Sign in

You're signed outSign in or to get full access.

AI

AUDIOEYE INC (AEYE)·Q3 2025 Earnings Summary

Executive Summary

  • Record Q3 revenue of $10.227M (+15% YoY), record adjusted EBITDA of $2.453M (24% margin), and narrowed full-year guidance; EPS beat consensus while revenue was slightly below; Q4 guide implies continued momentum .
  • EPS (adjusted) beat: $0.19 vs S&P consensus $0.1775*; revenue slight miss: $10.227M vs $10.258M*; Q4 EPS guide $0.21–$0.23 aligns above consensus $0.21*, signaling potential estimate upward revision .
  • Guidance: FY25 revenue narrowed to $40.3–$40.4M (lowering the high end), FY25 adjusted EBITDA raised at the low end to $9.0–$9.1M, FY25 adjusted EPS raised at the low end to $0.72–$0.73; new Q4 revenue guide $10.45–$10.6M, adjusted EBITDA $2.7–$2.8M, adjusted EPS $0.21–$0.23 .
  • Strategic catalysts: accelerating EU pipeline under the European Accessibility Act (EAA), larger average deal sizes in Europe (~50% above U.S.), partner ramp into DOJ Title II (May 2026), and platform migration nearing completion to support margin improvement .

What Went Well and What Went Wrong

What Went Well

  • Thirty-ninth straight quarter of record revenue ($10.227M), record adjusted EBITDA ($2.453M) and margin (24%); ARR rose sequentially to $38.7M; adjusted EPS $0.19 .
  • Strong enterprise channel growth (~26% YoY), with EU momentum; several late-stage EU deals >$100K ARR; partner/marketplace ARR growth also solid .
  • Management highlighted product advances leveraging Playwright MCP with the accessibility tree to further improve detection accuracy and margin leverage; aspirational goal to grow adjusted EPS and EPS 30–40% annually for three years .

What Went Wrong

  • Gross margin compressed to ~77% (from 80% YoY) due to audit service delivery costs related to platform migrations and higher cost of revenue from acquired customers .
  • GAAP net loss of $0.554M (vs $1.202M prior year) despite revenue growth; operating expenses rose modestly (+2% YoY) with higher selling/marketing spend .
  • Cash declined to $4.550M from $6.869M in Q2, primarily due to $1.8M buybacks; net debt increased to ~$8.9M; customer count decreased YoY due to a Q1 partner renegotiation despite sequential growth .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$9.733 $9.857 $10.227
Gross Margin (%)80% 77% 77%
Adjusted EBITDA ($USD Millions)$1.908 $1.931 $2.453
Adjusted EBITDA Margin (%)20% 20% 24%
GAAP Net Loss ($USD Millions)$1.469 $0.002 $0.554
GAAP EPS ($)$(0.12) $0.00 $(0.04)
Adjusted EPS ($)$0.15 $0.15 $0.19

Segment/channel and KPIs:

MetricQ1 2025Q2 2025Q3 2025
ARR ($USD Millions)$37.1 $38.2 $38.7
Customer Count~119,000 ~120,000 ~123,000
Cash & Equivalents ($USD Millions)$8.265 $6.869 $4.550
Net Debt ($USD Millions)N/A$6.5 $8.9
Free Cash Flow ($USD Millions)$1.4 $1.4 $2.0
Stock Repurchase ($USD Millions)N/A~$1.8 ~$1.8; ~154k shares avg $11.86
Enterprise Rev growth YoY~26% ~25% ~26%
Partner/Marketplace Rev growth YoY~17% ~10% ~7%
Rev mix (Enterprise/Partner %)43% / 57% ~45% / ~55% ~45% / ~55%
ARR mix (Enterprise/Partner %)~42% / ~58% ~45% / ~55% ~42% / ~58%

Consensus/Estimates vs Actuals and Guide:

MetricQ3 2025 ActualQ3 2025 Consensus*Beat/MissQ4 2025 GuideQ4 2025 Consensus*
Revenue ($USD Millions)$10.227 $10.2582*Miss (~$0.031; ~0.3%)$10.45–$10.60 $10.4885*
EPS (Adjusted, $)$0.19 $0.1775*Beat (+$0.0125)$0.21–$0.23 $0.21*
# of Estimates (Rev/EPS)—5 / 4*——4 / 4*

Values with asterisk are retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$40.3–$40.7M $40.3–$40.4M Narrowed; lowered high end
Adjusted EBITDAFY 2025$8.9–$9.1M $9.0–$9.1M Raised low end
Adjusted EPSFY 2025$0.71–$0.73 $0.72–$0.73 Raised low end
RevenueQ4 2025—$10.45–$10.60M New
Adjusted EBITDAQ4 2025—$2.7–$2.8M New
Adjusted EPSQ4 2025—$0.21–$0.23 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/product technologyBuilding AI into testing/remediation; margin benefit; EU pipeline building Playwright MCP integration using accessibility tree; expect improved detection accuracy and margin Deepening implementation; margin leverage
EU/EAA pipeline & demandEU sales team expansion; early wins; EAA in effect; pipeline tripled QoQ by Q2 “Best quarter” in new business; several late-stage EU deals >$100k ARR; average EU deal ~50% higher than U.S. Accelerating; larger deal sizes
Partners & DOJ Title II (May 2026)Finalsite/CivicPlus pipelines building; strong H2 expected Partner/marketplace ramp; government shutdown not impacting Title II adoption Ramping; resilient
Platform migration/integrationTemporary margin impact expected; pushing audits in Q2; return to high-70s GM in H2 Migration near completion in Q4; sequential GM up ~1% in Q4 Completing; margin improving
Litigation expenseElevated in Q1/Q2; non-recurring items Litigation expense included in non-GAAP adjustments; overall G&A litigation costs lower YoY Normalizing
Capital allocationNew $20M facility; Q2 buybacks ~$1.8M Q3 buybacks ~$1.8M; YTD ~$3.6M; consider buybacks alongside M&A Ongoing
R&D execution/efficiencyR&D ~17% of revenue Q1/Q2 R&D ~15% of revenue; AI tools improving efficiency Efficiency improving

