AUDIOEYE INC
For the period ended Mar 31, 2025. Filed May 1, 2025.
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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.
Mar 31, 2025 · Filed May 1, 2025
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 2024-09-30; filed 2024-11-07.
0001558370-24-014907
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-01.
0001558370-25-006123
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 66 previous paragraphs and 69 current paragraphs.
29 unchanged; 27 reworded; 11 added; 10 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 24 previous and 18 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 (11)
Current report
ended March 31, 2025 was due primarily to an increase in litigation expenses, as well as transaction costs and severance incurred in connection with business acquisitions.
Current report
For the three months ended March 31, 2025, cost of revenue increased by 13% over the prior year comparable period. The increase in cost of revenue was primarily due to additional costs attributable to ADA Site Compliance, which was acquired in September 2024, and higher amortization expense related to our capitalized software development costs.
Current report
For the three months ended March 31, 2025, R&D expenses decreased by 13% from the prior year comparable period. This decrease was driven by lower personnel cost. For the three months ended March 31, 2025, capitalized R&D cost decreased by 4% over the prior year comparable period. The decrease in capitalized R&D cost was the result of engineering personnel spending less time on product
Current report
Interest Expense
Current report
For the three months ended March 31, 2025, interest expense, net increased by 16% over the prior year comparable period. The increase in interest expense, net was primarily attributable to a reduction in interest income from investment in money market funds.
Current report
Loss on Extinguishment of Debt
Current report
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 this term loan, we recognized a $300,000 loss on extinguishment of debt, which included $144,000 in prepayment and other fees and the unamortized portion of related debt discount and debt issuance costs.
Current report
As of March 31, 2025, we had $8,265,000 in cash and cash equivalents and working capital of $3,585,000. The $3.0 million increase in working capital in the three months ended March 31, 2025 was primarily due tothe new credit facility with Western Alliance Bank, under which we obtained a $12 million term loan and used a portion of the proceeds to pay our previous $7.0 million term loan with SG Credit Partners in full.
Current report
As of March 31, 2025, we had $1.4 million in noncurrent contingent consideration liability recognized in connection with the acquisition of ADA Site Compliance, and $12.0 million in noncurrent term loan which matures on March 31, 2030.
Current report
For the three months ended March 31, 2025, in relation to the prior year comparable period, cash provided by operating activities decreased primarily due to additional investment in selling and marketing efforts and increases in litigation expenses.
Current report
For the three months ended March 31, 2025, in relation to the prior year comparable period, cash provided by financing activities increased primarily due to proceeds from a new $12 million credit facility, which were partially offset by the repayment of our previous $7 million term loan. In addition, in thethree months ended March 31, 2024 the Company paid $1.7 million to repurchase shares of its common stock, whereas no such stock repurchases occurredin thethree months ended March 31, 2025.
Removed paragraphs (10)
Previous report
Legal and Regulatory Framework Update
Previous report
On April 24, 2024, the U.S. Department of Justice (“DOJ”) published a rule to add specific requirements about web and mobile application accessibility under Title II of the ADA that would apply to state and local governments. On May 9, 2024, the U.S. Department of Health and Human Services (“HHS”) published a rule to add, among other things, specific requirements about web and mobile application accessibility under Section 504 of the Rehabilitation Act that would apply to recipients of Federal financial assistance.
Previous report
For the three and nine months ended September 30, 2024, cost of revenue remained consistent with the prior year comparable periods.
Previous report
Interest Income (Expense)
Previous report
As of September 30, 2024, we had $5,478,000 in cash and working capital of ($2,214,000). The $5.5 million decrease in working capital in the nine months ended September 30, 2024 was primarily due tothe acquisition of ADASite Compliance, for which we made an initial payment of $3.1 million, net of cash received, and recognized $2.3 million in noncurrent note payable.
Previous report
In the second quarter of 2024, the Company initiated an At The Market offering (“ATM offering”), under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $7.0 million from time to time. As of September 30, 2024, we had issued 162,524 shares of our common stock and raised $3,473,000, net of transaction expenses, under the ATM offering.
Previous report
In the second quarter of 2024, we made a $2.4 million cash payment to settle the contingent consideration associated with the BOIA acquisition in full.
Previous report
As of September 30, 2024, we had $7.0 million in noncurrent term loan which matures on November 30, 2026. As of September 30, 2024, we had Note Payable in the aggregate principal amount of $2.4 million, which matures on November 26, 2024.
