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AI

AUDIOEYE INC (AEYE)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered record revenue ($9.72M, +24% YoY, +9% QoQ) and 80% gross margin, with adjusted EBITDA margin at 24% and adjusted EPS of $0.18; GAAP net loss was $(1.49)M due to higher litigation and stock comp expenses .
  • Management guided FY 2025 revenue to $41–$42M (~18% growth mid) and adjusted EBITDA to $9–$10M (~41% growth mid), expecting continued “Rule of 40” performance; Q1 2025 guidance: revenue $9.7–$9.8M, adjusted EBITDA $1.85–$1.95M, adjusted EPS $0.14–$0.16 .
  • Strategic catalysts: expanding EU footprint ahead of the European Accessibility Act (June 2025), strengthened partner go‑to‑market (CivicPlus, Finalsite), and a $12.5M share repurchase authorization through Jan 2027; revenue per employee exceeded $330K annualized in Q4 .
  • Estimate comparison unavailable via S&P Global due to access limits; results assessed vs company guidance and prior periods. S&P Global consensus values were unavailable.

What Went Well and What Went Wrong

What Went Well

  • Revenue, profitability, and operating metrics: Record revenue ($9.72M), gross margin (80%), adjusted EBITDA margin (24%), “Rule of 40” achieved; revenue per employee >$330K annualized .
  • ARR and customer growth: ARR rose sequentially to $36.6M; customers reached ~127,000, +17,000 YoY, driven by both Partner/Marketplace and Enterprise channels .
  • Strategic positioning: EU team build-out ahead of EAA; enhanced AI detection (≈500% more issues auto-detected vs peers) and Accessibility Protection Status launch bolstered product differentiation and legal risk mitigation narrative .

What Went Wrong

  • Higher operating expenses: OpEx +36% YoY ($9.1M) on litigation (+$1.0M in Q4) and higher stock comp (+$0.7M), driving GAAP net loss to $(1.49)M vs $(0.53)M prior year .
  • Interest expense headwind: Net interest expense rose to $(0.217)M in Q4 from $(0.040)M prior year, contributing to net loss .
  • Macro/estimates context: Management flagged macro caution (tariffs, potential budget cuts) in setting 2025 outlook; S&P Global consensus estimates for Q4 were unavailable for direct beat/miss analysis . S&P Global consensus values were unavailable.

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$7.87 $8.93 $9.72
Gross Profit ($USD Millions)$6.17 $7.10 $7.81
Gross Margin %78% 80% 80%
Operating Expenses ($USD Millions)$6.67 $8.09 $9.08
Adjusted EBITDA ($USD Millions)$1.32 $2.03 $2.29
Adjusted EBITDA Margin %17% 23% 24%
Net Loss ($USD Millions)$(0.53) $(1.20) $(1.49)
GAAP Diluted EPS ($)$(0.04) $(0.10) $(0.12)
Adjusted EPS ($)$0.11 $0.16 $0.18

Segment/Channel indicators (ARR mix and growth):

Channel KPIQ2 2024Q3 2024Q4 2024
ARR ($USD Millions)$33.3 $36.2 $36.6
Partner & Marketplace: ARR share~60% ~58% ~58%
Enterprise: ARR share~40% ~42% ~42%
Partner & Marketplace YoY growth (quarter)+13% YoY (Q2) Near-record ARR growth, +13% YoY (Q3) +14% YoY (Q4)

KPIs

KPIQ2 2024Q3 2024Q4 2024
Customers (period-end)~121,000 ~126,000 ~127,000
Cash & Equivalents ($USD Millions)$5.1 $5.5 $5.7
Revenue per Employee (annualized)N/AN/A>$330,000
Adjusted Free Cash Flow ($USD Millions)~$1.0 (Q2) ~$1.6 (Q3) ~$1.9 (Q4)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
RevenueQ4 2024$9.7–$9.8M $9.72M Met
Adjusted EBITDAQ4 2024$2.2–$2.3M $2.29M Met (high end)
Adjusted EPSQ4 2024$0.18–$0.19 $0.18 In-line
RevenueFY 2024$35.2–$35.3M $35.20M In-line
Adjusted EBITDAFY 2024$6.62–$6.72M $6.71M In-line (mid/high)
Adjusted EPSFY 2024$0.54–$0.55 $0.55 At high end
RevenueQ1 2025—$9.7–$9.8M New
Adjusted EBITDAQ1 2025—$1.85–$1.95M New
Adjusted EPSQ1 2025—$0.14–$0.16 New
RevenueFY 2025—$41–$42M New
Adjusted EBITDAFY 2025—$9–$10M New
Adjusted EPSFY 2025—$0.70–$0.80 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
AI/Tech differentiationEmphasis on AI + human-assisted approach; SDK launched soon SDK GA launched; HIPAA & SOC2; Accessibility Protection Status announced Automated detection now ~500% more issues vs peers; product provides 300–400% more legal protection Strengthening
EU EAA (June 2025)Monitoring EU demand Inbound awareness building, leads increasing EU team in place; pipeline building; expecting H2 acceleration Accelerating setup
Title II (DOJ) & HHS regsDetailed rule summary; mandates across government and healthcare Confident rules won’t be rolled back Private enforcement likely main driver; OPM memo supportive of accessibility Supportive policy tailwinds
Partners (CivicPlus, Finalsite)Finalsite partnership expansion planned; mandate penetration CivicPlus expansion; 3‑year penetration goals; “tens of millions” potential CivicPlus aggressive GTM; Partner bookings expected to ramp; ~58% ARR share Execution momentum
Litigation/legalNonrecurring litigation costs impacting P&L Litigation expense persists Litigation expense +$1.0M in Q4 drove OpEx increase; legal protection messaging Ongoing cost headwind
Capital allocationBuybacks modest in Q2; ATM opened ATM completed; raised $7M cash Board authorized up to $12.5M buybacks through Jan 2027; debt paydown vs buybacks discussed Flexibility improving
Macro/tariffs/budgetNot highlightedNot highlightedGuidance prudently factors potential tariff and budget pressures Cautious stance

