This call is being recorded on Thursday, November 12th, 2026. I would now like to turn the conference over to Ms. Katie Cooper, Head of Brand and Communications. Please go ahead.
Thank you, operator, and good afternoon. I'd like to thank everyone for joining us today for the Inuvo third quarter 2026 shareholder update call. Today, Inuvo's Chief Executive Officer, Rob Buchner, and Chief Financial Officer, Derric Ciccone, will be your presenters on the call. We plan to file our 10-Q with the Securities and Exchange Commission this evening. Before we begin, I'd like to remind you that 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 Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risk and uncertainties, and actual results may differ materially. 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 intended to identify forward-looking statements. Investors are cautioned that all forward-looking statements involve risk 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 date 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. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release on our website. With that, I will now turn the call over to CEO Rob Buchner.
Thank you, Katie, and good afternoon, everyone. Thanks for joining us. I'll begin today's remarks with our third quarter performance and a clear-eyed look at where our industry stands. From there, I will outline the execution across our strategic pillars before turning the call over to Derric for a detailed financial review. I'll wrap up with a few closing perspectives before we take your questions. Turning to our third quarter results. Let me be direct about where we are. We're at an inflection point. Over the past year, we took deliberate, decisive operational steps to contain and manage our Legacy Search business. Today, that side of the house is operating cash neutral to cash positive. It's no longer a financial or operational drag on the company. Google is currently navigating its own structural questions regarding the future economics of search.
While search remains an enormous global market, and consolidators, resellers, or platforms like Bonfire will continue to try to carve out margins in that shifting landscape, I want to be unequivocally clear to our shareholders. Legacy Search does not represent the future of Inuvo. We have stabilized it pays for itself, and our capital, energy, and executive focus have fully transitioned to where our growth resides, IntentKey. On the audience modeling side of the house, our pipeline is expanding rapidly. The market is actively rewarding ad techs that can construct dynamic audience intelligence at machine speed without identity tracking. While enterprise sales cycles run four to six months, meaning our newly deployed sales force has only begun to scratch the surface since onboarding this summer. The macro environment is validating our thesis faster than anticipated. The marketing playbook is being rewritten from search to programmatic.
As AI changes how people find things and browsers close off the identity signals the industry was built upon, marketers who move beyond programmatic dogma will see that the future is not about knowing what an audience did yesterday. It is about understanding what matters to them right now. That is why we committed the company to IntentKey. We built it to read intent in the moment at audience scale without depending on identity. As the industry rethinks rules it has run on for decades, the value of that decision becomes clear. IntentKey doesn't need to adapt to this new reality. It was built for it. Macro pressures are catalysts for IntentKey's adoption. Consider what happened across the open web just weeks ago. Apple delivered another significant blow to the legacy ad tech and its latest, with its latest iOS updates, cutting off critical connections to third-party identity resolution networks.
For years, programmatic advertising has relied on these workaround tracking layers to identify people across browsers. When Apple targeted those backbone domains, legacy ad delivery in Safari across Apple environments hit an immediate wall. Advertisers dependent on identity signals suddenly lost audience visibility, delivery at scale, and reliable attribution. For IntentKey, there was zero disruption. In fact, our iOS traffic volumes increased into the fourth quarter. IntentKey was never built to figure out who an individual is. It was built to identify why someone was consuming content right now. We map live engagement and active intent, not personal identifiers. And in doing so, we are answering a fundamental marketing need that will never go away: discovering new customers. We are giving marketers access to an entirely new audience, driven by genuine interest rather than what they already know about someone.
When the industry's ability to surveil individuals disappears, the ability to model real-time contextual intent becomes the only viable currency on the open web. Apple didn't create this imperative, but their actions have rapidly accelerated the demise of the cookie. At the same time, the buying side is evolving through AI and agentic workflows. Research from Boston Consulting Group shows that 96% of CMOs see AI driving end-to-end transformation in marketing, with two-thirds already running agentic media optimization. Media buyers require audience intelligence that lives natively inside their daily AI tools. We are actively deploying integrations that embed IntentKey directly into those agentic environments, portability that legacy ad tech platforms cannot match. With that as a backdrop, let's look at execution across the four core pillars I talked about earlier this year. One, go-to-market focus. Two, raising IntentKey's industry profile. Three, continuous product innovation. And four, high-margin growth.
