Aware, Inc. Aktie

Good afternoon, and welcome to Aware's First Quarter FY '26 Conference Call. Joining us today are the company's CEO and President, Ajay Amlani; and CFO, David Traverse. Following their remarks, we will open the call to questions. [Operator Instructions]

Before we begin today's call, I would like to remind everyone that the presentation today contains forward-looking statements that are based on current expectations of Aware's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described. Listeners should please take note of the safe harbor paragraph that is is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today. Aware wishes to caution you that there are factors that could cause actual results to differ materially from the results indicated by such statements. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Additionally, this call contains certain non-GAAP financial measures as that term is defined by the SEC and Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, Aware has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today.

I would like to remind everyone that this presentation will be recorded and made available for replay via a link available in the Investor Relations section of the company's website. Now I would like to turn the call over to Aware CEO and President, Ajay Amlani. Ajay?

Thank you, Delaney, and good afternoon, everyone. First, let me start with our performance this quarter. Revenue for the first quarter was $3.4 million, which was below our expectations. Transparently, we underestimated the pace at which the market was shifting and the degree to which our existing product infrastructure and architecture needed to evolve to meet it.

The rapid advancement of AI has simultaneously raised the stakes and expanded the threat surface for biometric systems, making liveness detection and identity assurance more critical than ever, while making the job of protecting against spoofing and deepfakes more demanding. We did not move fast enough to get ahead of that reality, and this for quarter's results reflect that.

As part of our ongoing transformation, we took deliberate steps during the quarter to further align the business with our platform-first strategy. This included removing approximately $4 million in expenses and simplifying our go-to-market operating model. These actions represent a meaningful reset of our cost structure and are designed to support a more focused, efficient organization, aligned with our highest return opportunities.

Stepping back, this quarter marks the next phase of our transformation. 2025 was about building the foundation, strengthening our technology, expanding certifications and deepening our understanding of customer requirements. We are now in step 2, focusing the company around a single scalable platform strategy. At the center of that strategy is the Awareness Platform. We are moving away from a fragmented portfolio of components and FI biometric orchestration platform designed to serve both federal government and enterprise customers at scale. We believe biometric orchestration represent a critical layer in modern identity infrastructure, enabling organizations to integrate, manage and scale biometric systems and workflows across their environments with increased efficiency and simplicity.

More importantly, this is not just a product decision. It is grounded in market demand and data. In our recently published market research, the state of biometric security in the age of AI fraud, an astounding 98% of organizations already using biometrics said they're interested in investing in orchestration capabilities. Additionally, nearly 90% report concerned over AI attacks targeting biometric systems, further illustrating why they need visibility into orchestrating biometric workflows. The report is available on our website, and I'd encourage you to read it.

Taken together, this feedback reinforces that we are aligned with where the market is headed, allowing us to build with a clear understanding of the opportunity in front of us.

We also believe Aware is uniquely positioned to lead in this category. Our decades of experience, our deep scientific foundation and our strong intellectual property portfolio, particularly in liveness detection represent a durable competitive advantage. It is the critical capability that will determine winners and losers in this space, and it is where we have historically been strong and intend to lead.

As part of this shift, we are prioritizing investment in the Awareness Platform and aligning our resources accordingly. This includes downshifting investment in certain legacy product areas, including portions of our law enforcement-focused offerings while continuing to fully support our existing customers and deliver on our commitments. At the same time, we are increasing our focus on the federal government, where our foundational capabilities have long proven and where we continue to see demand for [indiscernible].

In parallel, we have gained important insight from enterprise customers whose requirements are increasingly centered around cloud-based multi-tenant architectures. This feedback has directly shaped the design of the Awareness Platform, which is built to support scalable enterprise-grade deployments. The platform continues to evolve, and we are actively engaging with customers to refine capabilities and ensure strong product market fit. We are encouraged by the feedback we are seeing and believe this positions us as we plan for a broader platform rollout later this year.

Step 3, which we expect to begin in the coming quarters and accelerate into the fall, is about scaling, bringing expanded platform capabilities to market, including continued advancements in liveness and providing single integration access to top-performing systems so that customers can test and evaluate performance as well as quickly deploy biometrics anywhere across their business.

As we move through this transition, we expect near-term variability to continue. Our focus is not on optimizing for quarter-to-quarter results but on building a more durable, modern and scalable business that can deliver steady, long-term growth and broader adoption of the platform. While this business did not meet our expectations this quarter, we are confident that the actions that we have taken position us more effectively for the future.

A key example of continued progress is our performance in independent real-world government evaluations. During the quarter, we delivered strong results in the DHS Remote Identity Validation Rally, Track 3, where our Intelligent Liveness solution demonstrated the ability to stop sophisticated attack vectors while maintaining a high-quality user experience. We view results like these as more than technical milestones. They are a direct reflection of our commitment to building a high assurance, production-ready technology that can operate at scale with speed and accuracy in the most demanding environments. These validations are critical prerequisites for winning large government and enterprise deployments, and they reinforce our confidence in the platform as we are continuing to build.

With that, I will turn the call over to David to review our financial results in more detail. Over to you, David.

Thank you, Ajay. Let's review our financial results for the first quarter of 2026, which ended on March 31, 2026. Revenue for the quarter was $3.4 million compared to $3.6 million in the prior year period. This decrease reflects lower perpetual software license revenue and was partially offset by higher maintenance and services and other revenue.

Operating expenses for the quarter increased to $7 million compared to $5.5 million in the prior year quarter. The higher expenses included onetime severance costs of $700,000 as well as higher compensation costs related to hires we made in 2025. As Ajay noted earlier, we have reduced operating expenses by $4 million on an annualized basis starting in the second quarter of 2026, and we continue to make adjustments to our operating expenses as we continue to focus on our strategic objectives.

Net loss for the quarter was $3.5 million or $0.16 per diluted share compared to $1.6 million or $0.08 per diluted share in the prior year period. Adjusted EBITDA loss was $3.2 million compared to $1.5 million in the prior year period. We ended the quarter with approximately $19.6 million in cash, cash equivalents and marketable securities, and we have no debt.

Our balance sheet remains strong and provides flexibility as we execute on our strategic plan. We expect the savings of the actions taken this quarter to be more visible as we align our expenses with our strategic priorities.

Given the nature of our business and the transition underway, we expect quarterly variability to continue. And as a result, we continue to believe performance is best evaluated over multiple quarters. With that, I'll get it back to Ajay for closing remarks. Ajay?

Thanks, David. We have been transparent with you today about where we fell short. We underestimated both the fit and capability demands of the current market and the speed at which AI is reshaping what customers need from biometric infrastructure. That is on us, and the restructuring actions we have taken this quarter reflect genuine accountability, not a reaction to 1 quarter, but a deliberate reset towards our opportunity to lead us as a biometric orchestration platform player.

We are intentionally moving away from products that will not be relevant in our new paradigm and concentrating our resources on the areas where we have a proven, durable advantage. Chief among those is our liveness capability to help combat AI-powered spoofing and deepfake threats and our proven track record serving the federal government. The Awareness Platform is how we bring this to market at scale, giving customers a single integration point to access, evaluate and deploy best-in-class biometric capabilities across their environments. The early feedback reinforces that this is the right direction, and we remain focused on executing the rollout with discipline. We are building toward consistent, long-term growth from a sharper, more defensible position. We believe the path forward is clear, and we are committed to it.

That concludes our prepared remarks. We will now open the call for questions. Delaney, please provide the instructions.

Thank you, Ajay. At this time, there are no questions. That completes our Q1 FY '26 broadcast.

As a reminder, this presentation is recorded and made available for replay via a link available in the Investor Relations section of the company's website. Thank you, and you may now disconnect.

Good afternoon, and welcome to Aware's Fourth Quarter and Full Year 2025 Conference Call. Joining us today are the company's CEO and President, Ajay Amlani; and CFO, David Traverse. [Operator Instructions]

Before we begin today's call, I'd like to remind everyone that the presentation today contains forward-looking statements that are based on the current expectations of Aware's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described. Listeners should please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today. Aware wishes to caution you that there are factors that could cause actual results to differ materially from those results indicated by such statements. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K and quarterly reports on Form 10-Q.

Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance upon any forward-looking statements, which speak as only of the date made. Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Additionally, the call contains certain non-GAAP financial measures that are [indiscernible] the term is defined by the SEC and Regulation G. Non-GAAP financial measures should be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, Aware has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today. I would like to remind everyone that this presentation will be recorded and made available for replay via link available in the Investor Relations section of the company's website.

Now I'd like to turn the call over to our CEO and President, Ajay Amlani. Ajay?

