Earnings call transcript Q4 2022

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Operator

Good afternoon, and welcome to AudioEye's Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Brian Prenoveau, Investor Relations. 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

open remarks, for their we the publishing Following will analysts. company's call the questions from

will at available like recorded Investor link Relations would to the everyone the this I company's of website remind available in and replay for call made section via www.audioeye.com. a that be

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

financial measures website of include release the GAAP certain company's the measures is measures. non-GAAP earnings today non-GAAP Relations www.audioeye.com. directly comparable available A posted remarks our financial section the to at of Further, most in these financial management's in will reconciliation Investor

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

David Moradi

joining forward. our for to strong want I and going expectations financial our you us today's performance begin Thank on call. with

XX% Despite macroeconomic quarter straight XX% fourth to which $X.XX of the XX% fourth revenue, increase board the across We R&D to quarter success. margin continued marked our year-over-year third investment a organization, the from uncertainty, XXXX. given XXth efficiencies customer quarter in impressive see the continued quarter is million, record increase growth. was and in of in in the margin The were pleased was gross in of gross our function achieving which

which revenue revenue, quarter saw to XXXX. Fourth XX% As in previous recurring of year-over-year revenue by and and an XX% comprised marketplace the driven third quarter total of growth the increase approximately quarters, in revenue for in enterprise growth our partner quarter we primarily was fourth channels. in compared

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

we implemented costs were by XXXX, that a revenue In and able absolute in the XX% as operating earnings reduced XX%. processes our and basis. expenses an we year-over-year revenue January to by increasing call, of beginning in noted last drive resulted As on in while operating approximately quarter, the efficiencies percentage down

included million to of $XXX,XXX to quarter, Cash the expense burn continued $X.X nonrecurring which in $XXX,XXX. improve fourth sequentially from

the while contractually and couple reduction increasing of partner the marketplace minimums long-term a a partnerships, plan of renegotiated On significantly. in contract ARR and channel, resulting strategic short-term we

increases Specifically, half in XXXX. on we improvements X second these in contracts, ARR expect material the in and

the the partnerships in coming new leading this the many share market industry. We We continue competitors. channel quarter, gain several in with signed from in product to

cycles. tightening some seen of sales have we side, Enterprise the budgets elongation On of and

large ARR of time. term, in year-over-year. ARR relationships these guidance resulting couple and negotiations. These that relatively we'll in Kelly detail and XX% the over a customers flat contracts short sequentially from impact grow these growth have and in maintain deals revenue ARR which confident We're remain will growth revenue We this shortly. more discuss over

logo Customer remain to continues retention strong.

During periods with of to important experiencing working for win-win cost pressure uncertainty, is the both long provide parties in customers a term.

million guidance. first the of the of XX% million for at growth Moving revenue to $X.X on guiding representing in year-over-year We're between quarter, and midpoint. $X.X

quarter. slow growth renegotiating discussed, enterprise and partner As first in specific will contracts the

sequential and We year. second revenue in quarter for and the expect ARR will remainder over growth the that accelerate of resume the

costs and XXXX. flat expect non-GAAP G&A will relatively stay sales from we and XXXX, For marketing

be We expect marketing will down. sales be and G&A will GAAP relatively and flat,

in. investments a XXXX throughout in high-impact expect see With the trend increased operating with we return first areas of year up the will second invest to investment, R&D non-GAAP we to half loss the R&D non-GAAP in profit as operating a half.

