Good afternoon, and welcome to AudioEye's Third Quarter 2024 Earnings Conference Call. Joining us for today's call are AudioEye's CEO, Mr. David Moradi; and CFO, Ms. Kelly Georgevich. 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 and 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 risk and uncertainties. Actual results could materially 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 10-Q, and in other reports 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. A reconciliation of the most directly comparable GAAP financial measures and these non-GAAP financial measures and available -- 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 would like to turn the call over to AudioEye's Chief Executive Officer, Mr. David Moradi. Sir, please proceed.

Thank you, operator. We are pleased with our strong performance in the third quarter. We achieved the high end of our revenue guidance from July and beat adjusted EBITDA guidance. We also exceeded the Rule of 40 for the first time. 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 sequentially, from 17% in the second quarter to 23% in the third quarter. Third quarter revenue grew 14% year-over-year, while we reduced non-GAAP operating expenses by 10%. Looking at adjusted free cash flow. In terms of EBITDA minus CapEx, we generated a record $1.6 million in the quarter compared to $1 million in the second quarter and negative $200,000 in the third quarter of last year. We continue to see impressive performance in our Enterprise and Partner and Marketplace channels. Both channels grew organically, around 5% sequentially or 21% annualized. Strong business momentum is leading us to increase our full year guidance, which I will discuss shortly. I will now cover a few other notable developments in the quarter. As discussed on our last earnings call, we recently expanded our partnership with Finalsite, the market share leader in K-12 schools. The goal is to penetrate all their installed base over the next three years with a comprehensive go-to-market plan, which is being implemented now. During the quarter, we announced a significant expansion of our partnership with CivicPlus, a leader in public sector SaaS technology solutions with over 10,000 government customers, the most of anyone in the industry. The partnership will include enhanced go-to-market strategies to provide our best-in-class digital accessibility platform to penetrate the local government market. The goal is to penetrate their entire customer base over the next three years.…

Thank you, David. As David discussed, revenue again hit record levels with Q3 2024 revenue at $8.9 million, which translates to a 21% annualized growth rate and 14% growth rate over the comparable period of prior year, marking our 35th quarter of record revenue. Annual recurring revenue, or ARR, at the end of the third quarter of 2024 was $36.2 million, a $2.9 million increase sequentially, which was driven by both a significant Enterprise and reseller ARR increase and contributions from the acquisition of ADA Site Compliance. Our two revenue channels are continuing to generate strong results, with high annualized sequential growth rates in both channels. The Partner and Marketplace channel includes all revenue from our SMB-focused marketplace products and revenue from a variety of partners who deploy these same products for their SMB customers and had near record-setting ARR growth with approximately $1 million of sequential ARR increase in Q3. In the third quarter of 2024, this revenue channel grew 13% year-over-year and 5% sequentially or 21% annualized. This channel represents 59% of revenue and around 58% of ARR. AudioEye's Enterprise channels consist of our larger customers and organizations, including those with non-platform websites, who generally engage directly with AudioEye sales personnel for pricing and solutions. The Enterprise channel grew organically around 14% year-over-year and 5% sequentially or 21% annualized. In the third quarter, the Enterprise channel contributed 41% of revenue and around 42% of ARR. On September 30th, 2024, our customer count was approximately 126,000, an 18% increase from 107,000 customers on September 30th, 2023, and an increase of approximately 5,000 customers from June 30th, 2024. The increase in customer count was driven by additions in both the Partner and Marketplace and Enterprise channel. Gross margin picked up 1% sequentially and 3% year-over-year to 80% of revenue, with…

Thank you. We'll not take questions from the company's publishing analysts. [Operator Instructions] Our first question comes from George Sutton, Craig-Hallum.

Thank you. Nice results, guys. So, David, I'm curious when you talk about Finalsite and CivicPlus both being resellers you can fully penetrate over a three-year period, I just want to make sure I'm hearing that correctly. Is that a practical assumption? Or is that just simply touching their customers and then giving them the ability to buy? I just want to see how significant we're talking.