Let me expand on pillar number one, go-to-market focus. Over the last two quarters, we rebuilt our commercial engine. Beyond onboarding a dedicated enterprise sales team, we established targeted industry verticals, introduced strict pipeline accountability, and integrated closed-loop buyer feedback directly into our product cycles. That rigor is fueling our pipeline. We are seeing sustained demand across automotive, travel, healthcare, and financial services, adding blue-chip logos including Sony, Extended Stay Hotels, Fairmont Resorts, and Regal Cinema Group. With our pipeline continuing to grow sequentially, we are deploying a disciplined land-and-expand playbook, driving new logo wins while converting pilots into scaled, repeatable monthly spend. Simultaneously, in September, we rolled out our White-Label Partner Program. This allows agencies and media networks to deliver IntentKey's AI-driven targeting directly into their clients under their own flag.
For partners struggling with the breakdown of legacy identity solutions, it offers turnkey, privacy-safe intelligence without the massive capital expenditure of building custom AI tools. For Inuvo, it represents a high-margin, scalable distribution channel that leverages our partners' sales teams with minimal customer acquisition costs. Pillar number two, raising IntentKey's industry profile. Market confusion is our biggest commercial opportunity. Legacy ad techs are yielding diminishing returns, yet many brands don't realize that our identity-free solution exists and that it has been pressure-tested in the market. Our hurdle isn't the technology, it's driving awareness and adoption. When Apple disrupted identity-dependent ad delivery, we went on the offensive. We immediately reached out to impacted agencies and ad tech peers, offering IntentKey's managed service as a live solution to recapture scale across iOS and Safari ahead of peak seasonal period. The response was immediate, and active partnership discussions are underway.
Our market visibility efforts extended across key industry forums this fall, including Marketecture Live, Programmatic I/O, LD Micro Conference, and the ANA Masters of Marketing Conference. IntentKey was awarded an honorable mention for Best Privacy Technology at the 2026 AdExchanger Awards. Furthermore, we established recurring thought leadership columns with The Drum and expanded our executive commentary with outlets like AdExchanger to cement our positioning as a standard bearer for privacy-first intent. On to pillar three, continuous product innovation. IntentKey's R&D efforts center on a clear mandate: make IntentKey accessible wherever media decisions are made. Last quarter, we highlighted testing on our Model Context Protocol, or MCP server. In October, we completed end-to-end integration testing, enabling marketers to interact with IntentKey audience intelligence natively inside generative AI platforms using simple conversational prompts.
Marketers can now build, refine, and deploy dynamic audience strategies directly from their primary AI workspace straight into exchange pipelines. We're prepared to launch in Claude's Connectors Directory, which will broaden discovery to enterprise teams already executing inside that ecosystem. Additionally, we extended IntentKey's connected TV capabilities down to neighborhood level. By combining ZIP code-level demographic signals with short-lived localized neighborhood intent models, we allow streaming advertisers to dynamically adjust campaigns based on local media consumption without needing fragile household device graphs. This algorithm processed over 20 million impressions in October alone, providing connected TV advertisers with scale in environments where identifiers are increasingly unavailable. Pillar number four, high-margin growth. Our fourth pillar demands operational discipline and resource allocation toward high-yield opportunities. Legacy Search has been streamlined to cover its direct costs on a cash basis, reducing cash burn.
In October, we completed the sale of Ranger, our AI quality assurance tool, generating $450,000 in cash while retaining a perpetual royalty-free operating license for our internal search workflows. These strategic actions isolate legacy operations, preserve cash, and direct our balance sheet and talent towards scaling IntentKey. With that, I am pleased to welcome Derric Ciccone to his first earnings call with us. Since stepping in as President and CFO in mid-August, Derric has brought operational discipline, commercial urgency, and financial accountability across every department. His product delivery background has already helped sharpen our execution and commercial narrative. I will hand the call over to Derric for the financial review.
Thanks, Rob. That was awesome. Good afternoon to everyone listening. Thank you for joining us. I will start with the third quarter results, then cover liquidity and how we are thinking about the balance of the year, then I will turn it back over to Rob. Third quarter revenue was down $6.8 million. That is down 70% year-over-year. The decline was again driven by Legacy Search, down roughly 80% year-over-year, following that Bonfire reset. Audience modeling revenue was down 24% year-over-year and 18% sequentially. This was driven by the reduced spend in one large client. Conversion from our pipeline was also slower than planned, while the new sales team is coming up to speed. As Rob said, we believe this is the inflection point in the pivot. The pipeline is strong and growing, and we expect more of it to convert as the team matures.