We profit expect breakeven the a non-GAAP full XXXX. for of year operating

will year-over-year. improve results We also GAAP expect that

XX of We million $X.X ended with cash. December

XXXX. our costs in of macroeconomic positive slowdown. inflection see the of we by manage previously, prudently fourth discussed As anticipation flow quarter We to an the cash

a You program million we announced repurchase may $X stock recall that last year.

fourth be We it option delivers an for deploying manner but our to in capital the a greatest XXXX. did we'll shareholders. utilize value maintain buyback in all that the committed continue not quarter, We as the for to

Chertudi He's experienced Chief over AudioEye's sales our go-to-market teams call and as expertise. built that excited CFO, award-winning leader Mikel Ancestry.com. marketing decades joined of Officer. technology I'm X Adobe, SaaS over Omniture Mikel at Revenue and recently with AudioEye is Before turning industry-recognized, has to Kelly, the an

million million to quickly Adobe. X acquisition years, by scaling growth leading Omniture $XX to oversaw just Mikel in its demand at in creation $XXX of ARR while from

helping a scale This transformation, time an from $XX enterprise sales and he internal left later sales at company at to billion to unicorn, Mikel company. year-over-year been ObservePoint Mikel's over billion by scaling he marketplace led to success. growth. marketing years and acquired was recently after where technology analytics led XX% $X Adobe, customer Mikel has growth Guild, co-found During digital ARR. entrepreneurial-minded, of SaaS Being X the Adobe

at joining growth. is Mikel are we us primed when significant for time a

revenues Over over the a gross have last increased X direction, and XX XXX%, embarked non-GAAP points in up have our over change we is our years delivered we since on margin profitability. strategic

in the have have with increased the and which improve best R&D to investment. in product We industry, continues invested

over turn to CFO, the now I'll Kelly. call AudioEye's

Kelly Georgevich

Thank Revenue XXXX you, David. $X.XX for from up QX from QX was and XXXX. QX XX% a increase XXXX sequentially million,

$XX.X pleased were there the On grew from logo in revenue are a While enterprise XXXX. the several XX% basis, the in full both XXXX, from high and revenue XX% growth $XX.X to and and David marketplace we in in growth year negotiations as quarter, our play discussed, retention with million channels. million

discuss partner marketplace channels, now revenue key and will I our enterprise. and

to and deploy marketplace partner their from products same The from and of marketplace revenue our channel customers. SMB includes variety for products a these SMB-focused all revenue partners

On the and quarter XX% ARR. For XX% to approximately revenue XXXX. of from represented basis, this of million partnership in full $XX of XX% in XXXX, and fourth million $XX.X channel our revenue grew XXXX channel's XXXX, in and year year-over-year marketplace XX% a of grew revenue

to this We pleased of and and are XXXX in QX growth to commitments throughout will in and beyond. which revenue specifically, in from revenue XXXX stability contribute and the channel expand year, the existing partnerships

local our and of approximately This consists custom state X, and revenue revenue Internet of revenue in of XXXX. enterprise AudioEye XX% from who contributed those The channel XXXX year enterprise XX% BoIA, from XXXX, or year revenue grew for the prior also government comparable of XX% $XX.X with approximately directly On and websites agencies with acquisition million XXXX. engage QX full ARR. from $XX.X XXXX enterprise generally and the XX% channel to on our channel non-platform personnel includes in customers a period Accessibility, March in custom AudioEye's the organizations, in grew of federal, Bureau the basis, and million of and solutions. sales larger including pricing of

XXXX Annual fourth end recurring end fourth ARR QX $XX.X of is over a at the slightly $XX.X quarter increase XXXX. the or XX% enterprise renegotiations ARR. XXXX of excluded ARR of the from from million and of being at the million, ARR was because of revenue, lower contracts ARR, of quarter

return sequential accelerate we the ARR growth mentioned, quarter David next to of remainder expect As over XXXX. to and

approximately uptick enterprise, On an increase December XX, driven XXXX, customers December was from was XX, customers customer September marketplace customers. count on uptick partner X,XXX our XX,XXX, and higher by approximately and XX, The an XX,XXX of XXXX. XXXX, from

XX% Gross and year profit for revenue compared $X of about $X.X the to last of revenue million fourth XX% and or QX million quarter XXXX. of was QX XX% in in

