Executive Summary / Key Takeaways

• AudioEye is transforming into a highly profitable leader in the digital accessibility market, driven by a compelling blend of regulatory tailwinds, strategic acquisitions, and continuous technological innovation. The company has achieved 39 consecutive quarters of record revenue, culminating in $10.2 million in Q3 2025, and record adjusted EBITDA of $2.5 million with a 24% margin in the same period.
• The company's core competitive advantage lies in its patented, AI-powered technology, which is 300% to 400% more effective than competitors in protecting against legal claims and can automatically detect 500% more issues. Recent advancements, such as the Playwright MCP integration, are set to further enhance detection accuracy and drive margin expansion.
• Significant market expansion opportunities in Europe, spurred by the European Accessibility Act (EAA), and in the U.S. public sector, driven by the DOJ's Title II rule, are expected to accelerate Annual Recurring Revenue (ARR) and revenue growth in the second half of 2025 and into 2026.
• AudioEye demonstrates strong operating leverage and disciplined capital allocation, with an aspirational goal of 30% to 40% annual growth in adjusted EBITDA and adjusted EPS for the next three years. The company's balance sheet is well-capitalized, and share repurchases are an active component of its capital deployment strategy.
• While temporary gross margin compression was observed in Q2 and Q3 2025 due to platform migration, margins are expected to rebound to the high 70s by Q4 2025, contributing to an anticipated annualized adjusted EPS of nearly $0.90.

The Mandate for Accessibility: AudioEye's Strategic Foundation

AudioEye, Inc. stands at the forefront of the rapidly expanding digital accessibility market, providing essential software and services that ensure web content is accessible to all, regardless of device, location, or disability. Its core offering delivers ongoing testing, automated fixes, and 24/7 monitoring to continually improve conformance with Web Content Accessibility Guidelines (WCAG) and applicable U.S. and foreign accessibility laws. This foundational mission is becoming increasingly critical as regulatory mandates intensify globally, creating a compelling and non-discretionary market demand.

The company's strategic evolution began in earnest in 2019 with David Moradi joining the Board of Directors, initiating a transformative focus on operational efficiency and strategic growth. This shift proved pivotal, elevating gross margins from the mid-50s to a robust 80% and adjusted EBITDA margins from negative 60s to a record 24% by Q4 2024. Revenue per employee also expanded significantly, reaching over $330,000 in the same period. This disciplined approach culminated in AudioEye achieving the "Rule of 40" in Q1 2025, a testament to its balanced growth and profitability.

AudioEye's business model is bifurcated into two primary sales channels: the Partner and Marketplace channel, catering to small and medium-sized businesses (SMBs) through resellers and direct offerings, and the Enterprise channel, which serves larger organizations, including government agencies, directly. This dual-channel strategy allows AudioEye to address a broad spectrum of the market, from high-volume SMBs to high-value enterprise clients, ensuring diversified revenue streams and market penetration.

Technological Edge: The AI-Powered Moat

At the heart of AudioEye's competitive differentiation is its patented technology, which provides a robust moat in the digital accessibility landscape. The company's solutions are designed to immediately identify and fix most common accessibility errors, addressing a wide range of disabilities including dyslexia, color blindness, and epilepsy. This core technology is not merely reactive; it offers continuous, automated testing and remediation, a critical feature in the dynamic digital environment.

The tangible benefits of AudioEye's technology are quantifiable and significant. Based on an analysis of 1,500 legal claims, AudioEye's solution is already 300% to 400% more effective than competitors in providing protection against valid legal claims. Furthermore, improvements in its automated testing capabilities have enabled the company to automatically detect approximately 500% more accessibility issues than other solutions on the market as of Q4 2024. These metrics underscore a substantial lead in efficacy and proactive compliance.

AudioEye continues to invest heavily in research and development, particularly in advanced AI. A key recent advancement is the integration of the open-source Playwright framework with the Model Context Protocol (MCP). This innovation enables large language models (LLMs) to interact with websites and perform tasks like humans by navigating the accessibility tree, rather than the Document Object Model (DOM). This approach is expected to be more efficient in terms of compute and LLM token usage, especially at scale. The stated goal of this technological push is to further improve AudioEye's industry-leading detection accuracy and scale, which management anticipates will drive further margin expansion and cash flow into next year. For investors, this technological leadership translates directly into a stronger competitive position, enhanced pricing power, and a more resilient business model capable of delivering superior financial outcomes.

Expanding Horizons: Regulatory Catalysts in Europe and the U.S.

AudioEye is strategically positioned to capitalize on significant regulatory tailwinds in both Europe and the United States. The European Accessibility Act (EAA), which officially went into effect in June 2025, mandates accessibility standards for digital products and services across the EU for companies with more than 10 employees or annual revenue exceeding EUR 2 million. Non-compliance can result in substantial fines, up to EUR 3 million, and additional legal risks. AudioEye has proactively established a team in Europe, adding account executives and increasing marketing budgets, to capture this burgeoning demand. Early indications are promising, with the EU pipeline tripling from Q2 to Q3 2025 and average deal sizes running approximately 50% higher than in the U.S., focusing on enterprise and upper mid-market clients. The company expects a "substantial pickup once the fines are issued, similar to what happened with GDPR."

Domestically, the U.S. Department of Justice's (DOJ) Title II rule, with its first effective date in May 2026, presents another significant growth catalyst. This rule is expected to have a considerable impact on AudioEye's key partners in the government-adjacent space, such as Finalsite and CivicPlus. These partners have implemented aggressive go-to-market plans, and AudioEye anticipates accelerated penetration and growth from these collaborations in the second half of 2025 and extending into 2026 and 2027. Management believes private litigation, rather than direct government enforcement, will be the primary driver of compliance, mirroring trends observed with Title III website accessibility.

