- Earnings call transcript Q3 2022

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Operator

Good day and welcome to the AudioEye Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Brian Prenoveau. Please go ahead.

Brian Prenoveau

Thank you, operator.

call CEO, today's for us are Mr. AudioEye's Joining Moradi; and Ms. CFO, David Georgevich. Kelly

call available website Investor for open remarks, for at I like that in www.audioeye.com. their we the section publishing link would recorded this made everyone remind the Following replay via will available to of analysts. company's call will and be the Relations questions a from the company's

for reflect section in statements filings place Officer, as and are expect, remarks any made statements the Form Further, not which forward-looking in Commission. posted are assumptions and forward-looking current are call most to non-GAAP AudioEye directly cautioned materially discussed not call predictions, made that on all reports are over quarterly the company's its XX-K, undertake today's on the believe, XX-Q certain anticipate, undue Executive is AudioEye to financial company similar these Actual results any hereof. factors identify management's Participants of release www.audioeye.com. and Private the The such statements. measures. in about Relations update will the turn of press Chief remind comments conference measures in belief differ would statements comparable forward-looking A in Litigation I on based our reliance risks subject and other could management's these be the or Before conference does because to participants the historical forward-looking statements. confident, during Reform estimate, XXXX on other AudioEye's that future company's during reports These of other by Securities forward-looking website management this Harbor considered correct course will and words events call Act of to release duty call on at financial the this like annual the a to provides statements. Risk earnings Securities facts Factors projections report to statements GAAP only of and and expectation uncertainties. are statements to are of that and of Investor The this expectations or and financial of Form non-GAAP the with section measures available include reconciliation not statements. today the date Exchange Safe

Executive Now, turn Chief Officer, I David? to will call David the over Moradi. AudioEye's Mr.

David Moradi

quarter quarter our begin to XXth the financial XX%. margins results. straight revenue, consistent year-over-year at achieving positive $X.X which growth. million marked headwinds, Despite want of remain by Gross the We discussing record XX% third some macroeconomic was

resulted channel Our our and Partner Enterprise channel. from both revenue the and growth Marketplace

within achieving $XXX,XXX. of the In revenue non-GAAP are to guidance pleased report approximately profitability range, addition to we

near breakeven guided previously We the to have fourth in quarter.

this to drive basis percentage absolute to companies year, to we sequentially implemented by excited of XX% burn efficiencies Cash ahead facing. We processes while is are revenue the XX%. that and increasing approximately a improved target. revenue. new by quarter, given expenses January as GAAP milestone and are Beginning $X.X an most this million. environment operating XX%, year-over-year notable on from inflationary also and million non-GAAP down respectively, believe we were in our operating We expenses our in reduced the both able achieve of In of this resulted $X.X

burn, stock working Kelly including Excluding $XXX,XXX. declined items, such to details give further as repurchases, litigation cash capital, nonrecurring and will shortly.

to resellers added show dive and several our strong business I a new Marketplace momentum. bit from We while revenue channel Now into demand. expanding revenue quarter Partnership the further existing in and will partnerships. continues

looking Like economic to we most the market for industry-leading in of are high to due our retention competition. new drivers have uncertainty the ways our investment. revenue compared despite offering resellers and to main robust provide a offering is the best their R&D that of other expand companies, One

at with services accessibility comprehensive web to sophisticated scale, while solving deal providing winning percentage these approach as and drive resellers. required, cost-effective Our issues our continues high to

to Enterprise well. as the revenue see channel year-over-year growth continue We in

customers in While accessibility elongation to we have sales continue have cycles, see retention seen especially some not for do who customers. existing high for those we solution, yet an

Our for necessity in increasingly product stack is viewed software as the a businesses.

audit I'd made existing core our also providing like AudioEye product are and We customers into there purchase have site BoIA's the Outside new highlight. financial to results, of reviews. to a offering, other our business progress complete now developments by reports SaaS and option positive integrating few

to customers next-generation AudioEye's platform's pleased that using the next-gen access confirm our customers features and never to excited remaining old We migrations Platform migrated we have who platform. easy. We're to are are functionality. the have are platform now

to grew accomplishment So significant much pleased stand existing that last functionality especially we of to the over platform with more we the revenue are was This scale new substantially. and operations October, able and product, years, couple engineering Senate a up teams Representative In and simultaneously our Software Sarbanes were House of and customers migrated the and the Tammy and their introduced work. and Websites Accessibility all States United I'd Applications hard Representatives. like for in John and thank Duckworth the Senator Act

