AudioEye, Inc.
Q1 2016 Earnings Call Transcript

Published: 5 Apr 2016

[Operator:]

Good afternoon, and welcome to the AudioEye shareholder call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Some of the information to be discussed on the call today is forward-looking. As such it is inherently uncertain and subject to risks and uncertainties. We encourage you to review the risks identified in the Annual Report on Form 10-K, press releases and other filings. I would now like to turn the conference over to Dr. Carr Bettis, Executive Chairman of AudioEye. Please go ahead, sir.

[Dr. Carr Bettis:]

Hey thanks to -- thanks Lauren and thanks everyone for being here today. I'm pleased to be doing the call today and certainly, it's a lot of more fun than the call we had about a year ago. We're going to have discussion today about some progress. I have Todd Bankofier who is our CEO, with me here is Sean Bradley, the Cofounder and President and CTO is also here, and Sandy thank you for joining us, Sandy Purcell our Audit Committee Chair has joined us telephonically, thank you Sandy. So first of let's talk a little bit about what we've accomplished during the past year. It's pretty evident by reading the 8-Ks and the press release today and the past few over the last month or a few weeks that we're making some progress on the core business and the road we have travelled to, to get where we're today has not been an easy one. The road we're going to travel going forward is going to still require effective sales, service, business operations obviously requires product excellence and continued shareholder support and stakeholder support. So in a few minutes I am going to have Todd, Todd Bankofier the CEO speak about our sales results, our value proposition and the market opportunity that we have with AudioEye. Sean is going to come talk a little bit later about our IP and our technology progress that we've made, why we believe in short why we believe we have some strong and good competitive advantages in the market. But in short, we're a B2B tech company. We offer a cloud-based solution and tools that are going to greatly increase the accessibility of digital content. And we are unaware of any other single solution out there that improves accessibility to the extent that the AudioEye Solution does. And we're proud of that solution and Sean will talk more about it later. And by the it's a big deal when 5% to 10% of the population have some form of disabilities and there are other sources that would say it's more than that they have some sort of disability or a physical limitation preventing them from gaining full access to the Web content, so we're doing something special in a market that we see as very significant. I am going to need stop talking because I am getting kind of excited about the market, so I'll let you come back and spend some time talking about that. But it's a big deal because of the size and opportunity we have. So a year ago we set out to define our culture at AudioEye, it's a culture we want where everyone would feel compelled to and rewarded for just doing the right thing. We sell to build the culture of accountability within the Company and between our company and our stakeholders. We also really pivoted the business model and now I'll just mention we add significant development for higher type services that were related to our technology, but we really pivoted to a Software-as-a-Service model and focused on our technology. And it took some time here to refine our pricing model, to change and refine our sales message, our go-to-market strategy, to establish credibility with our prospects, to sort through a variety of operational issues. We had to redefine some staff roles and get the staffing levels that we thought would be appropriate to reach and execute on our plan. Our 2015 financial results they certainly reflect the reality of that transition. We had approximately 339,000 in revenues and reported an operating loss of approximately 7.4 million and a net loss that would be attributable to shareholders of about 7.9 million for the calendar in fiscal year 2015. We understand that we have a going concerned opinion from our auditors in our 2015 Form 10-K, so our cost structure that we had into the previous regime or management obviously anticipated something really different in terms of growth and revenues and the strategy frankly was just different in the licensing revenues and other non-monitory transactional part of that period. In 2015, our use of cash from operating activities was almost 5.5 million and 2.4 million of that was in the first quarter of 2015 alone. So we not only changed our business model via restructuring, but we believe we have right sized the business while we still maintain this commitment to enhancing and improving and advancing our technology. And some of the details obviously about what we've done in the restructuring categories are in the public filings. We've been blessed along this way to have the support of shareholders, providing capital and expressing confidence in the Board and the team and I sincerely thank the shareholders and noteholders to, and to the AudioEye team by the way for their commitment during the past year. I think it's worth noting something I am really proud of actually as we had only one non-executive staff member who is a salesperson that resigned from AudioEye during the past 12 months. As a reminder, we have important goals and so we have a 2016 budget and forecast that we expect to have negative cash flows from operations of approximately 1.82 million and we expect to collect cash of around 2.05 million, and all of that being on cash contract bookings that we are targeting and have as a forecast of 3.62 million. We’re going to continue and we do continue to emphasize the stewardship of capital here. We have to deliver excellence for our customers as we’re working towards these targets. And when I think of working towards targets and I think of excellence, our CEO Todd he’s a guy that just embodied the golden rule that we are determined to operate under and has a long history of operational excellence, history of integrity and a lot of great leadership. He’s brought that to bear here over the last few months and I am going to let Todd take the floor.

