AudioEye, Inc.

Good afternoon, and welcome to AudioEye's fourth quarter 2020 earnings conference call. Joining us for today's call are AudioEye's interim CEO, Mr. David Marotti, Executive Chairman, Dr. Carl Bettis, and CFO, Mr. Sach Barot. Following their remarks, we will open up 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 Thank you for joining us. provides a safe harbor for such forward-looking statements. The words 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 not based on current expectations and assumptions that are subject to risks and uncertainties. could differ materially because of factors discussed in today's press release, in the comments made during the conference call, and in the risk factor sections of the company's annual report on Form 10-K and its quarterly reports filing with the Securities and Exchange Commission. Participants on this call are cautioned not to place under-reliance on these forward-looking statements, which reflect management's belief only as the date hereof. AudioEye 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 directly comparable GAAP financial measures to these non-GAAP financial measures is available in the company's earnings release posted in the Investor Relations section of our website at www.audioeye.com. Now I'd like to turn the call over to AudioEye's Executive Chairman, Dr. Carl Bettis. Sir, please proceed.

Thank you, operator. Welcome, everyone, and thank you for joining us today. After the market closed, we issued a press release announcing our results for the fourth quarter ended December 31st, 2020. A copy of the press release is available in the investor relations section of our website at AudioEye.com. I'll now begin, you know, as we always do here with a business overview. We are the leading provider of SaaS-based digital content accessibility platform and solutions. Our mission, eradicate all barriers to digital accessibility. We pride ourselves in addressing the largest range of issues that impact many people around the globe. At AudioEye, we do more than just identify accessibility issues. We strive to fix, maintain, and continuously monitor them. We also certify websites to demonstrate compliance with both the Americans with Disabilities Act, or ADA, and the latest Web Content Accessibility Guidelines, or WCAG 2.1. Furthermore, for our private sector clients, we give them an opportunity to gain an ROI from their investment in and commitment to a large population of individuals with disabilities. Before turning the call over to our interim CEO, David Moradi, I'll provide a few highlights around our Q4 and full for your 2020 results. We had another truly excellent quarter and fiscal year. Q4 marks the 20th straight quarter of record revenue, ending the quarter at about $5.6 million, which was over 57% growth year over year. Monthly recurring revenue, or MRR, at the end of the fourth quarter of 2020 was about $1.9 million, a 54% increase over MRR at the end of the fourth quarter of 2019. On a full year basis, in 2020, our revenue grew 90% to $20.5 million from $10.8 million in 2019. Gross profit for the fourth quarter was $4.1 million, or about 73% of revenue, compared to $2.4 million and 66% of revenue in Q4 of last year. It's worth looking back a bit further to put our margins and gross margin progress into context. Gross margin was 54% in the second quarter of 2019. Again, in the fourth quarter, gross margin was up materially to 73%. This is a result of the company's strategy to increase automation and reflects the benefit of scale. As we mentioned in the past, we expect our gross margins to continue to improve. On a four-year basis, gross profit increased 128% to $14.5 million, about 71% of total revenue. from 6.4 million or about 59% of total revenue in the same year-ago period. New customer acquisition was also very strong in Q4. We ended Q4 with approximately 32,000 customers representing about 370% growth year-over-year. We were also very proud of our customer retention which remained strong at historical rates. Our high retention rates speak to not only the quality, stickiness, and transparency of our solution, but to the excellent service that our team provides to our customers. Net loss in the fourth quarter of 2020 was $3 million or about $0.30 per share compared to $1.4 million or $0.16 per share in the same year-ago period. However, on a non-GAAP basis, our Q4 net loss was about $900,000 or $0.09 per share compared to the same year-ago period of about $1.3 million loss of $0.14 per share. On an annual basis, the net loss and many more. The net loss in 2020 was $7.2 million or $0.77 per share compared to $7.8 million or $0.97 per share for fiscal year 2019. On a non-GAAP basis for the full year 2020, net loss improved to $2.6 million or $0.28 per share from $6.6 million or $0.81 per share for fiscal year 2019. The primary adjustments to GAAP earnings and EPS for both the full year and Q4 with non-cash share-based compensation and amortization of interest expense related to the debt issuance. In a recent past, we've provided an update on three revenue channels, enterprise, vertical partners, and other, which has included the marketplace. However, our growth and strategy has evolved over the last six quarters to focus on two primary channels today, the partner and marketplace channel, and secondly, the Enterprise Channel. The Partner and Marketplace Channel includes all revenue from our SMB-focused marketplace products and revenue from a variety of partners who deploy these same products for their SMB customers. These include CMS partners of all types, such as industry vertical partners like dealer.com, platform partners like Duda and general digital agencies. In the fourth quarter of 2020, this revenue channel represented more than 50% of our revenue and our MRR. As 2021 unfolds, we expect to continue to see this channel contribute explosive growth in customer count and MRR. We also remain excited about our enterprise channel. In the fourth quarter, we continue to add prominent enterprise brands from our direct sales efforts and continue to renew our enterprise clients at a healthy rate. Large enterprises also benefit from our focus on automation and transparency. We are proud that large multinational corporations and government agencies, both large and small, trust AudioEye with their digital accessibility solution. Finally, just a word about COVID-19. Since the spring of 2020, we've discussed the uncertain impact of the global pandemic and its negative impact on our business. While there is still uncertainty about the impact of the pandemic in general, We're pleased to say we are seeing the COVID-driven headwinds being replaced with new business opportunities as commercial activity picks up. I'll now turn the call over to David, who will provide a brief update on our platform and leadership development. David.

