AudioEye(AEYE) - 2023 Q3 - Quarterly Report

Financial Performance - For the nine months ended September 30, 2023, total revenue increased by 6% to $23.446 million compared to $22.175 million in the prior year[90]. - As of September 30, 2023, Annual Recurring Revenue (ARR) was approximately $30.5 million, representing a 4% year-over-year increase[81]. - The customer count increased by 32% to approximately 107,000 as of September 30, 2023, up from 81,000 at the same time last year[82]. - Revenue from the Partner and Marketplace channel grew by 14% for the nine months ended September 30, 2023, contributing $13.365 million[91]. - Gross profit for the nine months ended September 30, 2023, increased by 9% to $18.169 million, up from $16.701 million[95]. - The operating loss for the nine months ended September 30, 2023, improved by 36% to $5.472 million from $8.505 million in the prior year[90]. - Non-GAAP earnings for the three months ended September 30, 2023, were $291,000, compared to a loss of $1,355,000 under GAAP[116]. - Non-GAAP earnings per diluted share for the three months ended September 30, 2023, was $0.02, compared to a GAAP loss per diluted share of $(0.11)[116]. Operating Expenses - Total operating expenses decreased by 6% to $23.641 million for the nine months ended September 30, 2023, compared to $25.206 million in the prior year[90]. - Selling and marketing expenses decreased by 11% to $9.387 million for the nine months ended September 30, 2023, compared to $10.502 million in the prior year[98]. - Selling and marketing expenses decreased by 14% and 11% for the three and nine months ended September 30, 2023, respectively, primarily due to reductions in online media and third-party marketing expenses[99]. - General and administrative expenses decreased by 18% and 17% for the three and nine months ended September 30, 2023, respectively, due to lower legal expenses and stock compensation expenses[103]. - Research and development costs represented 31% of total revenue for the three months ended September 30, 2023[85]. - Research and development expenses increased by 27% and 28% for the three and nine months ended September 30, 2023, respectively, driven by higher personnel costs associated with increased investment in the platform[101]. - Total research and development costs rose by 33% and 35% for the three and nine months ended September 30, 2023, respectively, totaling $2.437 million and $7.215 million[100][101]. Cash Flow and Liquidity - Cash as of September 30, 2023, was $3.274 million, with working capital of $(2.673) million, primarily due to investments in the internally-developed platform[120]. - Current assets decreased from $12,966,000 in December 2022 to $8,343,000 as of September 30, 2023, while current liabilities remained relatively stable[124]. - Working capital turned negative, decreasing from $1,904,000 in December 2022 to $(2,673,000) in September 2023[124]. - Net cash used in operating activities improved significantly, decreasing from $(4,492,000) in the nine months ended September 30, 2022, to $(515,000) in the same period of 2023[125]. - Cash used in investing activities decreased from $(5,426,000) in 2022 to $(1,654,000) in 2023, primarily due to the prior year's acquisition of BOIA[126]. - Cash used in financing activities increased to $(1,461,000) in 2023, influenced by a $974,000 payment related to the contingent consideration from the BOIA acquisition[127]. - The company has no debt obligations and believes it has sufficient liquidity to continue operations for the next twelve months[122]. - There is uncertainty regarding the ability to raise additional capital in the future, which may necessitate modifications to the business plan[123]. - The company’s cash decrease for the nine months ended September 30, 2023, was $3,630,000, compared to a decrease of $11,143,000 in the prior year[125]. Other Financial Information - Interest income increased significantly to $35,000 for the three months ended September 30, 2023, compared to an expense of $1,000 in the prior year, marking a change of 3,600%[104]. - Contingent consideration classified as a current liability was $2.2 million, expected to be paid in the second quarter of 2024[120]. - The company raised $16,534,000 from the issuance of 471,970 shares under the At The Market offering in 2021, with no shares sold in 2022 or 2023[121]. - There have been no material changes to the company's critical accounting policies and estimates since the last annual report[129]. - The decrease in Enterprise channel revenue for the nine months ended September 30, 2023, was primarily driven by a reduction in revenue from one large customer[94].