AudioEye, Inc. Q3 FY2025 earnings call

• Achieved record third quarter results with $10.2 million in revenue and a record $2.5 million in adjusted EBITDA, up from $1.9 million sequentially, with an adjusted EBITDA margin of 24%.
• Saw significant momentum in the enterprise channel with one of the best quarters in new business in history, including contributions from the EU, and several late-stage deals with ARR over $100,000 in the EU and U.S.
• Partner and marketplace channel ramping in anticipation of the DOJ Title II rule starting in May 2026, with big partners in government and adjacent spaces contributing to growth.
• Migrated customers from small acquisitions to eliminate duplicate systems and processes, on track to complete integration this quarter, expected to improve margins in the fourth quarter and beyond.
• Excited about recent AI advancements like the combination of Playwright framework with MCP, which could improve detection and accuracy.

In the third quarter of 2025, AudioEye achieved $10.2 million in revenue, marking 39 straight quarters of record revenue. The enterprise channel grew around 26% over the comparable period of the prior year, contributing around 45% of revenue and 42% of ARR. The partner and marketplace channel grew around 7% over the same period, contributing around 55% of revenue and 58% of ARR. The third quarter also saw a record $2.5 million in adjusted EBITDA, up from $1.9 million sequentially, with an adjusted EBITDA margin of 24%. Annual Recurring Revenue (ARR) at the end of the third quarter was $38.7 million, a $2.5 million increase over the end of the third quarter of the prior year.

• Fourth quarter revenue guidance: $10.45 million to $10.6 million.
• Fourth quarter adjusted EBITDA guidance: $2.7 million to $2.8 million, adjusted EPS: $0.21 to $0.23.
• 2025 full year revenue guidance narrowed to $40.3 million to $40.4 million, adjusted EBITDA guidance refined to $9 million to $9.1 million, adjusted EPS: $0.72 to $0.73 per share.
• Expect annualized adjusted EPS of nearly $0.90 based on fourth quarter adjusted EBITDA margins, and aspirational goal of increasing adjusted EBITDA and adjusted EPS by 30% to 40% annually for the next 3 years.

Q: It sounds like you're getting some nice traction in the EU. Can you maybe speak a little bit more to the momentum that you're seeing there?

A: Yes. I think we had some deals closed in the third quarter. We have some large deals active in the late-stage pipeline today. And this is before any real enforcement. We expect a substantial pickup once the fines are issued, similar to what happened with GDP.

Q: It sounds like you're on track for your platform migration. Can you maybe speak to where you're at as of right now?

A: Sure. Yes, the migration is going well. Most customers are going to be on the new platform this quarter. So we're happy to see that. It's going really well.

Q: Just with regard to Title II of the ADA. Have you seen any impact to the rate of compliance adoption there from the government shutdown?

A: No, we're not seeing anything there.

Q: I'm just curious if you can give us anything on how the pipeline has developed over the past quarter. And kind of beyond that, is there anything you can say about close rates or conversion rates kind of relative to expectations or maybe the business historically?

A: It's too early to tell on the close rates. It's going very well in the EU at the moment. Kelly, anything to add on that? Kelly Georgevich: No. I think just that pipeline is also growing in the EU, and we're seeing some good opportunities come up.

Q: One of the things that we picked up is that potentially in Europe under the EAA, there's a bit more emphasis on documentation of accessibility and usability statements, things of that nature. Just curious if you're seeing that also. And does that change anything competitively? Or how does that play into your product offering?

A: That's true. We've adopted accordingly with that. We have all the statements for each member state.

Q: Could you remind us what average deal size looks like in Europe versus the U.S.?

A: It's a bit higher. It's running I would say about 50% higher than the average field in the U.S., it's more enterprise deals that we're seeing there in upper mid-market.

Q: How do we think of that in terms of what's coming from revenue growth versus gross margin expansion versus ongoing cost discipline. I mean, how do we kind of piece that out? To get to that 30% to 40% on the adjusted EBITDA line.

A: Yes. I think they're all coming into play. To reach that aspiration all we do need revenue to continue to increase. We see good opportunities with you, resellers, U.S. business demand. So that is obviously a factor, but there is also the gross margin opportunity. And then what we've proven is with revenue scaling, we can still be efficient with costs. So all three of those things are contributing to that aspirational goal.