Good afternoon, and welcome to AudioEye’s Fourth Quarter and Full Year 2018 Earnings Conference Call. Joining us for today’s call are AudioEye’s Executive Chairman, Dr. Carr Bettis; and CEO, Mr. Todd Bankofier. Following the remarks, we will open up the call for your questions. 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 Web site at www.audioeye.com. Before I turn the call over to AudioEye’s Executive Chairman, I want to emphasize that some of the information you’ll hear during our discussion today will consist of forward-looking statements that are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call and in the Risk Factors section of our Form 10-K and other reports and filing 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. Now, I would like to turn the call over to AudioEye's Executive Chairman, Dr. Carr Bettis. Sir, please proceed.

Thank you, operator. I’ll warn everyone that I’ll be speaking a little faster, hopefully not too fast. Got a lot to talk about today. So welcome everyone and thank you for joining us. After the market close, we issued a press release announcing our results for the fourth quarter and the full year ended December 31, 2018. A copy of the press release is available in the Investors section of our Web site at audioeye.com. As many of you dialing in today are aware, AudioEye is a leading provider of SaaS-based digital content accessibility solutions. We’re in the business of making Web sites and other digital content accessible for all individuals, especially those individuals with disabilities. We pride ourselves in addressing a very large range of disabilities. With the AudioEye platform, we do more than identify issues with Web properties. We strive to fix, maintain and continuously monitor them. We also certify Web sites to demonstrate compliance with both the Americans with Disabilities Act or ADA and the latest Web Content Accessibility Guidelines or WCAG 2.1. Because many of the remediation capabilities we provide are automated, our customers can more quickly be in compliance with accessibility standards, regulations and laws. Coupled with manual testing and remediation by subject matter experts, we provide our clients with the best solution to make their Web sites and digital content more accessible and more usable for more people. Furthermore, for our commercial clients we give them the opportunity to get an ROI from their investment in and commitment to the enormous population of individuals with disabilities. Let me move on to the business update. As expected from the preliminary results we released last month, the fourth quarter was a great finish to a great year for AudioEye. With 103% increase in revenues for Q4,…

Thanks, Carr. 2018 was a better year for our organization on every level. Operationally, we continue to generate substantial growth through our direct sales as we see our indirect channel partnerships beginning to ramp up in their activities. More specifically, we are progressing through 2019 with more than a 1,000 active total customers and a growing number of channel partners. Our current sales pipeline is now more than double where it was just a year ago at this time, which has been driven by the improved lead generation processes in the areas of more targeted page search frenzies, more purposeful digital content and attendance at more targeted industry conferences. Given the additional resources we’re focusing on marketing and public relations we expect to continue to grow our pipeline. Now I’m going to spend the rest of my remarks providing additional color around really the three sources of customer success for AudioEye which are the direct sales, the indirect channel partnership sales and customer retention. First, the direct sales. While I can’t directly disclose any of the high profile names that have recently become Ally customers, what I can tell you is that we’re continuing to attract large Fortune 500 enterprises to the Ally Managed Service solution at a growing rate. We’ve been saying for some time that the technology that addresses our direct channel is not just our Ally Managed Service solution but also includes our PDF remediation tools and our efforts in the kiosk space. We believe PDF remediation services will increase this year as a result of government and industry organizations needing to address the documents that they house on their Web sites. An organization simply can’t say their site is compliant if the documents on the site are not accessible. PDF remediation services contracts have been a…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from Zach Cummins, B. Riley FBR. Please proceed with your questions.

Hi. Good afternoon, Carr and Todd. Thanks for taking my questions and congrats on the strong finish to the year. So just starting off with bookings year-to-date in Q1, it sounds like you’re off to a little bit of a slow start in the indirect channel. Much of this is really not to do with any of the fault of your own. But can you talk about some of the reasons that some of these partners are delaying I guess impending rollout of the AudioEye solution to their customer bases?

Hi, Zach. This is Carr. Thanks for your question. It’s actually interesting. There have been a few things that have happened from some M&A activity that impacted us that we didn’t expect and just organizational decisions with the timing of their own programs to launch this and delay the launch slightly. So again, some of the important channel partners that we’re talking about have already made a financial commitment to us. They’ve shown that they’re very interested in it and we have insight into their programs and how they’re going to be unfolding. So I would call it – we clearly say that’s what it is, it’s the delay that is out of our control. Nothing to do with AudioEye being ready.

Understood. That’s helpful. And in terms of the direct channel, it seems like you’ve had some strength in both the federal and the kiosk side of the business. But were there any other verticals there that you saw some strength in the first quarter? I know that the automotive sector has been more of one that’s been to the forefront. Is a lot of your penetration on the automotive side going to come more so from the indirect channel partnership with Dealer.com or more of these direct relationships?