[Todd Bankofier:]

Thank you so much Carr, I appreciate that this morning. Coming into this year the Company has done such a tremendous amount of hard work and laid the groundwork for making ourselves successful going forward. A lot of that credit goes to Carr himself and the Board of Directors for making the very-very hard decisions they had to make last year. And really riding the shift they say. So let me start my remarks by giving you what is the new AudioEye value proposition. Any public or private enterprise with digital content or a Web site can partner with our Company under five tenants we call them; first one being to uphold the mission of inclusion and accessibility for the 5% to 10% of the population who are denied full access to the Internet or digital content; two, we focus on increasing the return on investments by improving market penetration, brand reputation and brand loyalty; three, we ensure that we hit the standards with the world’s content accessibility guidelines 2.0 AA compliant standards. We maintained those throughout the life of the subscription; four, deploying a cost effective managed service that is scalable with little and no project management; and five, lastly, we consistently know through our analytics that 3% to 7% of our client customers utilize our patented technology to access Web sites and digital content and they stay twice as long as others who come to a site and don’t use the technology. That’s our new value proposition. And as Carr said, we are a business to business technology Company, and we have built a leading edge technology that is low cost, easy to install, secure, all inclusive, makes your digital content compliant with international and U.S. standards and directly addresses the issue of accessibility for 5% to 10% of the world’s population. We really like that position in the market. So how does it correlate in the market potential? While we really don’t know the absolute size of the business market, we do know a lot about those who are used to technology. The World Health Organization states that over 1 billion people in the world today live with some form of disability. In the United States it's 39 million people. There’re over 5 billion Web pages created in the world today with 1.2 billion Web sites operating today. Microsoft states that 57% of the computer users are likely or very likely the benefit from the use of accessible technology and Forrester states that by 2018, organizations have fully invested in all types of online personalization will outsell organizations that has not by 30%. That’s big number. When you pare those statistics with our own knowledge of the millennial market and their demands to access digital content, you can see why we believe the market is only going to grow larger. So the going forward strategy for Audio is very simple, it's conducting the fundamentals of business with great accuracy and speed, just basic blocking and tackling. And placing sales is our top priority. Everyone participates in the selling process from our Board members to our technology team. We’re going to capitalize on the newly built suite of accessibility products sold and Software as a Service package and priced appropriately for the market. And engaging the new value proposition I outlined for you and messaging in a sales strategy which is having a true focus on that 5% to 10% of the population with disabilities and being the life changing connection between then and the ever growing digital content in our world. That’s significant for us. We came into 2016 with a really healthy new sales booking number, set and are approved by the -- the total number for the year is 3.62 million in new sales bookings. The Board and the team believed and still believe that it's achievable and we all signed up for it as a team. Our sales bookings results starting with the month of December 2015 through the first three months of this year is $639,147 in newly signed contracts. Sorry I had to say that twice. And we feel really good about the annual number and the trajectory we are on at this time, so with our focused and recalibrated sales strategy we have seen a much larger interest in purchasing of our services over the last four months. Now our pipeline of new prospect sales has grown significantly from about 945,000 in September of last year to about 2.39 million on March 31st of this year, a significant growth in size. Our pipeline figures reflect qualified prospects will receive the formal proposal from us and because of our limited experience with pipeline conversions it's difficult right now to translate these figures to actual revenue forecasts. However, these figures reflect substantially more in sales activity on our part. I think it is worth taking a moment to explain our sales experience so far in working with large enterprises. There are really two important dimensions to early success and momentum around our plan and achieving our yearly goal. First, we've been very successful in several clients when starting with the trial agreements that getting an initial agreement with the Company so that we can establish feasibility and we showcase our technology capabilities to them. So at least four of those cases we've been able to turn these trial agreements in the meaningful contracts. Second, we're in some cases dealing with some extremely large enterprises in both the government and enterprise space. And in one case we have one product area that we had sold into and as a result of that trial we now have a six bigger contract and additional proposals in that same entity. We call this type of gaining a beachhead in the account and it's been quite successful for us to-date. So lastly I really want to say it's been a privilege to be part of this team and such high intelligence and high integrity and everybody has such a strong passion for what AudioEye is doing for those persons with disability. And so I remind everybody that AudioEye's mission of inclusion is a lot of the reason why I became such a fan and was compelled to this new role with the Company. What we do is meaningful and impactful to a large population of people who deserve to participate in a digital world the same as anyone else. So as long as I am here, we will never ever lose focus on that mission. Now I am going to turn it over to Sean Bradley for an update on the technology.

