AudioEye, Inc. $AEYE

The thesis

AudioEye, Inc., of Tucson, Arizona, sells software and services that help organizations make their websites and apps usable by people with disabilities: round-the-clock monitoring, automated testing and fixes, expert testing, developer tools and legal protection (results release, Oct 2026). It had about 130,000 customers at 30 September, up from 123,000 a year earlier, served directly for larger organizations and through web-hosting platforms, agencies, resellers and its own marketplace for smaller businesses (10-Q, Oct 2026). Our case is that costs have fallen while revenue keeps growing, that the business now makes cash, and that the company has both the authority and the lender's consent to buy back a meaningful share of its stock.

The evidence

A profitable quarter. In the quarter to 30 September revenue rose 7% to $11.0M, gross profit to $9.1M, or 83% of revenue, from $7.9M, or 77%, and operating expenses fell 5% to $7.8M (release). Net income was $1.0M, or $0.08 a share, against a loss of $0.6M, or $0.04, a year earlier. Over the nine months the company still lost $2.0M, after $3.4M of litigation expense against $1.9M a year earlier (release). Adjusted EBITDA was $3.9M against $2.5M; it leaves out $1.2M of stock pay, $0.9M of depreciation and amortization, $0.5M of litigation, $0.3M of interest and a small acquisition expense (release).

Cash coming in. Operating cash flow in the nine months was $4.0M, against $2.2M a year earlier (10-Q). Cash rose to $9.3M at 30 September from $5.3M at the end of December (release). Against that sits a term loan from Western Alliance Bank with $16.6M of principal, repaid at $213,000 a quarter and due on 31 March 2030, with the $3.0M revolver undrawn (10-Q). Annual recurring revenue, a company measure, was $43.3M, up 12% on a year earlier and from $42.3M at 30 June (release).

A bigger buyback. On 20 October AudioEye announced that its board had authorized the repurchase of up to $15.0M of stock through 18 October 2027 (8-K, Oct 2026), about 9% of its market value at the 30 October close. It replaces a $12.5M program from January 2025 that had $7.45M left at 30 September, so about $5.05M was used by September, only $475K of it in 2026 (10-Q). On 26 October the bank removed a $7.0M cap on buybacks for 2025 to 2027; repurchases are now allowed as long as there is no default and liquidity stays at $5.0M or more (10-Q).

Insiders on both sides. A director, James Hawkins, bought 3,000 shares at an average of $12.34 on 29 October, about $37,000, and held 221,684 directly afterwards (Form 4, Oct 2026). He bought 38,000 shares at daily averages of $5.64 to $5.91 in March, and Kelly Georgevich, then CFO and CEO since May, bought 16,850 at an average of $5.90 (Form 4s, Mar 2026). On 30 October a Form 144 gave notice that David Moradi, Executive Chairman and CEO until May 2026, plans to sell 200,000 shares, about $2.6M, all to be sold by Sero Capital LLC, the investment firm he founded (Form 144, Oct 2026). The proxy gave him 2.64M shares, or 21.2%, at 30 April, so the planned sale is about 8% of his holding (proxy, May 2026).

What the market is missing

The shares closed at $13.03 on 30 October. At that price AudioEye is worth about $165M on 12.68M shares, about 3.9 times the $42.7M of revenue over the last four quarters, with $9.3M of cash and $16.6M of term loan principal. The company guides to fourth-quarter revenue of $11.4M to $11.6M and has raised its 2026 adjusted EBITDA guidance to $13.4M to $13.6M (release). What we think is underrated is how much of the gross profit now reaches cash: operating expenses fell while revenue grew, and the lender has allowed a buyback that would retire about 9% of the company at the 30 October close if the cash comes in to fund it, where the old program used about $5.05M of $12.5M from January 2025 to September 2026.

The risks

The profit is new. The third quarter is the only one of the last eight with net income, and the nine months are still a $2.0M loss (quarterly 10-Qs and 10-K). Two customers made up 23% of third-quarter revenue (10-Q). The term loan, $16.6M of principal, is larger than the $9.3M of cash, and the $15.0M buyback is larger than the cash too, so it depends on cash still to come; the bank requires at least $5.0M of liquidity after any repurchase (10-Q). Litigation expense was $3.4M in the nine months (release). The executive chairman's planned sale of 200,000 shares may add supply to the market for the stock. The company changed its CEO in May 2026 and its auditor in May 2026 (8-Ks, May 2026).

What would change our mind

A return to a net loss in the fourth quarter, or fourth-quarter revenue below the $11.4M to $11.6M guidance; operating cash flow turning negative; the loss of either of the two large customers; insiders selling beyond the 200,000 shares in the 30 October notice; or a share sale at or below the $13.03 close of 30 October.