Thank you, Matt, and good afternoon, everyone. Fiscal 2025 was a foundational year for Aware. While revenue timing dynamics, particularly within the federal market, created variability in our financial results, the year was defined by meaningful strategic progress across our technology platform, leadership team, certifications and market positioning. We strengthened the foundation of the business, expanded our competitive reach and positioned Aware as a trusted biometric identity solutions provider. To reiterate, our efforts this year have focused on progressing our 3-pronged transformation. First, advancing our core biometric technology with a focus on liveness and biometric orchestration. Second, strengthening our science forward customer-obsessed approach go-to-market model. And third, deepening strategic partnerships and certifications that build trust and scale.

Starting with our first strategic pillar, advancing core biometric technology. Liveness remains one of the most critical vulnerabilities in remote biometric systems today. Biometric injection attacks, deep fakes and presentation attacks continue to evolve rapidly. Throughout fiscal 2025, we invested significantly in our science and research teams to remain a leader in this domain. Our next-generation Intelligent Liveness combines deep biometric expertise with advanced boot protection to deliver their viable proof of person hood.

In the [ NIS-IR8491 ] evaluation, aware achieve best-in-class gender and race parity, earning the lowest ratio bias rating in the market and ensuring fair consistent performance across users at every high-risk touch point, critical for secure digital ecosystems. Aware Intelligent Liveness delivers subsecond capture speeds while materially reducing false negative rates and improving adaptability to emerging spoofing threats without introducing friction. We believe Liveness is not simply a feature. It is foundational infrastructure for secure digital identity. Innovation will continue to be at the heart of our progress in this area. At the same time, we have continued to evolve our biometric orchestration capabilities, which you may recognize as our Awareness platform.

Our orchestration framework is designed to maximize system uptime, enable modular integration of multiple biometric modalities and simplify deployment in complex customer environments. We are focused on building out our open architecture biometric infrastructure to bring civil and criminal identity management together in a single secure and highly scalable environment. By eliminating vendor lock-in and supporting a broad range of biometric systems, it gives organizations the flexibility to modernize on their own terms. We are working diligently to ensure enterprise-grade security, interoperability and scalability of our orchestration platform.

Beyond orchestration, customer testing activity across our broader portfolio remains strong in both government and commercial sectors. Much of the demand is centered on defending against facial devices, injection and presentation attacks and threats that are evolving in real time. Organizations are actively evaluating vendors capable of mitigating these risks at scale. Initial customer feedback has been encouraging, particularly around algorithm accuracy, ease of integration and flexibility of deployment. These evaluation cycles are often lengthy especially in government, but the depth and rigor of engagement signal, meaningful intent.

We are also seeing continued engagement in fingerprint biometrics, where our long-standing expertise continues to differentiate us. A driving force behind our technology is the Aware team. Over the course of fiscal 2025, we strengthened leadership across engineering, product, sales and marketing. We recently welcomed a new Head of Engineering and a new Head of Product both of whom brought immediate domain expertise and began implementing operational improvements from day one. These leaders are building upon Aware's strong scientific foundation while driving tighter alignment between product development and customer requirements.

Our third pillar centers on building trust and scale through strategic relationships and certifications. Despite procurement delays stemming from the lasting effects of the government shutdown, including delayed appropriations and slower procurement cycles, we saw continued engagement across U.S. and international government and commercial markets. During Q4, we successfully deployed our first mobile biometric solution within a U.S. federal agency. Law enforcement customer growth also continued with the onboarding of additional U.S. agencies. While individually modest, these wins demonstrate growing international trust and institutional trust in our technology. We are expanding direct engagement with U.S. federal agencies at a time when [indiscernible] America priorities and supply chain considerations are increasingly relevant.

As a U.S.-based biometric provider, we believe we are well positioned to compete both directly for federal buyers and indirectly through system integrator partners. Both channels remain core components of our federal strategy. While procurement timing remains dynamic, biometric modernization continues to be an area of focus within DHS and related agencies. Internationally, we continue to deepen relationships across both advanced and developing markets where digital identity systems are increasingly recognized as foundational national infrastructure.

In the fourth quarter, we launched a pilot program with the Caribbean nation to deploy biometric time and attendance systems for government employees, further expanding our global footprint. We also are seeing expanding engagement in aviation and border-related use cases. During Q4, we successfully tested biometric boarding in Orlando International Airport, which now serves as a flagship reference or a direct travel and border strategy in partnership with the Greater Orlando Aviation Authority and U.S. Department of Homeland Security.

Our technology supports contactless passengers processing under the Biometric Exit Program. This program demonstrates how biometric orchestration can improve throughput, reduce document handling and enhance traveler experience in one of the busiest airports in the United States. We also continued to expand our partner ecosystem through new strategic relationships, including integrations with digital workflow providers and collaborations with biometric hardware vendors. These initiatives remain in early stages, but we believe they strengthen our long-term go-to-market strategy and broaden our reach over time.

We also continue to perform strongly in independent government-led evaluations, including DHS related biometric testing programs. Our face and fingerprint algorithms have improved meaningfully in accuracy, bios mitigation and scalability. During the year, we successfully completed DHS River phase matching evaluations and achieved ISO-30107 Level 3 certification for [ presentation ] attack detection, placing us among a small group of global providers that meet the highest standards for liveness detection.

In the [ selfie to document match track ] operating under the first [indiscernible], Aware was one of only 5 vendors to meet all DHS high-performance benchmarks. We were also one of just 3 to achieve 0 to 0 failure to extract rates for both selfie and document images, and we delivered the lowest false match rate among that group, including against demographically [ similar imposters ]. These results highlight the accuracy, resilience and real-world readiness of our platform at scale. We also achieved ISO 27001 certification, a leading international standard for information security management. As enterprise and government customers increasingly require formal validation of security practices before engaging with vendors, this certification strengthens our ability to compete in larger and more regulated opportunities.

We also completed independent biometric bias testing inducted by [indiscernible] NVLAP accredited lab under the ISO IEC-19795-10 standard. The full system evaluation covering both liveness and matching under real-world conditions delivered outstanding results. These results reinforce the accuracy, consistency and fairness of our technology across critical applications, including border control, national ID, financial onboarding, mobile authentication and enterprise access control.

Finally, in addition to our biometric and liveness evaluations, where recently achieved 502 Server Certification, validating our ability to support secure task-based authentication layered with biometric verification. This certification confirms compliance with FIDO Alliance standards for cryptographic authentication and interoperability, capabilities that are increasingly expected in regulated high assurance environments such as payments and financial services.

When combined with our Intelligent Liveness technology, this approach helps verify real user presence, reduce fishing and automated attack risk and deliver fast seamless identity experiences. These certifications are not simply badges. ISO-30107 Level 3 demonstrates our technology can defend against increasingly sophisticated presentation, deep fake and injection attacks. ISO-27001 validates our corporate security posture and operational rigor. Together, they materially strengthen our credibility with both enterprise and government buyers. More importantly, these validations are how Aware becomes a trusted provider for top Tier 1 enterprises and leading government agencies worldwide.

The largest institutions require proven performance, independent verification and enterprise-grade security before they deploy biometric infrastructure at scale. Our certifications and evaluation results meaningfully expanded the universe of opportunities we could pursue and have already enabled us to compete in several large engagements that previously would not have been accessible.

With that, I will turn the call over to David to review our financial results in more detail. Over to you, David.

Thank you, Ajay. Let's review our financial results for the fourth quarter and full year. which ended on December 31, 2025. Starting with the fourth quarter. Revenue in the fourth quarter was $4.7 million compared to $4.8 million in the prior year period. The slight decrease reflects lower perpetual software license revenue, partially offset by higher maintenance and services and other revenue. Operating expenses for the quarter improved to $6.1 million compared to $6.3 million in the prior year quarter. The lower expenses largely reflects the onetime costs incurred in the prior year period related to the former CEO's transition, which includes severance and acceleration of stock-based compensation expense of $600,000. As we noted in our last earnings call, we continue to expect operating expenses to reflect the strategic investments we are making.

Net loss for the quarter was $1.5 million or $0.07 per diluted share compared to a net loss of $1.2 million or $0.06 per diluted share in the prior year quarter. Adjusted EBITDA loss was $800,000 for both Q4 2025 and the prior year quarter.

Turning to our results for the full year. For the full year, revenue was $17.3 million compared to $17.4 million in 2024. The slight year-over-year decrease was driven by lower perpetual license revenue, which was partially offset by increases in maintenance and services and other revenue. Net loss of $5.9 million or $0.28 per diluted share compared to a net loss of $4.4 million or $0.21 per diluted share in the same period last year. Adjusted EBITDA loss for the year was $4.6 million compared to an adjusted EBITDA loss of $3.9 million in the prior year period. [indiscernible] ended the year with $22.3 million in cash, cash equivalents and marketable securities and no debt. Our balance sheet reflects the increased investments we've made throughout the year to enhance our team, advance our core technology and certifications and support go-to-market initiatives.