[Sean Bradley:]

Thanks Todd. First of I want to take a moment to recognize the hard work of each member of the organization since last having the opportunity to address our shareholders in this format, the Company has taken many steps to move the Company forward. Under the leadership of our Chairman and also our CEO we have all embraced the mantra it takes the privilege and I am proud to say that each member of the team has been and remain deeply committed to making AudioEye a truly successful technology company not only as a place people enjoy coming to work a place with endless promise and possibilities for making the world a better place, but also a company that delivers value to our customers and of course to our shareholders. Today I believe categorically that AudioEye is a trusted technology leader in our field. Our technology goal has been to build the most inclusive solution possible and we're doing just that. It's not just about the noble goal of meeting the needs of individuals with diverse-abilities or even making our clients compliant with internationally accepted Web accessibility guidelines or the ADA, it's what delivering the best and most inclusive solution one that makes access to digital content better for people with a broad range of disabilities. In short, we believe that AudioEye is the only solution that addresses the issue Web accessibility in a truly holistic manner. During the past year, we have not only enhanced the capabilities of our flagship Ally plus and developed report of products in order to increase their universality, but we also continue to expand our product offering. I'm excited to announce that we are releasing a beta version of our voice solutions, so on top of our player and reader utilities our first of its kind voice utility allows users to command our client Web sites using their voice. I'm willing to bet just about anyone on this call or listening to the archive of this recording has ever told the browser to scroll down or add to cart or go home, go back. These are just some of the basic verbal commands that can be spoken aloud when users interact with our new voice tool. We believe that we remain ahead of the curve and are very excited about the capabilities of our voice offering. We also believe that we have just begun to scratch the surface as it pertains to the market potentials for this product and the technical capabilities of the solution. Our commitment to our being an inclusive and modular technology is reflected in our patent which we just filed with the USPTO. The patent was signed by 11 AudioEye team members, each of which had a hand in defining our inventions. The filing is 54 pages of specification and includes 41 claims. In the end derived from the honour of this patent, we would like to be awarded as many as six new times over the coming 2 to 3 years, this is extremely exciting. To echo some of the Todd’s comments Forrester has said that we are living in the age of the customer. Never before has it been so important for brands to invest in the customer experience. AudioEye’s technology solutions are designed to ensure clients customers are provided an enhanced Web experience, tailored to their individual preferences. It's the universality of our IP that makes me so excited about the things to come at AudioEye. At this time I’d like to hand it back over to Carr.

[Dr. Carr Bettis:]

Thanks Sean. By the way, Sean, it's worth noting, Sean is the only remaining member of the executive team from a year ago and he is one special guy. I think his passion for the technology and the direction that he’s working with the team in Atlanta is pretty evident just from listening to him from a -- and while we’re talking about special people, before we open it for questions, I want to point a couple of things out. I’ve already mentioned and thanked shareholders and employees for their loyalty and for employees for rolling up their sleeves here and it's been mentioned a couple of times. We’ve done a lot of work and I want to recognize the couple of advisory board member of folks as well. David Kovacs, he’s been a strategic consultant and advisor to me, he’s been really extremely helpful. Strategically he’s also someone that some of you may have had a chance to talk to in speaking with shareholders. He’s has been a really valuable asset. Joyce Bender, he’s from Bender Consulting, is a relationship that we really do appreciate and value. She has worked for over 35 years in various capacities on this important issue around accessibility. She’s got held numerous leadership positions and has been recognized many-many times for a contribution. So we’re really I’ll just say we’re engaged with her, not just a first and flop down on a Web site just got a nice name. I mean this is somebody that we care about, who is a believer in what we do in AudioEye. And we’re the small tech company and sometimes when I sit here working hard in my role over the past year, I step back a little bit because we really have an incredible board and I am really honored to work with the board that we have. I’d encourage you to take the time, if you’re not familiar with our board to go out and look at our Web site or public filings about the board. But I have to mention a couple of things. Mr. Tony Coelho, who is a former longstanding member of the house representative is the person broadly recognized as the author of the American Disabilities Act. He understands and is really passionate about accessibility. He really is and he’s knowledgeable also as a business manager, he’s got a lot of terrific experience. He’s had lot of interesting backgrounds including things like serving as a General Chairman of the Presidential Campaign for Vice President Al Gore from 1992 to June of 2000. Another person I’ll mention on the board just briefly is Christine Griffin. Chris has just a really extensive work history involving disability across both public and private sectors. She was Deputy Direct of the U.S. Office of Personnel Management. She was responsible for federal agencies implementation of President Obama’s executive of order on increasing the employment of individuals of disability in the federal work force. I mean these are just people who really understand the issues, care about the issues and we have them on our board because they believe in what AudioEye is doing and our potential there. Sandy Purcell and Alex Zyngier are both really accomplished and knowledgeable financial executives with strong relevant experience. And this whole group of people we think combined together as Todd said we could involve and as we engaged in prospecting and selling process from time to time and that’s what this board needs to do. Okay, enough from us right now. And I want to open up the floor for questions. Thanks for being here.

[Dr. Carr Bettis:]

Well, thank you everyone for coming. There’ll be a recorded transcript available, so we really appreciate it all of you that have joined us today. Thanks for your time and thanks for your support.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.