"The and the X% passed, this member, bill press accessibility. form disability as and the community. the While In on architect bill, from it truly to the support If expect to still are have also XX demand digital introduction material bill Board passage release the cooperation passed put we the will of is emphasis the bill significant Coelho, of only the the the the websites will and in as a accessible. impact is currently accessibility shows ADA ago, of ADA likely which and changes AudioEye author of made, as further on say. announcing web solving draft Tony years had be

in legal a that competitor quarters. that disputes. over have all we highlight on this agreed settlement cannot further comment said, on materially but the of need step trend signing Also should litigation burn announcement from October, to down. As AudioEye the We another a ADA, of cash direction." exclusion and the pending global taken down to Bush of is walls President the be announced This in coming

may recall quarter repurchase we in year stock program. a that You this second of million $X the announced

continue the to all to greatest deploying value manner capital committed that our be in for a delivers shareholders. We

We buy continue back in to the quarter. third

As of $XXX,XXX September program. XX, have repurchased under approximately the we

to guidance. on Moving

We management. recurring operating have set growing success margins gross ourselves with our base, and up for revenue expense high

feedback to Simply invest best the from the put, offering have R&D effective heard have We market happy the next-gen have continue at to many on platform. industry-leading our most positive migrated who customers in and price. we

delight in term. strengthen more. and our the near customers offering even We are excited to further product

of quarter, for to are representing revenue million growth XX% the in guiding of million We $X.X $X.X midpoint. between the at year-over-year fourth approximately

fourth million have results for our results term. AudioEye's to investing of now quarter further consistent in to and the remain income Kelly? the well information. solid continue We will capitalized relatively financial turn third cash the quarter. the with quarter call with to over I third expect non-GAAP the the share $X.X long We the CFO in ended for runway business to

Kelly Georgevich

Thank you, David.

which Internet inclusive increased acquisition marketplace of quarter. $XX.X products the Both prior year-over-year in of revenue revenue and year. channel pleased quarter XX% of over the Recurring represented XXXX Enterprise revenue the Accessibility of PDF XX% end ARR, the prior decreases addition XX% recurring the David comparable approximately The quarter from XXXX BoIA also with in revenue XXXX to of increase XXXX. million, third mobile Internet growth same the The from contributing Enterprise of third revenue was revenue in helped a offset with and the of from or to at contributed channels at the we XX% quarter in our grew which from Bureau also total period QX ARR Accessibility, and As third XX% Project-based revenue XX% SMB-targeted over end the a project-based revenue new experienced and Bureau the increased approximately and in Marketplace our increased and organic year, XX% of of Partner performance. variety of of partners, the XXXX. year-over-year revenue, revenue period and in of products of ARR. includes Annual channel, growth, total mentioned, with ARR. SMB-focused are XX%

an Enterprise model to going low in decline forward QX. and QX XXXX, a XX,XXX, sequentially. September and to and XXXX customers. our we focused about approximately of nonrecurring revenue higher expect percentage ARR On was XX, and on Partner an sales as was on are XX, customer single X% approximately count We increase XX,XXX digits from September Marketplace of from and by The driven uptick uptick customers X,XXX an

in As updated customer was contract noted earnings fell going out an count. the August, in we last our the that agency with of renegotiations call, QX and on through signed

million $X.X quarter and count customer to XX% for contributing start QX or [ph] to deal Gross third of revenue specific million of $X.X XXXX. the QX profit this revenue of expect We compared in last to year. and revenue in about XX% was

are investment We gross which success a play factor margin revenue. platform percent our given the cost significant with in costs in the consistent pleased and customer next-generation of

lead $X.X XX% be XXXX which offset QX This third same generation XX% expect operating last driven and quarter efficiencies expenses produce lower million the revenues We by XXXX. investments in around for in approximately of to in the to gross implemented was needed, the $X.X from in partially quarter to are of $XXX,XXX. decreased With primarily from marketing and year-over-year up decrease XXXX decreased impressive investment year margin year-over-year, sales remainder with from million by continuing XX% BoIA.