We will continue to allocate capital to our strategic priorities and build a stronger, more competitive business. While we remain confident in our long-term positioning, we believe we will continue to experience quarterly results that remain uneven given the nature of our procurement cycles and customer conversion timing. This is particularly true in government and large enterprise markets, where funding and execution time lines can shift from quarter-to-quarter. As a result, quarterly results may not fully reflect the underlying progress we're making. For that reason, we believe performance is best evaluated over multiple quarters.

With that, I'll hand it back over to Ajay for closing remarks. Ajay?

Thanks, David. As David noted, variability remains a feature of our business, particularly as we advance complex government and enterprise opportunities where procurement and funding timing can shift between quarters. During the fourth quarter, multiple large identity solution providers progressed into testing and evaluation phases. These processes can be lengthy and technically rigorous and not at all evaluations -- not all evaluations, result in near-term deployments. While timing remains uncertain, continued participation in these evaluations, expands our relationships and informs future opportunities. Retention performance remained strong and well above industry benchmarks and approximately 3/4 of our current pipeline consists of new logos with the balance representing expansion within existing accounts. .

This year marked the beginning of a comprehensive revitalization of the Aware brand. We've launched a fully redesigned website, our digital storefront with a modern look and feel that reflects the strength and innovation of our technology. At the same time, we sharpened our market positioning to clearly align Aware as a biometric identity solutions company. We also restructured and repositioned our product suite to better align with buyer needs and decision-making priorities, supported by refreshed messaging that clearly communicates our differentiated value across biometric identity, liveness and authentication solutions. While still early, search visibility has improved meaningfully, and we are seeing increased inbound engagement.

On the technology front, we continued advancing our intelligent liveness capabilities to defend against increasingly sophisticated presentation, deep fake and injection attacks. We also achieved ISO-30107 Level 3 certification for presentation attack detection and ISO-27001 certification for information security management, strengthening our credibility with enterprise and government customers that require independently validated performance and enterprise-grade security.

Stepping back fiscal 2025 was about building the foundation and getting us out Intelligent Liveness front of key customers. We strengthened our core technology, expanded certifications, deepened partnerships and continued evolving toward a more integrated biometric solutions platform, execution and conversion will take time, and we expect variability to remain part of the near-term landscape. However, we believe the structural progress achieved over the past year strengthens our competitive position and supports our long-term opportunity in biometric identity.

As we move into 2026, our focus is disciplined execution, converting pilot programs, strengthening the awareness platform, scaling revenue and delivering durable long-term growth. We are building a more predictable and scalable biometric identity business, one that balances innovation with discipline and positions aware to lead in the next era of digital identity.

That concludes our prepared remarks. We'll now open the call for questions. Matt, please provide the instructions.

Thank you, Ajay. [Operator Instructions] First question is for Ajay, federal procurement timing has created some variability in results and 2025 revenue was essentially flat year-over-year. How should investors think about the drivers of potential growth going forward, particularly given the mix of federal, commercial and international opportunities?

Thank you very much for the question. In 2025, we did see some programs move slower than expected during the year. As you know, government procurement cycles can vary in timing from quarter-to-quarter. We also had a pretty significant slowdown in government shutdown that also impacted the responsiveness of [indiscernible], the federal government, public servants that we're going through a very difficult point in time in their careers and in their lives trying to suffer through what was one of the longest shutdowns in the history in the U.S. government.

Coming out of that, we've seen increased activity in federal government meetings, which have resulted in significant pipeline acceleration and opportunities here in the U.S. federal government work. We continued working though, on the international front and in commercial markets to convert our pipeline, expand our pipeline and expand our brand to make sure that the business continues to stay in a growth path as we expand our product portfolio and our certifications.

Our next question is for David. How should investors think about the mix between perpetual licenses, recurring software, services and maintenance going forward?

What we're seeing is the mix will likely continue to evolve depending on the types of programs we're secure. As you know, historically, we've had a combination of perpetual license, maintenance and services and that's particularly in larger government deployments. Exact mix can vary from quarter-to-quarter depending on [indiscernible] the revenue is driven by platform licenses, recurring software sales or cloud-based solution-based programs. So rather than targeting a specific mix, what we're focused on is expanding our presence in these large programs where our software platform can be deployed and maintained over multiple years.

Thanks, David. Our next question. You mentioned several evaluations and testing phases with potential partners. What is the process and time line from evaluation to production deployment? .

Yes. I mean many of these opportunities start with an evaluation after we've included establishing ourselves as a repeatable company to be able to participate. These evaluations can basically move on to pilot programs and then the customers will validate the technology within their environment to decide if they want to be able to move forward. The process typically moves into production deployments which can expand over time depending upon the scope of the program. Well, our goal is to start small, honestly, with an onboarding a customer, keeping expectations in check and then continuously exceeding those expectations. And then from there, as long as we continue to exceed expectations, they'll grow the amount of work that they do with Aware and don't feel comfortable being able to feed more business and more opportunities our way, particularly in government and large enterprise environments.

That's balanced obviously, with procurement cycles budget availability, but the focus is continuing to advance those evaluations and making sure that we can improve conversion and growth as our platform evolves and we end up in a land-and-expand strategy.

Ajay, another one for you. How did the recent certifications and platform enhancements strengthen Aware's competitive position and support future opportunities with customers and partners?

So I really do applaud the amount of work that goes into the development of these new certifications around biometrics. We -- people globally are really pushing the envelope in terms of being able to make sure that the technology can keep up with current threats in the market. There are a lot of threats that are based in this market, especially with AI and AI generated identity that can basically trick systems. And so continuing to stay not just one step ahead of it, whereas you could potentially be breached, you need to stay 2 steps ahead of it. And that's where these certifications come into play and become very important.

These certifications are typically listed within procurement from major customers, and it's very important to be able to meet these certifications. In a lot of ways, these are just basically ways to be able to make sure that aware is qualified to be able to bid, but not all parties are usually qualified with these different types of certifications. So it is an ability and a strategic differentiator for us to be able to advocate on behalf of including these certifications in the customers' requests and then also being able to meet these certifications puts us in a competitive set that's smaller than the more broader set of people that you would normally consider for a solution by proving who's better and who's been able to meet certifications that are available in the industry.

Our next question, why are deals not announced as they are signed?

Thanks, Matt. I can kind of break that down to 2 parts. One is from an SEC requirement standpoint and the other one is more from a customer standpoint. So the first one, the SEC, we make sure all our disclosures and we comply SEC disclosure requirements. Most of the contracts we do sign are within our ordinary core business and don't require a separate disclosure on the SEC side. On the commercial side, many of our government and security-focused customers also have confidentiality provisions. And in addition, our business -- in our business, the signing of a contract is not always the most meaningful milestone as programs often progress through pilots employments over time.

Another question received. Are you seeing any new AI native competitors or customers in-sourcing by building their own algorithms using LLMs? What moats or risks does your business have from an AI disruption relative to other SaaS companies?

Our company is actually really well positioned to be able to take advantage of the LLMs and the technology that's in place to be able to improve our efficacy, improve our productivity and also decrease our costs. We look towards the development of these capabilities is a really big strategic differentiator for us. Our existing presence in the market with existing customers and data allows us to be able to work with that data to be able to train our models in a more effective fashion. And we can also utilize it to be able to work on better co-development, upgrading the code and being able to serve our customers in a more effective fashion.

As you know, we have a [indiscernible] list of existing customers, including Department of Homeland Security Department of Defense and many others globally, that are really the who's who in terms of government agencies. So being able to expand the services that we actually do with our existing customers to be able to surprise and delight them with new capabilities and functionalities would typically take a lot of effort on our side to be able to invest behind that capability, whereas with all of the different tools that are now existing in the marketplace, we can be able to do that more effectively because we have a lot of inherent knowledge in the market in terms of what the customers need. We're in cost of communication with the customers in terms of what they would like and how they'd like to improve their systems. And we're in the right place to be able to ask the right questions to the tools to be able to develop capabilities, whereas most people don't even know what to ask.

You described 2025 as foundational. What should investors look for in 2026 to measure success?

Sure. So 2025 was really about strengthening the foundation in our product platform and our go-to-market execution. We're now in front of most of the major customers for biometrics. They know of us. They have a positive opinion of us. We're being included in a lot of their evaluations. And as we move into 2026, the proof points that investors should look around or look for really around improving execution, stronger conversion of our pipeline into actual program wins, recurring software deployments, larger solution-based programs, particularly in government markets are definitely things that investors can look to.

Progression from pilots and evaluations into production employment is another one. And third, while results can be uneven quarter-to-quarter given the nature of government opportunities, especially, we expect to see greater consistency in bookings and revenue over time as those efforts begin to take hold.

Thank you, Ajay and David, at this time. This concludes our question-and-answer session. If your question wasn't answered, please e-mail Aware's IR team at [email protected]. Before we conclude, I'd like to remind everyone that a replay of today's call will be available via link in the Investor Relations section of Aware's website. Thank you for joining us for Aware's Fourth Quarter 2025 conference call. You may now disconnect.

