Q4 2023 AudioEye Inc Earnings Call
Operator: Good afternoon, and welcome to AudioEye's fourth quarter and full year 2023 earnings conference call. Joining us today on today's call are AudioEye CEO, Mr. David Moradi, and CFO, Ms. Kelly Georgevich.
Good afternoon, and welcome to audio is fourth quarter and full year 2023 earnings conference call. Joining us today on today's call are audio I C. E O Mr. David Marathi and CFO Ms. Kelly, Georgia pitch following their remarks, we'll open up the call for questions from the company's pub.
Operator: Following their remarks, we'll open up the call for questions from the company's publishing analysis. I would now 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. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. The words believe, accept, anticipate, estimate, confident, will, and other similar statements of expectation identify four kinds of looking statements.
Analysis.
I would now 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 I Dot com before I turn the call over to audio <unk> Chief Executive Officer of the company would like to remind all participants that statements made by audio I management.
During the course of this conference call that are not historical facts are considered to be forward looking statements. The private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward looking statements. The words believe except anticipate estimate confident will and other similar statements of expectation identify.
Forward looking statements. These statements are predictions projections and other statements about future events and are based on current expectations and assumptions that are subject to risks and uncertainties.
Operator: These statements are predictions, projections, and other statements about future events and are based on current expectations and assumptions that are subject to risk and uncertainties. Actual results could materially differ because of factors discussed in today's press release, in the comments made during the conference call, and in the risk factors section of the company's annual report on Form 10-K, its quarterly reports on Form 10-Q, and its other reports and filings with the Securities and Exchange Commission. Participants on this call are cautioned not to place undue reliance on these forelooking statements, which reflect management's beliefs only as of the date hereof. AudioEye does not undertake any duty to update or correct any forward-looking statements.
Actual results could materially differ because of factors discussed in today's press release and the comments made during the conference call and in the risk factors section.
Section of the company's annual report on Form 10-K, its quarterly reports on form on Form 10-Q, and its other reports and filings with the Securities <unk> Securities and Exchange Commission.
Participants on this call are cautioned not to place undue reliance these forward looking statements, which reflect management's beliefs only as of the date hereof or do I does not undertake any obligation does not undertake any duty to update or correct any forward looking statements.
Operator: Further management's remarks today will conclude with certain non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures to these non-GAAP financial measures is available in the company's earnings release or otherwise posted in the investor relations section of its website at www.audioeye.com. Now I would like to turn the call over to AudioEye's Chief Executive Officer, Mr. David Moradi. Sir, please proceed.
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 in the company's earnings release.
Otherwise posted in the Investor Relations section.
Of its website at Www Dot audio <unk> Dot com now I would like to turn the call over to audio is Chief Executive Officer, Mr. David Marathi Sir. Please proceed.
David D. Moradi: Thank you, operator. Today, I will discuss a few of the accomplishments since joining AudioEye in 2019 and why we are on the strongest trajectory in our history. But first, I want to thank all of our employees for their hard work in getting us there. As the largest investor and shareholder, I initially joined the board in 2019 as chair of the Strategic Committee of the Board of Directors to address operating efficiency and strategy. While AudioEye was growing off a small revenue base, operating efficiency needed to improve, and growth margins were in the mid-50s. Adjusted APDA margins were in the mid-negative 60s, and Gravity Per Employee was in the low $100,000 range.
Thank you operator.
Today, I will discuss a few of the accomplishments since joining audio why 2019 and why are we around the strongest trajectory in our history, but first I want to thank all of our employees for their hard work to get us here.
As the largest investor and shareholder I initially joined the board in 2019 as chair of the strategic many of the board of director to address operating efficiency and strategy.
Well Ali why it was growing up a small revenue base operating efficiency needed something.
Gross margins were in the market.
Adjusted EBITDA margins were in the big negative 60 and revenue per employee was in the low 100000 dollar range.
David D. Moradi: The company is in a much stronger position today. We have tripled revenue and dramatically improved operating efficiency. Growth margins have improved to the high 70s, and adjusted EBITDA margins have improved by approximately 80 points to 17% in the fourth quarter. Revenue per employee is approaching $300,000. These efficiency metrics are now in the top tier at SAS.
The company is in a much stronger position today.
Both revenue and dramatically improve operating efficiency.
Gross margins have improved the high 70, and adjusted EBITDA margins have improved by approximately 80 point to 17.
17% in the fourth quarter.
Revenue per employee is approaching $300000.
He used to patients the metrics are now in the top tier or something.
