AEYE - Earnings call 3 2023

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Operator

Good afternoon and welcome to AudioEye's Third Quarter 2023 Earnings Conference Call.

Joining us for today's call are AudioEye's CEO, Mr. David Moradi; and CFO, Ms. Kelly Georgevich. [Operator Instructions] I would like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of the company's website at www.audioeye.com.

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

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

David Moradi

Thank pleased first, of XXst sequentially, $XXX,XXX. the representing in of the record of quarter sequential been an the of deliver and Welcome, non-GAAP work $XXX,XXX representing largest ahead hard exciting joining sequential are million, approximately of $XXX,XXX of of you, increase profitability for revenue growth record in revenue us. We've at everyone, X and quarters; thank announcements: or third recurring record $X.XX operator. million, annual several ARR second, to expectations you $XX.X revenue; quarter, reported

in detail the fourth positive deliver the shortly. to cash quarter. financial track in discuss on flow remain we Lastly, Kelly will more performance free

and index results released disability. mostly consulting first that with digital that report. failed Internet web solving the quarter, traditional the accessibility inaccessible remains those industry's have During for The we approaches to confirmed accessibility

million in and conducted site-specific tested, websites the X than companies annual of $XXX billion study, AudioEye images, across XX,XXX revenue. of elements an headers. from links million with X scan pages More over part automated were As over including

experts, accessibility success concluded revealing community, scan, that issues WCAG. findings to top And of the items Of tested, elements least disability one the page the the members at industry, criteria of website disruptive are had each users. sites page billion most every including the the which average of had X failed accessibility the Following error. one audited in XX

accomplishing and of catch XXX a lawsuit compelling. utilize highest in barriers study over and analysis such with people utilizing the we coupled technology market to is critical of the a technology shared an against scalable activities. approach protection Our unique of us valid receive are with legal found banking, combination AI rates of disabilities offering detect. Recently, cannot to from plans frequent disability to regularly keyboard XXX AudioEye lawsuits accessibility which Customers data errors tasks job-related claims The less using found news shopping, image industry. The barriers to human-assisted the that online likely with at that impacts with competitors, in also significantly archives the best from over letters. from the demand a product alone significant: claims on has and findings leverage managed the legal issue compared XX% related WCAG a links that to digital AudioEye many scale, Internet. accessibility, were preventing to were in trying world most to a solve as people descriptive accessibility, the depend

first XX% customers lawsuits. in 'XX to industry-wide decreased lawsuits by compared accessibility lawsuits digital increase against against the while half In decreasing. are AudioEye addition, of increased XXXX, lawsuits year-over-year, customers the despite half over of In first an AudioEye

Moving on guidance. to

will quarter for revenues the million revenue XXXX. guiding see the of from $X.X the impacts are million integration. $X and BoIA quarter sequential between final We Fourth fourth onetime of

on generate increase fourth to sequential non-GAAP We expect remain the AudioEye's quarter and deliver in the call turn in CFO. Kelly? free profitability to quarter. I'll cash track over now a the to flow in

Kelly Georgevich

pleased end Thank million, which $X.XX from comparable ARR year. quarter over at you, straight record ARR marks at the XXXX highest the the years. quarter of represents grow XXst growth an of million, ARR revenue $XX.X We recurring annualized of XXXX to an revenue of David. QX of was second the $XXX,XXX Annual in XXXX its XX.X%. rate of growth end increase represents the at with or X.X and of the X% were ARR rate quarter see period prior third

from for and XX% and X channels solid coming revenue revenue QX products growth these deliver ARR XXXX, approximately represented this deploy XX% revenue includes revenue channel grew for of to a the this customers. of their XXXX QX partners marketplace since SMB Marketplace all third and of and products Our our a continuing same Marketplace are with sources highest Partner the quarter channel. variety of year-over-year revenue In Partner channel in to variety and saw performance. the growth from from of XX% ARR. of within channel SMB-focused XXXX, The

We to momentum quarter. the this continue expect in next

up XXXX. channel, of XX% of third Our the Enterprise in consists revenue of larger quarter our ] customers typically revenue [ and made ARR of XX% which organizations, and

first contract half previously, customer in normalize in large the to additional an with having of total XXXX. mentioned half renegotiations one the XXXX, first of this which As revenue Enterprise headwinds expect we impact channel faced on

reoccurring audit conversion services ] QX's the impact and customers XXXX revenue. integration revenue so of an We to expanded in services, to have an existing early have approximately selling $XXX,XXX recurring did expected, suite [ of seen of success onetime (sic) BoIA as the

customer $X.X third approximately lesser approximately of revenue count quarter profit a was Increase XX, the to complete million this September XXXX. in the XXXX incorporates increased from total on XXX,XXX of to guidance additions process. The $X.X customer revenue impact on customers of for and customer of QX XX,XXX XX% count XX% XXXX, June QX customers Our was about the customers Partner year. Marketplace million in and to and our notably or QX XX, in result XXX,XXX revenue compared last in channel. Gross

to gain continue revenues resulted while our products which in delivering revenue the of lower and has We in increased. cost services, of efficiency

relatively with growth, revenues comparable While consistent year G&A, and by $XXX,XXX operating decreased with million. were X% was X% result continued of expenses efficiencies or approximately sales prior in offset R&D. the decrease investments of the period marketing and $X.X This to in continued