Thank you, Carr. It is my pleasure to speak with you today. I am pleased with the excellent fourth quarter and our results for 2020, but we are not resting or patting ourselves on the back. Instead, we have a single-minded determination to achieve our mission, eradicate all barriers to digital accessibility. Our bold, uncompromising mission requires execution and a great team of leaders and employees. I want to speak with you about two important things. First, AudioEye's differentiated platform. Second, our team, which will execute on the strategy. First, I will discuss the platform. AudioEye's platform is the most comprehensive, technology-first answer to accessibility, period. Yes, we are trusted by tens of thousands of SMBs, by some of the world's biggest brands, and by some of the largest U.S. government agencies, but we also have a truly differentiated product offering. On February 2nd, we announced our next-generation platform, representing a significant advancement for digital accessibility. The new platform features always-on accessibility monitoring, coupled with the most advanced artificial intelligence in the industry. We provide an accessibility score that shows customers what we do and do not fix. We can improve a client's accessibility score by up to 30 points on day one. Our IAAP certified subject matter experts are available to help clients further improve their accessibility with human-assisted technology. Since at present there is no 100% fully automated solution on the market, we believe that transparency is paramount to addressing issues of web accessibility. Customers should and will demand it. We think that as the industry develops opaque products making unsubstantiated claims will be left behind. It is worth remembering that we not only build great technology that is robust, Cost effective and highly scalable, but we create the technology to help our clients and partners meet the needs of individuals with disabilities. Without full transparency, this is not possible. About the team. During my tenure as CEO, we have continued to add depth and experience to our leadership. I believe that, without question, today we have the strongest leadership team in AudioWise history. Since we spoke last quarter, we have added two additional key members to our leadership team. In December, Rob Alveling joined as Chief Business Officer. Rob was most recently at Pinterest, where he led the platform integration strategy, delivering significant revenue growth and new client acquisition. Before Pinterest, he led platform integration partnerships at Facebook, creating integrations with dozens of platforms globally. The partnerships drove the acquisition of hundreds of thousands of clients for Facebook and billions of dollars in revenue. He also served as VP of Business Development and Sales at Find, where he helped steer the company through a Facebook acquisition. At the beginning of this month, we announced Zach Okun joined as Chief Product Officer. Zach was most recently at Facebook, where he led their offsite data products, like the Facebook Pixel and Conversions API. Zach's products serve millions of customers and power tens of billions of dollars in revenue. Before Facebook, he led product teams at Oracle Cloud Infrastructure, Amazon Web Services, and several high-growth startups. Our ability to attract exceptional talent such as Rob and Zach is because they too believe that AudioEye is posed for explosive growth, and they can help us achieve our full potential. That said, AudioEye's success is not about a single individual, but about our complete team of leadership and staff working together. It is an honor to work with such a talented leadership team and with our mission-driven employees. In February, we followed an S3 shelf registration and implemented an ATM program to raise additional capital. We're pleased to report that we have raised over $14 million in net cash at an average price of around $38 a share. This cash strengthens our balance sheet and gives us the flexibility to take advantage of new market opportunities in this rapidly growing space. In terms of guidance, we remain focused on growing MRR and becoming cash flow positive in 2021. We were off to a good start in 21 and reiterate our full year guidance range of 30 to 32 million. We expect growth to accelerate in the second half of the year as we begin converting customers to higher tier offerings and announced new partnerships. Before I turn the call over to Sash to walk through some additional financial results, I want to take a minute to thank him for his contributions at AudioEye. We have improved critical systems and processes during the last two years, added talent and necessary infrastructure. These achievements have been significant given our growth and we have set a strong foundation for the future. We are confident of a smooth transition and wish Sash good luck in his future endeavors. Again, thank you, Sash.