David D. Moradi: We are entering 2024 ready to capitalize on all this hard work. Our operating leverage will allow us to drive future revenue growth with only moderate increases in operating expenditures. The fourth quarter was an inflection point.
We are entering 2024 ready to capitalize on all of this hard work.
Our operating leverage will allow us to drive future revenue growth with only moderate increases in operating expenditures.
The fourth quarter was an inflection point.
David D. Moradi: We achieved gross margins of 78 percent and record adjusted EBITDA of $1.3 million while generating approximately $900,000 of free cash flow. We delivered solid recurring revenue growth of approximately 700,000 sequentially, and we ended the year with 110,000 paying customers, the most of anyone in the digital accessibility industry. The product development team has accomplished a lot over this time. After building a new platform and migrating all of our customers over, we invested further into products for enterprise customers. I'm pleased to report that we're seeing this bet pay off with one of the best enterprise ARR growth quarters to date. Our balance sheet is strong. As Kelly will discuss, we received a $7 million term loan from SG Partners in November of last year. The term loan did not include any warrants or other equity incentives.
We achieved gross margins of 78% and record adjusted EBITDA of $1 3 million, while generating approximately 900000, a free pass well.
We delivered holiday there are approximately 700000 sequentially and we ended the year with 110000 paying customer the most with anyone in the digital accessibility industry.
Product development team has accomplished a lot over this time.
After building, a new platform and migrating all of our customers over we invested further in the product for enterprise customers.
I'm pleased to report that we're seeing that pay off.
One of the best enterprise are our growth quarter to date.
Our balance sheet is strong.
As Kelly will discuss we received a $7 million term loan F. C partner in November of last year.
The term loan did not include any one or other equity dilution.
David D. Moradi: The board and management remain highly aligned with shareholders. In November, the board announced a stock buyback of $5 million. As of March 5th, we have repurchased 437,000 shares at an average price of $4.87. In addition, under our previous stock buyback announced in June of 2022, we bought 139,000 shares at an average price of $544. Combining both programs, we have repurchased 5.5% of the shares outstanding over the last two years at a valuation below two times revenue for the benefit of long-term shareholders. Lastly, management and members of the board have purchased approximately 350,000 shares on the open market over the last two and a half years.
The board and management remain highly aligned with shareholders.
In November the board announced a stock buyback of $5 million.
As of March that we have repurchased 437000 shares at an average price of 47.
In addition, under our previous stock buyback announced in June of 2022, we bought 139000 shares at an average price of 544.
Combining both program, we have repurchased five 5% of the shares outstanding over the last few years and evaluation below two times revenue for the benefit of long term shareholders.
Lastly management and members of the board.
Purchased approximately 350000 shares on the open market over the last two and a half years.
David D. Moradi: We have also invested substantially in R&D, to our knowledge, the most of anyone in the industry. Our investment in R&D allows us to meet customers wherever they are in their accessibility journey, from the smallest businesses to large enterprise customers. We recently announced a few new products and features. AudioEye's accessibility testing SDK allows developers to identify and quickly address accessibility issues at the source, empowering them to implement changes in pre-production environments proactively.
We have also invested substantially in R&D, where our knowledge most of them.
Anyone in the industry.
Our investment in R&D allows us to meet customers wherever they are and that's that's really good.
Those businesses large enterprise customer.
We recently announced new products and features.
How do you why accessibility testing SDK allows developers to identify and quickly addressing really itchy outlet stores empowering them to implement changes in preproduction environment proactively.
David D. Moradi: Recognizing the need for consistency in issue detection, the SDK employs the same automated test logic utilized by AudioEye's accessibility experts during customer site audits and automated monitoring. With SSO, we address the stringent security requirements of enterprise clients, providing a deeper level of security and policy adherence. We continue to improve our rules engine and have made ongoing quality improvements to the test suite, incorporating advanced rules that more accurately test compliance with current legal guidelines, further improving our industry-leading lawsuit protection. Awareness of digital accessibility has grown, and private plaintiff attorneys are filing record levels of digital accessibility lawsuits under the ADA. Further, we expect that a significant driver of future progress will come from the regulatory environment. In 2023, the Department of Justice proposed comprehensive accessibility regulations under Title II of the ADA.
Recognizing the need for consistency unless you detection yes.
I'm quite the same automated pathologic utilized by audio I think that's the only expert during customer site audits and automated monitoring.
So we address the stringent security requirements enterprise clients, providing a deeper level of security and policy in here.
We continue to improve our rules engine and have made ongoing quality improvements to depress me incorporating advanced rule that more accurately.
With current legal guideline.
Further improving our industry, leading Lockheed protection.
