AudioEye, Inc.

And welcome to AudioEye's first quarter 2021 earnings conference call. Joining us for today's call are AudioEye's interim CEO, Mr. David Marotti, Executive Chairman, Dr. Kar Betis, and CFO, Mr. Saj 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 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 executive chairman, 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, 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, in the comments made during this 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 in its other reports and filings with the Securities and 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. 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 would 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 again today. After the market closed, we issued a press release announcing our results for the first quarter ended March 31st, 2021. A copy of the press release is also available in the investor relations section of our website at AudioEye.com. I'll begin, as we always do, with an overview of our business. AudioEye is a 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 the ADA, and the latest web content accessibility guidelines, or WCAG 2.1. Furthermore, for our private sector clients, we also give them an opportunity to gain an ROI from their investment in and commitment to the large population of individuals with disabilities. Before turning the call over to our interim CEO, David Morardi, I'll provide a few highlights around our Q1 2021 results. We had strong performance in several areas of focus this quarter. We expanded gross margins significantly. We doubled our customer count. We significantly bolstered our balance sheet, and we grew revenue for the 21st straight quarter. Monthly recurring revenue, MRR, at the end of the first quarter of 2021 increased to just over 1.9 million, which was 36% growth year over year. Revenue also grew 36% year over year, with the first quarter revenue reaching a new record of 5.8 million. Gross margins, they grew from 276, they grew 276.6%, from 69 percent in the first quarter of 2020, a year-over-year increase of 11 percent and 7.6 percentage points. It is worth looking back even further. Gross margins has grown to the Q1 76.6 percent level from 54 percent in the second quarter of 2019, just seven quarters ago. This dramatic margin expansion is a result of the company's strategy to increase automation and reflects the benefit of scale. We expect margins to somewhat stabilize around these levels, but improve as the business scales. Gross profit for the first quarter was 4.4 million compared to 2.9 million in Q1 of last year. New customer acquisition was very strong in Q1. We ended Q1 with approximately 68,000 customers representing about 500% growth year over year. David's going to talk some more about the momentum we are seeing in customer acquisition. and its expected impact on our MRR in the coming quarters. Customer retention also remains strong at historical rates. Our high retention rate speaks to not only the quality, stickiness, and transparency of our solution, but to the excellent service that our team provides to our customers. That loss for the first quarter of 2021 was 2.8 million, or 27 cents per share, compared to a loss of 1.7 million, or 19 cents per share, in the same year-ago period. However, on a non-GAAP basis, our Q1 net loss was a little less than $1 million, or $0.09 per share, compared to the same year-ago period of a loss at about $1.4 million, or $0.16 a share. The primary adjustments to GAAP earnings and EPS for both comparable quarters were non-cash share-based compensation, amortization, and amortization of interest expense related to the debt issuance. During the first quarter, we strengthened the balance sheet by raising $16 million through our ATM program and ended Q1 with $25.8 million of cash. This is around $2.50 a share using the quarter's average outstanding share counts. In addition to the strongest balance sheet the company has had in its history, we also generated free cash flow for the first time in AudioWise history, producing $350,000 in free cash flow through prudent costs and working capital management. Regarding our two revenue channels, 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, recently announced partners like Dealer Center, platform partners like Duda, and general digital agencies. In the first quarter of 2021, this revenue channel represented around 55% of both revenue and MRR. As 2021 unfolds, we expect to continue to see this channel contribute most of our growth in customer count and ultimately in MRR in the second half of 2021. Our enterprise channel continues to perform in the quarter as well, contributing about 45% of revenue and MRR. We added prominent enterprise brands from our direct sales effort and continued to renew our enterprise clients at a healthy rate. Large enterprises also benefit from our focus on automation and transparency. As we have noted previously, we are proud that large multinational corporations and government agencies, large and small, trust AudioEye with their digital accessibility solutions. Finally, before turning the call over to David, I also want to thank Saatch for his contributions as AudioEye's CFO and wish him all the best in his future endeavors. David. Great.

Thank you, Kar. It's my pleasure to speak with you today. I'm very pleased with the first quarter as we continue to transition to a higher margin and highly scalable SaaS company. As I said last quarter, we are not resting or patting ourselves on the back. we have a single-minded determination to achieve our mission, eradicate all barriers to digital accessibility. Today, I'd like to speak with you about a couple things. First, continued enhancements to our team, and second, progress year-to-date and how we see 2021 unfolding. First, about the team. During my tenure as CEO, we have continued to add depth and experience to our leadership. On the last call, I said that I believe that AudioEye's leadership team was the strongest team in our history. I'm pleased to report that I believe it is even stronger today with the addition of Chris Hundley, who joined AudioEye as CTO in March. Chris was most recently at Drift, where he led the transition and integration of his company, Cifrock, into the Drift family of products branded as Drift Email. Cifrock's machine learning and large-scale email processing technologies have allowed Drift to expand capabilities beyond chat into other forms of digital marketing, cementing their position as a leader in the conversational marketing space. I'm also pleased to report that we have made good progress on the CFO position and expect to have more updates for you in the near future. As becoming CEO last August, hiring exceptional talent such as Chris in all departments has been a key focus because AudioEye's success ultimately is not about a single individual. but about a 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. Progress year to date. After the extremely high revenue and NMRR growth in the back half of 2020, the first half of 2021 represents the next building block for AudioLive. The re-platforming initiative we announced in February was only possible because of our dedicated and talented staff. It is great to see it come together. This was a massive step forward, building a strong foundation we need to handle growth and scale into the millions of customers. As we have discussed, we have been hiring talented staff since last summer, and replatforming was the next vital move before we ramp up marketing efforts. Last year, our efforts in cost control and automation led to the material higher margins we are seeing today, and we think our replatforming and marketing investments will also have an outsizing turn for our shareholders in the future. As a larger shareholder of the company, I'm excited about where AudioEye is today. We're in a very strong position. First, the market for accessibility solutions is in the early innings, and it is growing. Second, our technology and transparent approach to solving accessibility for our clients is differentiated. Third, AudioEye's platform is highly scalable. We have exceptional talent to execute on our growth plans. Fifth, we are very well capitalized. Finally, and importantly, there are tangible reasons for us to be optimistic about what lies ahead. In addition to the 68,000 current customers we have in various subscription tiers, our current partners have several hundred thousand potential AudioWide clients that are not yet in our customer cap. We have a clear plan to tap this giant opportunity over the rest of the year. In addition, we fully expect to add more platforms and agency partnerships this year. In terms of guidance, we remain laser focused on growing MRR. We are reiterating our full year guidance range of 30 to 32 million. As I mentioned on the call in March, we expect MRR growth to accelerate in the second half of the year as we begin converting customers to higher tier offerings and announce new partnerships. We did have positive free cash flow in the quarter and expect to turn cash flow positive on an operating basis later in 2021. Before I turn the call over to Sash to walk through some additional financial results, I want to thank him again for all his contributions at AudioEye. His leadership and achievements have been significant given our growth. We have set a strong foundation for the future. He's leaving AudioEye in a much stronger position than when he joined us. We wish Sash good luck in his future endeavors. Again, thank you, Saj.