AudioEye, Inc.

AudioEye's first quarter 2024 earnings conference call. Joining us today are AudioEye's CEO, Mr. David Marotti, and CFO, Ms. Kelly Georgievich. 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.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, 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 material 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 10Q and in its other reportings 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 beliefs 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. Reconciliation of the most direct comparable GAAP financial measures to use 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'd like to turn the call over to AudioEye's Chief Executive Officer, Mr. David Marotti. Sir, please proceed.

Thank you, operator. Well, it's been approximately six weeks since our last earnings call. Several developments have occurred that we are excited to discuss today. As our last earnings call mentioned, the fourth quarter was a significant inflection point. We generated record adjusted EBITDA and positive free cash flow while generating solid ARR growth. We are pleased to report that this momentum is continuing and driving the increase in our full year guidance, which I will cover later in the call. But first, I'll discuss the changing regulatory landscape, which we expect to impact the business significantly in 2025 and beyond. On April 8th, the Department of Justice signed a final rule under Title II of the Americans with Disabilities Act. These regulations mandate that state and local government entities ensure their websites and mobile applications are accessible to people with disabilities following the Web Content Accessibility Guidelines 2.1 . The documents published by the Justice Department estimate $17 billion in implementation costs over the first three years and $2 billion annually after the initial phase. The regulation applies to public schools, community colleges, universities, public hospitals and clinics, state and local police departments, courts, election offices, and state and local government offices that provide benefits or social services like food assistance, health insurance, employment services, libraries, transit agencies, and a range of other government-related entities. The new market opportunity under Title II is significant with most public sites not being accessible today. We are uniquely positioned to meet the demand increase with our direct sales team and our reseller channel. On the reseller side, we are already partnered with the leading SaaS platforms that serve cities, municipalities, and K-12 education websites. We estimate that these partners serve over 80,000 websites, which must all become compliant over the next two to three years. We are currently penetrated only in the single digits today in these resellers. A scalable approach like ours is required to meet this significant demand increase. AudioEye continues to improve its best-in-class technology platform, including investments in the latest artificial intelligence and scaled infrastructure to serve billions of end-user sessions and millions of potential customers. In addition to the Justice Department, we are excited about the opportunity in Europe. As discussed last quarter, the European Accessibility Act takes effect in June 2025 and requires digital accessibility for websites and mobile apps by that date. We are also seeing regulatory developments in additional jurisdictions, including California's AB 1757 proposal. If passed in its current form, it would expand and solidify the requirement that businesses operating in California must have accessible websites and mobile devices. As noted, we are not including any benefit from these upcoming requirements in our guidance for this year, but we expect meaningful demand increases in 2025 and beyond. Since joining the company in 2019, the customer count has increased from 3,500 to 112,000, and revenues have more than tripled. We are prepared to support this significant demand increase from the public sector. With the final rule just announced two weeks ago, we are still early in the planning phase, and we will share more about our outlook beyond 2024 as the year progresses. In the first quarter, we achieved system and organizational controls, or SOC 2 Type 1 compliance. This important milestone underscores our commitment to upholding the highest security and data privacy standards. Achieving stock two type one compliance was a priority for us as we continue to expand our enterprise channel and service large enterprise organizations. Stock two type one attainment and products rolled out this past year will further support the enterprise channel's growth initiatives.

The board and management remain highly aligned with shareholders.