Awareness of digital accessibility has grown and private plaintiffs attorneys are following record levels. They talk basketball he lawsuit under the date yet.
Further we expect that a significant driver.
That will come from the regulatory environment.
In 2023, the department of Justice proposed comprehensive basketball deregulation under title.
Oh, yeah yeah.
David D. Moradi: We expect further development and updates over the course of 2024. Also, several bills and regulations are currently being considered at the state level. Lastly, the European Accessibility Act requires businesses in the EU to have accessible websites and mobile apps by June of 2025 or face severe fines. Currently, 96 to 97 percent of all websites on the internet remain inaccessible. It has become clear that the old way of trying to fix issues at the source does not scale and will not solve the problem.
We expect further development and updates over the course of 2024.
Also several bills and regulations are currently be deterred.
Level.
Lastly, European Accessibility Act requires businesses, meaning you got accessible website and mobile app by June of 2025 or 55.
Approximately 90, 697% of all websites on the Internet remain inaccessible.
Yeah, it's become clear that the old way.
At the store does not bill and will not solve the problem.
David D. Moradi: Our approach to combining AI with human-assisted technology is the only way to solve this problem at scale. One of the most respected leaders in digital accessibility, Mike Paciello, recently joined AudioEye as chief accessibility officer. He also believes that the old way is not working, and a new vision is needed to meet the scale of the problem.
Our approach of combining AI with human assisted technology only way to solve this problem at scale.
One of the most respected leaders in digital accessibility, Mike Potts yellow recently joined <unk>.
No the opposite.
He also believes that the old way and not working on a new vision as needed to meet the scale of the problem.
David D. Moradi: Mike is a pioneer of digital accessibility with a deep understanding of the challenges faced by individuals with disabilities in the digital world. Mike brings over 40 years of expertise to this critical role, including authoring the first book on web accessibility, finding me at the Paciello Group, a pioneering accessibility solutions provider, and Co-founding and Co-Chairing Accessibility Industry Committees to Drive Advancement in Policy and Legislation. As a former co-chair of the United States Federal Access Board's Telecommunications and Electronics and Information Technology Advisory Committee and recognized by President Bill Clinton for his contribution to the W3C Web Accessibility Initiative, I can play a pivotal role in shaping accessibility standards and practices. Moving on to guidance. For the first quarter, we are guiding for revenue between $8 and $8.1 million.
Mike is a pioneer in digital accessibility with a deep understanding of the challenges faced by individuals with disabilities and the digital world.
Mike brings over 40 years.
Critical raw, including offering first book on web accessibility.
Finally in the past yellow grease pioneering billing solutions provider.
Co founded and co chairing accessibility industry committees to drive advancements in policy and legislation.
As the former culture in the mountain States federal access for telecommunications and electronic and information Technology Advisory Committee.
And recognize that President Bill Clinton was contribution from the W. E T.
First of all the initiatives.
I think played a pivotal role in shaping definitely standards and practices.
Moving onto guidance.
In the first quarter, you are guiding for revenue of between eight and $8 1 million.
David D. Moradi: With Social Security taxes and other beginning of year expenses, we expect to generate adjusted EPA between $700,000 and $900,000 on adjusted EPS of $0.06 to $0.08 per share. We're entering 2024 with strong business momentum. In addition to continued operating margin improvement, we expect revenue growth to accelerate throughout the year. For 2024, we are guiding for revenue of between $34 and $34.4 million, with growth rates approaching the high teens by the fourth quarter. We expect adjusted EPA between 3.5 and 4.5 million and adjusted EPS between 29 and 38 cents per share. I'll now turn the call over to AudioEye's CFO, Kelly. Thank you, David.
With talks with 30 taxes. Another beginning of your expenses, we expect to generate adjusted EBITDA between seven and 900000.
And adjusted EPS of six to eight cents per share.
We're entering 2024 with strong business momentum.
In addition to continued operating margin improvement, we expect revenue growth to accelerate throughout the year.
For 2024, we are guiding for revenue of between 34 to $34 4 million with growth rates approaching high teens by the fourth quarter.
We expect adjusted EBITDA between three five and $4 5 million and adjusted EPS between <unk> 29, and 38 cents per share.
I'll now turn the call over to our CFO Kelly.
Thank you David as David discussed revenue again.
Kelly Georgevich: As David discussed, revenue again hit record levels in Q4 2023, with revenue at $7.87 million, a 2% increase from Q4 2022, and a minor increase sequentially from Q3 2023. On a full year basis, in 2023, our revenue grew 5% to $31.3 million from $29.9 million. As we have discussed on previous earnings calls, 2023 was impacted by several contract renegotiations running the channel. The Partner and Marketplace channel includes all revenue from our S&B-focused Marketplace products and revenue from a variety of partners who deploy these same products for their S&B customers.
