AUDIOEYE INC
For the period ended Jun 30, 2026. Filed Aug 13, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 13, 2026
AEYE$12.37+2.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-12.
0001104659-26-059498
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-13.
0001104659-26-096032
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 72 previous paragraphs and 72 current paragraphs.
38 unchanged; 30 reworded; 4 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 19 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
For the three and six months ended June 30, 2026, cost of revenue increased by 1% and 8%, respectively, over the prior year comparable periods. The increases in cost of revenue were primarily due to higher costs incurred for service delivery supporting our increased revenue, partially offset by a reduction in employee headcount as a result of efficiency gains from newly implemented AI tools and automation.
Current report
For the three months ended June 30, 2026, selling and marketing expenses decreased by 4% from the prior year comparable period. The decrease in selling and marketing expenses resulted primarily from a reduction in marketing personnel resulting from efficiencies gained with the implementation of AI tools and automation, partially offset byan increase in third-party marketing expenses. Selling and marketing expenses for the six months ended June 30, 2026 were consistent with the prior year comparable period.
Current report
For the three and six months ended June 30, 2026, general and administrative expenses increased by 22% and 30%, respectively, over the prior year comparable periods. The increases in general and administrative expense were due primarily to an increase in litigation expense, as well as higher severance cost associated with a reduction in headcount and amortization expense associated with our intangible assets.
Current report
For the three and six months ended June 30, 2026, interest expense, net increased by 9% and 5%, respectively, from the prior year comparable periods. The increases in interest expense were attributable to the increase in outstanding principal balance on our term loan, as we drew the remaining $3.6 million in subsequent term loan advances in the first quarter of 2026.
Removed paragraphs (4)
Previous report
expenses and personnel costs. The increase in general and administrative expenses in the three months ended March 31, 2026 was due primarily to higher litigation, stock compensation and amortization expense.
Previous report
For the three months ended March 31, 2026, cost of revenue increased by 15% over the prior year comparable period. The increase in cost of revenue was primarily due to higher costs incurred for service delivery supporting our increased revenue, additional costs attributable to asset acquisitions, and higher amortization expense related to our capitalized software development costs.
Previous report
For the three months ended March 31, 2026, selling and marketing expenses increased by 4% over the prior year comparable period. The increase in selling and marketing expenses resulted primarily from higher third-party marketing expensesand personnel costs.
Previous report
For the three months ended March 31, 2026, interest expense, net remained consistent with the prior year comparable period, as the impact of the higher outstanding principal balance was mostly offset by the lower interest rate from the new credit facility and the increase in interest income from investment in money market funds.
Reworded paragraphs (30)
Previous wording
Readers of this report are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This cautionary note is applicable to all forward-looking statements contained in this report.
Current wording
Readers of this report are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our subsequent SEC filings. This cautionary note is applicable to all forward-looking statements contained in this report.
Previous wording
At its core, AudioEye’s offering provides ongoing testing, automated fixes, and 24/7 monitoring that continually improves conformance with Web Content Accessibility Guidelines (“WCAG”). This in turn helps businesses and organizations comply with WCAG standards as well as applicable U.S. and foreign accessibility laws. Our technology is capable of immediately identifying and fixing most of the common accessibility errors and addresses a wide range of disabilities including dyslexia, color blindness, epilepsy and more. AudioEye also offers additional solutions to provide for enhanced compliance and accessibility, including periodic auditing, custom fixes by experts, and legal support services. Our solutions may be purchased through a subscription service on a month-to-month basis or with one or multi-year terms. We also offer PDF remediation services and mobile application and audit reporting services to help our customers with their digital accessibility needs.
Current wording
At its core, AudioEye’s offering provides ongoing testing, automated fixes, and 24/7 monitoring that continually improves conformance with Web Content Accessibility Guidelines (“WCAG”). This in turn helps businesses and organizations comply with WCAG standards as well as applicable U.S. and foreign accessibility laws. Our technology is capable of immediately identifying and fixing most of the common accessibility errors and addresses a wide range of disabilities including dyslexia, color blindness, epilepsy and more. AudioEye also offers additional solutions to provide for enhanced compliance and accessibility, including periodic auditing, custom fixes by experts, and legal support services. Our solutions may be purchased through a subscription service on a month-to-month basis or with one or multi-year terms. We also offer PDF remediation services, as well as mobile application and audit reporting services, including Voluntary Product Accessibility Template (VPAT) audits, to help our customers with their digital accessibility needs.