Previous report
For the nine months ended September 30, 2024, in relation to the prior year comparable period, cash provided by operating activities increased primarily due to increased revenue, cost efficiencies associated with lower personnel expense following a realignment in our product and development teams, as well as lower online media and third-party marketing expenses.
Previous report
For the nine months ended September 30, 2024, in relation to the prior year comparable period, cash used in financing activities decreased primarily due tocapital raised under the ATM Offering initiated in the second quarter of 2024, under which we issued 162,524 shares of our common stock and raised $3,473,000, net of transaction expenses. The decrease was partially offset by common stock repurchases totaling $2.02 million, as well as higher payouts towards the contingent consideration in connection with the acquisition of BOIA. In the nine months ended September 30, 2024, payments towards this contingent consideration totaled $2,387,000, of which $1,677,000 and $710,000 were classified as cash used in financing and operating activities, respectively. In the nine months ended September 30, 2023, payments towards this contingent consideration totaled $974,000, of which $908,000 and $66,000 were classified as cash used in financing and operating activities, respectively.
Reworded paragraphs (27)
Previous wording
At its core, AudioEye’s offering provides an always-on testing, remediation, and monitoring solution 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, human assisted technological remediations 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 and mobile application and audit reporting services 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-three (23) 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-four (24) issued patents in the United States and three (3) pending US patent applications. The commercial value of these patents is unknown.
Previous wording
AudioEye is an industry-leading digital accessibility platform delivering Americans with Disabilities Act (“ADA”) and WCAG compliance at scale. Our solutions advance accessibility with patented technology that reduces barriers, expands access for individuals with disabilities, and enhances the user experience for a broader audience. In the three and nine months ended September 30, 2024, we continued to focus on product innovation, expanding revenue and managing expenses.
Current wording
AudioEye is an industry-leading digital accessibility platform delivering Americans with Disabilities Act (“ADA”) and WCAG compliance at scale. Our solutions advance accessibility with patented technology that reduces barriers, expands access for individuals with disabilities, and enhances the user experience for a broader audience. In the three months ended March 31, 2025, we continued to focus on product innovation, expanding revenue and managing expenses.
Previous wording
For the nine months ended September 30, 2024, total revenue increased by 9% over the prior year comparable period. As of September 30, 2024, Annual Recurring Revenue (“ARR”) was approximately $36.2 million, which represented an increase of 19% year-over-year. Refer to Other Key Operating Metrics below for details on how we calculate ARR.
Current wording
For the three months ended March 31, 2025, total revenue increased by 20% over the prior year comparable period. As of March 31, 2025, Annual Recurring Revenue (“ARR”) was approximately $37.1 million, which represented an increase of 16% year-over-year. Refer to Other Key Operating Metrics below for details on how we calculate ARR.
Previous wording
As of September 30, 2024, AudioEye had approximately 126,000 customers, an 18% increase from 107,000 customers at September 30, 2023. The increase in customer count is attributed to both our Partner and Marketplace and Enterprise channels.
Current wording
As of March 31, 2025, AudioEye had approximately 119,000 customers, a 6% increase from 112,000 customers at March 31, 2024. The increase in customer count is attributed to both our Partner and Marketplace and Enterprise channels.
Previous wording
In the nine months ended September 30, 2024, revenue from our Partner and Marketplace channel grew 12% over the prior year comparable period. This channel represented about 58% of ARR at the end of September 2024. In nine months ended September 30, 2024, total Enterprise channel revenue grew 5% over the prior year comparable period. The Enterprise channel represented about 42% of ARR at the end of September 2024.
Current wording
In the three months ended March 31, 2025, revenue from our Partner and Marketplace channel grew 17% over the prior year comparable period. This channel represented about 58% of ARR as of March 31, 2025. In three months ended March 31, 2025, total Enterprise channel revenue grew 26% over the prior year comparable period. The Enterprise channel represented about 42% of ARR as of March 31, 2025.
Previous wording
We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 16% of our total revenue in each of the nine months ended September 30, 2024 and 2023.
Current wording
We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 14% and 16% of our total revenue in the three months ended March 31, 2025 and 2024, respectively.