You can partly in 'twenty three.
787, Million% to 2% increase from Q4, 2022, and a minor increase sequentially from Q3 2023.
And if all your base in 2023, our revenues grew 5% to 31 3 million from $29 nine.
As we have discussed on previous earnings calls 2023 with impact and I have a contract renegotiation.
Turning to channels.
The partner marketplace channel increased revenue from our F&B focus marketplace products and about the Nielsen variety of partnering to apply these same products for their SMB customers.
Kelly Georgevich: For the fourth quarter of 2023, our partner Marketplace Channel grew 10% year over year and represented approximately 59% of revenue and 60% of ARR. On a full year basis, this channel's revenue grew 13% from $16 million in revenue in 2022 to $18 million in 2023. We continue to see expansion of existing customers and additional partners engaging with AudioEye, which continues to fuel growth. AudioEye's enterprise channel consists of our larger customers and organizations, including those with non-platform custom websites who generally engage directly with AudioEye sales personnel for pricing and solutions.
For the fourth quarter of 2023 partner marketplace channel grew 10% year over year and represented approximately 39% up Avenue and 60% of a R. R.
And I saw your basis in 2023, that's channels revenue grew 13% from $60 million of revenue in 2020 two to 18 million in 2023, we.
We continue to see expansion of existing customers and additional partners engaging without anyway, which continues to be all crap.
How do you guys enterprise channel can specify a larger customer as an organization.
Nah I'm custom website, who genuinely engaged directly with IDI sales personnel or pricing installation.
Kelly Georgevich: Last year, the enterprise channel was impacted by a large enterprise customer rolling up. However, with the momentum we are seeing in enterprise growth, we expect to resume year-over-year growth in Q2 2024. In Q4 2023, the Enterprise Channel contributed approximately 41% of revenue and 40% of ARR.
Last year, the enterprise channel was impacted by a large enterprise customer rolling off.
With the momentum we are seeing it in the background, we expect trade down year over year growth in Q2 2024.
Fortunately in 'twenty three the enterprise channel contributed approximately 41% up Avenue and 40% of a R. R.
Kelly Georgevich: Annual recurring revenue, or ARR, at the end of the fourth quarter of 2023 was $31.2 million, a 7% increase over ARR at the end of the fourth quarter of 2022. ARR grew approximately $700,000 sequentially, and as David mentioned, we expect this growth to accelerate going into 2024. On December 31st, 2023, our customer count was approximately 110,000, an increase from 107,000 customers on September 30th, 2023 and an increase of approximately 24,000 customers from December 31st, 2022. The increase in customer count was driven by additions in the partner marketplace channel.
Annual recurring revenue or AI at the end of FY 2023 was $31 2, million% to 7% increase or AI or at the end of the fourth quarter 2022.
They are hard to approximately $700000 sequentially and as David mentioned, we expect this growth to accelerate going into 2024.
On December 31st playing 23, our customer count of approximately 110000, an increase from 107000 customers on September 30 of 2023, and an increase of approximately 24000 customers from December 31 2022.
The increase in customer count was driven by additions in the partner marketplace channel.
Kelly Georgevich: Gross profit for the fourth quarter was $6.2 million, or about 78% of revenue, compared to $6 million and 77% of revenue in Q4 of last year. For the full year 2023, our gross margins will be approximately 78%, with gross profit increasing from $22.7 million in 2022 to $24.3 million in 2023. There are several factors that go into the cost of revenue, including web hosting, customer support, and other costs directly related to delivering the product.
Got it.
Fourth quarter was $6 2 million or about 78% of revenue compared to $6 million and 77% of revenue in Q4 of last year.
For the full year 2023, gross margins were approximately 78% with gross profit increasing from $22 7 million in 2022 to $24 3 million in 2023.
There are several factors that go into cost of revenue, including web hosting customer support and other costs directly related to delivering the product in.
Kelly Georgevich: In 2023, we are able to drive these costs down while also growing revenue and adding additional value to our customers. As we continue to implement efficiencies, we believe gross margin has room to expand in future quarters. While revenues were up 2%, operating expenses in the fourth quarter of 2023 decreased 16% to $6.7 million from $7.9 million in the same quarter last year. On a full year basis, revenue increased 5% while operating expenses decreased $2.8 million from $33.1 million in 2022 to $30.3 million in 2023. The annual year-over-year decrease was driven primarily from efficiencies implemented in sales and marketing, which is continuing to produce impressive lead generation with lower investment needed and lower stock compensation and other non-recurring expenses, partially offset by investments in R&D.