$XX.X XXXX, less additional add were that were we these service the improving delivering our XX%, remediation million in gross profit continue For time product. drive full a cost XX There in $XX.X web other costs of and value and factors hosting, reducing from are to customer increasing to but XXXX, XXXX. including XXXX directly revenue, to support costs of go million days than year with the into such number for related gross approximately to able average down to as our automation. In margins

expect to be We forward. going XX% around margin gross

revenue in XXXX. full same reduced to fourth last $XX.X operating million XX% while $X.X in million XXXX expenses of million in decreased XX% $XX.X With quarter from up increased a million operating revenue in XXXX On XX% expenses year-over-year, from quarter to the the $X.X year year. basis,

in compensation lower BoIA and decrease lower annual to year-over-year investment continuing expense, quarterly efficiencies are with produce from sales impressive generation primarily and R&D. which offset and This by marketing, in partially implemented driven stock investments and was lead needed

Our costs total XX% XX% XXXX and spend the the was our for full software $X.X full of development inclusive as total million, of QX in R&D statement. XXXX of $X.X XX% XXXX R&D revenue was costs. XXXX QX and R&D investing as This development spend to in around approximately compared revenue with $X.X reflected approximately reflected flow year revenue. spend million year QX is million, section software of $XXX,XXX of cash the

build continue invest we offering. a maintain will out as We R&D to and opportunity to see best-in-class in

of On year-ago compared basis, in for or per loss share $X.XX loss XXXX a same share of was net loss share million $XX.X in a loss to $X year $X.XX or to per XXXX million share million of full Net a quarter net fourth compared the the per or net $X.X per or period. million $XX.X $X.XX $X.XX was in XXXX.

or non-GAAP basis, again per the income approximately million at $X.XX $XXX,XXX a in net in $X.XX a same loss share fourth profitable compared of to once quarter are XXXX, year-ago or with share per On $X.X period. we non-GAAP the net of

On the the approximately a compared of in $X.X was margins XXXX. per net of a result revenue a $XXX,XXX or non-GAAP $X.XX share per year reductions or to loss in expenses. net million and dramatic XXXX loss was is improved share and $X.XX increase, basis, improvement non-GAAP full This

for earnings and and depreciation costs. GAAP compensation, to adjustments share-based noncash were and QX primary amortization, XXXX and EPS miscellaneous year XXXX The litigation full other

$XXX,XXX negative to of for to sequentially the tax $XXX,XXX The Cash improve related $XXX,XXX grants, in $XXX,XXX primarily for offset litigation nonrecurring by $XXX,XXX, $XXX,XXX. to million share-based $X.X capitalization employee continued in XXXX was negative of software expenses, payments to burn use fourth of related earnings approximately from non-GAAP quarter. QX cash approximately

sheet Our XXXX. remains with balance on debt of $X.X no XX, well million cash December capitalized and

expect to earnings related in last settlement in our QX as October the materially of on down to mentioned call, result As starting trend we cash a litigation usage XXXX XXXX.

in believe will see first We of expect the QX R&D which will and to and We payment current increase BoIA. cash we of sufficient, the XXXX. on expect cash investment XXXX, continued hand include is by an cash earn-out half generating usage

instructions. for open we the that, give Operator, questions. please With up call

Operator

Wainwright. [Operator Scott H.C. first with comes Instructions] The question from Buck

Scott Buck

color provide you of a is additional where in XXXX? on going can curious, incremental little spending the maybe bit of R&D I'm some

David Moradi

that take product We in expansion for the justifies the market see R&D. continued opportunities I'll increasing one. Sure. that

we're risks really the the always, to a We generate against expect ROI as and to on weigh good looking the ROI potential. us. risk/reward R&D for investments additional the and And

Scott Buck

what David. that, sales environment, that there gets like to those there? And potential And the line? would specific the customers kind appreciate broader Or conversations help on with them dotted event are is I of something sign what accelerate sales then cycles? that

David Moradi

or you reseller? about Are enterprise talking

Scott Buck

fence on macro enterprise. from standpoint? off the What gets Yes, specifically them a

