Groove Update – Inuvo Q4 Results
Inuvo reported net income of $645,000 or $0.03 per diluted share for the fourth quarter of 2014 on Thursday. Revenue for the quarter was $15.5 million, compared to $11.4 million in the same quarter of 2013. Both the top and bottom lines reported by Inuvo for Q4 outpaced analysts estimates significantly. Most surprising to many (including many Groove members) was that the company was able to produce these results during a quarter where the legacy ALOT Appbar business contributed revenue that was immaterial and they did this during a quarter where many other similarly sized companies (Like LOCM) reported major hiccups due to traffic quality issues. Aside from not dealing with the financial hit of the chargebacks, etc. that typically accompany traffic quality issues, the company’s focus on acquiring and maintaining relationships with high quality traffic sources has really started showing up in key metrics like the amount of time consumers spend on each site, the number of pages they view on average. More importantly, the company also reported a 25% gain in revenue earned per click and significant improvements in organic traffic, with organic traffic to the ALOT Career site up over 800%, to the Living site up over 100% and organic traffic to the Health site up over 50%.
An interesting article was published yesterday through Seeking Alpha. The author wrote “INUV management seemed to dance and dodge around any questions that asked about guidance especially for the first quarter.” While we believe the author is right in suggesting we should not annualize the fourth quarter results, we have to point out that 1) He has obviously not followed Inuvo very long if he was surprised that management would not give quarterly projections (that has been standard with Inuvo management for as long as there has been Inuvo management) 2) He suggested that the fourth quarter has typically been the strongest, which suggests he was not following Inuvo as recently as 12 months ago and/or he also failed to look back to last year’s Q4 results before making that assertion and 3) he said to sell now which we think is a mistake.
The bottom line for Groove members – Inuvo beat even the most bullish projections on the top and bottom lines in Q4. We agree with the author that it would be risky to assume we should use that as a baseline and annualize it, but selling Inuvo at $1.40 range risks leaving significant capital gains on the table. We think the author will wish he had those shares back. The Q4 numbers were better than most well-informed followers of Inuvo expected. We find it surprising that the stock has continued to trade as low as it has in light of the company’s continued strong numbers quarter after quarter, but we remain very confident that the stock will eventually trade higher as the strength of Inuvo’s full year results and investor recognition that this management team is executing at a level that will eventually lead to a higher stock price.