In 2020 three we were able to drive these costs down while also growing revenue and adding additional value to our customers.
As we continue to implement efficiency, we believe gross margin has room to expand in future quarters.
Well Robin has around 2% operating expenses in the fourth quarter of 2023 decreased 16% to $6 7 million from $7 9 million in the same quarter last year.
On a full year basis revenue increased 5%, while operating expenses decreased $2 8 million from $33 1 million in 2000 $22 million to $33 million in 2023.
The annual year over year decrease was driven primarily from efficiencies implemented in sales and marketing, which is continuing to forget it's impressive lead generation with lower investment needed and lower stock compensation and other nonrecurring expenses.
Yeah.
It's in R&D.
Kelly Georgevich: In Q4 2023, with major R&D initiatives completed, we were able to gain more efficiencies in R&D. Our total R&D spend in Q4 was approximately $1.7 million, with approximately $465,000 reflected in software development costs in the investing section of the cash flow statement. This was down from approximately $2.4 million in Q3 2023. R&D spend for the full year 2023 was $8.9 million, inclusive of $1.9 million reflected in software development costs.
In Q4, 2023 major R&D initiatives completed we were able to gain more efficiencies in R&D.
Total R&D spend in Q4 with approximately one 7 million with approximately 465000 affected of software development costs, and then best infection of the cash flow statement.
It was down for approximately $2 4 million in Q3 2023.
Alright, he spent with all you're saying 23 was $8 9 million inclusive of $1 9 million reflected a software development costs.
Kelly Georgevich: The total R&D spend is around 22% of our Q4 and 29% of our full year 2023 revenue, compared to 25% of Q4 2022 revenue and 24% of full year 2022 revenue. We feel the current investment in R&D is appropriate for 2024. The net loss in the fourth quarter of 2023 was $500,000 or $0.04 per share compared to a net loss of $1.9 million or $0.17 per share in the same year-ago period.
Total R&D spend at around 22% of our Q4 and 29% of our full year 2023 revenue compared to 25% of Q4, 2022 revenue and 24% of all your 2022 right.
We feel the current investment in R&D is appropriate for 2024.
Net loss in the fourth quarter of 2023 and was $500000 or four cents per share compared to a net loss of $1 9 million or 17 cents per share in the same year ago period.
Kelly Georgevich: On a full-year basis, the net loss for 2023 was $5.9 million, or $0.50 per share, compared to a net loss of $10.4 million, or $0.91 per share, in 2022. This is a dramatic improvement from the net loss a few years ago, and is a result of both increases in revenue and efficiencies, including technological investments. In the fourth quarter of 2023, we achieved record profitability with adjusted EBITDA of approximately $1.3 million, or $0.11 per share, compared to adjusted EBITDA of $200,000, or $0.01 per share in the same year-as-old period. On a full-year basis, we also produced adjusted EBITDA of approximately $1.3 million, or $0.11 per share, compared to a negative adjusted EBITDA of $900,000, or The primary adjustments to gap earnings in EPS for Q4 2023 and full year 2023 were non-cash share base compensation, depreciation, and amortization, non-cash valuation adjustments to liabilities related to the earn-out of the OIA, and other miscellaneous costs.
On a full year basis.
For 2023 was $5 9 million or 50 cents per share compared to a net loss of $10 4 million or 91 cents per share in 2022.
This is this is a dramatic improvement from net loss of a few years ago and as a result of both increases in revenue and inefficiencies, including technological investment.
In the fourth quarter of 2023, we achieved record profitability with adjusted EBITDA of approximately $1 3 million or 11 cents per share compared to adjusted EBITDA of 200000 or one cent per share in the same year ago curious.
On a full year basis, we also produced adjusted EBITDA of <unk>.
My 1.3 million or 11 cents per share compared to a negative adjusted EBITDA of 900000 or a loss of eight cents per share in 2022.
The primary adjustments to GAAP earnings and EPS for Q4, 2023, and full year 2023 were noncash share based compensation depreciation and amortization noncash valuation adjustments of liabilities related to the earn out a BLA and other miscellaneous costs.
Kelly Georgevich: In November 2023, we partnered with SQ Credit Partners for a $7 million term loan. We plan to use the proceeds from the loan for share repurchase and add additional liquidity to our balance sheet. In Q4 2023, we implemented a share repurchase program of up to $5 million, with $1.1 million of shares repurchased in the fourth quarter of 2023. As David discussed, in the fourth quarter of 2023, we hit a significant milestone, positive free cash flow. In the quarter, we generated $900,000 of free cash flow, calculated as adjusted EBITDA of $1.32 million. That's $465,000 of software development costs.
