AUDIOEYE INC Q4 FY2024 earnings call

• David Moradi noted that in Q4 2024, the company achieved record revenue, gross margins, adjusted EBITDA, and free cash flow. Revenue per employee reached over $330,000 in Q4. - The company invested in AI automated detection, with an analysis showing it can automatically detect approximately 500% more issues than other solutions. - The 2025 Digital Accessibility Index was released, showing a significant increase in accessibility issues detected. - The European Accessibility Act (EAA) approaching in June 2025 led to building a team in Europe to address the EU market. - In the U.S., the Office of Personnel Management's memo reaffirmed enforcement of existing disability laws, and the business had limited revenue in the federal government. - Jim Hawkins was welcomed to the Board of Directors. - Kelly Georgevich discussed revenue growth by channel, operating expenses, R&D spend, and profitability metrics like net loss and adjusted EBITDA.

In Q4 2024, revenue for the partner and marketplace channel grew 14% year-over-year and represented approximately 58% of ARR. The enterprise channel contributed 42% of ARR. For full year 2024, revenues grew 12% to $35.2 million from $31.3 million. Gross margins in Q4 2024 improved to 80%, and for the full year 2024, gross margins were approximately 79%. Adjusted EBITDA in Q4 2024 was approximately $2.3 million, and on a full year basis, record adjusted EBITDA of approximately $6.7 million was produced.

• First quarter 2025 revenue guidance: $9.7 million to $9.8 million. Adjusted EBITDA guidance: $1.85 million to $1.95 million. Adjusted EPS guidance: $0.14 to $0.16 per share. - Full year 2025 revenue guidance: $41 million to $42 million (~18% growth at midpoint). Adjusted EBITDA guidance: $9 million to $10 million (~41% growth at midpoint). Adjusted EPS guidance: $0.70 to $0.80 per share. - Expect growth acceleration in the second half of 2025 from EU and continued U.S. demand.

• Economic conditions could impact business growth. - Challenges in implementing the European Accessibility Act (EAA) in Europe. - Potential changes in government policies affecting digital accessibility requirements in the U.S. could pose risks.

Q: Please state your question. Joshua Riley asked about EBITDA guidance for 2025, including sales investments in Europe and the U.S., and if additional sales hires would be made if demand outperforms.

A: Kelly Georgevich responded that the guidance accounts for expected sales and marketing investments in Europe and the U.S., and David Moradi mentioned being aggressive but waiting for signs of demand.

Q: Zach Cummins asked about trends in the enterprise channel and potential investments in 2025.

A: Kelly Georgevich said the enterprise channel is seeing strong growth with record leads and improving close rates.

Q: Richard Baldry asked about adding new partners, balance between buybacks and debt reductions, retentions, and friction points if Europe accelerates.

A: David Moradi said they're speaking to partners in Europe, buybacks are a good use of cash, retention rates are around 90%, and hiring salespeople is a challenge if Europe accelerates.

Q: George Sutton asked about GDPR comparison for Europe, DOJ enforcement, and ADA site compliance rollout.

A: David Moradi said private litigation is the driver, and ADA site compliance is being upsold to customers.

Q: Scott Buck asked about return on increased marketing spend and capital allocation.

A: Kelly Georgevich said they're investing in marketing with good ROI and will balance investment in sales and marketing while maintaining adjusted EBITDA margins.