AUDIOEYE INC

AudioEye, Inc. operates as an industry-leading digital accessibility platform, providing website accessibility compliance solutions to businesses of all sizes. The company's core business model revolves around selling subscriptions for its software-as-a-service (SaaS) accessibility solutions, which are powered by machine-learning/AI-driven technology designed to identify and rectify common accessibility errors. AudioEye's offerings are designed to help websites and applications achieve and maintain substantial conformance with the Web Content Accessibility Guidelines (WCAG), thereby assisting customers in mitigating the risk of digital accessibility-related legal actions. The company generates revenue through two primary channels: the Enterprise channel, which serves larger customers and government agencies directly, and the Partner and Marketplace channel, catering to small and medium-sized businesses through CMS partners, platform & agency partners, authorized resellers, and its own Marketplace. AudioEye differentiates itself by offering a combination of automated and human-assisted technological fixes, continuous monitoring, and a broad range of price points, from a free 14-day trial to customized enterprise solutions. The company also provides additional services such as periodic auditing, custom fixes by certified accessibility experts, PDF remediation, and mobile application and audit reporting services.

For the fiscal year ended December 31, 2025, AudioEye reported total revenue of $40,311,000 ¹, marking a 15% increase over the prior year ². Gross profit for the period was $31,556,000 ³, representing a 13% increase year-over-year ⁴. The company's operating loss improved to $(1,830,000) ⁵ from $(3,390,000) in the prior year ⁶, a 46% reduction ⁷. Net loss for the year was $(3,077,000) ⁸, an improvement of 28% compared to the $(4,254,000) net loss in 2024 ⁹. Diluted EPS for 2025 was $(0.25) ¹⁰, compared to $(0.36) in 2024 ¹¹. As of December 31, 2025, cash and cash equivalents stood at $5,288,000 ¹², and the company had a working capital deficit of $(1,794,000) ¹³. Total debt, represented by the outstanding term loan, was $13,401,000 ¹⁴, with $503,000 ¹⁵ classified as current and $12,479,000 ¹⁶ as noncurrent.

Year-over-year, total revenue increased by 15% ¹⁷. The Partner and Marketplace channel revenue grew by 10% ¹⁸, driven by expansion with existing partners and new partnership agreements. The Enterprise channel revenue increased by 21% ¹⁹, primarily due to new customer relationships, including expansion into the European Union. Cost of revenue increased by 21% ²⁰, primarily due to higher service delivery costs and increased amortization expense related to capitalized software development costs. Selling and marketing expenses rose by 18% ²¹, mainly due to increased investment in third-party marketing services and higher personnel costs. Research and development expenses decreased by 10% ²² due to lower personnel costs from a headcount reduction, while capitalized R&D costs increased by 6% ²³. General and administrative expenses increased by 13% ²⁴, driven by higher amortization expense for intangible assets, increased personnel costs (including stock compensation), and a $715,000 ²⁵ increase in litigation expenses. The change in fair value of contingent consideration resulted in a $(1,350,000) ²⁶ income, a significant shift from the $140,000 ²⁷ expense in the prior year, attributed to a reduction in the estimated earnout payable for the ADA Site Compliance acquisition. Interest expense, net, increased by 10% ²⁸ to $(947,000) ²⁹, primarily due to a reduction in interest income from money market investments. The company also recognized a $300,000 ³⁰ loss on extinguishment of debt in 2025 ³¹ related to the termination of its previous term loan.

During the fiscal year, AudioEye continued to focus on product innovation and revenue expansion. The company acquired ADA Site Compliance, LLC on September 27, 2024, to expand existing customer relationships and migrate them to AudioEye's products, with an aggregate consideration of approximately $7.0 million ³². On March 31, 2025, AudioEye entered into a new Loan and Security Agreement with Western Alliance Bank, providing for borrowings of up to $20.0 million ³³, including a $12.0 million ³⁴ term loan advance and a revolving line of credit up to $3.0 million ³⁵. The proceeds from this new facility were used to repay the previous $7.0 million ³⁶ outstanding principal on the term loan with SG Credit Partners. In January 2025, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $12.5 million ³⁷ of common stock through January 24, 2027. As of December 31, 2025, $4.57 million ³⁸ had been used for repurchases, with $7.93 million ³⁹ remaining.

AudioEye anticipates continued improvement in cash provided by operating activities in 2026, primarily driven by expected revenue growth. The company plans to continue investing in its product offerings and in sales and marketing efforts to capitalize on market demand.

A key growth area for AudioEye is the expansion of its Enterprise channel, which saw a 21% ⁴⁰ increase in revenue in 2025, partly due to new customer relationships and expansion into the European Union. The European Accessibility Act (EAA), effective June 2025, mandates digital products and services, including websites, e-commerce, and mobile apps, to meet accessibility standards across the EU, presenting a significant market opportunity for AudioEye's solutions. The company's solutions are designed to help customers achieve and sustain substantial conformance with WCAG, which is the standard often used in legal and regulatory contexts.

