AEYE

AudioEye is a small-cap digital-accessibility SaaS with genuinely high-quality unit economics hiding behind GAAP losses. Gross margin is 78.3%, revenue has compounded cleanly every year ($24.5M→$29.9M→$31.3M→$35.2M→$40.3M, +14.5% in FY2025), and the net loss has narrowed for four consecutive years from -$14.2M to -$3.08M. The most important number is operating cash flow of $4.75M (+74% YoY) against near-zero capex of $54K — this business is self-funding on a cash basis even while reporting a loss, with the GAAP gap explained by $3.57M of D&A and stock comp. The model is overwhelmingly recurring (~$40M ARR, ~131,000 customers up from 127,000), and the Enterprise channel grew 21%, the faster and stickier half of the mix. At a $70M market cap that is 1.7x sales and ~15x operating cash flow — an undemanding price for a 78%-margin recurring-revenue business approaching GAAP breakeven (operating loss narrowed 46% to -$1.83M).

The case against is the balance sheet, and it is not trivial. Cash is only $5.29M and declining, stockholders' equity fell 49% to $4.80M, liabilities/equity is 5.71x, and the accumulated deficit is -$103M. In March 2025 the company took on a Western Alliance term loan (long-term debt now $12.5M, +83%) secured by substantially all assets, with covenants tied to minimum cash, debt/ARR, debt/EBITDA and a fixed-charge coverage ratio — any breach the filing explicitly warns it 'cannot guarantee' it will meet. Most striking is capital allocation: the company spent $4.58M on buybacks (+127%) — more than its entire cash balance — funded effectively by the new debt. That is a confident, owner-minded signal at 1.7x sales, but it thins an already-thin liquidity cushion and concentrates the risk on covenant compliance.