AudioEye, Inc. (AEYE) Earnings

Management highlights

- Leadership Transition & Strategic Focus * Long-time turnaround leader David Marotti moves from executive leadership to focus full-time on long-term strategy and product innovation, including LLM/AI-enabled product development * Kelly Georgievich, previously CFO, is appointed CEO, with board confidence in her operational discipline to drive continued growth and margin expansion * Since 2019, the company has nearly quadrupled revenue, improved adjusted EBITDA margins from ~negative 70% to a projected high 20% range for 2026, and increased revenue per employee 400% from ~$100,000 to over $400,000 - Market & Product Positioning * A 2026 WebAIM study found 95.9% of top 1 million homepages have detectable WCAG accessibility errors, averaging 56.1 errors per page (a 10% year-over-year increase), reversing 6 years of gradual improvement. The decline is driven by AI-assisted coding and increased reliance on third-party web frameworks, which has pushed accessibility-related litigation to all-time highs, creating strong demand for AudioEye's solutions * AudioEye's next-generation platform combines AI automation with custom fixes to deliver full visibility into accessibility risk and remediation, a capability management states no competitor can match. The company is preparing upcoming agentic AI product releases built on its 10-year proprietary dataset of over 100,000 websites * The company has over 127,000 total customers as of Q1 2026, which management claims is more than any other company in the digital accessibility industry, marking the 41st consecutive quarter of record revenue - Regulatory Developments * In April 2026, the US DOJ extended Title II web accessibility compliance deadlines for state and local governments by one year, with enforcement now starting in April 2027. Management views this as an affirmation of federal commitment to accessibility, and it gives the company and its channel partners additional runway to acquire and serve government customers * In the EU, the company is building its sales pipeline and making disciplined investments ahead of upcoming accessibility enforcement, with early positive market signals - Q1 2026 Core Financial Performance * Gross profit was $8.3 million (78% GAAP gross margin), adjusted gross margin (adjusted for non-cash items) was 84% * Adjusted EBITDA was $2.4 million (22% adjusted EBITDA margin), up $500,000 year-over-year * Free cash flow was $1.9 million, a $500,000 improvement year-over-year * R&D spend totaled $1.6 million (15% of Q1 revenue, down from 17% year-over-year, showing improved operating leverage) * The company ended Q1 with $8.6 million in cash and $3 million available under its revolving credit line, with a net debt to 2026 adjusted EBITDA ratio of ~0.7x

Guidance

- Q2 2026 guidance: Revenue is projected between $10.65 million and $10.75 million; adjusted EBITDA is projected between $2.6 million and $2.7 million, for an adjusted EBITDA margin of ~25% at the midpoint; adjusted EPS is projected between 21 and 22 cents per share - Full year 2026 guidance: Revenue is refined to a range of $43.25 million to $44.25 million; full year adjusted EBITDA is projected to be at least $12 million, representing a ~27% adjusted EBITDA margin at the revenue guidance midpoint, for at least 33% year-over-year growth in adjusted EBITDA and adjusted EPS (adjusted EPS is projected to be at least 96 cents) - Management confirms the prior target of reaching a $15 million run rate of adjusted EBITDA by the end of 2026, driven by accelerating sequential revenue growth in the third and fourth quarters from compounding ARR growth and expanding operating leverage

Segment performance

AudioEye operates two business segments: 1. Enterprise Channel: Serves larger customers with custom non-platform websites, generally via direct sales. In Q1 2026, the segment grew 9% year-over-year, and represented 41% of total Annual Recurring Revenue (ARR) as of March 31, 2026. 2. Partner and Marketplace Channel: Includes SMB-focused marketplace products and partner-deployed solutions for SMB customers. In Q1 2026, the segment grew 8% year-over-year, and accounted for 59% of total ARR as of March 31, 2026. Total company Q1 2026 revenue was $10.6 million, an 8% year-over-year increase. Total ARR as of March 31, 2026 was $41.2 million, an 11% year-over-year increase and 12% annualized sequential growth from end-2025.

Risks & headwinds

- Forward-looking statements about future performance are subject to material risks and uncertainties that could cause actual results to differ materially, including those outlined in the company's SEC filings (Form 10-K, Form 10-Q and other regulatory filings) - Elevated litigation expenses in Q1 2026 contributed to a higher year-over-year net loss; ongoing litigation is expected to keep costs elevated through Q4 2026, when costs are projected to decline substantially after the scheduled trial date - AI-driven web development is evolving rapidly, and customer adoption of AI coding tools and understanding of associated accessibility risks remain uneven, creating uncertainty about near-term demand timing - EU accessibility enforcement timing and market adoption remain uncertain, with slower-than-anticipated early market development due to regional bureaucracy

Analyst Q&A

• Q: Why is now the right time for this leadership transition, and what confirms the product is well-positioned amid AI-related industry shifts? /

  A: David Marotti was asked by the board to turn the company around in 2019, and that goal has been achieved: the business has 41 straight quarters of record revenue, 127,000 customers, and is approaching a 30% adjusted EBITDA margin (up from negative 70% in 2019). The transition allows Marotti to focus full-time on long-term AI and product strategy, while Kelly Georgievich, a 5-year company leader with deep institutional knowledge, is ready to lead day-to-day operations. The product now has unique capabilities competitors cannot match, making this the ideal time for the transition.

• Q: How does the 1-year extension of the Title II ADA compliance deadline change the business opportunity for AudioEye? /

  A: Management views the extension as a net positive, as it confirms the DOJ's long-term commitment to web accessibility and gives AudioEye and its partners additional runway to penetrate the large, still underserved state and local government market. Partners have not reduced urgency with their customers, and the market remains wide open, with most entities still lacking accessibility solutions. The extension gives more time to acquire new customers and onboarding new partners ahead of the 2027 enforcement date.

• Q: What opportunities does agentic AI create for AudioEye's product and margins, and can it reduce required professional services? /

  A: AudioEye is leveraging its 10-year proprietary accessibility dataset with agentic AI to unlock new product improvements that were not previously possible, including faster remediation, better client experience, more accurate detection, and stronger legal protection. The core long-term goal of AI automation is to reduce the amount of manual professional services required for remediation, which will drive margin expansion over time, continuing the company's history of disrupting the legacy accessibility consulting market.

• Q: What is the current status of European market expansion? /

  A: AudioEye continues to make disciplined incremental investments in the EU through 2026 and beyond. The EU market is developing slower than initially expected due to regional bureaucracy, but the company has seen positive early signals and a steadily growing sales pipeline. The team is building market awareness and positioning ahead of enforcement, so the business will be well-prepared to capture demand when enforcement goes into effect.