In November 2023, partnering with S. T credit partners for $7 million term loan with plenty of the prestige phenomenon for share repurchase and to add additional liquidity to our balance sheet.
In Q4, 2023, we implemented a share repurchase program of up to 5 million with $1 1 billion of shares repurchased in the fourth quarter 2023.
As David discussed in the fourth quarter of 2023, we hit a significant milestone positive free cash flow in the quarter. We generated 900000 of free cash flow calculated as adjusted EBITDA of 1.32 million. That's 465000 of software development costs we.
We are pleased we are able to achieve this milestone and expect to continue to generate positive free cash flow in 2024.
With the addition of the term on our balance sheet is well capitalized with $9 2 million of cash as of December 31st 2023.
Operator: We are pleased we are able to achieve this milestone and expect to continue to generate positive free cash flow in 2024. With the addition of the pheromone, our balance sheet is well capitalized with $9.2 million of cash as of December 31, 2023. With that, we open up the call for questions. Operators, please give instructions.
With that we open up the call for questions operator, please give instructions.
Thank you.
We will now take questions from the company's publish publishing analysis.
Can I ask a question you May press Star then one on you touched on phone.
If youre using a speakerphone please pick up your handset before pressing the keys. If anytime. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, a pause momentarily to assemble our roster.
Operator: Thank you. We will now take questions from the company's publishing analysis. To ask a question, you may press star then 1 on your touchtone phone.
And the first question will come from George Sutton with Craig Hallum. Please go ahead.
George Frederick Sutton: If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then two. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from George Sutton with Craig Hallam. Please go ahead. Thank you. Hello, David. Hello, Kelly.
Thank you David Hello, Klaus congratulations on the results.
Thank you.
Just wanted to walk through what you were defining as an accelerating growth.
Throughout the year ahead.
And just one understand the factors behind that obviously, we do have some.
David D. Moradi: Congratulations on the results. Thank you. I wanted to walk through what you were defining as accelerating growth throughout the year ahead and just want to understand the factors behind that. Obviously, we do have some easier comps, but wanted to make sure I was fully appreciating what's driving that acceleration. Yeah, when you look at the guidance, it implies revenues are going to ramp up as the year unfolds. So, as I said on the call, we're expecting high teens revenue growth in the back half with strong EPA margins. Also, the sequential growth rates should pick up and compound even higher than the high teens as we get to the second half. Compiled ARR is what I'm talking about. And we expect the Enterprise Channel and the Partner and Marketplace Channel to contribute to this. The EU, by the way, is not in these numbers at all, because I know you're about to ask that, and Mark Hake. We'll see you next time.
Easier comps, but.
Wanted to make sure I was fully appreciating what what's driving the acceleration in growth.
Yeah. When you look at the guidance. It implies revenues are going to ramp as the year unfolds. So I said on the call we're expecting high teens revenue growth in the back half.
With strong EBITDA margins.
Also the sequential growth rates should pick up in compound even higher than the high teens as we get into the second half compounded when I'm talking about and we expect the enterprise channel and the partner and marketplace channel to contribute to this you by the way is not in these numbers at all because I know you're about to ask that.
[laughter], we are focused on your investment in Europe, but I would say that you've.
You've made some C O N changes.
You got to do it a little.
You added new salespeople I Wonder if you can give us a bigger.
David D. Moradi: We are focused on your investment in Europe, but I would say that you've made some CRM changes, you've added analytics, you've added new salespeople. I wondered if you could give us a bigger explanation of sort of what's driving the go-to-market. Yeah, I think it's just the full product suite we have now with all that R&D investment we've made. We can meet you wherever you are, whether you're a small business or you're a big, large enterprise.
Explanation of sort of what's driving the go to market plans.
Yeah, I think it's just the fall.
Full product suite, we have now with all of that R&D investment. We've made we can meet you wherever you are whether you're a small business or you're a big large enterprise we have to.
<unk> offering and I think that's a major competitive advantage and like you said, there's been a lot of optimization in our go to market. So we're seeing some record lease there and we're seeing the most robust pipeline on the enterprise side in our history.
David D. Moradi: We have this breadth of offering, and I think that's a major competitive advantage. And, like you said, there's been a lot of optimization in our go-to-market strategy. So we're seeing some record leads there, and we're seeing the most robust pipeline on the enterprise side in our history. Great. Lastly, if I could bring two things together. You mentioned a record number of lawsuits that you're seeing under the ADA. We're obviously, we believe, months away from getting a more defined law from the DOJ. What do you think is driving this record number of lawsuits right now? And is there any way you can quantify that? Most sites are inaccessible on the internet today.
