Q2 2022 AudioEye Inc Earnings Call
Good afternoon, and welcome sure audio Hi.
Quit or 2022 earnings call.
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I'd now like to turn the conference over to Brian I don't know if it. Please go ahead. Thank.
Thank you operator, joining us for today's call are audio Weis CEO , Mr. David Marathi and CFO Ms. Kelly, Georgia pitch following their remarks, we will open the call for questions from the company's publishing analysts.
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 Dot audio why dot com.
Before I turn the call over to audio Weis CEO the company would like to remind all participants that statements made by audio wide management. During the course of this conference call that are not historical facts are considered to be forward looking statements.
Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward looking statements.
<unk> believe expect anticipate estimate confident will and other similar statements of expectation identify forward looking statements.
These statements are predictions projections or other statements about future events and are based on current expectations and assumptions that are subject to risks and uncertainties actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call and in the risk factors section of the company's in.
Our report on Form 10-K, its quarterly reports on Form 10-Q, and its other reports and filings with the Securities Exchange Commission participants on this call are cautioned not to place undue reliance on these forward looking statements, which reflect management's belief only as of the date hereof.
Or do you I does not undertake any duty to update or correct. Any forward looking statements. Further management's remarks today will include certain non-GAAP financial measures a reconciliation of the most direct directly comparable GAAP financial measures to these non-GAAP financial measures is available on the company's earnings release posted in the Investor Relations section.
Of our web site at Www Dot <unk> Dot com now I'd like to turn the call over to audio Wise, Chief Executive Officer, Mr. David Marathi, Sir the floor is yours.
Thank you, Brian and welcome everyone and thank you for joining us.
Earlier. This afternoon, we issued a press release announcing our results for the second quarter that ended June 30th 2022.
You can find the press release on our web site's Investor Relations section.
Www Dot audio why dotcom.
We're excited to share the progress we have made in the quarter and wed like to begin by discussing our strong financial results.
Our second quarter revenue was at the high end of the guidance range, we provided last quarter at $7 6 million.
Revenue growth continues to accelerate with the second quarter, representing 26% year over year growth rate.
Revenue growth resulted from expansion of our partnership and marketplace channel, which I will discuss in more detail organic growth in our enterprise sales channel and revenue from our acquisition of the Bureau of Internet accessibility.
We are pleased with the integration of B O I E until Audi Y, which is performing within expectations.
In addition to achieving the high end of guidance. We are pleased to report our second quarter non-GAAP per share operating loss was reduced to two cents in the quarter.
The improvement is primarily the result of increased revenue and efficiencies coupled with expense management.
Annual recurring revenue or <unk> ended the quarter at $28 7 million up 19% versus the comparable year ago period.
The increase was driven by growth across all channels.
<unk> was affected by the timing of enterprise deals at the end of the quarter and the culling of lower profit margin accounts.
In addition to the solid financial results in the quarter, We recently announced two new partnerships I would like to highlight.
In July we formally announced new partnerships with sellers and the Doctor.
Seller. It is a leading provider omnichannel retail point of sale solutions, which processes over $2 5 billion annual retail sales.
The das as a leading platform for local experts, who sell digital solutions to small and medium businesses with a network of more than 65000 partners serving over 6 million Smbs.
These opportunities have significant potential and further validates that our product offering is best on the market and that our strategic approach to revenue growth through partnerships is working.
Our cost effective and comprehensive approach to solving web accessibility issues at scale is driving our high deal winning percentage with the sophisticated and discerning resellers and platforms.
Stellar had previously use a vendor and had this to say.
How do I quickly showed us that they are a partner that cares about us as well as our clients to deliver custom accessible experiences to those that need them well.
While many make these claims otherwise world class technology paired with certified accessibility and legal experts make them stand out as a partner we can trust.
The last of element on the partnership side I would like to touch on is the progress on the digital agency negotiation I discussed on the previous earnings call.
In the first quarter 2022 our customer count decreased due to renegotiations with digital agency upgrading from a basic tier two or more advanced offering.
We are pleased to confirm that a new agreement has been signed with this agency.
The new deal is a win for all parties.
We expect more of their customers to deploy and benefits tomorrow accessibility solution and are or will be materially higher overtime than in the prior agreement.
In the second quarter, we announced a $3 million stock repurchase program.
The program is authorized for the second quarter of 2024.
We are committed to deploying our capital in a manner that delivers the greatest value for all shareholders.
