Record Total Customer Count, MRR and Total Revenue
TUCSON, Ariz. — November 12, 2020 — AudioEye, Inc. (NASDAQ: AEYE), an industry-leading digital accessibility platform delivering website accessibility compliance to businesses of all sizes, reported financial results for the third quarter ended September 30, 2020.
Third Quarter and Recent Operational Highlights
Added key executives to help build on and execute upon on the strategic initiatives laid out last November which are designed to accelerate growth in customers, MRR and gross margin:
As many Enterprise organizations continue to balance the still-uncertain impact of COVID-19, AudioEye continued to grow its Enterprise (direct) sales channel client roster in the third quarter with prominent new customers from the automotive, fashion and retail industries, among others.
Continued to solidify existing Vertical (indirect) channel partner relationships through deeper penetration within active channel partners who offer AudioEye as a preferred digital accessibility solution to their clients.
The Company remains focused on growing monthly recurring revenue (MRR) as its leading financial indicator. The Company is reiterating its expectation to grow MRR and become cash flow positive in 2021. This expectation remains subject to the overall economic conditions.
AudioEye’s Director and Interim CEO David Moradi said, “We continue to bring on top tier talent, invest in our scalable technology and expand our market leading position as we pursue our mission to eradicate barriers to digital access. AudioEye remains the market’s most trusted choice when it comes to digital accessibility compliance, as we deliver to our customers unique, truly comprehensive and sustainable digital accessibility solutions through our platform.”
Executive Chairman Dr. Carr Bettis added, “Our positive momentum continued in the third quarter of 2020 with an increase in our total customer count to about 22,000 customers representing enterprise, vertical partner and marketplace/platform channels. We also saw an increase in total revenue, representing our 19th straight quarter of revenue growth, and an increase in MRR, with MRR at the end of Q3 at approximately $1.7M, an increase of 67% on a year-over-year basis.”
AudioEye management will hold a conference call today, November 12, 2020 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.
AudioEye management will host the conference call, followed by a question and answer period.
U.S. dial-in number: (877) 407-9208
International number: (201) 493-6784
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.
The conference call will also be webcast live and available for replay, which will be accessible via the investor relations section of the company’s website. The audio recording will remain available via the investor relations section of the company’s website for 90 days.
A telephonic replay of the conference call will also be available after 7:30 p.m. Eastern time on the same day through November 19, 2020.
Toll-free replay number: (844) 512-2921
International replay number: (412) 317-6671
Replay ID: 13712272
AudioEye is an industry-leading digital accessibility platform delivering trusted ADA and WCAG accessibility compliance at scale. Through patented technology, subject matter expertise and proprietary processes, AudioEye is eradicating all barriers to digital access, helping creators get accessible and supporting them with ongoing advisory and automated upkeep. Trusted by the FCC, ADP, SSA, Samsung, and more, AudioEye helps everyone identify and resolve issues of accessibility and enhance user experiences, automating digital accessibility for the widest audiences. AudioEye stands out among its competitors because it delivers Machine Learning/AI-driven accessibility without fundamental changes to site architecture. Join our movement at www.audioeye.com.
Any statements in this press release about AudioEye’s expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance are not historical facts and are “forward-looking statements” as that term is defined under the federal securities laws. Forward-looking statements are often, but not always, made through the use of words or phrases such as “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, “outlook” , “forecast” and similar words. You should read the statements that contain these types of words carefully. Such forward-looking statements contained herein include, but are not limited to, statements regarding anticipated contributions from less mature lines of business, long-term growth prospects, opportunities in the digital accessibility industry, our expectation that we will grow MRR and be cash flow positive in 2021 and the COVID-19 related macroeconomic impact to our customers and to AudioEye. These statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements, including the variability of AudioEye’s revenue and financial performance; risks associated with product development and technological changes; the acceptance of AudioEye’s products in the marketplace by existing and potential future customers; competition; general economic conditions; and uncertainties regarding the impact on our business and the overall economy from the coronavirus (COVID-19) outbreak. These and other risks are described more fully in AudioEye’s filings with the Securities and Exchange Commission (the “SEC”), including AudioEye’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 30, 2020, Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 15, 2020, Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August 13, 2020 and its subsequent filings with the SEC. There may be events in the future that AudioEye is not able to predict accurately or over which AudioEye has no control. Forward-looking statements reflect management’s view as of the date of this press release, and AudioEye urges you not to place undue reliance on these forward-looking statements. AudioEye does not undertake any obligation to update such forward-looking statements to reflect new information, future events or uncertainties or otherwise after the date hereof.
We consider monthly recurring revenue (“MRR”) as a key operating metric and a key indicator of our overall business. We also use MRR as (i) one of the primary methods for planning and forecasting overall expectations and for evaluating, on at least a quarterly and annual basis, actual results against such expectations; and (ii) as a performance metric for certain executive share-based compensation awards.