Previous wording
Our intellectual property is primarily comprised of copyrights, trademarks, trade secrets, issued patents and pending patent applications. We have a patent portfolio comprised of twenty-six (26) issued patents in the United States and three (3) pending US patent applications. The commercial value of these patents is unknown.
Current wording
Our intellectual property is primarily comprised of copyrights, trademarks, trade secrets, issued patents and pending patent applications. We have a patent portfolio comprised of twenty-five (25) issued patents in the United States and three (3) pending U.S. patent applications. The commercial value of these patents is unknown.
Previous wording
We have two sales channels to deliver our product, the Partner and Marketplace channel and the Enterprise channel. AudioEye continues to focus on recurring revenue growth in both channels, while still offering our website and mobile application reporting services and PDF remediation services that provide non-recurring revenue.
Current wording
We have two sales channels to deliver our product, the Partner and Marketplace channel and the Enterprise channel. AudioEye continues to focus on recurring revenue growth in both channels, while still offering one-time website and mobile application reporting services as well as PDF remediation services that provide non-recurring revenue.
Previous wording
In the three months ended March 31, 2026, total revenue increased by 8% over the prior year comparable period. As of March 31, 2026, Annual Recurring Revenue (“ARR”) was approximately $41.2 million, which represented an increase of 11% year-over-year. Refer to “Other Key Operating Metrics” below for details on how we calculate ARR.
Current wording
In the three months ended June 30, 2026, total revenue increased by 9% over the prior year comparable period. As of June 30, 2026, Annual Recurring Revenue (“ARR”) was approximately $42.3 million, which represented an increase of 11% year-over-year. Refer to “Other Key Operating Metrics” below for details on how we calculate ARR.
Previous wording
As of March 31, 2026, AudioEye had approximately 127,000 customers, a 7% increase from 119,000 customers at March 31, 2025. The increase in customer count was attributable to an increase in our Partner and Marketplace channel customers.
Current wording
As of June 30, 2026, AudioEye had approximately 129,000 customers, a 7% increase from 120,000 customers at June 30, 2025. The increase in customer count was attributable to an increase in our Partner and Marketplace channel customers.
Previous wording
In the three months ended March 31, 2026, revenue from our Partner and Marketplace channel grew 8% over the prior year comparable period. The Partner and Marketplace channel represented about 59% of ARR as of March 31, 2026. In three months ended March 31, 2026, total Enterprise channel revenue grew 9% over the prior year comparable period. The Enterprise channel represented about 41% of ARR as of March 31, 2026.
Current wording
In the three months ended June 30, 2026, revenue from our Partner and Marketplace channel grew 16% over the prior year comparable period, primarily due to continued expansion with existing partners. The Partner and Marketplace channel represented about 59% of ARR as of June 30, 2026. In three months ended June 30, 2026, total Enterprise channel revenue remained consistent with the prior year comparable period, as the growth in recurring revenue was mostly offset by attrition of customers added through acquisition and a reduction in non-recurring revenue. The Enterprise channel represented about 41% of ARR as of June 30, 2026.
Previous wording
We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 13% and 14% of our total revenue in the three months ended March 31, 2026 and 2025, respectively.
Current wording
We had two customers (including, for each such customer, the customer’s affiliates) which accounted for 10% and 13% of our total revenue, respectively, or 23% in aggregate, in the three months ended June 30,2026. One customer accounted for 13% of our total revenue in the six months ended June 30, 2026.
Previous wording
The Company continued to invest in research and development in the first quarter of 2026. Total research and development cost, as defined under the “Research and Development Expenses” section in the “Results of Operations” below, was 15% of total revenue in the three months ended March 31, 2026. Total research and development cost in the three months ended March 31, 2026 decreased from the prior year comparable perioddue to lower personnel cost.
Current wording
The Company continued to invest in research and development in the second quarter of 2026. Total research and development cost, as defined under the “Research and Development Expenses” section in the “Results of Operations” below, was 12% of total revenue in the three months ended June 30, 2026. In the three months ended June 30, 2026, research and development expenses decreased from the prior year comparable period primarily due to a reduction in employee headcount as a result of efficiency gains from newly implemented AI tools and automation.
