AudioEye (AEYE) 10 Aug 232023 Q2 Earnings call transcript

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

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

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

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

statements. not Before to course Executive the I call, of all such this Company Chief AudioEye be by are remind Officer, statements to conference turn made over historical like management AudioEye's considered call participants the forward-looking facts to are would during that the

Securities Act statements. and safe words subject expectations uncertainties. current confidence, Reform Private statements. harbor are projections for statements that believe, to assumptions estimate, These risks and and the The XXXX provides forward-looking predictions, similar or Litigation of anticipate, expectation based other such The will are events other are on identify statements future of statements forward-looking and expect, about

differ Actual section Form on press comments its on and XX-Q the today's results with the in quarterly and the other Commission. Form could and Risk filings in this and materially and factors annual Securities reports discussed report report release the call Company's Exchange the during because made XX-K, of its conference of Factors

lieu this of correct management's any cautioned to on duty reliance or update AudioEye statements. any which to date not Participants does statements, forward-looking on hereof. belief place are forward-looking the under these as call reflect only not undertake

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

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

efficiencies. for I performance I'm our and to been talk on about you Thank thank want continued There and the before over with to do, and joining operator. solid have you, today. excited financial last three I months, highlight everyone, us. Welcome, focus developments But several you

annual pleased of At $X.XX million the in are was recurring second or end announce $XX.X We to ARR, record quarter, revenue revenue, the quarter. second the of million.

in growth previously, certain As renegotiations, ARR pleased results revenue expected contract second sequential ARR are and these in about of with excited our the we XXXX discussed impacted and first are the renegotiations. by acceleration were Despite half. half

the increased gross on increased gross gross of into were year-over-year, representing versus margin $X by XXX% by million quarter, Continuing while grow efficiencies, to XXXX In second expenses we to expect year-over-year focus flow-through margins XX% we Revenue X% increase as profit operating and further $X.X revenues. to gross X%. additional a million revenue profit. in decreased

the Our CFO, more detail shortly. Kelly will discuss in performance financial

Americans are the apps. II the the today believe websites have we under we remain disabilities proposed accessibility. of despite Department The website and Act. with content digital ensure at week, Justice Last equal mobile ADA. in increased Disabilities said, web As issued to litigation XX% of role access inaccessible early innings we of people rule to of the a on accessibility people to have under help disabilities with Title would

we proposed drive with will positioned rule well are XXX over and we awareness organizations school as already The more districts. and and compliance government work

e-commerce offering previously all services, EU many states reminder, adopt Act required European for to logs of services As ensure and websites member the including to a Accessibility and companies products types accessibility.

and requires disability expert accessibility typically communicating that on from by from the with a the to issues websites June identifying, accessible member the enforce requirements. impact XXXX, shared provide accessibility experts must companies EU, act collaborative accessibility In community on filings June, AudioEye review. require states effectiveness AI of and of the initiative and the generative In fixing

whether the complex a who could link the assess as determining reduce AI on time and up and found issue those needed including to clear rely to experts, is technology accurate correct by accessibility such AudioEye's XXx. assisted accessibility

accuracy our future. incorporating to are and is there believe and increase speed tremendous potential We processes AI the in currently into

The and by North that with expert the it's is a by Star AI expert let accessibility for experience no crafted solve make at will between high when bar. That's created an claim or accessibility trimming an AI. distinguish very someone And only digital they disability a with can't bar AI. anyone scale an mistake,

While in one, day community and improving only investing need our from it by capabilities actively time. continuous involving feedback the getting over disability

AudioEye's of announced includes initiatives our development platform of and solution accessibility expansion recently and accessibility accessibility product addition AudioEye's new define controls of The help the progress These on AI, the and the investments In with enterprise-grade sustainable assess to maturity program measurable, to health certified program Company's advisers. digital expansion make accessibility. of to accessibility the findings new required and team management offerings. experts our we level use accessibility our and current

guidelines, program of first-class management identifies perform goals. organization towards these further track maturity AI at with people, to in system make of accessibility regulations the corresponding increasing scale. to accessibility change automation health accessibility the Company's the When and development concern first-of-its-kind Our tools and adviser be any will the needs required program accessibility to This changes new changes, notifies culture, drivers progress process comply. an powerful

we March quarter, acquired integration this Internet Accessibility, pleased in In 'XX. the am the of our I to of completed of that addition recently to R&D Bureau was which efforts confirm