Good afternoon, and welcome to Aware's Third Quarter 2025 Conference Call. Joining us today are the company's CEO and President, Ajay Amlani; CFO, David Traverse; and CRO, Brian Krause. [Operator Instructions]

Before we begin today's call, I'd like to remind everyone that the presentation today contains forward-looking statements that are based on the current expectations of Aware's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described. Listeners should please note the of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today. Aware wish to caution you that there are factors that could cause actual results to differ materially from those results indicated by such statements. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking statements whether as result of new information, future events or otherwise, except as required by applicable securities laws.

Additionally, this call contains certain non-GAAP financial measures as the term is defined by the SEC and Regulation G. Non-GAAP financial measures should be considered in isolation from or a substitute for financial information presented in compliance with GAAP. Accordingly, Aware has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today.

I would like to remind everyone that this presentation recorded available for replay via link available in the Investor Relations section of the company's website.

Now I'd like to turn the call over to Aware's CEO and President, Ajay Amlani. Ajay?

Thank you, Matt, and good afternoon, everyone. Q3 reflects disciplined execution and continued progress in a Aware's transformation strategy. This quarter, we delivered 33% year-over-year revenue growth while improving our bottom line. We recognize there's still important work ahead to build consistency and scale, and we expect near-term quarterly results may vary based on timing of customer decisions and license mix. These results reinforce our 3-pronged transformation, which centers on first: advancing core biometric technology with a focus on Liveness and the Awareness Platform; second, strengthening our science forward customer-obsessed go-to-market model; and third, deepening strategic relationships and partnerships and certifications that build trust and scale.

Before diving into Q3 highlights, let me set some market context. As I shared at the Gateway Conference in September, customer perceptions around biometrics have fundamentally shifted, everyday use of face ID and biometric travel checkpoints has made biometrics both familiar and expected. In the age of AI, it's not only getting harder to prove identity. Individuals must also prove they're human in real-time against increasingly sophisticated stooping attempts. This elevates Liveness Detection from a nice-to-have into a critical control for fraud prevention and trust. Against this backdrop, our strategy is to meet customers where risk is rising most, delivering adaptive liveness, interoperable matching and a platform architecture that allows enterprises and agencies interoperable orchestration without vendor lock-in. Aware isn't just selling technology, we're delivering solutions that help customers maintain uptime while solving their most pressing trust and safety challenges. Aware is a U.S.-based company with 3 decades of biometric innovation and a blue-chip customer base across government and enterprise. That foundation of trust matters as buyers raise the bar on security, privacy and interoperability. And as governments increasingly emphasize domestic providers for critical identity infrastructure.

On the government side, we see tailwinds from broader funding for biometric modernization within DHS agencies coupled with a strong Buy American orientation, having helped launch some of the earliest biometric programs at DHS, I've seen firsthand how federal adoption sets global standards and Aware is uniquely positioned to lead as a U.S.-based science-led provider.

On the commercial side, enterprises are moving to anchor digital identity on a biometric backbone with strong privacy controls, replacing fragile combinations of passwords and device trust with biometric proof of presence and proof of person. Our platform is designed for choice, speed to value and standards alignment, a differentiator that customers and partners increasing value. Our Awareness platform integrates matching engines, adaptive liveness and anti-spoofing and interoperability layers to deliver flexibility at scale. Earlier this year, our Passive Liveness achieved best-in-class performance in the Department of Homeland Security remote identity validation benchmark, providing clear third-party validation that we're solving real-world identity fraud with less friction.

In October, our face verification stack, combining advanced liveness with facial matching, earned FIDO Alliance Certification. This is 1 of the most rigorous global benchmarks in biometric security. It not only validates our approach but also reduces compliance friction in enterprise procurements and accelerates integrations with major partners and identity ecosystems. It also complements our road map to build additional certifications that customers expect. Over the past several quarters, we've upgraded leadership across revenue, marketing and product, aligning the organization to scale with discipline. We are focused on prioritizing large durable opportunities in federal and the enterprise market that can translate into multiyear recurring revenue and product leverage. With this team in place, we are executing across 2 core markets. First, government, building a direct presence with agencies, aligning to Buy American requirements and modernization initiatives across the Department of Homeland Security, the Department of War and many other related programs in departments where liveness and interoperability are central. Growing demand for mobile identity and modernization of legacy systems plays directly to our ABIS and mobile capture strengths.

Second, commercial enterprises, companies are adopting biometric-anchored journeys for both workforce and customer use cases, emphasizing privacy, standards and interoperability all well aligned with our Awareness Platform and AwareSDK. Our strategy is translating into both top line momentum and better operating discipline.

I'll now hand it over to David to review our third quarter financial performance in more detail. Over to you, David.

Thank you, Ajay. I'll now walk through our third quarter financial results. Revenue in the third quarter was $5.1 million, an increase of 33% year-over-year. The increase was primarily driven by a $1 million perpetual license expansion sale with an existing customer and a $600,000 new term license contract, partially offset by typical fluctuations in perpetual license and lower services and other revenue.

Operating expenses for the quarter were $6.4 million compared to $5.4 million in the prior year quarter. The increase reflects targeted investments in sales, marketing and product development as we execute our go-to-market strategy. Looking ahead, we do expect an increase in our operating expenses in the fourth quarter, reflecting the full quarter impact of the investments made during the third quarter to support our growth strategy.

Net loss for the quarter was $1.1 million or $0.05 per diluted share, an improvement compared to a net loss of $1.2 million or $0.06 per diluted share in the prior year quarter.

Adjusted EBITDA loss was $800,000, an improvement compared to a loss of $1.1 million in the prior year quarter.

Turning to our results for the first 9 months of 2025. Revenue was $12.6 million, similar to last year. Net loss was $4.4 million or $0.21 per diluted share compared to a net loss of $3.2 million or $0.15 per diluted share in the same period last year.

Adjusted EBITDA loss year-to-date was $3.8 million compared to an adjusted EBITDA loss of $3 million in the prior year period. We ended the quarter with $22.5 million in cash, cash equivalents and marketable securities and no debt. The change primarily reflects the operating loss for the period as well as normal fluctuations in working capital, including the timing of accounts receivable collections. Our balance sheet provides us with flexibility to continue investing in growth while maintaining a disciplined approach to expenses.

Our Q3 results reflect progress towards sustainable growth. We are executing with discipline, scaling revenue and positioning the company for operating leverage as our top line continues to expand.

With that, I'll hand it over to Brian to provide more color on our product, customers and go-to-market progress.

Thank you, David. Building on the strong financial results, I'd like to provide more details on the customer and go-to-market side. We continue to see diverse demand for biometric solutions across both government and enterprise sectors. Organizations are under pressure to not only authenticate identities but also to ensure that users are live and present without adding friction. That combination, security plus usability is where Aware has the opportunity to win. We are also seeing growing demand in the local government sector with focus on modernizing biometric systems for civil and criminal investigations. In the third quarter, we expanded our work with a major U.S. federal agency by adding our Intelligent Liveness to a previously successful program. This builds on days of trust Aware has established in government and underscores our ability to bring new technology into mission-critical programs. Overall, federal demand continues to grow as a result of the new priorities at the federal level that have created both new and expansion opportunities for biometric solutions within these programs. However, the federal shutdown has slowed these actual appropriations which means that some of these programs will likely see delays until that is resolved.

On the commercial side, we secured new enterprise contracts and financial services and workforce management sectors where customers are looking to reduce fraud and streamline onboarding. These deployments highlight the flexibility of our platform to integrate into existing identity ecosystems, support multiple modalities and deliver high-performance biometric capabilities. These contracts also represent solid progress in our land-and-expand approach. Over the past 6 months, we've continued to make progress in strengthening our pipeline and partner ecosystem as well. Our direct federal team is engaged across multiple U.S. and international government programs, and our partner strategy is helping us scale without an overinvestment in a direct sales force. These investments in expanding and establishing relationships with system integrators and technology partners not only validates our tech but also extends our reach into larger enterprise and government track vehicles are key buying criteria. We continue to see strong customer retention and growth opportunities and expect this to continue for the rest of this year. Looking forward, our go-to-market priorities are clear. Within the U.S. federal government deepen our direct engagement across all agencies, while aligning with the Buy American requirements.

On the commercial side, expand in fraud-prone verticals in areas where biometric adoption is growing such as financial services and travel.

On the partner side, broaden our ecosystem of system integrators, identity platforms and device partners to accelerate adoption and scale across the globe, aligned tightly with our customers. Most importantly, continue to deliver great products as they grow their use of biometrics to protect and automate their businesses. Our customers and partners consistently tell us that Aware stands out for combining science-driven innovation with enterprise-grade delivery. That's a differentiator that is working effectively and one we intend to continue building on.