We are hard pressed to find many opportunities that represent higher return potential than our common shares when looking at our growth prospects and what similar companies are being valued at in the private markets.
As of June 32022, we have repurchased approximately $410000 under the program.
Moving onto guidance.
We're guiding for revenue of between 7.65, and 785 million in the third quarter, representing year over year growth of approximately 25% at the midpoint.
In the second quarter, our operating loss, excluding nonrecurring items and non-GAAP adjustments was reduced to approximately 250000, a substantial sequential improvement.
We expect operating loss, excluding nonrecurring items to remain stable in the third quarter and near breakeven by the fourth quarter.
We ended the second quarter, well capitalized with over $9 million of cash on June 30, and have the runway to continue investing in the business for the long term.
I will now turn the call over to <unk> CFO .
Kelly, Georgia pitch Kelly.
Thank you David as David mentioned, we are pleased with our second quarter 2020 to perform at the second quarter marked the 26th straight quarter of record revenue and then the quarter at $7 6 million, which was 26% growth year over year.
Annual recurring revenue or <unk>.
At the end of the second quarter of 2022.
$8 7 million, a 19% increase over AI at the end of the second quarter of 2021.
If you have any channels experienced organic growth.
The euro of Internet accessibility acquisition also contributing to enterprise revenue growth in the quarter.
Like in other revenue channels in more detail the partner marketplace channel, which includes revenue from our SMB focused marketplace products and a variety of F&B targeted partner grew 16% year over year and represented approximately 52% of total revenue and 55% of era.
We expect to continue to see those channels contribute significantly to our growth in revenue as we continue to both land new partners and expand existing partnerships.
The enterprise channel inclusive of revenue from the Bureau of Internet accessibility had a strong quarter, increasing 38% year over year and contributing approximately 48% of total revenue and 45% of air.
In addition, we have crane revenue from the enterprise channel increased 27% over the same period prior year.
Please proceed project based revenue increased over the same period of prior year with the addition of B O I E revenue, which help offset decreases in project based mobile and PDF revenue in 'twenty to 'twenty two.
Yeah.
On June 30 of 2022, our customer count with approximately 76000 and increased from 75000 customers at June 30 of 2021.
As David highlighted we also signed an updated contract with the agency that was going to renegotiations in Q1 and fell out of that customer count.
They have extended and expanded this partnership going forward.
Gross profit for the second quarter was $5 7 million or about 76% of revenue compared to $4 5 million and 75% of revenue in Q2 of last year.
We are pleased with the consistent gross margin percent given the significant investment in our next generation platform and customer success costs, which play a factor in cost of revenue.
We expect gross margin to be around 75% for the remainder of 2022.
With revenues up 26% year over year operating expenses in the second quarter 2022 increased 10% to $8 3 million from $7 6 million in the same quarter last year.
This increase was primarily driven by expenses appear of Internet accessibility and investments in head count offset by efficiencies in sales and marketing and lower stock compensation expense.
Claims really from Q1 2022 operating expenses decreased by approximately $500000 is there any thought of more effective marketing spend lower non reoccurring items and efficiencies across all departments, partially offset by a full quarter of deal related expenses in Q2 2022.
Our total R&D spend in Q2 was approximately $1 7 million with approximately 325000 reflected the software development cost and the investing section of the cashless statement.
Total R&D spend is about 23% of our revenue this quarter versus 32% last year.
We're committed to investments in R&D to maintain our best in class product and increasing revenue providing us additional operating leverage.
Net loss in the second quarter of 2022, with $2 6 million or 23 cents per share compared to a net loss of $1 8 million or 17 cents per share in the same year ago period.
The second quarter of 2021 benefited from a $1 3 million gain on loan forgiveness, which was non reoccurring.
On a non-GAAP basis net loss in the second quarter with about 250000 or two cents per share compared to a non-GAAP net loss of 650000 or six cents per share in the same year ago period.
Primary adjustments to GAAP earnings and EPS for Q2, 2022 for noncash share based compensation depreciation and amortization costs and litigation costs.
Cash burn in Q2, 2022 was within expectation, but decreased cash of $2 7 million in the quarter.
The decrease in cash is related to operating burn of approximately 250000.
Software capitalization of approximately 325000 410000 for stock repurchase.
150000 per tax payment related to employee share based grants.
1 million for nonrecurring items and approximately 600000 from other working capital movements.
Going forward, we expect overall cash used to go down sequentially in the third and fourth quarter.
Our balance sheet remains well capitalized with zero debt and $9 3 million of cash on June 32022.