Previous wording
In the three months ended March 31, 2026, both selling and marketing expense and general and administrative expense increased from the prior year comparable period. The increase in selling and marketing expense was mainly driven byhigher third-party marketing
Current wording
In the three months ended June 30, 2026, selling and marketing expense decreased from the prior year comparable period. The decrease in selling and marketing expense was mainly driven by a reduction in marketing personnel resulting from efficiencies gained with the implementation of AI tools and automation, partially offset byhigher third-party marketing expenses.
Previous wording
For the three months ended March 31, 2026, general and administrative expenses increased by 38% from the prior year comparable period. The increase in general and administrative expense was due primarily to an increase in litigation expense by $1,110,000, as well as to higher stock compensation expense and amortization expense associated with our intangible assets.
Current wording
In the three months ended June 30, 2026, general and administrative expense increased from the prior year comparable period. The increase in general and administrative expenses was due primarily to higher litigation expense, severance associated with a reduction in headcount, and amortization expenses.
Previous wording
Our unaudited consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP” or “GAAP”). The discussion of the results of our operations compares the three months ended March 31, 2026 with the three months ended March 31, 2025.
Current wording
Our unaudited consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP” or “GAAP”). The discussion of the results of our operations compares the three and six months ended June 30, 2026 with the three and six months ended June 30, 2025.
Previous wording
Our results of operations in these interim periods are not necessarily indicative of the results which may be expected for any subsequent period. Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
Current wording
Our results of operations in these interim periods are not necessarily indicative of the results which may be expected for any subsequent period. Due to rounding, numbers presented throughout this document may not add precisely to the totals provided and percentages may not precisely reflect the absolute figures.
Previous wording
The following table presents our revenues disaggregated by sales channel:
Current wording
The following tables present our revenues disaggregated by sales channel:
Previous wording
For the three months ended March 31, 2026, total revenue increased by 8% over the prior year comparable period. The 8% increase in Partner and Marketplace channel revenue for the three months ended March 31, 2026 was primarily due to continued expansion with
Current wording
For each of the three and six months ended June 30, 2026, total revenue increased by 9% over the prior year comparable periods. The 16% and 12% increases in Partner and Marketplace channel revenue for the three and six months ended June 30, 2026, respectively, were primarily due to continued expansion with existing partners.
Previous wording
existing partners. The 9% increase in Enterprise channel revenue for the three months ended March 31, 2026 was driven primarily by new customer relationships, including additions from acquisitions.
Current wording
For the three months ended June 30, 2026, Enterprise channel revenue remained consistent with the prior year comparable period as the growth in recurring revenue was mostly offset by attrition of customers added through acquisition and a reduction in non-recurring revenue. The 4% increase in Enterprise channel revenue for the six months ended June 30, 2026 was driven primarily by new customer relationships.
Previous wording
Cost of revenue consists primarily of compensation and related benefits costs for our customer experience team, as well as a portion of our technology operations team that supports the delivery of our services, fees paid to our managed hosting and other third-party service providers, amortization of capitalized software development costs and patent costs, and allocated overhead costs.
Current wording
Cost of revenue consists primarily of compensation and related benefits costs for our service delivery team, as well as a portion of our technology operations team that supports the delivery of our services, fees paid to our managed hosting and other third-party service providers, amortization of capitalized software development costs and patent costs, and allocated overhead costs.
Previous wording
For the three months ended March 31, 2026, gross profit increased by 7% over the prior year comparable periods. The increase in gross profit was a result of increased revenue from new customers exceeding the incremental fulfilment cost.
Current wording
For the three and six months ended June 30, 2026, gross profit increased by 11% and 9%, respectively, over the prior year comparable periods. The increases in gross profit were primarily a result of increased revenue from new customers exceeding the incremental fulfilment cost.
Previous wording
For the three months ended March 31, 2026, R&D expenses decreased by 4% from the prior year comparable period. The decrease was driven by lower personnel cost. For the three months ended March 31, 2026, capitalized R&D cost remained consistent with the prior year comparable period due to engineering personnel spending a similar level of effort on product development. For the three months ended March 31, 2026, total R&D cost, which includes both R&D expenses and capitalized R&D costs, decreased by 3% from the prior year comparable period.