Previous wording
The Company continued to invest in research and development in the third quarter of 2024. Total research and development cost, as defined under Research and Development Expenses section in the Results of Operations below, was 20% of total revenue in the nine months ended September 30, 2024. Total research and development cost decreased from the prior year comparable period primarily due to the completion of significant initiatives in research and development.
Current wording
The Company continued to invest in research and development in the first quarter of 2025. Total research and development cost, as defined under Research and Development Expenses section in the Results of Operations below, was 17% of total revenue in the three months ended March 31, 2025. Total research and development cost decreased from the prior year comparable period primarily due to lower personnel cost.
Previous wording
In the nine months ended September 30, 2024, selling and marketing expense decreased from the prior year comparable period. This decrease was mainly driven by efficiencies in selling and marketing. The increase in general and administrative expenses in the nine months ended September 30, 2024 was due primarily to transaction costs incurred in connection with the acquisition of ADA Site Compliance, as well as an increase in litigation expenses.
Current wording
In the three months ended March 31, 2025, selling and marketing expense increased from the prior year comparable period. This increase was mainly driven byhigher third-party marketing expense. The increase in general and administrative expenses in the three months
Previous wording
We provide further commentary on our Results of Operation below.
Current wording
We provide further commentary on our Results of Operations below.
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 and nine months ended September 30, 2024 with the three and nine months ended September 30, 2023.
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 months ended March 31, 2025 with the three months ended March 31, 2024.
Previous wording
The following tables present our revenues disaggregated by sales channel:
Current wording
The following table presents our revenues disaggregated by sales channel:
Previous wording
Partner and Marketplace channel consists of our CMS partners, platform & agency partners, authorized resellers and the Marketplace. This channel serves small & medium sized businesses that are on a partner or reseller’s web-hosting platform or that purchase our solutions from our Marketplace.
Current wording
The Partner and Marketplace channel consists of our CMS partners, platform & agency partners, authorized resellers and the Marketplace. This channel serves small and medium sized businesses that are on a partner or reseller’s web-hosting platform or that purchase our solutions from our Marketplace.
Previous wording
Enterprise channel consists of our larger customers and organizations, including those with non-platform custom websites, who generally engage directly with AudioEye sales personnel for custom pricing and solutions. This channel also includes federal, state and local government agenciesand revenue attributable to ADA Site Compliance, which was acquired in September 2024.
Current wording
The Enterprise channel consists of our larger customers and organizations, including those with non-platform custom websites, who generally engage directly with AudioEye sales personnel for custom pricing and solutions. This channel also includes federal, state and local government agencies.
Previous wording
For the three and nine months ended September 30, 2024, total revenue increased by 14% and 9%, respectively, over the prior year comparable periods. The increase in Partner and Marketplace channel revenue for the three and nine months ended September 30, 2024 was primarily due to continued expansion with existing partners. The increase in Enterprise channel revenue for the three and nine months ended September 30, 2024 was driven primarily by an increase in Enterprise customers.
Current wording
For the three months ended March 31, 2025, total revenue increased by 20% over the prior year comparable period. The increase in Partner and Marketplace channel revenue for the three months ended March 31, 2025 was primarily due to continued expansion with
Previous wording
For the three and nine months ended September 30, 2024, gross profit increased by 17% and 11%, respectively, over the prior year comparable periods. The increase in gross profit was a result of increased revenue.
Current wording
For the three months ended March 31, 2025, gross profit increased by 22% over the prior year comparable period. The increase in gross profit was a result of increased revenue.
Previous wording
For the three months ended September 30, 2024, selling and marketing expenses increased by 9% over the prior year comparable period. The increase in selling and marketing expenses resulted primarily from higher third-party marketing and stock compensation expense. For the nine months ended September 30, 2024, selling and marketing expenses decreased by 3% over the prior year comparable period. This decrease resulted primarily from a reduction in online media and third-party marketing expenses.
Current wording
For the three months ended March 31, 2025, selling and marketing expenses increased by 24% over the prior year comparable period. The increase in selling and marketing expenses resulted primarily from higher third-party marketing expenses and additional costs associated with ADA Site Compliance, which was acquired in September 2024.
Previous wording
Research and development (“R&D”) expenses consist primarily of compensation and related benefits, independent contractor costs, and an allocated portion of general overhead costs related to our employees involved in research and development activities. Total research and development cost includes the amount of research and development expense reported within operating expenses as well as development cost that was capitalized during the fiscal period.