and expenses a We stock expenses as lower from G&A primarily XXXX, have result QX compensation. decreased of

quarter million, Our the statement. costs total is approximately of this reflective $X.X XX% of of investing revenue XX% section versus QX in last total $XXX,XXX flow development cash the R&D about spend our R&D with approximately This spend was year. software in

non-GAAP burn in We in $XXX,XXX primary to period. net $X.XX XXXX same an share or per adjustment share-based within related compared of a payments same QX $XXX,XXX; for of amortization and and expectations loss costs repurchase; cash depreciation of XXXX of related share $X.XX share-based was and improvement $X.X in compared for The $X.X compared year-ago third period. maintain loss million of about net employee nonrecurring best-in-class in investments $X.X Cash was in QX primarily grants; On million $X.X a R&D third to QX million and share in to or loss to $XXX,XXX burn share non-GAAP per product. a was noncash was expenses. $XXX,XXX to for for software XXXX. to capitalization cash approximately costs. litigation XXXX earnings in compensation, to stock GAAP million $X.X tax million were the litigation Net EPS decrease $X.XX per and quarter The $X.XX a or quarter the are net or per income $X.X to in basis, $XXX,XXX committed million year-ago the the of

usage of As David cash litigation. with materially noted, we the expect settlement trend to down

balance the capitalized we Our remains give With debt of X instructions. cash open Operator, XX, sheet well for call with that, up $X.X please on September questions. XXXX. million and

Operator

[Operator Instructions] question from And first Cummins Securities. today's B. with Riley Zach comes

Zach Cummins

David and off. Kelly, on David, just congrats here. solid starting results the

In terms you bit pulling there, that of out made can sense the guidance But trigger I with of just different assumptions some giving in when longer us the some are maybe the setting taking terms puts give customers I'm and like purchasing you're XQ decisions. a a have outlook. It curious little that of mean, the of you the of sounds XQ enterprise you takes?

David Moradi

record I the close will Zach, customers. all-time leads. I the deals elongation seeing in. We some say seen just leads. of with got We've think to coming these right. We're high sales yes, enterprise seeing that's we're cycles

So well. Resellers pretty doing constraints just enterprises. We're there. dealing from budget some the is demand are definitely with

We And a times and by modeled XX% that's and through we're February, in leaner back we we So absolute within were to January, while economic costs grow growing the reduced business. so able them. our good rightsized ago, about XX%. penetration

was that good. think we Yes. pretty So

So considers for We're this. growth midpoint. of the all XX% guidance our about guiding at

Zach Cummins

a schedule hit point pretty And congratulations challenging you've this I helpful. That's a operating inflection And spoken getting you've now now. environment to to profitability, know, right key Understood. David, quarter on here. that of of to point, that ahead your target

high-level you give invest sense can of you're how some for me balancing So these a versus continuing growth of about profitability forward? opportunities just to thinking going

David Moradi

profitability in rightsized and the place think point. non-GAAP Besides quarter. the for in to going is year, we're nice future. this structure Yes. fourth we're to see not growth going at guiding that, the partners next guiding with reseller and we're We We're cost in the

Zach Cummins

the sort maybe you the helpful. sense, And give from when and have curious you seeing legislation? business a of of any us this mean, mean, just That's I can I just with with of steps legislation topic. of introduced in October. additional uplift on time of we sense these this some that of Understood. developments forward incremental even a seen the demand mean, the thoughts your other getting was broader line And I outside with the start just potentially passed? I'm introduction of

David Moradi

too I a be don't It's demand. think forward. early demand driver going huge I've to for say obviously this seen could additional but

websites just growing companies legislation, in contracts. you know, a of DOJ, trend accessible As front the only today. X% requiring here with their There's are accessibility

So we a things. but of could the as a conjunction I know positive opportunity. look at It don't I these it's other TAM timing think with this multibillion-dollar year in be all legislation. next the

Operator

conference ladies We and concludes thank Instructions] call. for you And [Operator Okay. this today's and session question-and-answer today's all attending gentlemen, presentation. today's

a and lines your wonderful You day. may disconnect now have

AudioEye (AEYE) 11 Nov 222022 Q3 Earnings call transcript