Aware, Inc.

With a growing pipeline and stronger market in place, I'll turn it over to David for a closer look at our Q1 financials. Over to you, David.

Thank you, AJ. Let's take a look at our financial results for the first quarter, which ended on March 31st, 2025. Total revenue was $3.6 million compared to $4.4 million in Q1 of last year. The year-over-year decrease was primarily driven by lower software license sales and a project-driven influx rate from period to period. Recurring revenue was 2.7 million compared to 3.1 million in the prior year period. This year over year difference was due to the timing of subscription term license renewals. Moving down the income statement, operating expenses were reduced to 5.5 million, down 5% for 5.7 million in Q1 of 2025. Operating loss was 1.8 million compared to an operating loss of 1.3 million in the same prior year period. Gap net loss was $1.6 million, or $0.08 per diluted share, compared to gap net loss of $1 million, or $0.05 per diluted share in Q1 of 2024. Our adjusted EBITDA loss for the quarter, which we reconciled gap in our earnings release, was $1.5 million, compared to adjusted EBITDA loss of $1 million in the prior year period. The decline was primarily due to the lower total revenue, slightly offset by reduced lower operating expenses. We continue to operate with discipline. Over the past few quarters, we streamlined operations to set up our new leadership to invest in the right areas for future growth. That work has made us more efficient and put us in a stronger position to scale around our strategic priorities. As we move through Q2 and into the second half of 2025, we do expect expenses to rise, but really just returning to levels more in line with where they were a few quarters ago. These investments are deliberate and focused. and we believe they're critical to driving long-term sustainable growth. Now, finally turning to the balance sheet, as of March 31st, 2025, we had cash, cash equivalents, and marketable securities tolling $24.8 million compared to $27.8 million on December 31st, 2024. Now, I'll hand the call over to our new CRO, Brian Krause. Welcome, Brian.

Thank you, David. It's a privilege to join AWARE at such a pivotal time in its transformation. I joined AWARE because of its unmatched pedigree in biometrics, a 30-year history of pioneering research environments, particularly across US federal agencies. Our solutions are relied upon by organizations such as Department of Defense, Department of Homeland Security, and many others. Very few companies can say this, and it provides a strong foundation for durable, sustainable growth as we expand into new commercial and international markets. Today, we're seeing unprecedented interest from Fortune 500 companies actively exploring and testing biometric solutions. This shift plays to aware strength. Large enterprises increasingly recognize the urgency of securing digital interactions with fast, accurate, scalable, and science-driven technologies. As fraud continues to rise across various sectors, biometrics is becoming a critical layer of defense. Importantly, our conversations now extend beyond security teams. We're speaking directly with CEOs and boards focused on enterprise risk. At the same time, the U.S. federal government's commitment to biometric modernization remains strong, further enforcing our market opportunity. To capture this momentum, we're evolving and expanding AWARE's go-to-market strategy. A key priority is replicating our success in the U.S. federal sector across high-growth commercial industries and international geographies. We're transforming our demand gen model by embedding domain experts to lead each market vertical, ensuring deeper engagement and relevance. We are building a focused, measurable, and scalable commercial engine that aligns with our strategic priorities. At the core of this is a science-forward approach to selling, one that emphasizes AWARE's technical leadership, solution orientation, and problem-solving capabilities rather than pushing product. In parallel, we've reoriented our customer success organization to align with this expansion. Our team is now delivering specialized journeys tailored to each customer's specific use case and deployment needs. We're also prioritizing strategic accounts with high potential for long-term growth, reinforcing our land and expand strategy and building durable customer relationships. We're also laying the foundation for a platform-based future. The awareness platform will enable customers to orchestrate solutions across various partners and providers, giving them access to the best algorithms and capabilities for their needs. Rather than locking customers into a proprietary stack, We're building an open, flexible, and science-led architecture. This represents a fundamentally new model for the biometrics industry, one that differentiates AWARE today and positions us for leadership into the future. In short, we're combining AWARE's proven legacy with a modern, customer-centric platform strategy and a focused go-to-market, unlocking significant new growth opportunities in the quarters and years ahead. With that, I'll turn the call back over to Ajay.

Thanks, Brian. We are operating with clear priorities, renewed leadership, and a sharp focus on disciplined execution. We understand the foundational work required to reposition AWARE, and we're leaning into it with urgency and discipline. In Q1, we added key leadership talent, ignited our commercial strategy, and transformed our platform into a more customer-centric, science-driven offering. We also took meaningful steps to modernize our brand and increase our visibility in the markets that matter most. As we look ahead to the remainder of 2025 and into 2026, we are confident that the strategic groundwork we've laid grounded in market alignment, operational rigor, and differentiated technology positions are where to lead, not just participate, in the next wave of biometrics innovation. Our goal is not only to return to growth, but also to define what best in class execution looks like in this evolving industry. Stepping back, there are a few key takeaways that underscore the progress we're making and where we're headed. First, we're executing. against a defined set of strategic priorities with a leadership team built for transformation. Second, our pipeline is growing, particularly with large, long cycle opportunities across both government and enterprise markets. Third, we've rebuilt the foundation from brand and platform to sales execution and customer engagement. And finally, while 2025 is a transitional year by design, we are building the momentum to exit the year stronger and position aware for durable, sustainable growth We look forward to updating you on our continued progress during our Q2 call. That concludes our prepared remarks. We'll now open the call for questions. Matt, please provide the instructions.