With that, I hand it back to Ajay for closing remarks and the outlook before Q&A. Ajay?

Thanks, Brian. As you've heard today, Aware is executing on a clear strategy, delivering trusted biometric solutions that combine adaptive liveness, best-in-class interoperability and enterprise-grade performance. These capabilities are not just differentiators. They are becoming requirements in a world where fraud is accelerating and digital identity is central to every interaction. Looking forward, we are focused on prioritizing large durable opportunities in federal and enterprise that can translate into multiyear recurring revenue and product leverage. That means driving deeper adoption within DHS and other federal agencies, sometimes directly and sometimes through value partners as biometric modernization accelerates. Expanding in enterprise verticals, where identity, fraud and compliance costs are highest, financial services, travel, workforce management. And finally, continuing to build the certifications, integrations and partnerships that reduce adoption friction and extend our reach. We believe this strategy positions Aware to deliver not just growth but sustainable value creation. As we scale, you should expect to see increasing operating leverage, stronger recurring revenue contributions and a disciplined balance between innovation and profitability. I'm proud of the progress our team is making and the validation we're seeing from customers, partners and industry benchmarks. With 3 decades of biometric leadership, a strong foundation of trust and a clear strategy, we believe Aware is positioned to lead in this next era of digital identity. That concludes our prepared remarks. We'll now open the call for questions. Matt, please provide the instructions.

Good afternoon, everybody. Before we move to Q&A, I just want to note that Ajay is traveling back from the Money20/20 Conference. His return flight was delayed and there may be some airport noise in the background as we answer questions.

Thanks, David. [Operator Instructions] Our first question is for David. Q3 revenue grew 33% year-over-year, but was flat year-to-date. Can you elaborate on the drivers of that variance and how investors should think about the sustainability of that top line growth in 2026?

Yes. Thanks, Matt. So we're striving to build a more sustainable revenue model, but we still have a meaningful license component business that the timing can create some variability. The strong year-over-year growth in Q3 shows that demand is there, but the flat year-to-date trend reflects the timing dynamic. With the management changes that we made this year, we really are sharpening our focus on driving more recurring and predictable revenue. So over time, you can expect smoother results and a more consistent growth.

Thanks David, another 1 for you. You mentioned that quarterly results may fluctuate based on the timing of customer decisions and license mix. Can you give more color to the pipeline conversion patterns? How much visibility you have in the near-term deals and recurring revenue contribution?

Yes. Thanks again, Matt. It's kind of similar to the other question. With the new management team, we really put a stronger emphasis on building a disciplined go-to-market engine and improving how we are able to forecast and manage the pipeline. What we're really seeing is healthy engagement and good visibility into opportunities, though the timing of customer decisions can still affect the quarterly results. As our process matures and the team gains traction, we do expect to be able to see more consistency and better conversion across the pipeline over time.

Thanks, David. Next question is for Ajay. Ajay you called out the federal budget delays and shutdown impacts on appropriations. How significant has that been the near-term bookings? And are those revenues expected to shift into FY '26?

Yes. The government shutdown has impacted businesses across the board. And most -- I feel most sorry for obviously, the people that are furloughed. Those individuals are going through a very difficult time now trying to sustain their livelihoods and pay the rent, pay for their families daily expenses. For us, there is an impact to near-term bookings. However, most of the conversations are still occurring. And we would expect to see all of that money still flow and a higher urgency to be able to deploy that budget coming through in the near term. So we anticipate significant volume of deal flow and conversations once the shutdown is over. The total amount of budget allocated is still going to remain the same and the urgency to deploy the capital, to improve the systems, the antiquated systems of the federal government on the identity system is still going to have a very high sense of urgency.

Great. Thanks, Ajay. Another 1 for you. As enterprises move towards biometric anchored digital identity, who do you view as your primary competitors in the space? What differentiates Aware's Awareness platform technically and commercially?

Sure. From a competitive set, on the Awareness platform in particular, I'll [ think ] of the platform first. This is very much a buy versus build competitive set. So with regards to existing large enterprises looking to try to deploy biometrics at scale, our largest competition is actually internal development and a desire to be able to add and own your own platform and continue to increase and modernize its capabilities. What we see is significant overlap between all of these different companies that are looking to try to build these types of platforms and that they would turn to a model where economies of scale will help them to save money and increase capacity and capability much faster through an outside vendor such as Aware.

With regards to the individual components and the products that we actually serve and develop internally, there are other competitors in the market that develop different styles of biometric capabilities with different strengths. Those partners are -- those companies are, in fact, partners for us in the Awareness platform. while we still have an element of competition when it comes to proving who's best at which component of the technology overall. What's most important for us is that customers get the best [indiscernible] in the market to serve their individual needs and their use cases so that they have [ plausible ] experiences for their consumers, for their customers and secure experiences. And that could be different in a physical environment, as you can imagine, in an airport environment, in a border environments, those styles of biometrics and types of biometric technologies that you would deploy in those environments will be very different than the style of technology that you would deploy over people's mobile devices to be able to onboard into a financial services product remotely, which will be very different than the style of product that you want to use on a desktop computer, allowing a workforce application to protect, let's say, new hires or password resets to secure your enterprise against the largest vulnerability today in cybersecurity attacks, which is password compromises. So the different components of biometric technology. We go into it at Aware knowing we can't be the best at everything. So we select the specific components that we believe we'd like to be the best in, that are the most important and also that we have the capability of being the best in. And we look to partner with others who we feel in certain use cases are the best technology for our customer base.

Thanks, Ajay. Another 1 for you. How do you prioritize new certifications like ISO or FedRAMP in your road map? And are there any gating factors for certain federal or enterprise contracts?

ISO FedRAMP and other certifications, such as the FIDO Certification that we most recently announced are incredibly important certifications for customers to pay attention to, to require in their RFP processes when they're looking for vendors, to request vendors to adhere to and to continue to push the envelope with the certification organizations to protect their enterprises against the most modern threats that are in the market. And there are quite modern threats in the market. Cybersecurity attackers continue to get better. They continue to collaborate using commercial tools and a worldwide attack vector. Nation state actors are continuously trying to penetrate the most critical assets of our country. And as a nation and as a globe, we need to come together to have a unified set of standards to hold vendors accountable to continue to be able to communicate the importance of protecting them against things like liveness or generative AI deepfake attacks that basically can impersonate other people online through video calls, through voice calls with very minimal sophisticated tools. You can imagine with sophisticated tools in the hands of attackers, what they can do is quite dangerous. So pushing the envelope and staying ahead of the attackers with certifications that can push the vendors beyond what they have today to better protect our customer systems is what we actually here at Aware advocate for daily. We're talking to all the different testing organizations globally. We're pushing them to address better standards to understand how to protect against digital injection attacks and other extremely important vectors of attack that need to be secured, but doing so in a standardized fashion so customers know that if a vendor comes to you saying that they're the best in the market at something, they have proof to back it up. So we will continue to invest in these different standards. We'll continue to advocate to customers and to the actual certification organizations to push the envelope to become better because we at Aware, view ourselves as a premium provider of biometric systems, the best in the market with the best depth of technology and expertise to protect against these next generative -- next-generation generative AI attacks where the only way to determine if somebody is a human and the right human in a digital environment is through the utilization of biometrics.

Thanks, Ajay. Our next question is for David. David, operating expenses rose due to investments in sales, marketing and products. How should we go about expense levels and operating leverage in FY '26 as revenue scales?

Yes. Thanks, Matt. So yes, so operating expenses as expected and as we kind of mentioned last quarter, did increase as we invested in the sales and marketing and go-to-market and product positioning for the company growth. And we will continue to invest there when we see a clear line of driving top line revenue expansion. When the opportunity is there, we'll lean in and invest and accelerate growth so -- while also keeping a disciplined focus on efficiency.

Ajay, can you share any color on the national ID contract?

Sorry. But at this point in time, we're not in a position to be able to share any color on the national ID contract other than what was already shared. We are still in a position where we want to be able to pursue global business through partners in such a way that we can make sure that we can cover the globe and the needs of all countries with our identity needs, but focus our resources specifically towards direct conversations that we have here in the Americas. So we're spending the majority of our resources here on the Americas, North America in particular, given our domestic focus, given our large base of U.S. citizen biometric scientists and given the desires and the demands here in the market, along with the larger scale here in the market. But we believe that national ID program not to be ignored, but rather addressed. So we're constantly looking for the best partners in the market. And I would encourage any partners globally looking to work with countries to advance their national ID programs to better secure the needs of their citizens and residents to be able to increase their access the federal government benefit systems, whether it's United States or globally to reach out to our partnership team here at Aware and be able to encourage them to choose best-in-class technology with a partner they can trust that will have their backs in the global fight against nation state actors that are doing bad things.