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

invested last software months, the have over in improving new notably R&D products. We our XX and adding

software noncash GAAP net per ] nonreoccurring next Total and as and decreased the percent QX was a decreased by expect from We to $X.X period. earnings spending XXXX a in other to approximately the as ago million EPS was all non-GAAP ago share period. or few thanks the $XXX,XXX, compensation, approximately of $X well gross in litigation [ strategic were per result of or non-GAAP as coming other in investment same amortization share and payments a for quarter $X.X share-based quarters. Net profit of cash an prior R&D of $XXX,XXX, tax the $X.XX activities. of revenue loss adjustments profit quarter, $X.XX and third million operating in employee XXXX $XXX,XXX expenses items. Cash for and $XXX,XXX share loss down the from XX% in and The year $XXX,XXX net net $XXX,XXX per from efficient million $XXX,XXX or capitalization used of share (sic) was over $X.XX which to QX a the profit our same depreciation or outlays increase share-based of comparable compared continue period net year, to cash to $X.XX in compared of primary grants of nonrecurring per year basis, departments. On

As Operator, the David we cash to quarter. With for mentioned, give fourth call questions. up build please and generate instructions. in free cash flow we expect that, open the

Operator

from questions Sutton question will from We George company's Instructions] Craig-Hallum. first with Our now [Operator take will analysts. publishing come the

George Sutton

if should bit term. final rule in wondered ultimate rule. reading you the were assume, perspective, relative actively I so and how And from just of the us, I'm business have a a near could that DOJ are us the you curious The to then of that, the would ended comment benefit work period with for be second positioning get comments proposed rule. separate the relative rule? from like thinking perspective last final what your we meaning you I David, a on month, to

David Moradi

the government we -- on And up, this to we think up of There good marketing Yes, as the a period. terms this hear ramping well on as have sales for comment it's years really soon. about going to picks you this We're ]. and XX-day but we're looking in at to for going time. X some a do in what we're was out Demand we're said initiatives, Title comes [ Hopefully, probably X rule II. excited something sector after question.

George Sutton

out go-to-market Separate for over give how XXXX? your your quarters. couple talked sort feeds on you've plans update us that sales of from team and that, about of last Can the building expectations just the an you into

David Moradi

right? about team, talking You're the sales Enterprise

George Sutton

Yes.

David Moradi

Yes.

expect August. to just ramp We July, next hired in months. these over the few We up back this process folks

also really so into So that so building, far. gives to a but they growth good pipeline we're seeing of XXXX. take lot about ramp, X confidence And months good see is to going we're progress, us

George Sutton

'XX, XXXX, on giving And might you're I guidance not understand that in good what any growth yet perspective look like? but on

David Moradi

More 'XX 'XX. than 'XX, to

Operator

B. from with comes question Riley next Zach Our FBR. Cummins

Zach Cummins

Marketplace with just the driving of sales up Congrats Enterprise can more a quarter. curious ramp ARR selling little to just side in on ARR on on perspective obviously the environment more your starting take overall David, mean, -- you environment. the the Partner environment, speaking about strong your But what's so accordance off, sequential in confidence And both more growth? bit and just current little increase talk team. will the the a time profitability in this to and continued and I in your

David Moradi

bit environment tough there. out macro The Yes. is a

tightness and some are are you're cut seeing there of pressures. on that pipeline because cost and budgets. positioning. But we enterprise to definitely sure growth People good looking our well are SaaS. I'm costs, in You're budget seeing there as but seeing out enterprise products

Zach Cummins

guess, about I good flow, continue to And you to time upon Enterprise the in see QX. in really the, or execute Got growth starts how of Say you're positive necessary terms pick forward. here just to side. curious cash free that to up I'm the to moving execute line on reaffirmed capital demand plans it. thinking

to you're capital or about Just necessary run how you thinking the need available business.

Kelly Georgevich

momentum on that Yes. believe drop lot ongoing sufficient to We to revenue, do operations. to I the grow to partnership on cash that the expect the a we and the can continue Zach. bottom fund do take and side, to have hand line. Enterprise side with We on expansion that, of

cash we where generation QX the feel our stand, we and with so And especially and about position expected beyond. good in

Zach Cummins

final the approach are What's you quarters And now here row of me margins to to investing the versus in have a question continuing profitability. foreseeable expand Understood. multiple for growth in going future? improving is to in

David Moradi

if buy a at We possibility. more look back on good down. generation. things cash ratios, and with coming invest we a should sales That's it's that's we into Or question. Yes, think into we R&D, decide with LTV-to-cap or more but holistically stock the marketing, business,

Operator

question Buck Wainwright. next Scott comes with from H.C. Our

Scott Buck

for couple me. a Just

on gross one, margin. First

here just higher? out we bit room gross the here have expansion, stalled year-over-year do of you it Are for couple like kind quarters. margin, the push nice it's more to but So think you at in of last ceiling little or looks of a kind

Kelly Georgevich

to are see We year-over-year. gross margin happy grow

of year. proven find cost have in the can over last we I did we revenue. efficiencies that think We

As going efficiencies. margins we grow is we continue to forward. to do to continue expect think the to ability grow And we to revenue, continue there see gross

Scott Buck

Great.

what and Second one bit expense in that that the to about of coming to cash talked You more Is down few R&D over business need you forward? terms me: just constraints? a intentional due next move quarters. is the for Or

David Moradi

around past over the which R&D expect And revenue really is [ few should are Yes, so ]. we've we improved more come be as new down place. And the investments in over software. of with a out would there, quarters, in SaaS metrics, industry year, good a lot invested next the in in line XX% a R&D products percentage

Scott Buck

sorry. I'm And

were you the Is quarter. You said that correct? XX% at in

David Moradi

Correct.

Operator

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

David Moradi

joining you Thank for today. us

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

Operator

XXXX Quarter Thank joining for AudioEye's you Third today Conference Earnings us Call. for

As always, we employees and your would work continued like to and stakeholders, for thank dedication. our hard

disconnect. now may You

AudioEye (AEYE) 2 Nov 232023 Q3 Earnings call transcript