We think it's very significant. Full penetration would be all of their customers buying the product, so it changes the face of the company. I mean, it would be tens of millions of dollars additional.

Okay. We are 36 hours past finding out we're going to have a new administration coming in next year. And I'm just curious, given what I would expect to be a less pressured regulatory environment, the things that are driving our regulatory changes, can you talk about if there is any change to those? I believe they're in the register, so I don't think so. But I just wanted to confirm that.

I don't think so. We've analyzed it. I don't think the rule for Title II or HHS can be rolled back, so not concerned with that.

Okay. Last question is a go-to-market question. When I think of ADA being an audit business, you being a software business, those have historically been two somewhat separate offerings. Can you just explain to us how you're going to market with the combination? Or are you still going separately and then finding cross-sell opportunities? Just curious how that's working.

Yes, I think it's a good match with our customer base. We see an opportunity to migrate and up-sell their customers to AudioEye products and services. We are going pretty quickly with this integration. We've moved the employees over to our departments and expect to move their customers over in the next few months.

Got you. Okay. All right. I appreciate the time. Thanks guys.

Thank you.

Thank you. Our next question comes from Richard Baldry, ROTH Capital Partners.

Thanks. When we look at the acquisition first, do you think you view the synergies you can get out of that more from sort of overlapping in OpEx? Or do we view it as more you keep people because they've got some domain expertise and you can slow your own internal hiring ahead? How do we think about when those two are integrated and how does it work?

Yes, we think we're going to grow the revenue base like we did with the Bureau back in 2022. We grew that by about 50% from where we bought it. So we think there's a similar opportunity there over the next two, three years. And it's accretive from day one and will continue to be accretive.

Great. Then when you think about some of these partnerships, if they were to gain meaningful traction on sort of a near-term basis, what do you think the toughest scaling point for your ability to grow that quickly is? Is it on the implementation side, sort of adding heads to do that? Is it on the challenges of integration more determined by each customer's ability to sort of work with your teams? What -- how do you view your ability to respond if sort of that customer adoption was to take off? Thanks.

I think it's highly scalable. I don't foresee any problems on implementation, the way we do things with AI and automation. So, I don't see that. We can handle it. They're doing the selling and account management, so we can handle the implementation side.

Last for me. You're exceeding sort of Rule of 40 now. Do you think -- is it the right time to continue to try to scale the EBITDA line? Or do you think it's more important to take any upside you have now and sort of push it back into the go-to-market part of the business? Or do you think you still have an ability to sort of balance the two and sort of grow that number over time? Thanks.

I think we can grow them both in the future, so there's more scale on EBITDA margin. I think it can push up over time, and we could generate in the 20s or 30s potentially on the revenue side.

Thanks. Congrats on a great quarter.

Thank you.

Thank you. [Operator Instructions] Our next question comes from Zach Cummins, B. Riley Securities.

Hi, good afternoon. Thanks for taking my questions. David, I was curious if you've started getting any sort of inbound demand with the upcoming mandates for accessibility in Europe in June of 2025?

We're seeing quite a few leads coming in. They're not converting to deals yet, but people are more and more aware of it as the months go on. I'm seeing more and more in the calls that I'm monitoring.

Understood. And my one follow-up is really on the gross margin side of it. Nice to see it hitting the 80% mark this quarter. Just curious how we should think about the progression of that moving forward. Is there still room for expansion as we go forward on that side?

Yes, I think we're pleased to see it tick up both year-over-year and sequentially. We feel good about the 80% going forward. It's all about product mix and efficiencies, but we have been able to scale that revenue and be efficient in cost of revenue. And we see that going forward as well.

Got it. Well, thanks for taking my questions and best of luck with rest of the quarter.

Thank you.

Thank you. At this time, this concludes our question-and-answer session. I'd now like to turn the call back to Mr. Moradi for his closing remarks.

Thanks, everybody, for joining us, and we will see you on the next call.

Before we conclude today's call, 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 website. Thank you for joining us for today -- for AudioEye's third quarter 2024 earnings conference call. You may now disconnect.