Thanks, Ajay. We received another question for you. Has Aware considered enabling interactions with smaller platforms?

That's a great question. I would love to have a little bit more color and a little bit more follow-up with [ them ] after to specifically address which smaller platforms that they're requesting and talking about. But as we've went through the years, smaller platforms can grow very quickly in this economy. And we've seen if you have the right team, the right investor base and the right customer relationships and the right product, pretty expansive scale. So while most companies are only choosing to be able to work with the largest partners in the market, the ones that have raised the $200 million to $400 million to deploy identity systems and identity verification capabilities, we are also paying attention to the smaller vendors in the market and the smaller partners in the market. But we are prioritizing the ones that we believe have the most opportunity for scale based on the management team, based on the customer contacts, based on the products that they have and the capabilities for scale because we can't serve and be everything to everyone. So a prioritization process and the vetting process ahead of time is extremely important for us so that we can align resources effectively and better serve our partners and enable them for the kind of growth that they deserve.

Thank you, Ajay, David. At this time, this concludes our question-and-answer session. If your question wasn't answered, please e-mail Aware's IR team at [email protected].

Before we conclude, I'd like to remind everyone that a replay of today's call will be available via link in the Investor Relations section of Aware's website. Thank you for joining us for Aware's Third Quarter 2025 Conference Call. You may now disconnect.

Good afternoon, and welcome to Aware Second Quarter 2025 Conference Call. Joining us today are the company's CEO and President, Ajay Amlani. CFO, David Traverse; and CRO, Brian Krause. Following their remarks, we will open the call to questions. [Operator Instructions]

Before we begin today's call, I'd like to remind everyone that the presentation contains forward-looking statements that are based on the current expectations of Aware's management and involve inherent risks and uncertainties that cause actual results to differ materially from those described. Listeners should please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today. .

Aware wishes to caution you that there are factors that could cause actual results to differ materially from those results indicated by such statements. These results and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K, quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of date made. Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Additionally, this call contains certain non-GAAP financial measures as the term is defined by the SEC and Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, Aware has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today.

I'd like to remind everyone that the presentation will be recorded and made available for replay via a link available in the Investor Relations section of the company's website.

Now I'd like to turn the call over to Ware CEO and President, Ajay Amlani. Ajay?

Thank you, Matt, and good afternoon, everyone. This quarter marked another step forward in the strategic transformation we began earlier this year. We're building a durable, scalable business grounded in operational rigor, market alignment and differentiated technology. Since February, we laid the foundation for future growth through deeper customer engagement, enhancements to our industry-leading technology and strategic hires that reinforce our science-forward customer-obsessed approach to go-to-market execution.

At the core of our transformation is Aware's deep-rooted expertise and 3 decades of innovation in biometric technology from pioneering fingerprint and facial recognition to leading and passive liveness and multimodal identity platforms. We've consistently earned the trust of some of the world's most security-conscious institutions. Our proven track record across both public and private sectors gives us a unique advantage in today's market where trust, performance and interoperability are paramount.

As we've engaged with customers, we have identified new opportunities to be their trusted technology partner in biometrics, helping transform data into actionable intelligence. To meet a growing market need, we've harnessed the power of our core technology and repositioned our product suite as the awareness platform. This evolution allows us to deploy our capabilities in new and innovative ways, including strategic partnerships with customers and best-in-class providers. The result for customers is greater flexibility to deliver fast, accurate verification to help fight fraud, prove humanity and protect revenue with confidence.

In Q2, we achieved best-in-class performance in the Department of Homeland Securities, remote identity validation technology demonstration for passive liveness detection. This is one of the most rigorous biometric benchmarks in the world, and Aware Excel. Our solution stood out for its strength in combating identity fraud and reducing friction. These results validate not only our evolving technology, but also our ability to meet real-world performance requirements for secure seamless identity verification in the ever-changing identity fraud landscape.

We also received strong third-party validation of our technological prowess. We were recognized as a luminary in core identity technology in the Prism projects, deep fake and synthetic identity report, an independent evaluation of over 200 organizations. Aware was specifically recognized for standout capabilities in deep fake detection, injection detection and both active and passive liveness highlighting the depth of our science and the sophistication of our awareness platform.

These validations underscore that we're not just keeping pace with the market, but rather helping shape it. Though continuous through continuous product innovation and independent validation, Aware is becoming the trusted biometric infrastructure partner for government and global enterprises alike. As we outlined last quarter, advancing our core technology remains a central focus for our transformation strategy.

In Q2, we continue to focus on our first pillar of transformation to enhance our awareness platform, our system-agnostic infrastructure that integrates the best-in-class biometric algorithms into a single interoperable rapidly deployable solution.

We improved both facial matching speed and mobile face capture reliability, allowing for a more frictionless user experience. These improvements reflect our science forward approach our focus on scalability and our decades of experience with large commercial enterprises struggling to build this internally, our platform will give the market a plug-and-play biometric security solution that can be deployed in weeks. To support and accelerate this market opportunity, we further strengthened our leadership team. This quarter, we welcomed Lona Therrien as Chief Marketing Officer. With over 15 years of cybersecurity marketing experience, Mona has a proven track record of building high-performing teams, driving demand and strengthening brand visibility, hurdle leadership at companies like ExtraHop, Cybereason, Mimecast reflecting deep industry expertise and a data-driven customer-first approach.

Her expertise is already helping amplify our voice and drive stronger engagement across both the enterprise and government sectors. We anticipate that Lona's leadership will be instrumental in increasing brand visibility, accelerating pipeline velocity and generating more consistent marketing sourced demand in the second half of the year.

The second pillar of our transformation is continuing to strengthen our go-to-market strategy to scale the business thoughtfully and sustainably. We're executing effectively against our 2025 plan with strong momentum across both the pipeline and our strategic accounts. To improve win rates and accelerate the onboarding of key customers, we're making targeted investments in critical areas. This intentional and disciplined approach to spending is designed to derisk long-cycle opportunities and position us for accelerated revenue growth in the latter half of 2025.

The final pillar of our strategy is deepening our strategic partnerships across both the public and commercial sectors. This quarter, we expanded our presence in the federal space by engaging external experts to support our strategic positioning and drive opportunity development within key U.S. government agencies. These efforts are aimed at increasing our visibility and alignment with government priorities, ultimately strengthening our public sector opportunity pipeline.

In addition, we expanded our federal footprint internationally. In Q2, we secured national ID programs for 2 Middle Eastern governments. These contracts were secured through a new partner, highlighting the strength of our growing network and customer success team. A key customer secured this quarter was a top 15 global financial institution, marking the continued expansion of aware in the commercial sector.

Our customer-obsessed go-to-market execution is translating into real wins and a growing pipeline of meaningful opportunities across our target markets. We're building real momentum and doing it with customers that understand the strategic value of what we're offering and in particular, the uniqueness of our awareness platform.

With that, I'll turn it over to David for a closer look at our Q2 financials. Over to you, David.

Thank you, Ajay. I'll walk you through our financial results for the second quarter that ended on June 30, 2025. Total revenue for the quarter was $3.9 million compared to $4.3 million in the prior year period. The year-over-year decrease was largely the result of timing of perpetual license sales. As we mentioned on our last call, we expect revenue to fluctuate as we execute Aware strategic transformation, all of which is building the foundation for sustainable future growth. Recurring revenue increased 2% year-over-year to $2.7 million for the second quarter. The slight increase was primarily due to increased software maintenance.

Moving down the income statement. Operating expenses were $5.9 million compared to $5.7 million in Q2 of 2024. The increase is a result of expanding the Aware team, particularly the key executive leaders we've hired throughout the year to accelerate growth. Operating loss was $2 million compared to an operating loss of $1.3 million in the prior year period. GAAP net loss was $1.8 million or $0.08 per diluted share compared to GAAP net loss of $1.1 million or $0.05 per diluted share in the same year ago period. Adjusted EBITDA loss for Q2, which when reconciled to GAAP net income in our earnings release, was $1.4 million compared to an adjusted EBITDA loss of $1 million in the second quarter of 2024. The year-over-year increase in adjusted EBITDA loss was attributed to lower revenue as discussed above.

Turning to our financial results for the 6 months ended June 30, 2025. Total revenue was $7.5 million compared to $8.7 million in the first half of 2024. And recurring revenue was $5.4 million compared to $5.9 million in the first 6 months of 2024. The year-over-year decrease in revenue was the result of timing of perpetual license sales as well as the impact to recurring revenue of some customers rightsizing their transaction prepayments based on prior year usage.

Our operating expenses were flat year-over-year at $11.3 million, operating loss of $3.8 million compared to an operating loss of $2.6 million in the prior year period. Net loss was $3.4 million or $0.16 per diluted share, with a net loss of $2.1 million or $0.10 per diluted share in the same year ago period. Adjusted EBITDA loss was $3 million compared to adjusted EBITDA loss of $1.9 million in the first half of 2024.

