AUDIOEYE INC Q1 FY2025 earnings call

Execution - AudioEye has achieved 37th straight quarter of record revenue and the Rule of 40 for Q1 2025 with 20% year-over-year revenue growth and 20% adjusted EBITDA margins. ### Product Features - Launching additional platform features to increase customer value, with new features expected to be available to customers in the next few weeks as they migrate to the upgraded platform. ### EU Market - Approaching the European Accessibility Act deadline at the end of June, pipeline in the EU is strengthening with several deals won in April, and the sales team is being expanded. ### Reseller Business - Expect strong contributions from the reseller business in the second half with expanded go-to-market with Finalsite and CivicPlus. ### AI and Platform - Analyzed legal data showing AudioEye provides 3% to 400% more protection against valid legal claims than competitors when combining automation and human-assisted technology; building AI for testing and remediating. ### Refinancing - Refinanced existing debt for a $20 million facility, strengthening the cash position and reducing net interest expense.

In the first quarter of 2025, AudioEye achieved its 37th consecutive quarter of record revenue with Q1 revenue at $9.7 million. The partner and marketplace channel grew 17% year-over-year, representing 57% of revenue and around 58% of ARR. The enterprise channel grew 26% year-over-year, contributing 43% of revenue and around 42% of ARR. At the end of Q1 2025, annual recurring revenue (ARR) was $37.1 million, a $500,000 increase from the end of Q4 2024. Gross profit for the first quarter was $7.7 million (80% of revenue) compared to $6.3 million (78% of revenue) in Q1 of the previous year.

Q2 2025 - Guides revenue between $9.85 million and $10 million, expects adjusted EBITDA between $1.9 million and $2 million, and adjusted EPS between $0.15 and $0.16. ### 2025 Full Year - Reiterates revenue guidance of between $41 million and $42 million, adjusted EBITDA guidance of between $9 million and $10 million, and adjusted EPS between $0.70 and $0.80 per share. Adjusted EBITDA margin expected to continue increasing into the upper 20s by year-end. Free cash flow, defined as EBITDA minus CapEx, is expected to approach $3 million in the fourth quarter of 2025, with operating leverage and free cash flow expected to continue growing in 2026.

- Forward-looking statements are subject to risks and uncertainties discussed in SEC filings. ### - Macro economic environment poses challenges for the SaaS market. ### - Customer churn and lower tier customers impacted gross retention. ### - AI development not being a 'magic bullet' for all accessibility issues, as internal tests show AI is good at specific issues but not great at contextual understanding.

Q: Color on pipeline between direct sales and partner channel, and macro impact A: David Moradi stated there's strong deal progression at all stages in both US and EU, with deals moving deeper in stages. Direct momentum is picking up in the US.

Q: Pace of sales hires, M&A in macro A: Kelly Georgevich mentioned the refinancing strengthens the balance sheet, and they're balancing investments in sales and marketing with ROI, considering stock buyback and exploring acquisitions Q: New products and AI use A: David Moradi said they're building AI for testing and remediating, which could improve margins over time, but AI isn't great at contextual understanding yet Q: Europe sales force, partners, Minnesota ruling impact A: David Moradi said there's a huge opportunity in Europe with bigger deal sizes than in the US, working with some partners already, and not reading too much into the Minnesota ruling as demand is about the same as historical Q: Sales and marketing spend, AI perception impact A: Kelly Georgevich said they've invested across sales and marketing, adding headcount in US and EU, and David Moradi noted AI perception is evolving but they focus on controllable factors like free cash flow Q: ARR acceleration assumptions, near-term margin impact, public sector traction A: David Moradi said strong momentum in direct enterprise and EU, Kelly Georgevich mentioned Q2 margin impact from platform migration with a one-time effect, and David Moradi noted working closely with Finalsite and CivicPlus in the public sector with building pipelines