Great.
Actually if I could bring teams together you mentioned a record number of law suit.
Due to the a D a where obviously we believe months away from getting a more defined.
A walk from the Doj what do you think is driving this record number of losses right now.
And is there any way you can quantify that.
Most sites are inaccessible on the internet today, only three or 4% of sites or festival. So lawyers find an easy time suing companies and.
David D. Moradi: Only three or four percent of sites are accessible. So lawyers have an easy time suing companies and making money off of this, and that's why you're seeing record numbers of ADA lawsuits. It's just wide open here. I mean, the TAM is humongous, and we're in the early innings, so I can't really quantify how big this is going to be, but it's going to be big. Okay, I'll leave it there. Thanks, guys. Thank you. The next question will come from Zach Cummings with B. Reilly SBR. Please go ahead. Hi, good afternoon.
Making money off of this and that's why you're seeing the record 88 lawsuits.
It's just wide open here I mean, the Tam is humongous and we're in the early innings. So I can't really quantify how big this is going to be but it's going to be big.
Okay I'll leave it there thanks guys.
Thank you.
The next question will come from Zach Cummins with B Riley FBR. Please go ahead.
Yes, hi, good afternoon, David and Kelly Congrats on the solid results in the building momentum into 2024.
Zachary Cummins: David and Kelly, congratulations on the solid results and the building momentum into 2024. David, just starting off, could you just talk a little bit more about what you're seeing from that enterprise team? I know it was a big focus for you throughout 2023 to really build up that motion, so just curious about maybe some of the initial payback you're getting from that investment here in recent months. What do you mean in terms of payback, in terms of ARR costs, or the drive?
David just starting off can you just talk a little bit more about what you're seeing from that enterprise team I know it was a big focus for you throughout 2023 to really build up that motion. So just curious if maybe somebody but initial payback youre getting from that investment here in recent months.
What do you mean in terms of payback in terms of <unk>.
Yeah.
David D. Moradi: Yeah, in terms of just productivity that you're seeing from that team now that they're fully kind of built out and working towards, kind of fully ramped up. Yeah, like I said, the pipeline's building. We've optimized a lot. We have record leads. It's not gonna stop. It's just gonna continue.
Yeah in terms of just productivity that you're seeing from that team now that they are fully built out and working towards a kind of fully ramped up.
Yeah like I said the pipeline is building with optimized a lot.
We have rapidly.
Not going to stop that's just going to continue I can see it in the Domino's system, we use and so it's just really clicking so I'm happy to see that.
David D. Moradi: I can see it in the demo system we use, and so it's just really clicking, so I'm happy to see that. Got it. And when it comes to the stuff down in R&D expense that we saw here in Q4, I mean, can you give me a sense of kind of, is that really just a winding down of some major projects that you've been working on for multiple quarters in the past? Or what's going to be an appropriate way to think of ongoing R&D expense? Yeah, look, we made a lot of improvements to our product over the last two to three years. We're continuing to invest to maintain our lead. But we have completed a number of initiatives on the R&D side, so we were able to drive some efficiency. So you should expect similar levels of R&D going forward. I got it.
Got it.
When it comes to the step down in R&D expenses that we saw here in Q4, I mean can you give me a sense of kind of.
Is that really just a.
Wind down of some major projects that you've been working on for multiple quarters in the past or what's kind of the appropriate way to think of ongoing R&D expense.
Yes look we made a lot of improvements for our product over the last two to three years, we're continuing to invest to maintain our lead.
But we have completed a number of initiatives in the R&D side. So we were able to drive some efficiencies. So you should expect similar levels.
R&D going forward.
Got it.
David D. Moradi: And final question is really just on the competitive landscape, obviously another acquisition of one of your competitors at the end of last year. So just curious about the evolving nature of that competitive landscape and how AudioEye stacks up amongst this consolidation. Yeah, since PE got into space three to four years ago, there's been a lot of M&A activity. You've seen buyouts, you've seen capital raises. They think the space is gonna grow a lot more. That's why they're putting all this money into it. Competitor was recently taken out, user way for about eight times revenue. And that was a subscale company, about 12 and 13 million in revenue. So the space is clearly consolidating. There will likely be only a handful of players at the end here, so I think it's a good setup.
Final question is really just on the competitive landscape.
Obviously, another acquisition of one of your competitors.
At the end of last year. So just curious if any evolving nature of that competitive landscape and how audio AD stacks up.