Current wording
Research and development (“R&D”) expenses consist primarily of compensation and related benefits, independent contractor costs, and an allocated portion of general overhead costs related to our employees involved in research and development activities. Total research and development cost includes the amount of research and development expense reported within operating expenses as well as research and development cost that was capitalized during the fiscal period.
Previous wording
For the three and nine months ended September 30, 2024, research and development expense decreased by 41% and 36%, respectively, from the prior year comparable periods. These decreases were driven by lower personnel cost associated with a realignment in our product and development teams following the completion of significant initiatives in R&D. For the three and nine months ended September 30, 2024, capitalized research and development cost decreased by 10% and 7%, respectively, over the prior year comparable periods. These decreases to capitalized research cost were the result of engineering personnel spending less time on product development than in the prior year comparable periods. For the three and nine months ended September 30, 2024, total research and development cost, which includes both R&D expenses and capitalized R&D costs, decreased by 35% and 30%, respectively, from the prior year comparable periods.
Current wording
development than in the prior year comparable period. For the three months ended March 31, 2025, total R&D cost, which includes both R&D expenses and capitalized R&D costs, decreased by 10% from the prior year comparable period.
Previous wording
General and administrative expenses consist primarily of compensation and benefits related to our executives, directors and corporate support functions, general corporate expenses including legal fees, occupancy and transaction costs.
Current wording
General and administrative expenses consist primarily of compensation and benefits related to our executives, directors and corporate support functions, and general corporate expenses including legal fees, occupancy and transaction costs.
Previous wording
For the three and nine months ended September 30, 2024, general and administrative expenses increased by 46% and 11%, respectively, over the prior year comparable periods. The increases in general and administrative expenses were due primarily to transaction costs incurred in connection with the acquisition of ADA Site Compliance, as well as an increase in litigation expenses. For the three and nine months ended September 30, 2024, litigation expenses totaled $840,000 and $1,339,000, respectively.
Current wording
For the three months ended March 31, 2025, general and administrative expenses increased by 45% over the prior year comparable period. The increase in general and administrative expense was due primarily to a $617,000 increase in litigation expense, as well as transaction costs and severance incurred in connection with business acquisitions.
Previous wording
For the three and nine months ended September 30, 2024, interest expense, net consisted primarily of interest on our term loan borrowed in the fourth quarter of 2023, which was partially offset by interest income from investment in money market funds. For the three and nine months ended September 30, 2023, interest income, net consisted primarily of income from investment in money market funds.
Current wording
Interest expense, net consists primarily of interest on our term loan, offset by interest income from investment in money market funds
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 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 September 30, 2024, ARR was $36.2 million, which represents an increase of 19% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.
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 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, 2025, ARR was $37.1 million, which represents an increase of 16% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.
Previous wording
In November 2023, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $5 million of our common stock through December 31, 2025. The stock repurchase program may be suspended or discontinued at any time and does not commit the Company to repurchase any dollar amount or particular number of shares of stock. Shares repurchased under the program are subsequently retired and restored to the status of authorized but unissued shares of common stock. In the nine months ended September 30, 2024, we paid $2.02 million in cash to repurchase 299,371 shares of our common stock. As of September 30, 2024, we had $1.86 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. No repurchases have been made under this program to date.
Previous wording
For the nine months ended September 30, 2024, in relation to the prior year comparable period, cash used in investing activities increased primarily due to the acquisition of ADASite Compliance, for which we paid $3.1 million, net of cash acquired.
Current wording
For the three months ended March 31, 2025, in relation to the prior year comparable period, cash used in investing activities increased primarily due to the acquisition of Criterion 508 Solutions, Inc., for which we paid $0.3 million, net of cash acquired.
Previous wording
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported and disclosed in our consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates under different assumptions or conditions.
Current wording
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported and
Previous wording
Our critical accounting estimates, as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, relate to stock-based compensation and goodwill, intangible assets and contingent consideration recognized in connection with a business combination. There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Current wording
Our critical accounting estimates, as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, relate to goodwill, intangible assets and contingent consideration recognized in connection with a business combination. There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
existing partners. The increase in Enterprise channel revenue for the three months ended March 31, 2025 was driven primarily by an increase in Enterprise customers.
Current report — wording carried from elsewhere
disclosed in our consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates under different assumptions or conditions.