With that we open up the call for questions operator, please give instructions.
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At this time, we will pause momentarily to assemble our robust there.
Our first question comes.
From Scott Buck with H C. Wainwright. Please go ahead.
Hi, Good afternoon, guys. Thank you for taking my questions I think the first one David you called out the seller Anthony Vendetti.
Partnerships in the release and spoke to him on the call can you remind us what.
The lead times are like are you now.
In terms of when we'll start to see some revenue and then maybe how large are these individual customers that they can present to you in terms of revenue.
Sure Yeah. The lead time on deals like this typically take.
Multiple quarters.
Significant opportunities over the long haul as we've seen with Mega resellers in the past our platforms have been das I would qualify as a platform.
We're 6 million smbs on their side.
What else were you asking your question.
Oh, just in terms of the size of the individual customer you can tie into the reseller channel here I mean are they.
And in terms of annual revenue or are there a couple of hundred Bucks or are they you know several thousand dollars. Yeah in terms of annual revenues that could be anywhere from <unk>.
Five to $700 up to $130000 in that range.
Okay.
Helpful. And then tell you Mike telling us what.
<unk> contributed in the quarter in terms of revenue.
We're not disclosing contributions from Bofa specific.
Specifically in the quarter, we can say that they did contribute to enterprise and we did see organic growth in both the enterprise and reseller channel and we were pleased to see.
Revenue offset decreases in Pds and mellow project.
Click based revenue in 2022.
Okay.
Do you guys, Mike telling us how youre marketing that now that it's under the audio I umbrella.
Or is it operating as a standalone at the moment or have you integrated it with some of your other products.
Yeah. It's currently being integrated in so we're in the process of doing that with product and sales and marketing.
Okay. That's helpful. And then last one for me just curious on the repurchase.
How should we thinking about repurchases going forward.
Or how are you looking at it you know if the stock trades under six should we assume that you guys are in the market repurchasing or what's the criteria that you look at.
We're looking at a variety of factors first the stock is extremely cheap.
I think less than two times revenue, if you take out the cash and the N O L. A so we're hard pressed to find many opportunities like this especially when you look at the private market.
We see transactions.
Very similar to us anywhere from eight to 12 times, even in the current market environment.
So that's the reason for the stock repurchase we can't give you exact levels of where we're going to go in and buy.
And it could change at any time, and so I don't really want to talk about what we're doing intra quarter.
Sure that's fair well I appreciate the time guys and congrats on all the progress.
Thank you Scott.
Okay.
Again, if you have a question. Please press Star then one.
Please hold.
Yeah.
Our next question comes from Zach Cummins with B Riley. Please go ahead.
Hi, guys. This is Pat can help on for Zach today.
A few questions from me have you. The first would be have you seen any elongation in sales cycles or softness in demand related to the current macro environment.
Hi, Curt.
We've seen a little tightening on the enterprise side of budgets.
And that was towards the end of the quarter. However, we did bring in a lot of those deals over the past five weeks in this new quarter.
So there's a little bit of tightness on the enterprise side that we've seen I think you've also seen in the market.
Smbs has the similar commentary in terms of the large public website builders.
Our signaling some weakness in terms of Smbs. So I don't think we're immune to recessionary environment I think we're holding in very well.
As I said, we closed a lot of these enterprise deals that came in because of budget reasons. They still have to solve their problems of accessibility. So even though they put it off in a given quarter they've got to come back and solve this eventually.
Otherwise, they're open themselves up to litigation and brand risk.
Yeah.
Great. Okay. The next from me. So can you give a little bit more insight into the new contract with the agency partner again kind of what is expected to contribute in terms of customer count and IRR. If you could give any kind of insight there that'd be helpful.
Yeah, I don't think we can speak about specific customers.
Customers are contracts.
We're just very positive on these type of deals going forward and I think theyre going to contribute a lot of air art and customer count in the future. So we look to scale those up over the next few quarters.
Alright, Okay and then the last one for me can you give any more detail regarding partnerships with sellers had been that the currently like what type of revenue.
Revenue are they contributing and what sort of growth opportunities can we.
See what these two.
Yeah, that'd be the same as the last answer.
I can't really speak to specifics on those are just very significant opportunities in the long haul.
Okay. Thanks, guys.
No problem.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to David <unk> for any closing remarks. Please go ahead.
Thank you for joining us today as always I want to thank our employees partners and investors for their continued support we look forward to updating you on our next call.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Yeah.
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Yeah.
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