Current wording
For the three and six months ended June 30, 2026, R&D expenses decreased by 29% and 17%, respectively, from the prior year comparable periods. The decreases were primarily driven by a reduction in employee headcount as a result of efficiency gains from newly implemented AI tools and automation. For the three and six months ended June 30, 2026, capitalized R&D cost decreased by 23% and 13%, respectively, from the prior year comparable periods primarily due to a reduction in engineering personnel. For the three and six months ended June 30, 2026, total R&D cost, which includes both R&D expenses and capitalized R&D costs, decreased by 27% and 16%, respectively, from the prior year comparable periods.
Previous wording
Change in fair value of contingent consideration consists of non-cash valuation adjustments to contingent consideration liabilities recognized in connection with the acquisition of ADA Site Compliance, which was accounted for as a business combination.
Current wording
Change in fair value of contingent consideration consists of non-cash valuation adjustments to contingent consideration liabilities recognized in connection with the acquisition of ADA Site Compliance, which was accounted for as a business combination. The earnout targets for ADA Site Compliance were measured as of December 31, 2025, and there will be no further changes to the fair value of this contingent consideration.
Previous wording
For the three months ended March 31, 2026, no change in fair value of contingent consideration was recorded. The earnout targets for ADA Site Compliance were measured as of December 31, 2025, and no further changes in the fair value of this contingent consideration are expected following that measurement date.
Current wording
For the three and six months ended June 30, 2026, no change in fair value of contingent consideration was recorded.
Previous wording
On March 31, 2025, upon entering into a new credit facility with Western Alliance Bank, the Company paid the full $7.0 million in outstanding principal on its previous term loan with SG Credit Partners. In the three months ended March 31, 2025, in connection with the termination of the SG Credit Partners term loan, we recognized a $300,000 loss on extinguishment of debt, which included prepayment and other fees and the unamortized portion of related debt discount and debt issuance costs.
Current wording
On March 31, 2025, upon entering into a new credit facility with Western Alliance Bank, the Company paid the full $7.0 million in outstanding principal on its previous term loan with SG Credit Partners. In the three months ended March 31, 2025, in connection with the termination of the SG Credit Partners term loan, we recognized a $300,000 loss on extinguishment of debt, which included prepayment and other fees and the unamortized portion of related debt discount and debt issuance costs. No loss on extinguishment of debt was incurred in the three and six months ended June 30, 2026.
Previous wording
We define ARR as the sum of (i) for our Enterprise channel, the total of the annualized recurring fee at the date of determination under each active contract, plus (ii) for our Partner and Marketplace channel, the annual or monthly recurring fee for all active customers at
Current wording
We define ARR as the sum of (i) for our Enterprise channel, the total of the annualized recurring fee at the date of determination under each active contract, plus (ii) for our Partner and Marketplace channel, the annual or monthly recurring fee for all active customers at the date of determination, in each case, assuming no changes to the subscription, multiplied by 12 if applicable. Recurring fees are defined as revenues expected to be generated from services typically offered as a subscription service or annual service offering such as
Previous wording
the date of determination, in each case, assuming no changes to the subscription, multiplied by 12 if applicable. Recurring fees are defined as revenues expected to be generated from services typically offered as a subscription service or annual service offering such as our automation and platform, periodic auditing, human-assisted technological fixes, legal support and professional service offerings and other services that reoccur on a multi-year contract. This determination includes both annual and monthly contracts for recurring products. Some of our contracts are terminable prior to the expected term, which may impact future ARR. ARR excludes non-recurring fees, which are defined as revenue expected to be generated from services typically not offered as a subscription service or annual service offering such as our PDF remediation services business, one-time mobile application reports, and other miscellaneous services that are offered as non-subscription services or are expected to be one-time in nature. As of March 31, 2026, ARR was $41.2 million, which represents an increase of 11% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.
Current wording
our automation and platform, periodic auditing, human-assisted technological fixes, legal support and professional service offerings and other services that reoccur on a multi-year contract. This determination includes both annual and monthly contracts for recurring products. Some of our contracts are terminable prior to the expected term, which may impact future ARR. ARR excludes non-recurring fees, which are defined as revenue expected to be generated from services typically not offered as a subscription service or annual service offering such as our PDF remediation services business, one-time mobile application reports, and other miscellaneous services that are offered as non-subscription services or are expected to be one-time in nature. As of June 30, 2026, ARR was $42.3 million, which represents an increase of 11% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.
