AudioEye outlines $0.90 annualized adjusted EPS run rate as ARR and margins expand through EU momentum

Earnings Call Insights: AudioEye, Inc. (AEYE) Q3 2025

MANAGEMENT VIEW

* CEO David Moradi highlighted "record third quarter results" with "39 straight quarters of record revenue with $10.2 million in revenue." Moradi reported a record $2.5 million in adjusted EBITDA, up from $1.9 million sequentially, and a record 24% adjusted EBITDA margin. He stated, "We expect a significant increase in fourth quarter ARR, revenue, adjusted EBITDA and adjusted EBITDA margin." Moradi emphasized strong enterprise channel performance, noting "one of the best quarters in new business in our history, including contributions from the EU," and pointed to continued deal momentum into the fourth quarter with "several late-stage deals with ARR over $100,000."
* Moradi noted the ramp up in the partner and marketplace channel, backed by "anticipation of the DOJ Title II rule, which begins to take effect in May 2026." He confirmed, "Our biggest partners in the government and government adjacent spaces contributed significantly to partner ARR growth this quarter."
* Product innovation was underscored with Moradi describing advancements in AI: "One recent advancement is the combination of the open source Playwright framework with the Model Context Protocol or MCP... Using Playwright MCP enables large language models to integrate with websites and for AI agents to perform tasks like humans."
* Moradi discussed capital allocation, stating, "In the third quarter, we repurchased approximately 154,000 shares, bringing our total to roughly 300,000 shares in 2025."
* CFO Kelly Georgevich said, "Revenue again hit record levels with Q3 2025 revenue at $10.2 million, up 15% over the comparable period of prior year, and an increase of $370,000 over the second quarter of 2025." Georgevich added, "Annual Recurring Revenue, or ARR, at the end of the third quarter of 2025 was $38.7 million, a $2.5 million increase over the end of the third quarter of the prior year and a $500,000 increase from the end of the second quarter of 2025."

OUTLOOK

* Moradi provided fourth quarter guidance of "revenue between $10.45 million and $10.6 million" and adjusted EBITDA of "$2.7 million to $2.8 million" and adjusted EPS of "$0.21 to $0.23." He narrowed full year 2025 revenue guidance to "$40.3 million to $40.4 million" and refined profitability guidance toward the top end of the range with adjusted EBITDA of "$9 million to $9.1 million" and adjusted EPS of "$0.72 to $0.73 per share." Moradi stated, "Based on our expectation of adjusted EBITDA margins in the upper 20s in the fourth quarter, we expect to generate an annualized adjusted EPS of nearly $0.90."
* Moradi reiterated an aspirational target: "We continue to have an aspirational goal of increasing adjusted EBITDA and adjusted EPS by 30% to 40% annually for the next 3 years."

FINANCIAL RESULTS

* Georgevich reported, "The third quarter marked our 39th quarter of record revenue," with Q3 revenue at $10.2 million, and ARR at $38.7 million. She reported the enterprise channel grew "around 26% over the comparable period of the prior year, and the partner and marketplace channel grew around 7% over the same period."
* Gross profit for the third quarter was $7.9 million or around 77% of revenue. Georgevich noted, "we expected margins in the second and third quarter of 2025 to temporarily decrease," and expects gross margin to be up approximately 1 percentage sequentially in Q4.
* Operating expenses increased only 2% to $8.2 million, with R&D spend at approximately $1.6 million, consistent with the prior year. Net loss was $600,000 or $0.04 per share, compared to a net loss of $1.2 million or $0.10 per share in the same year-ago period. Adjusted EBITDA was $2.5 million, and adjusted EPS was $0.19 per share.
* The company repurchased approximately $1.8 million of shares at an average price of $11.86 in Q3, with total 2025 repurchases at approximately $3.6 million.

Q&A

* Ethan Widell, B. Riley Securities: Asked about EU traction and partnership momentum. Moradi responded, "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."
* Widell asked about platform migration progress. Moradi replied, "The migration is going well. Most customers are going to be on the new platform this quarter."
* Widell inquired about Title II of the ADA and government shutdown impacts. Moradi stated, "No, we're not seeing anything there."
* Logan for George Sutton, Craig Hallum: Asked about pipeline development and close rates. Moradi said, "It's too early to tell on the close rates. It's going very well in the EU at the moment." Georgevich added, "That pipeline is also growing in the EU, and we're seeing some good opportunities come up."
* Logan asked about EU documentation emphasis and competitive dynamics. Moradi confirmed, "That's true. We've adopted accordingly with that. We have all the statements for each member state."
* Scott Buck, HC Wainwright: Asked about average deal size in Europe versus the U.S. Moradi responded, "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."
* Buck asked about revenue from Europe versus the U.S. Moradi answered, "Do see contribution still mostly U.S. and it's picking up into the third quarter or fourth quarter."
* Buck inquired about the aspirational goal and drivers. Georgevich explained, "To reach that aspiration all we do need revenue to continue to increase... 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."

SENTIMENT ANALYSIS

* Analysts focused on EU momentum, pipeline strength, platform migration progress, and regulatory catalysts. Their tone was neutral to slightly positive, with pressing questions on metrics and strategic execution.
* Management maintained a confident, upbeat tone during both prepared remarks and Q&A, using phrases such as "We are very excited about ARR growing significantly and the operating leverage in our model" and "We expect a substantial pickup once the fines are issued."
* Compared to the previous quarter, analyst tone remained steady and inquisitive, while management's confidence level increased, especially regarding EU pipeline and product advancements.

QUARTER-OVER-QUARTER COMPARISON

* Fourth quarter revenue and adjusted EPS guidance was narrowed and refined upward compared to the prior quarter, reflecting stronger enterprise channel performance and EU contributions.
* Strategic focus shifted further toward AI-driven product enhancements and the integration of Playwright MCP.
* Analysts continued to focus on EU business growth, pipeline expansion, and the impact of regulatory changes, with increased attention to average deal sizes and documentation requirements.
* Key metrics, including ARR, adjusted EBITDA, and margin expansion, all improved sequentially, while operating expense growth was contained.
* Management’s language around guidance and future growth became more specific and confident compared to Q2 2025.

RISKS AND CONCERNS

* Customer attrition related to integration of acquired customers was noted, though management expects these to be "substantially complete in the fourth quarter."
* Temporary margin compression associated with platform migration was discussed, with expectations for sequential improvement as integration completes.
* No material impact observed from the U.S. government shutdown on compliance adoption.
* Analyst questions surfaced concerns about enforcement timelines and the effect on close rates, but management did not indicate any current obstacles.

FINAL TAKEAWAY

AudioEye’s third quarter results underscored accelerating ARR and margin expansion, highlighted by record revenue and significant progress in the EU and enterprise channels. Management reiterated raised guidance for both Q4 and full-year 2025, pointed to ongoing product innovation, and expressed confidence in achieving a near $0.90 annualized adjusted EPS run rate as integration efforts conclude and regulatory catalysts take hold in 2026.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/aeye/earnings/transcripts]

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