AudioEye(AEYE) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Second Quarter 2025 Performance Highlights AudioEye achieved its 38th consecutive quarter of record revenue, with significant year-over-year growth in total revenue, gross profit, adjusted EBITDA, and adjusted EPS, alongside a substantial reduction in net loss and sequential increases in ARR and customer count Second Quarter 2025 Key Financial & Operational Highlights | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :----------------------- | :------ | :------ | :----------- | | Total Revenue | $9.9M | $8.5M | +16% | | Gross Profit | $7.6M | $6.7M | +13.4% | | Gross Margin | 77% | 79% | -2 ppts | | Net Loss | $0.0M | $0.7M | -100% | | Net Loss per Share | $(0.00) | $(0.06) | -100% | | Adjusted EBITDA | $1.9M | $1.5M | +26.7% | | Adjusted EPS | $0.15 | $0.12 | +25% | | Annual Recurring Revenue (ARR) (as of June 30, 2025) | $38.2M | $37.1M (as of Mar 31, 2025) | +$1.1M (Seq) | | Total Customers (as of June 30, 2025) | 120,000 | 119,000 (as of Mar 31, 2025) | +1,000 (Seq) | Strategic Updates AudioEye is experiencing business momentum in the US and EU, driven by the newly enacted European Accessibility Act, while strategically phasing out legacy platforms to enhance efficiency and focus on synergistic cash flow - Business momentum is driven by the United States and the newly enacted European Accessibility Act (EAA), which went into effect on June 28, 2025, and is expected to drive demand and compliance[2][6] - The company is phasing out certain customers and legacy platforms from previous acquisitions to avoid duplicate systems, remove technology debt, and focus on synergistic cash flow[5] - Customer count increased sequentially by 1,000 to approximately 120,000, driven by growth in both the Partner and Marketplace and Enterprise channels[6] Financial Outlook AudioEye provided updated full-year 2025 guidance, projecting continued revenue growth and improved profitability, with an aspirational goal for significant annual EPS growth over the next three years Financial Outlook (Q3 2025 & Full Year 2025 Guidance) | Metric | Q3 2025 Guidance | Full Year 2025 Guidance (Updated) | | :----------------- | :--------------- | :-------------------------------- | | Revenue | $10.2M - $10.4M | $40.3M - $40.7M | | Annualized Growth Rate (midpoint) | 18% | N/A | | Adjusted EBITDA | $2.2M - $2.4M | $8.9M - $9.1M | | Adjusted EPS | $0.17 - $0.19 | $0.71 - $0.73 | - Aspirational goal to grow adjusted EPS and EPS annually by 30-40% for the next three years[2] Company Information About AudioEye AudioEye is a leading digital accessibility company dedicated to ensuring an accessible digital future, with a comprehensive solution combining AI automation and expert human fixes, serving over 120,000 customers and holding 24 US patents - AudioEye is an industry-leading digital accessibility company, aiming to ensure the digital future is accessible[1][9] - The company's solution combines AI automation technology with expert fixes informed by the disability community[9] - AudioEye serves over 120,000 customers, including major brands like Samsung, Calvin Klein, and Samsonite, helping them meet and exceed compliance standards[9] - The solution includes 24/7 accessibility monitoring, automated WCAG issue testing and fixes, expert testing, developer tools, and legal protection, backed by 24 US patents[9] Key Operating Metrics & Definitions AudioEye considers Annual Recurring Revenue (ARR) as a key operating metric and defines its customer base through two primary channels: Enterprise and Partner & Marketplace, each with distinct characteristics and service models - Annual Recurring Revenue (ARR) is considered a key operating metric and indicator of overall business performance, used for planning, forecasting, and evaluating results[11] Customer Channels AudioEye manages its customers through two primary channels: Enterprise, which serves larger organizations with custom solutions, and Partner & Marketplace, which caters to small and medium-sized businesses via partners or direct marketplace purchases - The Enterprise channel consists of larger customers and organizations, including those with non-platform custom websites, who generally engage directly with AudioEye sales personnel for custom pricing