Financial Trajectory and Operational Efficiency

AudioEye's financial performance reflects its strategic execution and operational discipline. The company has consistently delivered record revenues, reaching $10.2 million in Q3 2025, a 15% increase year-over-year. For the nine months ended September 30, 2025, total revenue grew 17% year-over-year to $29.8 million. Annual Recurring Revenue (ARR) stood at $38.7 million as of September 30, 2025, representing a 7% increase year-over-year and a sequential increase of $0.5 million from Q2 2025. This consistent ARR growth underscores the sticky nature of its subscription-based services.

Gross profit for Q3 2025 was $7.9 million, representing a 77% gross margin. While gross margins experienced a temporary dip in Q2 and Q3 2025 due to the migration of acquired customers to the upgraded AudioEye Core platform and additional audits to showcase new features, management expects margins to return to the high 70s by Q4 2025. This integration effort, aimed at eliminating duplicate systems and processes, is expected to be substantially complete by the end of Q4 2025, paving the way for improved profitability.

Operating expenses have been managed with prudence, increasing only 2% year-over-year in Q2 2025 to $7.4 million, despite additional investments in sales and marketing. This efficiency is partly attributable to lower personnel costs in research and development, where AI tools are driving increased productivity. Total R&D spend in Q3 2025 was approximately $1.6 million, representing 15% of revenue, down from 18% in the comparable prior-year period. The company's net loss has also shown significant improvement, decreasing to $0.6 million in Q3 2025 ($0.04 per share) from $1.2 million in Q3 2024 ($0.10 per share).

Adjusted EBITDA has reached record levels, hitting $2.5 million in Q3 2025, up sequentially from $1.9 million in Q2 2025, with a record adjusted EBITDA margin of 24%. This strong profitability translates into robust free cash flow generation. Free cash flow, defined as adjusted EBITDA plus capitalized software development costs, was $2.0 million in Q3 2025 and is expected to continue increasing in Q4. The company anticipates approaching $3 million in free cash flow in Q4 2025, representing a nearly $1 per share run rate and over 40% year-over-year growth.

Competitive Landscape and Positioning

AudioEye operates in a competitive digital accessibility market alongside direct rivals such as Deque Systems, Level Access, and Siteimprove. AudioEye distinguishes itself through its patented, real-time content conversion and distribution technology, which provides a significant operational advantage. While competitors like Deque excel in comprehensive auditing and Level Access in manual remediation expertise, AudioEye's integrated platform and always-on monitoring offer superior efficiency in addressing a broad spectrum of accessibility needs. The company's ability to provide 300% to 400% more protection against legal claims and detect 500% more issues than competitors highlights a clear technological edge that translates into a compelling value proposition for clients seeking robust compliance.

However, AudioEye faces vulnerabilities, particularly in specialized auditing depth compared to Deque and potential gaps in advanced analytics capabilities when contrasted with Siteimprove. The company's reliance on partnerships for distribution also presents a dependency. Despite these, the increasing regulatory demands and the growing integration of AI into digital tools serve as significant market drivers, playing directly into AudioEye's strengths. The company's strategic response involves continuous R&D in AI to enhance its core technology and aggressive expansion into new markets like Europe, where deal sizes are larger and the regulatory mandate is fresh.

Outlook and Guidance

AudioEye's management has provided an optimistic outlook for the remainder of 2025 and beyond, projecting continued acceleration in ARR and sequential revenue growth. For the fourth quarter of 2025, the company guides revenue between $10.45 million and $10.6 million. It also expects to generate a record adjusted EBITDA of $2.7 million to $2.8 million and adjusted EPS of $0.21 to $0.23.

For the full year 2025, AudioEye has narrowed its revenue guidance to $40.3 million to $40.4 million and refined its profitability guidance towards the top end of the range, with adjusted EBITDA of $9.0 million to $9.1 million and adjusted EPS of $0.72 to $0.73 per share. This guidance incorporates a temporary impact from the phaseout of lower-margin acquisition-related customers, which is expected to result in approximately $1 million to $1.5 million in churn for 2025, largely completed by year-end. Management anticipates adjusted EBITDA margins to reach the upper 20s by Q4 2025, leading to an annualized adjusted EPS of nearly $0.90.

Looking further ahead, AudioEye has an aspirational goal of increasing adjusted EBITDA and adjusted EPS by 30% to 40% annually for the next three years. This ambitious target is underpinned by expected continued revenue growth, gross margin expansion driven by platform integration and AI efficiencies, and ongoing cost discipline. The company's balance sheet is well-capitalized, with $4.55 million in cash and $6.6 million in available debt facilities as of September 30, 2025, following a debt refinancing that reduced interest rates from 14% to approximately 7.5%. AudioEye's active share repurchase program, with $8.91 million remaining, further demonstrates its commitment to disciplined capital allocation and shareholder value.

Conclusion

AudioEye, Inc. is demonstrating a compelling investment thesis, characterized by consistent revenue growth, expanding profitability, and a strategic alignment with powerful regulatory and technological trends. The company's patented, AI-driven accessibility platform provides a significant competitive advantage, offering superior protection against legal claims and enhanced issue detection capabilities. With the European Accessibility Act and the U.S. DOJ Title II rule acting as potent market catalysts, AudioEye is well-positioned for accelerated growth in both its Enterprise and Partner channels.

Despite temporary headwinds from integrating acquired customers, AudioEye's operational efficiencies and commitment to R&D are driving margin expansion and robust free cash flow generation. The company's prudent financial management, including a strengthened balance sheet and an active share repurchase program, further enhances its attractiveness. For investors seeking exposure to a growing, legally mandated market with a technologically differentiated leader, AudioEye presents a compelling opportunity, poised for sustained profitability and shareholder value creation in the years to come.