Transitioning now to the balance sheet. As of June 30, 2025, we had cash, cash equivalent and marketable securities totaling $23.7 million compared to $27.8 million as of December 31, 2024. We remain well capitalized, and our strong balance sheet provides the flexibility to continue investing with purpose. In the months ahead, we will focus on spending on areas that directly support growth, including customer success and commercial execution.

These investments are designed to accelerate pipeline conversion, improve onboard readiness and create long-term value. We are monitoring progress closely to ensure our spending stays disciplined and aligned with revenue opportunities. While the first half reflected a transitional phase of our business, we're continuing to see early traction from the foundational work completed across our go-to-market strategy, leadership additions and platform enhancements. These efforts are starting to generate signs of momentum that we believe will translate into improved revenue performance as we exit 2025.

With that, I'll turn our call over to our Chief Revenue Officer, Brian Krause. Brian?

Thank you, David. When I joined Aware, we set out to bring discipline, accountability and scalability to our go-to-market plan, and we're already making great progress on this front. Our pipeline value and potential opportunities have increased significantly. Last quarter, we introduced the awareness platform and have already made meaningful technical progress while garnering strong interest from the commercial sector.

Our awareness platform strives as a system-agnostic biometric infrastructure that delivers fast, flexible and secure identity capabilities at scale. In the second quarter, we introduced a series of performance and usability enhancements that further strengthen its position as an enterprise-grade solution.

Key updates included a 14x improvement in face matching speed through optimization of our one-to-end search algorithm, significantly reducing response times for high-volume identity checks. The mobile face capture function was also enhanced with improved blur and motion detection, dynamic positioning guidance and refined liveness prompts, leading to higher first-time capture rates and lower user drop-off across a range of devices and conditions.

These upgrades are already being deployed in customer pilots and delivering measurable gains in throughput, reliability and user experience. By improving both web and mobile performance, the awareness platform is becoming even more deployable and resilient, a clear differentiator for enterprise and government customers building identity systems that must perform at scale. The innovativeness of the awareness platform in conjunction with our marketing, sales and customer success initiatives has intensified customer engagement.

This quarter, our sales team advanced enterprise deals with several Fortune 500 companies across a range of sectors. Notably, we're nearing contract finalization with a digital identity wallet provider and are actively engaged with one of the world's largest and most influential financial institutions with whom we expect to begin testing in the third quarter.

Additionally, we initiated conversations with a global digital marketplace that serves the consumer services sector and our first major U.S. airport. Momentum is also building across our federal government relationships. Agencies are ramping up their use of biometrics and modernizing legacy systems, creating new opportunities for our core offerings, including awareness platform.

Separately, we're seeing continued traction within the law enforcement market where our ABIS product is being used to support large-scale multi-agency identity workflows. These parallel efforts highlight the expanding demand for both secure identity management and scalable biometric infrastructure across different segments of the public sector. Our late-stage pipeline is growing in both value and quality with many opportunities progressing beyond discussion and into well-structured buying processes that include clear budgets and time lines.

This includes deals moving through pricing, contracting and proof-of-value testing stages. Our confidence has reinforced that the second half of 2025 and 2026 will deliver meaningful revenue acceleration as these opportunities convert into production deployments. To support this growth, we continue to refine and professionalize our go-to-market strategy guided by 2 core principles: Science forward solutions and customer-obsessed execution. Our plug-and-play platform now incorporates best-in-class third-party technologies, allowing for more flexible and tailored deployments in a system-agnostic infrastructure with interoperability.

Simultaneously, our customer success team is empowered to manage end-to-end solution delivery with greater speed and precision. This combination strengthens customer relationships, accelerates time to value and drives expansion opportunities for Aware. As I mentioned earlier, we are also seeing steady progress with several key accounts moving into testing and evaluation stages.

Engagement is deepening across both commercial and government sectors as we broaden our footprint across multiple verticals. Our ongoing focus on execution and onboarding is critical to maximizing pipeline conversion and ensuring long-term value creation. Both our sales and customer success teams have been strengthened, helping us to deeply understand each client's unique environment, enabling us to tailor and deploy solutions rapidly and effectively.

This expertise allows us to offer an alternative to organization, trying to build these capabilities internally. By focusing on speed, interoperability and reduced time to value, we are building stronger, more durable customer relationships, increasing expansion opportunities and positioning Aware as the trusted partner for enterprise and government customers seeking scalable biometric solutions.

This disciplined approach to solution delivery and customer engagement will continue to drive momentum as we convert our growing pipeline into long-term high-impact deployments with meaningful revenue in the months ahead. Now I'll hand the call back to Ajay for his closing remarks.

Thanks, Brian. Q2 demonstrated clear progress against the strategic plan we put into motion. We are gaining credibility with enterprise and federal customers, validating our platform through independent benchmarks and real-world deployments and taking disciplined steps to convert our pipeline into revenue and future opportunities.

As we enter the second half of 2025, our strategy remains focused build the most flexible, trusted and science forward biometric infrastructure in the market and scale it with discipline. We are laying the groundwork for sustainable growth by aligning to market needs, tightening operational focus and leveraging our unique technology. We are executing against a clear road map driven by a leadership team purpose built for transformation.

We are expanding our pipeline through strategic partnerships that unlock long-cycle opportunities across both government and enterprise markets, while sharpening our go-to-market strategy through a customer-obsessed science-forward approach. With purposeful investments aimed at accelerating deployments, strengthening customer experience and deepening our presence in high-value markets, we believe Aware is well positioned to lead the next generation of biometric innovation and deliver sustainable growth in 2026.

I look forward to sharing more about our progress during our Q3 call. That concludes our prepared remarks. We'll now open the call for questions. Matt, please provide the instructions.

Thank you, Ajay. [Operator Instructions]. We'll begin with questions submitted by investors ahead of today's webcast. Our first question is for Ajay. Leidos has been a long-standing partner of wars. Today, they announced a significant task order awarded by the FBI. Can you provide some insight into the press release and what this means for Aware's partnership with Leidos. .

Yes. Thank you very much for the question. We're very excited about the ongoing investments by the U.S. federal government into the biometric industry and into identity. While we don't comment on any specific customers or partners, we encourage the ability for ongoing investments in growth and we look forward to being able to be a part of all of the investments within the federal government as they continue to recognize the importance of identity and biometrics.

The next question is for David. Based on your current visibility, what do you expect for revenue in the second half of 2025? And what are the key factors that could influence that performance?

Thanks, Matt. So we continue to be the second half of 2025 as an important period of progress for the company, particularly in terms of pipeline advancement as well as customer onboarding. However, we're still being thoughtful about how that translates into revenue timing as that can be very different on each specific deal. And we really don't have line of sight to that yet? Our focus really remains on execution and bringing new customers into production, which will set us up for multiyear contracts and contributing meaningful revenue over time.

The next question is for Ajay. Looking into 2026 and beyond, what are the key revenue growth levers you're focused on now? .

Our key growth levers today are the federal government work that we continue to be able to pursue, the law enforcement market that we've always had a legacy and a history within and also the commercial market, which have been showing a significant amount of interest and expansion within the utilization of biometric technology.

Historically, the biometric industry has really been formed around federal government work with national ID programs and border security work. Within that, there's been significant increases within the U.S. federal government's budget to the tune of about $165 billion that has been added to the Department of Home on security budget over the next 10 years. They've made plans to spend about $44 billion of it in fiscal year 2026, much of which is going to be done and spent on border security work and other related initiatives that involve technology.

So we're very interested and excited to be able to participate in some of that growth given that the baseline budget for the Department of Homeland Security to begin with is really just $115 billion to begin with. Within the law enforcement community, there's been added emphasis on the law enforcement community to be able to deploy better technology, upgrade and refresh some of their investments and continue to look for better vendors that will respond quicker to their needs.

We have a very strong reputation embedded within this industry, and we look forward to be able to grow within it. Within the commercial market, there are 3 levers of identity, 3 factors of identity, and that is what you know, what you carry and who you are. The who you are piece has always been biometrics, but that has been pushed down over the last few years with concerns of surveillance and other concerns that people have always had not recognizing that biometrics actually enhances privacy. What we found is that with Face ID and other technologies now being the go-to capability for consumers to be able to identify themselves on their mobile devices, the customer reaction to biometrics is now at an all-time positive and the utilization of the technology will continue to be increased as other factors of identity, namely what you know as a user use and passwords and social security numbers and phone numbers, continue to be openly available on the dark web and now even on the Open Web and ongoing AI capabilities from fraudsters continue to infiltrate factor number 2.

Factor number three, with regards to biometrics is the obvious utilization and opportunity of choice for technology that allows humans to be able to prove that they are a human online and prove that they are the right unit online at that time.