and solutions, and also includes federal, state, and local government agencies[12][13] - The Partner and Marketplace channel serves small and medium-sized businesses (SMBs) who are on a partner or reseller's web-hosting platform or who purchase an AudioEye solution from its marketplace, including CMS partners, platform & agency partners, and authorized resellers[13] Annual Recurring Revenue (ARR) Definition ARR is calculated as the sum of annualized recurring fees from active contracts in the Enterprise channel and annual or monthly recurring fees for active customers in the Partner & Marketplace channel, specifically including subscription-based services and excluding one-time fees - ARR is defined as the sum of (i) the total annualized recurring fee at the date of determination under each active contract for the Enterprise channel, plus (ii) the annual or monthly recurring fee for all active customers at the date of determination for the Partner and Marketplace channel, assuming no changes to the subscription[14] - Recurring fees include revenues from subscription services or annual service offerings such as automation and platform, periodic auditing, human-assisted technological fixes, legal support, professional service offerings, and other multi-year recurring services[14] - ARR excludes non-recurring fees, which are revenues from services typically not offered as a subscription or annual service, such as PDF remediation, one-time mobile application reports, and other miscellaneous one-time services[14] Financial Statements & Non-GAAP Reconciliations Consolidated Statements of Operations The unaudited consolidated statements of operations show AudioEye's financial performance for the three and six months ended June 30, 2025, compared to the prior year, highlighting revenue growth and a significant reduction in net loss Consolidated Statements of Operations (Unaudited, in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $9,857 | $8,470 | $19,590 | $16,553 | | Cost of revenue | $2,238 | $1,764 | $4,233 | $3,525 | | Gross profit | $7,619 | $6,706 | $15,357 | $13,028 | | Total operating expenses | $7,377 | $7,203 | $16,055 | $14,156 | | Operating income (loss) | $242 | $(497) | $(698) | $(1,128) | | Net loss | $(2) | $(735) | $(1,471) | $(1,564) | | Net loss per common share-basic and diluted | $0.00 | $(0.06) | $(0.12) | $(0.13) | Consolidated Balance Sheets The unaudited consolidated balance sheets present AudioEye's financial position as of June 30, 2025, compared to December 31, 2024, showing changes in assets, liabilities, and stockholders' equity Consolidated Balance Sheets (Unaudited, in thousands, except per share data) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $6,869 | $5,651 | | Total current assets | $14,789 | $12,120 | | Total assets | $33,900 | $29,766 | | Total current liabilities | $13,405 | $11,571 | | Total liabilities | $26,551 | $20,330 | | Total stockholders' equity | $7,349 | $9,436 | Non-GAAP Financial Measures AudioEye utilizes non-GAAP financial measures, specifically Adjusted EBITDA and Adjusted EPS, to provide a clearer view of its core operating performance by excluding certain non-cash or non-recurring items, while also providing detailed definitions and reconciliations to GAAP measures Use and Rationale of Non-GAAP Measures AudioEye uses non-GAAP measures like Adjusted EBITDA and Adjusted EPS to offer a consistent, period-to-period comparison of operating performance, believing they provide a more complete understanding of business trends by excluding items not reflective of core operations - Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted EPS are used to facilitate consistent period-to-period comparison and provide a more complete understanding of factors and trends affecting the business than GAAP measures alone[16] - Adjustments primarily exclude recurring non-cash items (e.g., stock-based compensation, valuation adjustments) and items management does not consider in assessing ongoing operating performance (e.g., litigation expense)[16] - These non-GAAP measures have limitations; they are not GAAP liquidity measures, not alternatives to cash flow, and should not be considered in isolation or as substitutes for GAAP results[17][18] Definitions of Non-GAAP Measures AudioEye provides