Inuvo Reports Good Revenue Figures for Q4 2012

January 23, 2013 at 10:31 am Leave a comment

This morning Inuvo released preliminary results for Q4 2012.  We believe that revenue of $16.2m is significantly better than most investors had been expecting.  When Inuvo announced the departure of Peter Corrao in December, the stock had been trading in a range of $1.10 – $1.30 and the general feel we were getting from a large cross section of the shareholder base was that the fourth quarter numbers would come in below Q3.  While Inuvo had not given official revenue estimates for Q4, a decline from Q3 would have been disappointing in light of former CEO Peter Corrao’s comment on the Q3 call that the company expected to report a sequential revenue gain in Q4.  Given Peter’s comments followed by his departure and the same day filing of the 30 day extension with Google, many took this to mean that the company would likely report a sequential decline in revenue and also that the Google contract would not be renewed.  We believe this is the reason that the stock has fallen 30% (from $1.17 on the day Corrao’s departure was announced to yesterdays close of 82 cents) since that time.  

We note that the two analysts who cover Inuvo both had slightly higher revenue estimates for the quarter.  However, we also note that both estimates appear to be somewhat stale, given that Corrao made it very clear in the Q&A session following the quarterly conference call on November 8th that the company did not expect to achieve double digit sequential revenue growth in Q4 and both analysts had estimates that were in that range. Thus, we do not believe that investors will perceive today’s report as anything less than very positive.  Additionally, Richard Howe’s comments that the company is starting 2013 with “a solid foundation” suggests to us that much of the hand wringing over the expiration of the Google deal will prove to be all for naught.  Of course, the company has never been able to issue a press release even when they do execute a deal or an extension with Google, so it is unlikely that we would see a comment in a company update that would mention Google.  However, we continue to believe that the Google deal will be renewed on substantially similar financial terms and we would not be surprised to see it expanded.

In summary, we believe that Inuvo’s stock has traded down 30% over the last 40 days due to concerns that Mr. Corrao’s departure foretold a Q4 revenue decline and a loss of the Google contract.  We now believe neither will prove to be true and that the company is well positioned to report strong year over year revenue growth while achieving sequential declines in the operating expense base for each quarter of 2013, though we would not be surprised at all to see the company sold at a significant premium to today’s trading range before we get a chance to see that occur.

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