BoIA, delighted are in will term. have near enable and result retention and fully integrated to in savings which We the help cost upsells

generate under expect to of we forward, product the instead offering audit revenue. subscription ARR nonrecurring primarily model our Going

transition into success to In bring States announce to forming to the impact congressman will Each District the continue and as revenue. addition AudioEye's audit Arizona's future. Gabby were by of we that revenue the quarter, thrilled talent July, of advocates The United Congressional in our quarter on integration of contribute we reduce board. to X BoIA advisory for recurring Giffords we third $XXX,XXX approximately one-time

influence awareness that during close accessibility community disability brain passion great she and attempt. building Giffords severe raise Gabby retired continue will resigned solutions after United in AudioEye help from Gabby's Today, for who the the injury is annassasination her digital States to make helps XXXX strides sustaining facilities. the change politician in gap. a in Congress about

Moving on to guidance.

guiding We between million sequentially. flat third of is for of the $X.X which XXXX, revenue $X.X and million are quarter

As revenue third is as several the we and impact that representing will by approximately integration of the rate approximately ARR audits reduce growth by mentioned, strengthening, momentum will transition quarter in recurring quarters. $XXX,XXX BoIA Business the million one-time we $X fastest of sequentially, into revenue. anticipate increase

growth in ARR reseller expect an by to improvement channel. and an driven our We enterprise channel in our be acceleration

year, are specific we a a continue in behind accelerate rate half half to first in saw single-digit ARR contracts, growth that process which and pleased forecast have a trajectory forward. higher XXXX going we low will return of While the to us of second expect we as renegotiate the the to

hand We fourth expect improvement on non-GAAP quarter. further going Cash see a fund operations, into burn of sufficient a to our to approximately generate cash in profit the expect and ongoing forward. with to quarter $XXX,XXX third is decrease the we

We flows by on items quarter the to positively inflect the working cash also fourth such capital. expect of as year depending

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

of the quarter QX from second end recurring was million the second straight million, which year-over-year. revenue, the ARR at David. of $X.XX QX revenue XXXX X% Annual XXth record of end you, was million, increase growth XXXX of $XX.X quarter the quarter at the of ARR a Thank XXXX. marks or ending at $X

came to expect mentioned, which our ARR ARR for accelerate $X XXXX, XXXX, David will Overall, results QX sequentially. we and loss second the we increase with we and approximately As in are net anticipate financial within expectations. of growth half by that million pleased revenue

variety a customers. the revenue products channel cost-conscious of all perform XX% two ARR. Our continuing second a environment. quarter our these revenue more their XX% for and deploy products channel revenue to revenue grew and this in of and represented In and of channels are revenue Marketplace SMB-focused from approximately SMB Partner partners The well to same marketplace from year-over-year of XX% XXXX, includes

We with build for contribute larger growth to in Overall, partners. in to this we to be revenue existing recognize significantly expect as continue further channel continue traction opportunities partners. in expansion our and expand to we our

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

this with having an one quarter. on in revenue renegotiations, customer total in previously, enterprise headwinds faced mentioned contract additional impact the of larger As XXXX half the first channel

Excluding this renegotiation, we year-over-year. ARR continue to grow enterprise

retention XXXX, QX We in showing also with logo logo great best rates rates to QX XXXX, see some to-date. retention to continue similar of our

and million most was count material approximately XX, XXXX, The total or driver of was customers of quarter customers first the customer million approximately of XX% on XXXX. customers The last and QX profit year. count compared QX revenue notably Gross about June expansion from for to in the increases. on XX,XXX March XXXX in $X XX% XX,XXX of of revenue customer $X.X XX, platforms increased to XXX,XXX

are our platform increase to customer margin in continue year-over-year products the the investment see and pleased success. We gross to significant given

While X% $X.X the revenues approximately operating $XXX,XXX prior over period comparable year, to expenses million. of or X% decreased increased

decrease by sales offset continued investment continued marketing G&A, a The in was of efficiencies and result and in R&D.

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

automation Accessibility like R&D new mentioned, to and allowed programs As and our investment AI Management Maturity driven David Advisers us and expert Health audit. Program, develop new has technology in the enterprise-grade Accessibility our

loss comparable strategic XX% well same share gross to loss as was in period. Net decreased compared of all in in or second spending in $X.X of profit period Total departments. $X.XX XXXX prior share efficient to million $X million the year ago increase year, per per thanks $X.XX quarter the as and $XXX,XXX the or in or net the

loss The $X.XX amortization net same adjustment EPS to and XXXX net and to On year compensation, and share-based a for ago nonrecurring QX share noncash was our primary $XXX,XXX loss were per $X.XX basis, period. or compared of a earnings or GAAP non-GAAP share depreciation $XXX,XXX in items. QX per the

the year. QX of We see to comparable items prior are from substantially decreased period nonrecurring in pleased XXXX

quarter, other was from employee litigation cash $XXX,XXX used costs $XXX,XXX, share-based tax activities. $X.X of approximately operating non-GAAP $XXX,XXX in from of grants million decreased the for software Cash of result capitalization of which approximately expenses the payments of net $XXX,XXX, outlays cash and