David Moradi

quarter. seen of Look, sales just cycles, mentioned Yes. we've we an as last elongation

to good where larger think but enterprise the though. on it of negotiations sign. couple go very on a But we're going bullish were a deals, so deals have are. We're smaller out up that it's is tougher. We also there. close seeing tougher We still a expiring is it in that's environment grow, rates We're side,

Scott Buck

make dollars help And then additional efficiency on to the side, improved helpful. given That's towards and sense what then in right. the top sales put does All sales it drive the at you acceleration last, line? marketing for point and some

David Moradi

we have efficient pretty think leads, as efficient Yes, We're been. that. we to ever do I on don't need as generating

expect a generating. of leads the continue over We the close rates ton generating leads. time are to on We're we

the going macro to think backdrop spend. I tough current in even this we're with S&M revenue grow So

Scott Buck

All guys. right. I color, the appreciate additional

David Moradi

you. Thank

Operator

with The Instructions] Riley comes question B. [Operator Zach Cummins Securities. next from

Zach Cummins

you've or mean, the at starting partner renewed the side David, of renegotiated in of channel you can little be just seems there? impact It off, going but seems term, it I longer about, sounds I like it. different it's something win-win a couple mean, here short like reasons to that a a in terms it like terms an talk bit looking could of for partnerships have term. the

David Moradi

right. that's Yes,

there just was the renegotiations. which driver the pressure, are cost of out most partners feeling Some main of

much in relief. with And we're We terms nice some is place win-win. step-ups. over puts giving a time. a us exchange, able significantly in short-term this So contract were extend better to It

Zach Cummins

feel the how a into you it on about next insight those of that of Or the I back you give still fold mean within into you coming of renewals sort renewals any give those side, would then any likely large helpful. incremental are And enterprise be the couple can you months? helpful. That's couple here sort like it. insight into can have sounds ongoing. Got

David Moradi

elongation Yes. the cycle We're seeing of sales environment. tougher a in that just

that We services, of still much the still have larger with them. were did deals moving forward, We're hopefully, end contracts a the and providing working We're couple deals them to couple of bigger quarter. in ARR reduce still negotiations. at with and Those of expiring.

we're be working But we place. and in these of we'll to we're strong. to think regardless. good going through, just get New couple them closing business deals It's it. continues a grow We're

Zach Cummins

called terms little us is enterprise into question any in bit the to out Revenue helpful. But give there, the And is And insight how the you side up final attack it of the of I new Officer some on within there That's shake it. sales of Got to partner the you going really had channels? leadership just changes mean, I a script. terms you on Chief it? hire. why be sort of in mean or

David Moradi

this and Yes. Mikel He multiple time, right scaled of just think right the record for a marketing. before. help has us has been to a before. done sales is ton and We a he's rock and He He's companies. track CRO unlock proven a of in he's has star. fit going the potential

it's good. think really I So

Zach Cummins

the of of Got luck it. rest Best with the quarter.

David Moradi

Thanks so much.

Operator

from Scott with And we H.C. have a Wainwright. follow-up Buck

Scott Buck

environment at I peers figure your here. you could of more maybe Guys, throw little if how bit I a I'd you Dave, are a wonder one environment. more speak and to the addressing challenging some competitive

David Moradi

outperforming is Look, market checks. on We that some We're so like market think have we we're very things The stay we exciting Yes. best tuned. confident the soon, product. we competition. still pretty the based And actually the coming have today fragmented.

Operator

At to now back this turn time, question-and-answer comments. this for his closing I'd over concludes the call session. Mr. our like to Moradi

David Moradi

for joining today. you us Thank

for look forward updating continued partners to their want our support. I and call. on our to next you investors employees, always, As thank We

Operator

would the today's everyone Investors like Before will link section recording be call I company's to a in of replay a available remind call, that via for the website. today's we available conclude of

Thank you today Quarter Year Conference Call. for Fourth AudioEye's joining XXXX and for us Full Earnings

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AudioEye (AEYE) 9 Mar 232022 Q4 Earnings call transcript