We define MRR as the sum of (i) for our enterprise and agency sales channels, the total of the average monthly fee amount under each active paid contract at the date of determination, plus (ii) for our vertical partners, marketplace and platform sales channels, the recognized monthly fee amount for all paying customers at the date of determination, in each case, assuming no changes to the subscription and without taking into account any usage above the subscription or recurring revenue base, if any, that may be applicable to such subscription. This determination includes both annual and monthly contracts for recurring products. Some of our contracts are cancelable, which may impact future MRR. MRR excludes revenue from our PDF remediation services business.
Vertical Partner is a CMS provider or a company which provides a web-hosting platform for private and public entities and resells the AudioEye Managed service as an accessibility service offering to its customers. CMS providers who are focused on a specific industry vertical are referred to as Vertical Partners by AudioEye. CMS providers who are vertical agnostic are referred to as Platform partners by AudioEye.
From time to time, we review adjusted financial measures that assist us in comparing our operating performance consistently over time, as such measures remove the impact of certain items, as applicable, such as our capital structure (primarily interest charges), items outside the control of the management team (taxes), and expenses that do not relate to our core operations, including transaction-related expenses (such as professional and advisory services) and other costs that are expected to be non-recurring. In order to provide investors with greater insight, and allow for a more comprehensive understanding of the information used in our financial and operational decision-making, the Company has supplemented the information presented on a GAAP basis in this press release with the following non-GAAP financial measures: Non-GAAP earnings (loss) and Non-GAAP earnings (loss) per diluted share.
These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of Company results as reported under GAAP. The Company compensates for such limitations by relying primarily on our GAAP results and using non-GAAP financial measures only as supplemental data. We also provide a reconciliation of non-GAAP to GAAP measures used. Investors are encouraged to carefully review this reconciliation. In addition, because these non-GAAP measures are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures, as defined by us, may differ from and may not be comparable to similarly titled measures used by other companies.
We define: (i) Non-GAAP earnings (loss) as net income (loss), less non-cash valuation adjustments to liabilities, plus interest expense, plus share-based compensation expense and plus certain severance expense; and (ii) Non-GAAP earnings (loss) per diluted share as net income (loss) per diluted common share, less non-cash valuation adjustments to liabilities, plus interest expense, plus share-based compensation expense and plus certain severance expense, each on a per share basis. Non-GAAP earnings per diluted share would include incremental shares in the share count that are considered anti-dilutive in a GAAP net loss position. However, no incremental shares apply when there is a Non-GAAP loss per diluted share, as is the case for the periods presented in this press release.
Non-GAAP earnings (loss) and Non-GAAP earnings (loss) per diluted share are used to facilitate a comparison of our operating performance on a consistent basis from period to period and provide for a more complete understanding of factors and trends affecting our business than GAAP measures alone. All of the items adjusted in the Non-GAAP earnings (loss) to net loss and the related per share calculations are either recurring non-cash items, or items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, such as share-based compensation expense and valuation adjustments to assets and liabilities, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from expenses that do not relate to our core operations and are more reflective of other factors that affect operating performance. In the case of items that do not relate to our core operations, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.
Non-GAAP earnings (loss) is not a measure of liquidity under GAAP, or otherwise, and is not an alternative to cash flow from continuing operating activities, despite the advantages regarding the use and analysis of these measures as mentioned above. Non-GAAP earnings (loss) and Non-GAAP earnings (loss) per diluted share, as disclosed in this press release, have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP; nor are these measures intended to be measures of liquidity or free cash flow for our discretionary use.
To properly and prudently evaluate our business, we encourage readers to review the GAAP financial statements included elsewhere in this press release, and not rely on any single financial measure to evaluate our business. Reconciliations of Non-GAAP earnings (loss) to net loss, the most directly comparable GAAP-based measure, as well as Non-GAAP earnings (loss) per diluted share to net loss per diluted share, the most directly comparable GAAP-based measure, are included in this press release. We strongly urge readers to review these reconciliations, along with the consolidated financial statements included elsewhere in this press release.
Corporate Contact:
AudioEye, Inc.
