AUDIOEYE INC Q3 FY2024 earnings call

• Strong Q3 performance: Achieved high end of revenue guidance, beat adjusted EBITDA guidance, exceeded Rule of 40 for the first time. Sequential revenues grew 21% annualized, adjusted EBITDA margin improved. - Partnerships: Expanded partnership with Finalsite (K-12 schools) and CivicPlus (public sector SaaS) to penetrate their customer bases over 3 years. - Acquisition: Accretive acquisition of ADA Site Compliance completed, which had ~$2M revenue in 2023 with ~70% recurring, and integrated their team. - Innovations: Launched Accessibility Protection Status, general availability of Accessibility Testing Software Kit SDK. - Compliance: Achieved HIPAA compliance and SOC 2 Type 2 certification.

The Partner and Marketplace channel represented 59% of revenue in the third quarter, with 5% sequential growth and 21% annualized growth. The Enterprise channel contributed 41% of revenue, also with 5% sequential growth and 21% annualized growth. In terms of ARR, the Partner and Marketplace channel accounted for around 58% of ARR, while the Enterprise channel was around 42% of ARR. Sequential revenues grew from $8.47 million in the second quarter to $8.93 million in the third quarter, representing an annualized growth rate of 21%. Adjusted EBITDA margin improved from 17% in the second quarter to 23% in the third quarter. Third quarter revenue grew 14% year-over-year, and non-GAAP operating expenses were reduced by 10%.

• Q4 revenue guidance: $9.7 million to $9.8 million, 24% year-over-year growth. - Full year 2024 revenue guidance: $35.2 million to $35.3 million. - Q4 adjusted EBITDA guidance: $2.2 million to $2.3 million, 23% margin. - Full year 2024 adjusted EBITDA guidance: $6.62 million to $6.72 million. - Full year 2024 adjusted EPS guidance: $0.54 to $0.55.

Q: George Sutton asks about the practicality of fully penetrating Finalsite and CivicPlus customers over three years, regulatory environment post-new administration, and go-to-market with ADA.

A: David Moradi states full penetration would be significant, doesn't think regulatory environment changes as rules like Title II can't be rolled back, and mentions migrating ADA Site Compliance customers to AudioEye products.

Q: Richard Baldry inquires about synergies of ADA acquisition, scaling partnerships, and balancing EBITDA and go-to-market.

A: David Moradi says similar growth to previous acquisition, partnership scaling is highly scalable with AI and automation, and can grow both EBITDA margin and revenue.

Q: Zach Cummins asks about inbound demand for EU accessibility mandates in 2025 and gross margin progression.

A: David Moradi notes seeing leads but not deals yet, Kelly Georgevich says gross margin at 80% is expected to continue improving due to product mix and efficiencies.