Another growth vector is the continued expansion within the Partner and Marketplace channel, which experienced a 10% ⁴¹ revenue increase in 2025. This growth is expected to continue through existing partner relationships and the execution of new partnership agreements. The company's strategy of offering a comprehensive accessibility solution that combines automated fixes with human-assisted expertise, along with broad price points, is designed to attract and retain customers across various segments.

Operationally, AudioEye expects its cost structure to evolve with continued investment in service delivery, in line with revenue growth. While research and development expenses decreased in 2025 due to lower personnel costs, capitalized R&D costs increased, indicating ongoing investment in product development. The company's focus on machine-learning/AI-driven technology for automated fixes and continuous monitoring suggests a commitment to enhancing its core platform. The company also noted an increase in selling and marketing expenses in 2025, driven by higher investment in third-party marketing services, indicating a continued focus on market penetration and customer acquisition.

Regarding capital allocation, AudioEye's Board of Directors adopted a share repurchase program in January 2025, authorizing the repurchase of up to $12.5 million ⁴² of common stock through January 24, 2027. As of December 31, 2025, $7.93 million ⁴³ remained available under this program. The company has not declared or paid any dividends on its preferred or common stock since its inception and anticipates retaining any future earnings for business development. The company also has a term loan facility with Western Alliance Bank, with an outstanding principal balance of $13,401,000 ⁴⁴ as of December 31, 2025, requiring quarterly principal payments beginning April 10, 2026.

Management explicitly flagged that the current legal environment for its products and services remains unclear, and there is no assurance that existing or planned offerings will comply with all local, state, federal, or foreign laws. Changes in the legal, regulatory, and judicial framework relating to website accessibility, including new laws or modifications to existing ones, could render the company's products less needed or cause violations. The company also highlighted risks related to the growth of online services and Internet-based applications, noting that if this growth does not occur as expected, or if consumers are unwilling to adopt new applications or purchase its products, the business could be adversely affected.

AudioEye faces several material risks. Macroeconomic uncertainty and geopolitical developments could adversely affect IT spending, customer purchasing decisions, subscription contract values, attrition rates, and the ability to collect on accounts receivable. The company has a history of significant losses, with a net loss of $3,077,000 ⁴⁵ for 2025 and an accumulated deficit of $103,398,000 ⁴⁶ as of December 31, 2025, and may not achieve sustained profitability. Future development requires additional capital, and there is no assurance that needed capital or financing will be available on satisfactory terms. The company's credit facility includes financial and liquidity covenants, such as maintaining a minimum cash balance of at least $3.0 million ⁴⁷ and a certain ratio of total committed debt to Annual Recurring Revenue between 0.70 to 0.55 ⁴⁸, which it may not always meet. Competition in the web accessibility market is intense and expected to increase, with larger, better-financed competitors potentially developing superior products or integrating AI-driven accessibility features directly into their core offerings. Advances in artificial intelligence may intensify competition and reduce demand for AudioEye's solutions. The company's ability to compete depends on adequately protecting its intellectual property, including twenty-six (26) issued patents ⁴⁹, and there is a risk of infringement or invalidity claims. The legal and regulatory framework for website accessibility is evolving and unclear, with potential for new laws or changes in judicial interpretation, such as the European Accessibility Act (EAA) becoming effective in June 2025, requiring compliance or risking penalties. Operational risks include system interruptions, security and privacy breaches, computer viruses, and cyber-attacks, which could harm the business, financial condition, or reputation. Fraud, impersonation, and social engineering schemes also pose a risk of financial loss or reputational harm.

Management's message to shareholders emphasizes continued focus on product innovation and expanding revenue, particularly recurring revenue growth in both the Partner and Marketplace and Enterprise channels. They highlight the company's unique combination of advanced technology, including machine-learning/AI-driven solutions, and expert-driven services as a competitive strength, aiming to provide reliable and sustainable website accessibility compliance. Management explicitly stated that for the year ended December 31, 2025, total revenue increased by 15% ⁵⁰ over the prior year, and Annual Recurring Revenue (ARR) was approximately $40.0 million ⁵¹, representing a 9% ⁵² increase from December 31, 2024. They also noted that cash provided by operating activities totaled $4.8 million ⁵³ in 2025 and is expected to continue to improve in 2026, driven mainly by anticipated revenue growth. Strategic priorities include continued investment in product development and sales and marketing efforts to capture market demand, as well as managing the integration of acquired businesses like ADA Site Compliance, LLC. Management also acknowledged the inherent risks in the business, including the uncertain market acceptance of existing and future products, the need for additional capital, and the evolving legal and regulatory environment for web accessibility.