Thank you, AJ. As a reminder, you can submit a question using the built-in Ask a Question feature in the webcast player. Please hold while we populate the questions. Our first question, will AWARE continue to pursue growth in annual recurring revenues via sales of the AwareID product? If yes, what do you expect to change between the immediate future and the last three years where no measurable revenue growth progress has been made?

Our focus is not on driving growth through any single product. It's on solving large-scale identity challenges for Fortune 500 enterprises and government agencies where biometrics are becoming mission critical. We're now solution-first, engaging directly with senior decision-makers on enterprise-wide risk mitigation, fraud prevention, and digital identity modernization. We're aligning our technology across the full portfolio to deliver scalable, high-impact solutions where customers need them most.

Our next question, has AWARE made progress in adding customers or growing sales on the AWS Marketplace or any of the other partner programs?

Thank you. Our top priority is direct engagement with customers, delivering science-forward, customer-obsessed solutions to solve their most critical identity challenges. Partners like AWS and others can complement our efforts. Still, we are selective. We will only work with partners who share our mindset, add real strategic value, and help us deliver the scalable, high-impact outcomes that our customers demand.

Thanks, AJ. You mentioned active conversations with several Fortune 500 companies. Could you provide more color on the types of industries or use cases these companies are exploring with AWARE's biometric solutions?

Sure. Today we're seeing strong engagement across several industries where secure seamless identity verification is becoming mission critical. That includes financial services, trusted networks, e-commerce, healthcare, travel and hospitality, and many other markets. The common thread is that large enterprises increasingly recognize that passwords and traditional authentication are no longer sufficient. Biometrics provide a faster, more secure and frictionless experience. We're speaking directly with CEOs, boards and senior security leaders about enterprise risk mitigation, fraud prevention and improving customer trust at scale. It's a great validation of the transformation we're driving with our awareness platform.

Thanks, AJ. How should we think about the timing and potential revenue contribution from some of the new strategic opportunities you're developing in the second half of 2025 and into 2026?

Thanks, Matt. I can take that one. While we don't give specific guidance for 2025 on revenue, we're viewing 2025 really as this foundational year for we are with the new leadership. And as we discussed on our last call, and as AJ kind of emphasized today, what we're really trying to do is strengthen our go-to-market model, focusing on high-impact customers and rebuilding the pipeline aligned with where we can win. With that, so the sales cycle can vary, can be a few months to a longer sales cycle. So what we're doing is we're taking a focus on quality, making sure that the customers we bring in are aligned with our strategy, our platform vision, and our growth objectives. So we do expect some early wins later this year and for more contributions to really build over time.

Thanks, David. Can you expand on the awareness platform? How does the open architecture approach differentiate aware from competitors and create a competitive advantage?

Absolutely. The awareness platform is a fundamental shift for both aware and for the biometrics industry. Rather than force customers into a closed back, we're offering open, modular architecture where they can orchestrate best-in-class algorithms through a unified platform. That flexibility is very attractive to large enterprises and governments who want choice, they want scalability, and they want future-proofing. It also allows us to gather valuable insights to improve our models continuously. It's a science-forward, customer-obsessed approach. and it's how we intend to lead the next wave of biometrics adoption.

You talked about federal government momentum remaining strong. Are there specific programs or initiatives such as border monetization or digital identity where you feel particularly well positioned today?

We feel well positioned across the full U.S. government portfolio of opportunities. The U.S. federal government remains the largest investor in biometric technologies globally. We are strategically aligned with its long-term priorities around secure digital identity, digital modernization, and border innovation. Rather than focus on any single program, we're actually positioning AWARE as a trusted partner across a broad set of initiatives where secure, scalable biometric authentication is critical. Our strength lies in providing proven flexible solutions that meet rigorous government standards while enabling future-ready architectures. With our deep domain expertise, science-driven approach, and commitment to operational excellence, we believe we're exceptionally well-positioned to support the evolving needs of federal government agencies over the coming years, especially being one of the only biometrics providers headquartered here in the United States in our headquarters in the Boston area.

Thanks, AJ. With the new leadership team in place and the revamped go-to-market strategy, what early indicators are you seeing that give you confidence-awareness on the right trajectory for scalable, sustainable growth?

We're actually seeing tangible progress on several fronts. First, our pipeline has materially expanded over the last 90 days, including opportunities with Fortune 500 companies and also new federal programs. Second, we've installed the leadership team necessary to drive discipline execution. Brian joining is our CRO, a full sales and customer success realignment, and a marketing reboot to modernize our brand and demand generation. Third, we're seeing growing inbound interest from customers who recognize Aware's technology leadership and our shift toward the science-driven, customer-first model. While 2025 remains a transitional year, the momentum we're building gives us strong confidence. We'll exit this year in a significantly stronger position.

Thanks, AJ. At this time, this concludes our question and answer session. If your question wasn't answered, please email AWARE's IR team at awre at gateway-grp.com. I'd now like to turn the call back over to AJ for closing remarks.

Thank you all for joining us today and for your interest in Aware. We are excited about the foundations we are building and remain committed to delivering durable, sustainable value in the years ahead. We look forward to updating you further on Aware's progress during our next webcast.

Thank you. Thanks, AJ. I'd like to remind everyone that a recording of today's call will be available for replay via link in the investor section of the company's website. Thank you for joining us today for AWARE's first quarter 2025 conference call. You may now disconnect.