We have a question for Brian. Given that recurring revenue grew modestly, what steps are you taking to accelerate your subscription-based business. .

Thank you for the question. So we continue to invest in our go-to-market process and teams with a focus on scalable biometric projects and solutions. And so as we continue to focus around the markets and the segments that support the core products we've talked about on this call, the awareness platform, the digital biometrics, the ABIS solutions for law enforcement. Our focus is generally on the larger end of the market, where our software solutions are deployed as enterprise infrastructure.

The commercial models for most of those deployments are generally recurring long-term sticky durable relationships. So we expect a continued focus on these segments and these products to help our transformation continue and accelerate into the future.

Thanks, Brian. We have another one for you. How are you improving the sales cycle velocity? And what are the bottlenecks today?

Sure. Thanks again for the question. So I won't highlight any specific bottlenecks today, but I will say that we have focused, as I mentioned in my comments, on really strengthening our end-to-end sales process and our teams to really focus on customer requirements and being customer-obsessed. And as a result of this, what we see generally is a closer alignment to customer requirements and understanding of needs, this often manifesting translates into shorter proof-of-value testing as well as higher success rates with proof-of-value testing.

So again, our focus is really on aligning closely with these big enterprise customers across a multitude of sectors, deeply understanding requirements and goals and being able to execute on value delivery and the short time to value for these customers.

Thank you, Brian. Ajay, what trends are you seeing globally in government biometric deployments that Aware is well positioned to capitalize on.

I'm very excited about this question because there is a lot of interesting trends happening globally that we are looking to try to advance on. Now we are a U.S.-based customer -- I mean, U.S.-based company. We have our history going back 35 years to really the foundation of this company in Boston by MIT graduates who responded back to a request by the FBI to really create a common standard for fingerprint technology, so that they can have open vendor-agnostic solutions and the capability for the market to be able to grow in the biometric realm.

What we've understood and accepted from the beginning is that our focus on the North American market doesn't preclude us from being able to operate internationally. We select very carefully our partners to be able to work with internationally, and we grow those partners, and we look for their success, and we stay hyper-focused on being able to make sure that we can deliver the things that we promised on our end.

Those partners that we have internationally and the work that we're doing here domestically is very fundamental components and opportunities around the biometric industry and especially as it relates to the federal government work that we have done for the last 30 years and continue to do and will grow. Much of that involves both federal uses of issued identities, whether that's for federal government employees or for individual residents of the country.

Mobile drivers licenses continue to roll out companies that have large digital wallets are looking at growing the utilization of those, both within the United States as the issuers are DMVs and other organizations. And then the issuers globally, who also have national ID programs that represents a very large opportunity for us as basically in any ID verification flow, there is, first, the presentation of a credential and then the recognition that the face matches -- the live face of the human matches the face that is on the credential.

So as that transitions into a digital world, which is very important because the digital world now far exceeds the number of transactions that you see in the physical world. Digital identity globally, government-issued digital identity globally, can help serve to protect the Internet and protect consumers and help to recognize what is a bot, what is not a bot, recognize the difference between AI-enabled capabilities and who is a human and whether or not the human has, in fact, authorized the bot on their behalf.

So there's a large growth in federal government issued digital identities as there are also in global travel. Global travel has expanded dramatically. Here in the United States, we're expecting huge leaps in global travel going into the World Cup in 2026 and the Olympics in 2028. And the way to be able to accommodate for all of that growth with very limited resources and the inability to be able to hire or expand footprint is through the utilization of technology such as biometrics. And so the utilization of biometrics across the globe in the travel sector presents a unique opportunity for Aware to be able to capitalize on its legacy and its presence that it established post 9/11 as one of the vendors of choice for most of the major travel organizations to be able to secure travel.

So those are 2 of the opportunities that we're looking at within the federal government sector globally.

Thank you, Ajay. We received several questions from John Basler from Basler Capital. His first question is for David. Why is the second quarter G&A up more than the sum of R&D and selling and marketing on a year-over-year basis?

Thanks for the question. I think it's easier to break those down to two parts. I'll start first with the R&D and sales and marketing, combining those. So both of those areas with the changes we made at the executive team have gone over really a purposeful transformation over the past year. And what we've been doing, we've been realigning these teams to focus on execution, efficiency and strategic priorities. And we're making investments in those groups.

So we do expect these costs to increase in the second half of the year as we make those investments.

On the G&A side, it's really worth noting it can really fluctuate from quarter-to-quarter depending on kind of timing of kind of onetime events and also kind of some other kind of just actions, but there's nothing really of note there. Just kind of one thing was there were some performance-based stock option expense in there for when we brought Ajay on that's happening on a quarterly basis. That wasn't there last year. But it's really just kind of an up and down expense that can happen, so just natural fluctuations that we expect G&A to hold pretty steady kind of in the second half of the year.

John has 3 questions for Brian. His first question is, how does your current pipeline and volume of deal flow compared to the first quarter? .

Good question, John. Thank you. I can say without providing sort of specifics on our internal KPIs, like I say that the acceleration of our pipeline, both from a volume and value size have accelerated significantly. Q2 was an investment quarter in go-to-market. And I think most of the growth in pipeline exceeded our internal expectations in terms of acceleration. And we feel very confident from my comments that the second half we'll start to see some of that revenue acceleration and into 2026.

Brian, what are your customer and revenue retention rates. .

So our current customer revenue and retention rates are without getting into specifics are very consistent with previous years. Our efforts to continue to focus on end-to-end customer relationship management and investments in our customer success team, that's an area of focus that we hope to actually continue to improve upon as well into the future, of course. But so far, both gross data retention, net data retention are consistent with previous years.

Brian, can you speak to any notable recent RFP wins or losses? .

Yes. We don't comment on specific projects or customers. I will say that the market is very obvious, both in commercial and government, as you've heard today throughout the call. We have been very active in pursuing a lot of computed projects, some of which will take some time, of course. But we are very excited by the validation that, that provides from the market that there is a lot of interest in our technology and there's a lot of formal process being undertaken by customers, both public and private to thoroughly evaluate their technology providers.

As you heard in some of the comments, and as you can see in a number of the reports, our product is performing very well is being validated very highly. So we feel confident that those projects that we are competing in we'll do well in. And we are competing in a fair number of on a quarterly basis at this point.

Final question is for Ajay. Can you give some color on Aware's M&A pipeline? .

Sure, absolutely. At this point in time, we're focused on tenacious execution internally and making sure that our phenomenal team that we have within the company continues to stay and understand the corporate strategy has [indiscernible] in developing the corporate strategy and continues to also work with that level of intensity to be able to serve customers with white glove service go over and above what we need to do to be able to deliver a great experience for the new customers that we bring on board of Aware, making sure that we can underpromise and overdeliver and then continue to grow within them, very much land and expand strategy for the company.

Much of that is tied into investments internally within the company to make sure that we have the best software engineers that we can have within the company to complement our existing amazing team of developers and engineering leaders. We continue to invest in internal go-to-market function and capability as evidenced with the hiring of Lona Therrien who has built multiple multibillion dollar companies with her marketing prowess and capabilities and with Brian Krause leading up our revenue organization and individuals underneath those teams.

So as we continue to invest in our customer success function, our sales function, our engineering function, we take a look at new customers coming on board, and we look at Aware's platform, the awareness platform, which in itself has many of the capabilities and components that are necessary to be able to serve today's demand and market need for biometrics globally. So from a technology perspective, a product perspective, there are not gaps necessarily in our product suite that would need to be filled with M&A. And from a customer standpoint and a growth standpoint, we look towards internal execution as opposed to external M&A to be able to drive that.

Our next question is from Nat Stewart from NAS Capital. It's good to hear that the pipeline is growing and substantial entities such as federal government and Fortune 500, what is the revenue model for these sales, onetime licensing fees, multiyear contracts or pay as use?

This is David. Matt, I can take this one. Go ahead, Brian. .

Sure. Yes. I think it's consistent with my comments earlier about where our focus is right now. So the pipeline is obviously a byproduct of where our go-to-market focuses and our process and program works. And so most of this newer pipeline that we've been able to successfully develop is in large-scale biometric projects that align more closer to sales models of enterprise software and infrastructure licensing. So we expect to see, as I mentioned earlier, sort of continued transformation of our overall revenue as more of these projects are successful and start to move towards more of an enterprise licensing model, not across the board, of course, but we still have a very strong components business across the world, and we'll continue to service that and continue to support that. But our focus right now is on being a true enterprise infrastructure provider to large-scale biometrics, projects, and those projects are typically sold as enterprise licenses

This time, this concludes our question-and-answer session. If your question wasn't answered, please e-mail Aware's IR team at [email protected]. Before we conclude, I'd like to remind everyone that a replay of today's call will be available via link in the Investor Relations section of Aware's website. Thank you for joining us for Aware's second quarter 2025 conference call. You may now disconnect.