AudioEye, Inc.

Good afternoon, and welcome to AudioEye's second quarter 2021 earnings conference call. Joining us today for the call are AudioEye's interim CEO, David Marotti, Executive Chairman, Dr. Cara Bettis, and CFO, Ms. Kelly Georgievich. Following their remarks, we will open up the call for questions and 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 that are based on current expectations or 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 the conference call, and in 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 This 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 again for joining us today. After the market closed, we issued a press release announcing our results for the second quarter ended June 30th, 2021. A copy of the press release is also available in the investor relations section of our website at AudioEye.com. I'll now begin just as we always do with a brief 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 also do more than just identify accessibility issues. We fix, maintain, and continuously monitor them. We also certify websites to demonstrate compliance with both the American with Disabilities Act, or ADA, and the latest Web Content Accessibility Guidelines. Furthermore, we give our private sector clients an opportunity to gain an ROI from their investments and commitment to a 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 Q2 2001 results. In the second quarter, monthly recurring revenue, or MRR, grew approximately 25% year over year to $2 million. In addition, we more than doubled our customer count in prior year Q3 to 75,000, and grew revenue 14% year-over-year to $6 million. Gross margin continued to expand year-over-year, reaching 74.9% and increased from 69.6% a year ago. We remain proud of our customer retention rate. Our continued 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. Our balance sheet remains well capitalized with zero debt and $24.8 million of cash at June 30, 2021. Regarding our two revenue channels, the partner and marketplace channel includes all revenue for our SMB-focused marketplace products and revenue from a variety of partners who deploy these same products for their SMB customers. These include content management system partners of all types, such as industry vertical partners like dealer.com, recently announced partners like Dealer Center and platform partners like Duda, and also general digital agencies. In the second quarter of 2021, this revenue channel represented approximately 56% of both revenue and MRR. As the second half of 2021 unfolds, we expect to continue to see this channel contribute the majority of our growth in customer count and ultimately in MRR. The enterprise channel continued to perform in the quarter contributing approximately 44% of revenue and MRR. While non-recurring revenue from our PDF product was down from Q2 2020, recurring revenue from enterprise grew notably over the same period. We again added prominent enterprise brands from our direct sales efforts and continue to renew our enterprise clients at a healthy rate. Before turning the call over to David, I want to welcome Kelly Djurjevic to AudioEye as our recently appointed CFO Kelly has been a true pleasure to work with and has the experience and the skill to help AudioEye during the next phase of growth. David. Thank you, Carl.

It is my pleasure to speak with you today. I want to start by welcoming a couple of our recent executive hires, our CFO, Kelly Georgievich, and Chief Architect, Mace Gray. Kelly's career has been focused on SaaS and technology, and she was most recently the CFO at e-commerce platform, Sticky.io. She previously served as financial controller at software platform Fuse and spent seven years of her career in the audit practice at E&Y. She holds an accounting degree from the University of Northern Iowa and is a CPA. Mace Gray has a proven track record of leading engineering teams and delivering industry transforming products. He was most recently at Facebook, where he served as its product and technical lead for advanced workload and data management infrastructure powering their next generation advertising systems. Before that, he was one of the original architects at Oracle Cloud Infrastructure and led engineering teams at Amazon and several startups. As I've said on prior calls, one of the reasons I continue to be so confident about the bright future of AudioEye is the strength of the team, from top leadership to the quality of team members across all of the business functions. Simply put, our team is the strongest in the industry. In addition, we have the most advanced patented technology in a market, which we expect will grow substantially over the next few years. These factors all set us up for success in our mission to eradicate all barriers to digital accessibility. Now I'd like to review our progress year to date and outline how we see the balance of 2021 unfolding. I'm pleased with the second quarter results and our continued transition to a higher margin, highly scalable SaaS company. All of our recurring revenue business lines grew sequentially from the first quarter. We're investing further into R&D and sales and marketing to drive growth. I want to reiterate what I discussed in our last call. We're in a very strong position. First, the market for accessibility solutions is still in the early innings and growing. Second, our technology and transparent approach to solving accessibility for our clients are differentiated. Third, AudioEye's platform is highly scalable. Fourth, 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 75,000 current customers we have in various subscription tiers, our current partners have several hundred thousand potential AudioEye clients that are not yet in our customer count. Moving on to guidance. As discussed in our first quarter conference call, our guidance for accelerating revenue growth in the back half of the year was based on customer conversions to higher tier offerings and new partnerships. While we have made significant progress in customer count, aspects of these initiatives rely on external timelines, which has led us to adjust our own. We remain enthusiastic about these growth opportunities, but since they are no longer tracking to our calendar year plan, we are converting our forecast to one quarter at a time. In terms of guidance for the third quarter, we believe revenue will be between $6.1 to $6.3 million, representing 16% growth year-over-year at the midpoint. On to cash flow. In the first half of the year, we managed the business to have positive cash flow from operations while setting a foundation for future growth. Over the last two years, we have demonstrated the ability to manage costs when warranted, focusing on long-term shareholder value. Given the significant growth opportunity ahead, we are now increasing R&D and sales and marketing investments to capitalize on this market. As such, we expect to use cash in the second half of the year as certain initiatives unfold with the view to revisit our cash flow investment program for 2022. It's a great pleasure to turn the call over to our CFO, Kelly, to walk through additional financial results. Welcome, Kelly.