agencies & Brands media and a new platform client campaign .
  • Seasonality persists: Management expects second half > first half; Q1 likely remains seasonally weakest even with strong growth start, moderating near-term normalization potential .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$18.21 $22.37 $26.19
Gross Profit ($USD Millions)$15.30 $19.78 $21.76
Gross Margin %84.0% 88.4% 83.1%
Operating Expenses ($USD Millions)$17.00 $21.72 $21.54
Marketing Costs ($USD Millions)$12.43 $17.01 $17.12
Net Income (Loss) ($USD Millions)$(1.75) $(2.04) $0.14
EPS ($USD)$(0.01) $(0.01) $0.00
Adjusted EBITDA ($USD Millions)$(0.67) $(0.36) $1.23

Segment breakdown and mix:

Segment MetricQ2 2024Q3 2024Q4 2024
Platforms Revenue Mix (%)83% 83% —
Agencies & Brands Revenue Mix (%)17% 17% —
Platforms Revenue ($USD)——≈$21.0M
Agencies & Brands Revenue ($USD)——≈$5.0M

Selected KPIs and operating data:

KPIQ2 2024Q3 2024Q4 2024
New brands onboarded (cumulative 2024)——33
Agencies & Brands retention——85% (2024)
Average order size increase——+40% (2024)
Platform ad-clicks delivered (2024)——~89M (+60% YoY)
Self-serve clients signed~6 (half-dozen) —~6–12 (half-dozen to a dozen)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue Growth YoYQ1 2025None disclosed~40% YoY growthNew
Gross Margin %FY 2025None disclosedSlight decline expected (mix shift toward platform)New
Free Cash Flow2H 2025None disclosedExpect to be cash generating (FCF positive)New
Segment MixFY 2025—Mix relatively stable vs 2024Maintained
OpEx / HeadcountFY 2025—+7 hires; compensation to increaseRaised

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
AI/IntentKey self-serveBegan scaling self-serve; half-dozen clients signed; margins 85–95% Preparing major update for early Q1 2025 Self-serve launched; highest-margin product (>90%); broad DSP compatibility Accelerating commercialization and margin leverage
Privacy/Cookies (Chrome)Expect consumer opt-in to deprecate cookies, benefiting IntentKey Chrome privacy changes discussed; intent to empower consumer choice Industry consensus on 2025 opt-in; tailwind to IntentKey Regulatory tailwinds firming
Platform vs Agencies mixPlatforms 83%, Agencies 17%; platform provides working capital Platforms 83%, Agencies 17%; both expected to grow Q4 split ≈$21M/$5M; 2025 mix stable; longer-term target ~50/50 Platforms scaling; agencies targeted for mix shift over time
Working capital/LOCNew $10M ABL facility; platform receivables fund growth $10M ABL; no debt at quarter-end $10M line; no debt at YE; cash $2.5M Liquidity improved; disciplined cash use
Sales cycle~6–9 months; relationships and consultative selling emphasized Continued need to overcome incumbent inertia Agencies/brands ~6–9 months; platforms scale via tech/service Pipeline building; GTM professionalized
Large retailer/autoExpect MSA; $2M potential in 2024 Retail up 10x in Q4 vs Q1; auto up ~$1.3M in 2024 Both growing into 2025; among top brand clients Strategic brand ramps continuing
SeasonalitySecond half typically stronger Strong start to Q4 Seasonality remains; H2>H1 expected Seasonal pattern intact
Cash generation thresholdFCF positive near $25M quarter —Confident passing ceiling with >$25M quarters On path as scale increases

Management Commentary

  • “We hit another all-time revenue high of $26.2 million in Q4 2024 with positive net income” .
  • “Our upgraded self-serve platform… has the potential to significantly boost our bottom line as we scale its adoption” .
  • “Platform revenue was approximately $21 million… Agencies and brands revenue was approximately $5 million” .
  • “We anticipate a small decline in gross margin in 2025 due to increasing revenue from that platform client” .
  • “We expect to generate cash in the second half of 2025” .

Q&A Highlights

  • Brand ramps: Large retailer and auto manufacturer are expected to be up in 2025; outside of search engines, they will be among the two largest brand clients .
  • Seasonality: Q1 remains seasonally weaker; second half expected to exceed first half, though the slope may be less steep than recent years .
  • Sales cycles: Agencies/brands require relationship-driven, consultative selling with 6–9 month cycles; platforms scale mostly through tech/service enhancements .
  • Self-serve margins: The self-serve IntentKey is north of 90% gross margin and largely costless at the COGS level; DSP-agnostic and supports CTV, online video, display, audio, native, and even linear TV planning .
  • Cash generation clarification: Management expects both Adjusted EBITDA and free cash flow to be positive in 2H 2025 .

Estimates Context

  • S&P Global (Capital IQ) consensus estimates for Q4 2024 (revenue and EPS) were not available at the time of analysis due to API access limits; as a result, we cannot quantify beats/misses vs Wall Street consensus. Coverage for micro-cap AdTech names can be sparse, and estimates may be limited. If needed, we can re-pull consensus later for precise comparisons.

Key Takeaways for Investors

  • Scale inflection: Crossing ~$25M quarterly revenue coincides with cash generation; Q4 achieved $26.2M with positive net income/Adjusted EBITDA, reinforcing operating leverage at scale .
  • Near-term growth catalyst: Q1 2025 guide of ~40% YoY growth suggests momentum from platform mix and brand ramps; watch weekly revenue cadence and any commentary on linearity .
  • Margin dynamics: Expect slight gross margin pressure in 2025 as platform revenue scales, partially offset by highest-margin self-serve product (>90%)—mix management will be key .
  • Liquidity and funding: $10M ABL facility and no debt at YE support working capital needs; platform receivables provide positive working capital to fund Agencies & Brands growth .
  • Strategic relationships: Large retailer and auto manufacturer ramp, plus platform clients among the largest in the world, should underpin revenue visibility into 2025 .
  • GTM maturity: Professionalized sales pods and consultative selling; 33 new brands and 85% retention in 2024 point to expanding footprint and durable client performance .
  • Watch list: Confirmation of self-serve adoption rates and monetization, gross margin trajectory, and timing of free cash flow in 2H 2025; seasonality implies H2 catalysts around platform scale and brand demand .