Dr. Carr Bettis, Executive Chairman
cbettis@audioeye.com
Investor Contact:
Matt Glover or Tom Colton
AEYE@gatewayir.com
(949) 574-3860
AUDIOEYE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three months ended September 30, |
Nine months ended September 30, |
|||
|---|---|---|---|---|
|
2020 2019 |
2020 2019 |
|||
| ( In thousands, except per share data ) | ||||
| Revenue | $5,341 | $2,776 | $14,885 | $7,198 |
| Cost of revenue | 1,551 | 1,147 | 4,478 | 3,193 |
|
|
|
|
|
|
| Gross profit | 3,790 | 1,629 | 10,407 | 4,005 |
| Operating expenses: | ||||
| Selling and marketing | 2,028 | 1,598 | 5,551 | 4,257 |
| Research and development | 203 | 149 | 801 | 442 |
| General and administrative | 3,197 | 2,040 | 8,185 | 5,624 |
| Total operating expenses |
5,428 |
3,787 |
14,537 |
10,323 |
| Operating loss | (1,638) | (2,158) | (4,130) | (6,318) |
| Other income (expense): | ||||
| Change in fair value of warrant liability | 593 | — | 120 | — |
| Interest expense | (35) | (37) | (141) | (39) |
| Total other income (expense) |
558 |
(37) |
(21) |
(39) |
| Net loss | (1,080) | (2,195) | (4,151) | (6,357) |
| Dividends on Series A Convertible Preferred Stock |
(13) |
(13) |
(39) |
(39) |
| Net loss available to common stockholders |
$(1,093) |
$(2,208) |
$(4,190) |
$(6,396) |
| Net loss per common share-basic and diluted |
$(0.12) |
$(0.27) |
$(0.46) |
$(0.81) |
| Weighted average common shares outstanding-basic and diluted |
9,385 |
8,279 |
9,067 |
7,848 |
AUDIOEYE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| September 30, 2020 | December 31, 2019 | |
|---|---|---|
| ( In thousands, except per share data ) | ||
| ASSETS | ||
| Current assets: | ||
| Cash | $10,295 | $1,972 |
| Accounts receivable, net of allowance for doubtful accounts of $79 and $63, respectively | 3,457 | 2,958 |
| Unbilled receivables | 34 | 160 |
| Deferred costs, short term | 179 | 183 |
| Debt issuance costs, net | — | 137 |
| Prepaid expenses and other current assets | 219 | 198 |
| Total current assets |
14,184 |
5,608 |
| Property and equipment, net of accumulated depreciation of $179 and $124, respectively | 121 | 156 |
| Right of use assets | 671 | 827 |
| Deferred costs, long term | 102 | 145 |
| Intangible assets, net of accumulated amortization of $4,294 and $3,710, respectively | 1,931 | 1,715 |
| Goodwill | 701 | 701 |
| Total assets |
$17,710 |
$9,152 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable and accrued expenses | $1,588 | $973 |
| Finance lease liabilities | 57 | 52 |
| Operating lease liabilities | 223 | 209 |
| Warrant liability | — | 120 |
| Deferred revenue | 5,587 | 5,372 |
| Total current liabilities | 7,455 | 6,726 |
| Long term liabilities: | ||
| Finance lease liabilities | 23 | 52 |
| Operating lease liabilities | 486 | 655 |
| Deferred revenue | 110 | 153 |
| Term loan | 1,302 | — |
| Total liabilities |
9,376 |
7,586 |
|
Stockholders' equity: Preferred stock, $0.00001 par value, 10,000 shares authorized |
||
|
Series A Convertible Preferred Stock, $0.00001 par value, 200 shares designated, 100 and 105 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively |
1 | 1 |
|
Common stock, $0.00001 par value, 50,000 shares authorized, 9,921 and 8,877 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively |
1 | 1 |
| Additional paid-in capital | 62,409 | 51,490 |
| Accumulated deficit | (54,077) | (49,926) |
| Total stockholders' equity |
8,334 |
1,566 |
|
|
|
|
| Total liabilities and stockholders' equity |
$17,710 |
$9,152 |
AUDIOEYE, INC.
RECONCILIATIONS OF GAAP to NON-GAAP FINANCIAL MEASURES
(unaudited)
| Three months ended September 30, |
Nine months ended September 30, |
|||||
|---|---|---|---|---|---|---|
|
2020 2019 |
2020 2019 |
|||||
| ( In thousands, except per share data ) | ||||||
| Non-GAAP Earnings (Loss) Reconciliation | ||||||
| Net loss (GAAP) | $(1,080) | $(2,195) | $(4,151) | $(6,357) | ||
| Non-cash valuation adjustments to liabilities | (593) | — | (120) | — | ||
| Interest expense | 35 | 37 | 141 | 39 | ||
| Share-based compensation expense | 1,089 | 273 | 2,004 | 997 | ||
| Severance (1) | 360 | — | 360 | — | ||
| Non-GAAP earnings (loss) |
$(189) |
$(1,885) |
$(1,766) |
$(5,321) |
||
| Non-GAAP Earnings (Loss) per Diluted Share Reconciliation | ||||||
| Net loss per common share (GAAP) — diluted |
$(0.12) |
$(0.27) |
$(0.46) |
$(0.81) |
||
| Non-cash valuation adjustments to liabilities | (0.06) | — | (0.01) | — | ||
| Interest expense | — | — | 0.02 | — | ||
| Share-based compensation expense | 0.12 | 0.04 | 0.22 | 0.13 | ||
| Severance (1) |
0.04 |
— |
0.04 |
— |
||
| Non-GAAP earnings (loss) per diluted share (2) |
$(0.02) |
$(0.23) |
$(0.19) |
$(0.68) |
||
| Diluted weighted average shares (3) |
9,385 |
8,279 |
9,067 |
7,848 |
||