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

Thank you.

from comes Cummins Our question Company's Please will publishing We proceed. Riley. take the now Instructions] B. from from Zack [Operator analysts. first questions

David, agreements those just about just half? coming just mean, of Or to outlook back a the driving are some factors in I ramp are can mean with Is there? the your expansion second here increasing meaningful that starting some bump from that pretty of partners? ARR, renegotiated I in mainly getting the QX. it we with you online talk for continuing

Yes. question. Good

our the We growth Partner expect forward both ARR. to channel to contribute and going in Enterprise

core year, accelerate. the the growth up. expect ramping success and build the are away, up, and -- those but processes, partner ramp seeing improvement earlier is more pipeline systems growth team move really revenue lot a those partners think as in accelerate a we start in of The you well, -- traction new our seeing mentioned, is in and in We they starting core people. new even products, -- there, lot start have channel this of our the and The enterprise as I product. changer with renegotiation selling slow industry growth as we building We're to a to to did to are should great the game we

recurring some about to you integration? of in integration what transitioning do nature of can and benefit that in the And kind that of just into gives Understood. with talk that of revenue BoIA sort terms

the value and and Yes, of I'm our one-time customers integration the BoIA from some revenue, under see does one-time those customers for to about forward. been recurring our to are the up Historically, talk the and the a bit automation that and that back. customers we're that both automation we up-sell recurring end, opportunity them. products on things to QX, of we they've retain to with like are in excited we and with happy can BoIA more customers set complete the to and essentially have in ARR audits see revenue, tick in customers deliver model. Yes, products the we and and our value also It but of a offer additional impact one-time same going

forward? some you forward. to expenses Got positive out development now in expecting down company the expenses I income non-GAAP have going enterprise see a in we should is think expanded of And AI really in question around Are free just me mean, and the positive cash flip you market? ramp QX to products in going final investments it. Or and to flow the how about QX. expecting capabilities that for

in we XXXX. Yes, did quite invest in notably R&D

more high-performing but the products on last last really we're months and years, coming specifically, see couple a and the down team six delivering. we're of excited the pipe. we products have In We over do the

And enterprise products investment. see also large so,, we're with new scale with that introducing. do up a the We or revenue our opportunity that happy to especially we're

expect think generate sales And we'd marketing so, forward. as in to invest continue I we going more profit and to

the the rest quarter. question. taking with the of for Thanks Understood. of Best luck

comes question proceed. Please next George Our from from Craig-Hallum. Sutton

Thank attacking specific opportunity the might a larger significant be also you address and penetration then then like things of what terms that you David, thus do those in I And are the Department that pursuing want and Justice in we've the market? relative seen markets? the we'll from in to NPRM rate to these low some compliance how much of of far EU terms how

sure near term one DOJ longer With billion. wouldn't very except in term, going think as XXXX. revenue sector the efforts, TAM some thinking very, years, for large for pretty smallest is estimate to going many be local if over which with meaningful. there, the It the action $X track state TAM Sure. two comprehensive. private I meaningful really around take the could covers I I'm websites, be a We be a the DOJ see they're and expect ones. not the surprised It's governments. effect on a they about here. It's ramp of I call to And very you're well. with but EU, there's large the it, to

do go you after today? And -- are how change local there? go And might how on positioned the opportunities specifically, after more you side, seeing governments that and how to EU

London, Yes, thinking. -- just tackling over next we're just the sales blocking of quarter year or tackling. what probably setting and But up in first and with a really selling blocking is office it's revenue

We have the product now.

going the getting and business. about So out just

clear compliance end is be of the people on everyone My lastly, of June And Can just is when 'XX. of to anticipate you you begin walk how date that seeing not to through the comply? the assumption is June EU completing 'XX.

early. it year everything will in some life, do Like a

do over will little is Canada. bit Some all it in we a Board It's the AODA with late. saw what

depends So, just Company it's really the on themselves.

H.C. Our Scott Wainright. proceed. next question from Please from comes Buck

cash? The guys. that pay Is I saw to a have in that for to Or the move assets. you do contingent shares? Just stock that option quick consideration, one, current paid in

performance The cash like second based QX, time a It's purchase agreement BoIA of has a is is cash contingent payment. period. the XXXX it contingent And the on XXXX payment. payments and XXXX but a

it. Great. it appreciate for me, That's I guys.

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

Thank for us you joining today.

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

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

today for conference for earnings joining AudioEye's second quarter us Thank call. XXXX you

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