Amongst those consolidation.
Yeah <unk> got this base the three to four years ago Theres been a lot of M&A activity, you've seen buyout you've seen capital raises.
They think the space is going to grow a lot more that's why they're putting all this money into this.
Our competitor has recently taken out user way for about eight times revenue and that was a subscale company in about 12 or $13 million revenue.
So the phase is clearly consolidating their likely be only a handful of players at the end here.
So I think it's a good setup.
Zachary Cummins: Got it. Well, thanks for taking my questions and best of luck with the rest of the quarter. Thank you. The next question will come from Scott Buck with H.C. Wainwright.
Got it well thanks for taking my questions and best of luck with the rest of the quarter.
Thank you.
The next question will come from Scott Buck with H C. Wainwright. Please go ahead.
Scott Christian Buck: Please go ahead. Hi, good afternoon, guys. Thanks for taking my question. First, David, I'm curious about the conditions that set up the high teen year-over-year revenue growth in the back half of this year. Could they potentially carry over into 2025? And I guess I'm asking because I'm curious if we could see not only acceleration of revenue in 2024 but then further acceleration in the following year. I think so.
Hi, Good afternoon, guys. Thanks for taking my question.
David I'm curious the conditions that.
At up to high teen year over year revenue growth in the back half of this year to.
Could they potentially carry over into 2025, and I guess I'm asking because I'm curious if we could see that on the acceleration of revenue in 2024, but then further acceleration in the following year.
I think so we've turned a corner here and nothing is going to stop this training and so I think you'll see higher growth rates with EU into 2025 D O J regulation on the state and local government.
David D. Moradi: We've turned a corner here, and nothing's going to stop this train. And so I think you'll see higher growth rates with the EU into 2025 and DOJ regulation on state and local government. This train is leaving the station.
This train is leaving the station.
Kelly Georgevich: Great, that's helpful. And then on the guide, it looks like the adjusted EBITDA margin is somewhere around 12% based on the midpoint. What does the EBITDA margin look like on this business, that kind of maturity, I guess? Yeah, you know, we like to see that 17% in Q4 2023. If you look at the guide, it does put you in a double digit, and we do expect to accelerate revenue in the second half. And so you can assume even margins would accelerate kind of a similar rate.
Great. That's helpful and then on the the guide it looks like the adjusted EBITDA margin is somewhere around a 12% based on the midpoint.
What is the EBITDA margin it looked like on this business that kind of maturity I guess.
Yeah, yeah, we'd like to see that the 17% in Q4 of 2023 and if you look at the Guy that's the check kind of double.
Yet, we do expect to accelerate revenue in the second half and so you can assume EBITDA margins would accelerate them kind of at similar rates.
Kelly Georgevich: But we do think there's an opportunity for 11% growth in fiscal year 2024 and growth further in the second half of 2024. That's helpful, Kelly. And then last one for me, guys, just on the buyback. Stocks obviously appreciated quite a bit from where your average purchase price was to date. I'm curious how you guys are feeling about the price today. Still pretty attractive, can't get into levels with you, but last I checked, it was around two times revenue or so. So it's still pretty cheap when companies are taken out for a time.
And we do think there's an opportunity to 11% of its full year and grow further in the second half of 2024.
That's helpful. Kelly and then last one for me guys just on the buyback.
Stock's, obviously appreciated you know quite a bit from where are your average purchase price was to date I'm curious how you guys are feeling about the price today.
It's still pretty attractive can't get into levels with you, but last I checked it was around two times revenue or so so that's still pretty cheap when companies are getting taken out for eight times.
Scott Christian Buck: Yep, that's it for me, guys. I appreciate the added color and congratulations on the results. Thank you. At this time, this concludes our question and answer session. I would like to turn the call back over to Mr. Moradi for any closing remarks. Please go ahead.
Yep, that's it that's it for me guys I appreciate the added color and congrats on the results.
Thank you.
At this time. This concludes our question and answer session I would like to turn the call back over to Mr. Moroni for any closing remarks. Please go ahead.
David D. Moradi: 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. Before we conclude today's call, I would like to remind everyone that a recording of today's call will be available for replay via a link provided in the investor section of the company's website. Thank you for joining us today for AudioEye's fourth quarter and full year 2023 earnings conference call. You may now disconnect. and Mark Hake. Thank you. Thank you.
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.
Before we conclude today's call I would like to remind everyone that a recording of today's call will be available for replay via a link available in the investors section of the company's website. Thank you for joining us today and for audio its fourth quarter and full year 2023 earnings Conference call. You may now disconnect.
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