Previous wording
As of March 31, 2026, we had $8,563,000 in cash and cash equivalents and working capital of $440,000. The $2.2 million increase in working capital in the three months ended March 31, 2026 was primarily due to $3.6 million in proceeds drawn from the remaining subsequent term loan advances available to the Company, partially offset by the increase in accrued expenses and in aportion of our term loan being classified as a current liability.
Current wording
As of June 30, 2026, we had $8,717,000 in cash and cash equivalents and working capital of $974,000. The $2.8 million increase in working capital in the six months ended June 30, 2026 was primarily due to our $3.6 million draw of the remaining subsequent term loan advances available to the Company, partially offset by the $0.8 million increase in deferred revenue.
Previous wording
In January 2025, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $12.5 million of our common stock through January 24, 2027. The program may be amended, suspended, or discontinued at any time and does not commit the Company to repurchase any shares of its common stock. Shares repurchased under the program are subsequently retired and restored to the status of authorized but unissued shares of common stock. In the three months ended March 31, 2026, we used $475,000 of the program to repurchase shares. As of March 31, 2026, we had $7.45 million remaining for the repurchase of shares.
Current wording
In January 2025, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $12.5 million of our common stock through January 24, 2027. The program may be amended, suspended, or discontinued at any time and does not commit the Company to repurchase any shares of its common stock. Shares repurchased under the program are subsequently retired and restored to the status of authorized but unissued shares of common stock. In the six months ended June 30, 2026, we used $475,000 of the program to repurchase shares. As of June 30, 2026, we had $7.45 million remaining for the repurchase of shares under the program.
Previous wording
As of March 31, 2026, we had $17.0 million outstanding under the term loan, $16.2 million of which is classified as a noncurrent liability. The term loan matures on March 31, 2030, and requires quarterly principal payments beginning on April 10, 2026. Refer to Note 3 – Debt to our consolidated financial statements for additional information regarding our credit facility.
Current wording
As of June 30, 2026, we had $16.8 million outstanding under the term loan, $15.9 million of which is classified as a noncurrent liability. The term loan matures on March 31, 2030, and requires quarterly principal payments which began on April 10, 2026. Refer to Note 3 – Debt to our consolidated financial statements for additional information regarding our credit facility. As of June 30, 2026, we were in compliance with all covenants under the credit facility.
Previous wording
For the three months ended March 31, 2026, in relation to the prior year comparable period, cash provided by operating activities increased primarily due to timing of payments and the increase in revenue.
Current wording
For the six months ended June 30, 2026, in relation to the prior year comparable period, cash provided by operating activities increased primarily due to the timing of customer payments.
Previous wording
For the three months ended March 31, 2026, in relation to the prior year comparable period, cash used in investing activities decreased primarily due to a reduction in payments associated acquisitions in the current year period.
Current wording
For the six months ended June 30, 2026, in relation to the prior year comparable period, cash used in investing activities decreased primarily due to a reduction in the current year period in payments associated with acquisitions.
Previous wording
For the three months ended March 31, 2026, in relation to the prior year comparable period, cash provided by financing activities decreased primarily due to $475,000 in stock repurchases in the first quarter of 2026, as well as tolower net proceeds from credit facility activity. In thethree months ended March 31, 2026 and 2025, we obtained $3.6 million and $12.0 million, respectively, in proceeds from term loan borrowings under the credit facility with Western Alliance Bank. In thethree months ended March 31, 2025, we used a portion of the term loan borrowings to repay our previous $7.0 million term loan, as well as costs associated with the issuance and termination of our previous credit facilities.
Current wording
For the six months ended June 30, 2026, in relation to the prior year comparable period, cash provided by financing activities decreased primarily due to lower net proceeds from credit facility activity, partially offset by a reduction in repurchases of common stock and lower payments related to settlement of employee share-based awards. In thesix months ended June 30, 2026 and 2025, we received $3.6 million and $13.4 million, respectively, in proceeds from term loan borrowings under the credit facility with Western Alliance Bank. In thefirst quarter of 2025, we used a portion of the term loan borrowings to repay our previous $7.0 million term loan, as well as costs associated with the issuance and termination of our previous credit facilities.