specific definitions for its non-GAAP measures: Adjusted EBITDA is net loss adjusted for various non-cash and non-operating expenses, and Adjusted EPS is net loss per diluted common share similarly adjusted, including incremental shares - Adjusted EBITDA is defined as net loss, plus interest expense, plus depreciation and amortization expense, plus stock-based compensation expense, less change in fair value of contingent consideration, plus certain litigation expense, plus certain severance expense, plus certain acquisition expense, plus loss on disposal or impairment of long-lived assets, plus loss on extinguishment of debt, and plus lost deposit on alternative financing[19] - Adjusted EBITDA margin is Adjusted EBITDA as a percentage of GAAP revenue[19] - Adjusted EPS is defined as net loss per diluted common share, plus the same adjustments as Adjusted EBITDA (on a per share basis), and includes incremental shares in the share count that are considered anti-dilutive in a GAAP net loss position[19][20] Reconciliation of GAAP to Non-GAAP Measures The company provides a detailed reconciliation of its GAAP net loss and net loss per common share to its non-GAAP Adjusted EBITDA and Adjusted EPS for the three and six months ended June 30, 2025 and 2024 Reconciliations of GAAP to Non-GAAP Financial Measures (Unaudited, in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss (GAAP) | $(2) | $(735) | $(1,471) | $(1,564) | | Adjusted EBITDA | $1,931 | $1,472 | $3,839 | $2,389 | | Adjusted EBITDA margin | 20 % | 17 % | 20 % | 14 % | | Net loss per common share (GAAP) — diluted | $0.00 | $(0.06) | $(0.12) | $(0.13) | | Adjusted earnings per diluted share | $0.15 | $0.12 | $0.30 | $0.20 | | Diluted weighted average shares (GAAP) | 12,446 | 11,703 | 12,418 | 11,706 | | Adjusted diluted shares (Non-GAAP) | 12,660 | 12,271 | 12,620 | 12,178 | Forward-Looking Non-GAAP Financial Measures AudioEye provides forward-looking non-GAAP guidance for adjusted EBITDA and adjusted EPS but does not offer quantitative reconciliations to GAAP measures due to the impracticality of prospective data and to avoid implying undue precision - The company includes forward-looking non-GAAP financial measures (adjusted EBITDA and adjusted EPS guidance) for Q3 and full year 2025, based on internal forecasts[21] - Quantitative reconciliations of these forward-looking non-GAAP measures to GAAP measures are not provided because the excluded items are not available on a prospective basis without unreasonable effort, and such reconciliations could imply a confusing degree of precision and certainty[21] Corporate & Legal Information Conference Call Information AudioEye announced details for its Q2 2025 earnings conference call, including the date, time, dial-in numbers, webcast link, and replay availability for investors and interested parties - AudioEye management will hold a conference call on Thursday, August 7, 2025, at 4:30 p.m. Eastern time to discuss the Q2 2025 results[7] - Participants can dial in using 888-645-4404 (U.S.) or 862-298-0702 (International), or access the live webcast via the Q225 Webcast Link[7] - A telephonic replay will be available until August 21, 2025, and the audio recording will remain available on the investor relations section of the Company's website for 90 days[8] Forward-Looking Statements This section serves as a cautionary statement, indicating that any forward-looking statements regarding AudioEye's future expectations are subject to various risks and uncertainties, and the company disclaims any obligation to update them - Statements about AudioEye's future expectations, beliefs, plans, objectives, goals, prospects, financial condition, assumptions, or future events or performance are considered "forward-looking statements" under federal securities laws[10] - These statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from what is expressed or implied[10] - AudioEye does not undertake any obligation to update such forward-looking statements to reflect events or uncertainties after the date of the press release[10] Investor Contact Contact information for investor relations is provided for inquiries regarding AudioEye - For investor inquiries, contact Tom Colton at Gateway Group, Inc. via email (AEYE@gateway-grp.com) or phone (949-574-3860)[22]