Management Commentary

  • “AudioEye achieved another record quarter with over $10.2 million in revenue, record adjusted EBITDA and margin, and strong GAAP results… we expect continued business momentum to drive a significant increase in ARR, revenue, and adjusted EBITDA.” — CEO David Moradi .
  • “We are also excited about recent advancements in AI… integrating into our product and operations, which should drive further margin improvement… We continue to have an aspirational goal to grow our adjusted EPS and EPS annually by 30–40% for the next three years.” — CEO David Moradi .
  • “We currently have several late-stage deals with ARR over 100,000 in the EU and the U.S., which would imply a record quarter in new business ARR… Our partner and marketplace channel also continues to ramp in anticipation of the DOJ Title II rule.” — CEO David Moradi .
  • “Gross margin to be up approximately 1% sequentially in Q4 as the migration to the upgraded platform completes… Total R&D spend was about 15% of our revenue this quarter… We see increased efficiency with AI tools.” — CFO Kelly Georgevich .

Q&A Highlights

  • EU momentum: deals closed in Q3 and large late-stage pipeline; enforcement expected to amplify demand (GDPR analogy); average EU deal size ~50% above U.S. .
  • Platform migration: “Most customers” on new platform in Q4; expected margin improvement and ARR re-acceleration post-integration .
  • Title II adoption: No impact from U.S. government shutdown; partners (Finalsite, CivicPlus) executing aggressive GTM with growing pipelines .
  • Aspirational 30–40% adjusted EBITDA growth drivers: revenue growth, gross margin expansion, and cost discipline all contributing .

Estimates Context

  • Q3: Adjusted EPS beat ($0.19 vs $0.1775*); revenue slight miss ($10.227M vs $10.258M*). Likely narrative is profitability outperformance amid migration-related cost headwinds .
  • Q4: Guide for EPS ($0.21–$0.23) sits at/above consensus $0.21*, and revenue guide ($10.45–$10.6M) brackets consensus $10.4885*; potential for modest upward EPS estimate revisions given higher margin commentary .

Values marked with asterisk are retrieved from S&P Global.

Key Takeaways for Investors

  • Profitability beat with record adjusted EBITDA and margin despite a small revenue miss; margin trajectory improving as migrations complete in Q4 .
  • EU emerging as a meaningful growth vector with larger deals and increasing pipeline; EAA enforcement should be a multi-year catalyst .
  • Partner/marketplace channel positioned ahead of DOJ Title II (May 2026); resilient adoption and strong retention support ARR growth .
  • FY25 guidance tightened with a higher profitability floor (adj EBITDA/EPS), signaling confidence in operating leverage into year-end .
  • Capital deployment active via buybacks (~$1.8M in Q3; ~$3.6M YTD) alongside M&A optionality; net debt manageable with facility availability .
  • Near-term trading: focus on Q4 margin uptick and ARR acceleration; watch for EU deal announcements and partner wins as catalysts .
  • Medium-term thesis: recurring regulatory tailwinds (EAA, Title II), differentiated tech plus expert fixes, and sustained margin expansion underpin potential 30–40% adjusted EPS growth aspiration .

Guidance Changes — Additional Detail and Rationale

  • Gross margin pressure in Q3 was mainly due to audit service delivery tied to platform migrations and higher costs from acquired customers; management expects sequential GM improvement in Q4 as migrations complete .
  • FY25 revenue range narrowed (lower high end) reflecting disciplined pruning of lower-margin legacy acquisition customers; profitability guidance raised at the low end supporting cash flow focus .

Additional Relevant Q3 Press Releases

  • Partnership with Creode (UK) expands EU reach into financial services and enterprise amid EAA compliance demand .
  • Motability Operations selected AudioEye’s platform to strengthen accessibility and compliance across digital experiences in the UK .
  • EU presence expansion announcement highlighted EAA scope, potential fines, and cross-border compliance needs, reinforcing international growth thesis .

Non-GAAP Adjustments and Impact

  • Adjusted EBITDA and adjusted EPS add back items including stock-based comp, interest, depreciation and amortization, litigation expense, severance, acquisition expenses, and changes in fair value of contingent consideration; these adjustments drove record adjusted profitability in Q3 .

Notes:

  • All figures and statements are sourced from AudioEye’s Q3 2025 8-K and press release, earnings call transcript, and prior quarter materials as cited.
  • Values marked with asterisk are retrieved from S&P Global.