Archive for November, 2014
Inuvo reported a very strong third quarter and what is now 8 consecutive quarters of GAAP net income profitability. The company reported GAAP EPS of .02 and an eye popping 19% sequential increase in revenue to $13m for the third quarter. Inuvo’s owned and operated websites reported a staggering 189% increase on revenue over the prior year, which was offset in part by the declines in Appbar revenue. The company’s partner segment reported a very impressive 27% jump in revenue for Q3 of 2014 vs. the same quarter in 2013.
Inuvo appears to be growing rapidly in each aspect that management has chosen to focus on. Remarkably, Inuvo management appears to have found a way to not only replace the $23.5m in appbar revenue generated in 2012, but they are now on track to actually replace that revenue stream in less than 18 months. More importantly, the company has remained solidly GAAP profitable throughout this transition and it appears to have found a real sweet spot in the burgeoning mobile landscape sd evidenced by the growth of its partner network. Given the growth trend and the fact that Q3 saw Inuvo achieve 49% of its revenue through mobile apps or browsers, it appears that Inuvo is now a company that earns the majority of its revenue from mobile sources. We believe this will bring increasing investor attention to the Inuvo story, as there are very few small cap mobile growth stories where the company is actually profitable. As many investors who have bet on small cap mobile plays have found, even the heady revenue growth does little to drive the stock higher if the company has to continuously issue new stock to continue to fund the company’s growth efforts (see MM, VELT, HIPP, and a long list of others). Inuvo is now in the very unique position of being one of the very few profitable mobile advertising plays while also having the kind of market cap that will allow for substantial growth as the company is discovered by more investors. Further, the stock remains very cheap on a P/E, Price/Revenue and relative valuation versus other players in the space even though its revenue and earnings growth continues to outpace them all.
One of the most interesting (and bullish) takeaways from the call was CEO Rich Howe’s answer to a question about the company’s long-term prospects. While Inuvo has traditionally been very cautious about giving guidance for future periods, Mr. Howe indicated that the company’s has internally targeted growing the company to a $100 million revenue run rate within three years, suggesting that the recent trend of very strong double digit YOY growth should continue for the forseeable future. With the stock continuing to trade at such a ridiculous relative valuation, the company’s operations hitting on all strides and all indications suggesting that this we can expect this to continue for the forseeable future, it is no wonder that insiders continue to load up on shares at every opportunity, with the most recent being entrepreneur/executive Charles Morgan adding another 55,000 shares on the first day he was allowed to buy after the restricted period (Wednesday). I will be surprised if we do not see more insider buying and significantly more interest from institutional money managers as more become familiar with the Inuvo story.