Yes, so first thing I want to make sure we’re clear about the federal channel, Zach. This is what we see as an evolving opportunity for us because of the IDEA Act. We’re trying to imply that we were doing a lot of direct bookings so far. We just see it as an opportunity that needs to be invested in and pursued. That’s got future benefit for us if we’re successful in that channel. So I think that’s important to recognize. I’m sorry, the second part of your question, Zach.

Yes, understood. That’s helpful. And in terms of the automotive vertical, that’s been one that’s been to the forefront of where you’ve been seeing some strength there. Should we expect a lot of the increased penetration to come from this indirect partnership with Dealer.com or are you also establishing some direct relationships with some automotive customers?

For the most part, Zach, they’ve come through mostly our dealer channel partners and we have four of them now. So we have surrounded ourselves with the majority of the CMS platforms in the automotive industry. We do see the automotive industry moving quickly on this. Our partners have engaged us in what they’re planning to do in some marketing programs to their auto dealers in the months ahead. So we really are excited about the next couple of quarters.

Understood. And then in your prior update you actually gave a monthly recurring revenue metric. Is that something that you are going to provide or anything you can give color on in regards to the performance of that metric in Q1?

Yes, so subject to review by a new CFO, Zach. We’ve decided we’re going to make that a practice for us to disclose that when we report quarterly results going forward. By the way with a CFO onboard, we may also provide some additional metrics as well.

Understood. Thanks, again, for taking my questions and best of luck here as you go into 2019.

Thank you, Zach.

Our next question comes from Ilya Grozovsky, National Securities. Please proceed with your questions.

Thanks. Given that we are essentially done with Q1, what kind of visibility do you have on revenues in the first quarter? And also if you could just talk a little bit about the gross margin trends, obviously you guys put up about 58% in Q4. How does that play out in your mind through 2019? Thanks.

Hi. Thank you for your question. We’ll talk about the Q1 results at a different time in terms of once we have them finalized, we’ll feel comfortable talking about those. We’re very excited about the pipeline that we have. Also where we sit today, also excited about that and again we had a solid start to our first quarter. So we’ll give you more information on the first quarter later. So yes, thank you for that.

As far as the gross margins in '19?

As far as gross margins go, we’re going to continue to expect to see gross margins improve over time. We’re also going to continue to invest significantly in the sales process, right, when we see these emerging markets available, we’re going to make investments. And we continue to ramp up the sales cost in the process as well. But we still expect to preserve some pretty strong margins here.

Okay. Thank you.

[Operator Instructions]. Our next question comes from Jim Kennedy, Marathon Capital Management. Please proceed with your question.

Hi, Carr. Hi, Todd. Congratulations on the progress.

Thank you, Jim.

Thank you.

My question is related to the two new indirect channel partners. Can you give us some color on either size, where they rank in the industry, what it takes to onboard them, are they already on-boarded, just kind of what that process looks like? And how from just a gross market standpoint what they add to the footprint that you already have out there in the indirect channel?

Well, we’re not at liberty to give the names yet, Jim, but we feel really excited about unveiling these. We’ve just signed one in the last week and we’re obviously going through the process of getting them set up on a training process and getting them going through what we coined as our indirect channel marketing process. But they represent a large number of new – in the thousands of new potential clients on their current CMS platform. They are an industry leader in an assorted number – they’re not necessarily industry classified, they’re not specific industry classified. They do an assortment of industry clients. So it’s not narrowed down to a specific industry sector.

Got you.

But I will tell you --

I was just going to say prior to the addition of these two, how many indirect channel partners do you have?

We have 16 today, so we had 14 prior to that.

Okay. So adding to would mean that you probably added maybe 12% to 15% capacity, it sounds to me like adding these two are more additive than Q1 top of 14. Am I reading that correctly?

Yes.

Okay, good. That’s what I wanted to know. Thank you.

Well done.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Dr. Bettis for his closing remarks.

Thank you everyone for spending time with us today. I appreciate the questions as well. We’re excited to be talking to you further as we get through into the next quarter; looking forward to it. Thanks for being here. Cheers.

Thank you very much.

Before we conclude today's call, I would like provide AudioEye's Safe Harbor statement that includes important cautions regarding forward-looking statement made during this call. 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 subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will, and other similar statements of expectation identify forward-looking statements. Forward-looking statements are subject to certain risks, uncertainties and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements. These risks and uncertainties are detailed in the AudioEye’s public filings with the U.S. 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. The company undertakes no obligation to update or revise its forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Finally, I would like to remind everyone that a recording of today's call will be available for replay via a link available in the Investors section of the company's Web site. Thank you for joining us today for AudioEye's fourth quarter and full year 2018 earnings conference call. You may now disconnect.