Third quarter gross margin was 44%, against 73% a year ago, and flat compared to the 2026 second quarter. The year-over-year change is revenue mix. Because most Legacy Search expenses sit in marketing cost rather than cost of revenue, Legacy Search carries a higher gross margin and a lower operating margin than audience modeling. On an operating margin basis, audience modeling is the more profitable business. Margin expansion from here depends on scaling self-service, which is where our product work is pointed. Operating expenses were $7.8 million, including a $2.4 million non-cash impairment of certain Legacy Search assets taken in light of the revenue decline. Of the remainder, marketing costs were down 90% year-over-year on lower search volume, and compensation was down 35% following the rightsizing completed this spring. Below operating loss, financing expense was $0.4 million, reflecting the secured notes issued in June.
Other income of $0.3 million reflected a net gain on the change in fair value of our notes payable. Net loss was $5 million, or $0.28 per share, against $1.7 million, or $0.12 per share a year ago. Adjusted EBITDA was a loss of $1.6 million compared with a loss of $0.7 million in the third quarter of 2025. A reconciliation to the net loss is included in today's release. Turning to liquidity, we ended the third quarter with $1 million of unrestricted cash. Strengthening our balance sheet is a priority, and we are evaluating financing alternatives to support our operations and growth plans, weighing the cost of capital against dilution to shareholders. Please refer to our 10-Q for additional details there.
Before I hand the call back over to Rob, I wanted to give some color about how we're thinking about the balance of the year from both an operating and cash flow perspective. From an operating perspective, we expect the fourth quarter audience modeling revenue to increase meaningfully from the third quarter based on campaigns already in flight and booked revenue for the remainder of the year, and consistent with the conversions we're beginning to see now. We expect fourth quarter Legacy Search revenue and margins to be in line with the third quarter. The business is roughly cash flow neutral against its direct cost, and we are managing it for cash rather than growth. We expect operating expenses to remain below prior year levels on lower traffic acquisition costs in Legacy Search and lower compensation.
In addition, remaining severance payments conclude at the end of the year, which will reduce cash outflows beginning in 2027. With the Legacy Search reset, the spring's rightsizing, and this quarter's impairment now largely behind us, we believe our cost structure is better aligned with where the business is going. Our focus from here is execution, converting our pipeline and expanding spend with existing clients, and we're operating with real urgency to do that. With that, I'll turn it back over to Rob.
Thanks, Derric. The digital advertising ecosystem has crossed a point of no return. Third-party tracking is breaking down. AI agents are reshaping how campaigns are planned and transacted. The race to track individuals across the web has reached a dead end. IntentKey was architected for this exact reality. We didn't patch an old tracking tool to fit modern privacy laws. We built an intent engine designed from day one to thrive in identity-blind environments. The legacy challenges of the past are addressed and contained. Our focus is squarely forward, driving pipeline conversion, accelerating partner integrations, and positioning IntentKey as the foundational engine for privacy-first agentic media buying. We have the architecture, the commercial strategy, and the operational discipline to exploit this shift and capture our fair share of market demand. If we execute as planned, 2027 stands to be our breakout year. Thank you for your continued support.
Operator, we're ready to open the line for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. If you are using the speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. Your first question comes from the line of Brian Kinstlinger from Alliance Global Partners. Please go ahead.
Great. Thanks so much for taking my questions. We'll start with the good news. In terms of the meaningful increase in audience-related revenue in the fourth quarter, maybe characterize how many customers are driving this recovery. Is it logos added in the current year, or is it existing customers maybe from last year? Just maybe some context around what's going on there.
Sure. Hey, Brian. Thanks. It's a confluence of both. I mean, our retention is really, really strong with existing clients. The pipeline carrying forward into next year, I think will start to bloom towards the later part of the quarter, both in terms of number of logos. I think the order of magnitude of the buys is the meaningful thing. I've talked about that in the past. We are taking our story upstream with bigger brands for bigger budgets, and we've got visibility into that pipeline. We're also putting some minimum thresholds, spend thresholds in our pilot phase so that when not only convert to pilot, but the pilot proves out, the recurring revenue tends to become evergreen and grow. So, I'm not able to give you much more guidance beyond that, but both the quantity and quality of the new brands coming in are meaningful.
Great. Can you talk about what's happening with the--
[I think there is a momentum as well with the sales team.]
Sorry.
Oh, no. Sorry. I believe there is a momentum there with the sales team as we start getting in from Q4 to Q1 with the new team, is the only bit I would add there.
Great. Thanks, Derric. Can you talk about what is happening with the large customer and audience? Why the major pullback sequentially? I think it is a little bit larger year-over-year, but even more so sequentially. Do you see further degradation from this customer?
