AWARE INC /MA/ Q4 FY2025 earnings call

Fiscal 2025 was a foundational year. Focused on three-pronged transformation: advancing core biometric technology (invested in liveness and biometric orchestration, achieved best-in-class in NIST IR 8491 evaluation, evolved biometric orchestration capabilities), strengthening go-to-market model, deepening strategic partnerships and certifications. Strengthened leadership team, welcomed new head of engineering and product. Continued customer testing activity in government and commercial sectors. Successfully deployed first mobile biometric solution within U.S. federal agency, onboarding additional law enforcement customers. Launched pilot program in Caribbean, tested biometric boarding at Orlando International Airport. Achieved multiple certifications including ISO 30107 Level 3, ISO 27001, FIDO2 server certification.

Fourth quarter revenue was $4.7 million compared to $4.8 million in the prior year period. Slight decrease due to lower perpetual software license revenue, partially offset by higher maintenance and services and other revenue. Full year revenue was $17.3 million compared to $17.4 million in 2024. Slight year-over-year decrease driven by lower perpetual license revenue, partially offset by increases in maintenance and services and other revenue. End of year had $22.3 million in cash, cash equivalents and marketable securities, and no debt.

Performance may continue to be uneven given procurement cycles and customer conversion timing. 2026 focus on disciplined execution, converting pilot programs, strengthening awareness platform, scaling revenue, delivering durable long-term growth. Look for stronger conversion of pipeline into program wins, progression from pilots/evaluations to production employments, and greater consistency in bookings/revenue over time.

Factors causing actual results to differ materially from forward-looking statements, including uncertainties in government procurement timing, slowdowns from government shutdowns, and risks related to AI-generated threats and competitors insourcing. Also, evaluations and testing phases can be lengthy and not all result in near-term deployments.

Q: 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?

A: In 2025, some programs moved slower than expected due to government procurement cycles and shutdown. Coming out of shutdown, increased federal government meetings led to pipeline acceleration. Continued working on international and commercial markets to convert and expand pipeline.

Q: How should investors think about the mix between perpetual licenses, recurring software, services, and maintenance going forward?

A: Mix will likely evolve depending on program types. Focus on expanding presence in large programs where software platform can be deployed and maintained over multiple years.

Q: What is the process and timeline from evaluation to production deployment?

A: Evaluations can move to pilot programs, then customers validate technology. Process moves into production deployments, which can expand over time. Goal is to start small, exceed expectations, and expand work.

Q: How did recent certifications and platform enhancements strengthen AWARE's competitive position and support future opportunities?

A: Certifications are important as they are typically in major customer procurements. Put AWARE in a competitive set that's smaller. Help meet customer requests and show qualification.

Q: Why are deals not announced as they are signed?

A: From SEC requirement standpoint, most contracts are within ordinary core business and don't require separate disclosure. On commercial side, many customers have confidentiality provisions. Signing of contract not always most meaningful milestone as programs progress through pilots and employments.

Q: Are you seeing any new AI-native competitors or customers insourcing by building their own algorithms using LLMs? What moats or risks does your business have from an AI disruption relative to other SaaS companies?

A: Company well positioned to take advantage of AI elements. Existing presence, customers, and data allow effective training of models. Utilize data for better code development and serving customers.

Q: What should investors look for in 2026 to measure success?

A: 2025 was about strengthening foundation. 2026 look for improving execution, stronger conversion of pipeline into program wins, progression from pilots/evaluations to production employments, and greater consistency in bookings/revenue over time.