Management Commentary

  • “In the fourth quarter, we demonstrated strong operating metrics, including 24% year-over-year revenue growth and adjusted EBITDA margin of 24%, together achieving the ‘Rule of 40.’ Another key SaaS metric, revenue per employee, exceeded $330,000 on an annualized basis in the fourth quarter.” — David Moradi, CEO .
  • “We expect another great year in 2025 with strong growth and record adjusted EBITDA margins... We expect adjusted EBITDA between $9 million and $10 million... We also expect to achieve the ‘Rule of 40’ in 2025.” — David Moradi, CEO .
  • “Annual recurring revenue, or ARR, at the end of the fourth quarter of 2024 was $36.6 million... our customer count was approximately 127,000... Additions in both the Enterprise and Partner and Marketplace channels drove the increase.” — Kelly Georgevich, CFO .
  • “We continue to invest in our product suite and have significantly increased our AI automated detection. An analysis of recent data shows we can automatically detect approximately 500% more issues than other solutions on the market.” — David Moradi, CEO .
  • “We are planning for further expansion in the EU in 2025 and beyond... we expect that demand will look like the GDPR rollout in 2018, which scaled over 5 years.” — David Moradi, CEO .

Q&A Highlights

  • Investment and EBITDA guidance: FY25 adjusted EBITDA ($9–$10M) includes planned EU/U.S. sales investments; further spend will be ROI-driven; potential upside hiring if demand accelerates .
  • Partner/government pipeline: CivicPlus aggressive Title II GTM; expect growth starting H1 and ramping H2; government demand remains resilient regardless of administration .
  • Capital allocation: Management favors buybacks at current levels given expected cash generation vs debt reduction; authorization up to $12.5M through Jan 2027 .
  • Retention: GRR around ~90%; NRR solid; no notable YoY change .
  • EU acceleration friction: Main constraint would be hiring “great salespeople”; implementation highly scalable with AI/automation .
  • Enforcement outlook: DOJ Title II likely left in place; private litigation seen as key enforcement mechanism; first case already emerging .

Estimates Context

  • S&P Global consensus for Q4 2024 (EPS and revenue) was unavailable due to access limitations; therefore, beat/miss vs Wall Street consensus cannot be quantified. S&P Global consensus values were unavailable.

Key Takeaways for Investors

  • Execution remains strong: Three consecutive quarters of margin expansion (17% → 23% → 24%) alongside accelerating top-line growth to $9.72M; sustained 80% gross margin underscores operating leverage .
  • Channel durability: Partner & Marketplace and Enterprise both contributing to ARR and customer growth; ARR reached $36.6M, customers ~127K, with sequential ARR and customer gains .
  • 2025 setup: Guidance embeds macro caution yet points to ~18% revenue growth and ~41% adjusted EBITDA growth; H2 weighted acceleration from EU EAA and partner GTM likely a key narrative driver .
  • Capital deployment: New $12.5M buyback authorization and improved free cash flow trajectory (Q4 adjusted FCF ~$1.9M) provide flexibility; balancing debt reduction vs repurchases remains an ongoing consideration .
  • Litigation expense: Continued nonrecurring litigation costs elevated OpEx in Q4; watch for normalization to support GAAP profitability trajectory .
  • Product moat: Accessibility Protection Status and improved automated detection (≈500% vs peers) strengthen legal protection positioning; messaging may enhance enterprise conversion and partner adoption .
  • Near-term trading: Potential catalysts include EU EAA momentum updates, partner wins, buyback execution, and sustained ARR/customer growth; any litigation expense moderation would be viewed positively .