I will take that one, Derric. Our largest customer has been with us for years, and their spend has already returned in the fourth quarter. Their business was affected by tariffs. I will just give you that much at least. They pulled back spend, and they are back to their seasonal norms, let us put it that way.
Great. That is helpful.
It was a blip--
My last question--
--It was a blip in the early part of the quarter.
Great. My last question is, it was a tough quarter. I do not see the Q, if you can tell us what cash used from operations was. With the severance in the fourth quarter offset by what is a stronger revenue quarter and what sounds like cost controls, maybe take us through how you see cash uses or generation over the next few months.
Derric, why do not you take that?
I think right now, the cash flow you will see in the 10-Q, but we have taken significant cost out of the business this year. Headcount is down from, I believe, 80- 47, and the Legacy Search now covers its direct operating costs, so we are reducing burn. We do not really have a runway date there, which is why I think the focus is on raising of capital.
Yeah. Okay. Can you share roughly what the expected severance, or do you know what the severance will be in the fourth quarter, the cash component?
Let me look.
Thank you. Once again, should you have a question, please press star followed by one on your telephone keypad. Your next question comes from the line of Jack Codera from Maxim Group. Please go ahead.
Hi, this is Jack Codera calling in for Jack Vander Aarde. Thanks for taking my questions. Can you give any additional color what makes the overhauled sales team and go to market in general, what makes it different from prior periods, and what sort of expectations do you have for the team relative to prior periods?
Yeah. First of all, the caliber of players that we brought in are enterprise level, more senior salespeople that have had years of success. So we went to market, we raised the ante with the caliber of talent that's come in. They come in with their portfolio of clients that they've worked with over years, so that gets us access to more senior level marketers. What's more, we put serious rigor into the sales pipeline management and visibility. We've automated things beyond just Salesforce. We've also really raised the minimum thresholds for them. So, the expectation across the board is work hard, work fast, get more meetings with more senior people with more significant budgets.
Taking our story higher up in brand organizations and within agencies has a material impact as that pipeline gets converted, as these salespeople, who have only been with us, some of them, for a couple of months, start to mature.
Okay, that is helpful. Then, one more question.
Yeah.
I know you guys do not really want to quantify the pipeline too much, but given that you have this growing pipeline, what do you think the sticking point is for these kind of decision makers? You mentioned you are getting more momentum in certain industry verticals. Is it having a more elaborate offering, or is it What are the sticking points? How do you see that kind of turning into future growth?
Well, first of all, you are usually displacing somebody else within the stack, and that is why this test usually occurs for one flight or two flights. It proves out. Then it scales thereafter. I think it is also problematic that when you pitch at a junior buyer level, their job is not necessarily to look for new technologies. They have a brief, they have a budget, their job is to exhaust it, optimize it, prove performance. They are not thinking strategically about bringing net new customers in, for example. When you start going up in brand authority within the organization, that is a strategic conversation that requires a more consultative pitch. It is not like we are not pitching juniors as well, because they are the hands on the keyboard.
But the more we can surround that and get upstream in the organizations, the more strategic the conversation becomes, the more valuable our proposition becomes.
Okay. Thank you for taking my questions.
Thanks, Jack.
Thank you.
Yes, sir.
Mr. Brian. Thank you. Mr. Brian Kinstlinger, your line is now open.
Yeah, sorry, Brian, I didn't get to finish your question there.
Oh, yeah, no worries. I didn't know I hit star one again. All good.
No worries, you are good. Most of the severance expense was covered in the first half of the year, right? The remaining payments are small as we get through Q4, and we will wrap up at the end of the year as of right now. Going into next year, we are not going to have the cash outlay.
Great. Okay. Thank you.
No problem.
Thank you. There are no further questions at this time. I will now hand the call back to Mr. Rob Buchner for any closing remarks.
I think I have said it all. This quarter kind of marks working our way through the reset. We are at that pivotal point, and heading into next year, I think we have upskilled across the board. We are cautiously optimistic. The industry continues to go through gyrations, and we think the portability of our technology gives us opportunities not only for commercial integrations, but ways that we are able to reduce friction in the buying process. This MCP connection is a real advancement. We got in early, and all these are, I think, positive factors going forward. We have got to make it through the end of the year and set ourselves up for success next year. Thanks, everyone, for joining us. It is good to see some familiar faces, and you can always reach us at a later point in time. Have a good evening.
This concludes today's call. Thank you for participating. You may all disconnect.