[Management View]
AudioEye reported $9.9 million in revenue for fiscal Q2 2025, marking 38 consecutive quarters of growth. ARR reached $38.2 million, up $1.1 million sequentially and $4.9 million year-over-year. Management emphasized the strategic integration of acquisitions and the phase-out of lower-margin legacy customers.

[Outlook]
Revenue guidance for fiscal Q3 2025 is projected between $10.2 million and $10.4 million, with an annualized sequential growth rate of 18% at the midpoint. Adjusted EBITDA margins are expected to reach the high 20s by fiscal Q4 2025. Full-year 2025 revenue guidance has been updated to $40.3 million to $40.7 million, reflecting the phase-out of certain acquisition-related customers.

[Financial Performance]
Fiscal Q2 2025 gross profit was $7.6 million, or 77% of revenue, compared to $6.7 million, or 79% of revenue, in fiscal Q2 2024. Operating expenses rose by 2% over the prior year to $7.4 million. Adjusted EBITDA for fiscal Q2 2025 was $1.9 million, up 31% year-over-year.

[Q&A Highlights]
Question 1: Can you give us some sense of how much the phase-out of acquisition customers impacted the numbers in the first half of this year relative to the second half?
Answer: Acquisition churn drove the reduction in revenue. Customers churned out in Q2 related to migration to AudioEye products and services. This impact will continue into Q3 and 2025, with overall ARR churn expected to be about $1 million to $1.5 million. Most affected customers will be phased out by the end of 2025.

Question 2: How much has the increase in digital accessibility lawsuits been a catalyst for growth year-to-date?
Answer: It's hard to quantify precisely, but lawsuits are up, possibly by 10-20%. AudioEye is outgrowing the market, and the EU is coming online, contributing to growth.

Question 3: What type of visibility do you have into the EU pipeline for the balance of the year relative to previous quarters?
Answer: The EU pipeline has tripled from Q2 to Q3, indicating strong growth. This trend is expected to continue into next year.

Question 4: Can you clarify the 3x pipeline growth? Is it specific to Europe?
Answer: Yes, the 3x pipeline growth refers specifically to the EU business.

Question 5: How are you expanding your presence in Europe?
Answer: We are adding salespeople, increasing marketing budgets, and becoming more active in the EU. This is a significant focus for long-term growth.

Question 6: Are international sellers in the U.S. making changes due to EU regulations?
Answer: Not yet, but enforcement may drive changes in the future.

Question 7: Can you elaborate on the 30% aspirational EPS growth goal?
Answer: The goal is driven by enterprise growth, EU contributions, partner expansion, and strong GRR metrics. The scale of the business supports this target.

Question 8: What products are customers being migrated away from, and does this relate to the earn-out reversal?
Answer: Customers are moving away from consulting or one-time audits to AudioEye's automated products and services. The higher churn is directly tied to the reversal of contingent liability related to earn-out.

Question 9: What is the ideal partner strategy in the EU?
Answer: Targeting around 300-500 agencies that create websites for clients.

Question 10: Are there specific EU member states where you've seen more traction?
Answer: Traction has been seen in France, Germany, Italy, and the UK.

Question 11: Can you provide an update on Title II of the DOJ and its impact on partners?
Answer: Partners like Finalsite and CivicPlus are investing resources to capture the opportunity. Their pipelines are building nicely, with expected momentum in the second half and into 2026.

Question 12: How is AI impacting internal development and long-term profitability?
Answer: AI is being integrated into testing, remediation, development workflows, and custom fixes. It is expected to improve accuracy and margins over time.

Question 13: How do you think clients will adopt mandates, and does it vary between enterprise players and others?
Answer: Adoption will take time, similar to GDPR. Big players are likely to adopt first.

[Sentiment Analysis]
Analysts were generally positive, focusing on growth prospects and strategic integration. Management maintained a confident tone, emphasizing long-term growth drivers and operational efficiency.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 | YoY Change |
|-------------------------|---------------|---------------|--------------|
| Revenue | $9.9 million | $8.5 million | +16% |
| Gross Profit | $7.6 million | $6.7 million | +13% |
| Operating Expenses | $7.4 million | $7.2 million | +2% |
| Adjusted EBITDA | $1.9 million | $1.4 million | +31% |
| Customer Count | 120,000 | 119,000 | +1,000 |

[Risks and Concerns]
The phase-out of acquisition-related customers may impact ARR and revenue in the short term. Regulatory compliance and enforcement in the EU and U.S. could pose challenges. The integration of AI into workflows may require ongoing adjustments.

[Final Takeaway]
AudioEye continues to demonstrate strong revenue growth and strategic integration of acquisitions. The company is well-positioned to capitalize on regulatory tailwinds in the EU and U.S., with a focus on expanding its presence and leveraging AI for operational efficiency. Despite short-term impacts from customer churn, the long-term outlook remains positive, supported by robust enterprise and partner marketplace channels.