Aware Q1 2025 Earnings Call Transcript

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April 30, 2025

There are 5 speakers on the call.

Operator

And welcome to Ware's First Quarter twenty twenty five Conference Call. Joining us today are the company's CEO and President, A. J. Amlani CFO, David Traverse and CRO, Brian Krause. Following their remarks, we will open the call to questions.

Operator

If you would to submit a question, you can do so at any time using the built in Ask a Question feature in the webcast player. Before we begin today's call, I'd 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 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 indicated by such statements.

Operator

These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10 ks and quarterly reports on Form 10 Q. Any forward looking statements should be considered in light of those factors. You're 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 that term is defined by the SEC in Regulation G.

Operator

Non GAAP financial measures should not 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 will be recorded and made available for replay via a link in the Investor Relations section of the company's website. Now, I'd like to turn

Speaker 1

the call over to WARE's CEO and President, A.

Operator

J. Pavlani. A. J?

Speaker 2

Thank you, Matt, and good afternoon, everyone. This quarter marked the beginning of a strategic transformation. With a renewed focus on durable, scalable growth, we have introduced a bold, streamlined go to market strategy aimed at unlocking new and more substantial revenue streams and addressable markets. This transformation began in February and we are already seeing meaningful improvements in our pipeline and deal flow. We are speaking to the who's who of the technology industry about their intent to deploy biometrics at scale and the improvements they expect to receive by doing so.

Speaker 2

We are well positioned with the right science forward solutions and the right customer obsessed associates to capture and grow these opportunities. We've taken clear focus steps to sharpen execution, concentrate on high potential segments and strengthen the foundation for scalable growth. Since stepping into the CEO role ninety days ago, our focus has been building the foundation for durable, sustainable growth. On our last call, I outlined three strategic priorities to guide that effort: deepen strategic partnerships, advance core technology, scale the business thoughtfully and sustainably. Today, I'd like to walk you through our progress on each front.

Speaker 2

First, deepening strategic partnerships. In q one, we realigned our go to market model to prioritize high impact customers and sectors where biometric authentication is mission critical. That work is already bearing fruit. We're now in active conversations with several Fortune 500 companies, relationships that simply didn't exist three months ago. On the public sector side, we're preparing for several high impact opportunities tied to national security, border modernization, and digital identity initiatives.

Speaker 2

We continue to see strong interest in citizen services and public safety where secure, scalable biometric solutions are becoming increasingly essential. We also significantly strengthened our leadership team. Brian Krausz joined us as chief revenue officer, bringing over a decade of leadership experience across Encode, Verus, and AnyVision. Brian has led high performing teams, closed multimillion dollar deals, and built deep partnerships across government and enterprise. He and I have a long standing working relationship, which allows for seamless coordination and execution.

Speaker 2

We also appointed Gary Edie as chairman of the board. Gary is a former IBM executive and cybersecurity expert with deep experience advising federal agencies and global enterprises. He's already played a pivotal role in our strategic alignment and brings the kind of governance and strategic discipline that will serve us well in this next phase. These leadership changes reflect a deliberate shift in how we intend to operate going forward. The board recognized the need for a major reset to install leadership capable of executing a disciplined commercialization strategy, strengthening our sales process and instilling clear operational rigor.

Speaker 2

Our mandate is to move forward with transparency, realistic goal setting and a clear focus on converting aware technological experience into sustained shareholder value. This strategic alignment with the board has enabled us to move quickly and decisively as we reposition the company for long term success. Second, we're advancing our core technology. We've begun consolidating our efforts under the awareness platform, a unified architecture that integrates our core biometric capabilities with best in class third party algorithms where needed. This enables us to deliver optimal outcomes to customers while continuously strengthening our own models with data insights.

Speaker 2

We've also revitalized our brand presence. The Aware name is now at the center of our our identity, Modern, clean, and focused. We've rebuilt our demand generation engine, increased our visibility at key industry events, and elevated our presence in Washington DC through new federal lobbying efforts. Third, scaling thoughtfully and sustainable. We've instilled a culture of radical transparency and accountability.

Speaker 2

We redesigned the sales organization, implemented consistent pricing and pipeline processes, and refocused our customer service team on renewals and strategic expansion opportunities. So while our Q1 results reflect the business in transition, the underlying transformation is real and accelerating. We expect the first half of the year to remain foundational, but we are building momentum heading into the second half with a growing pipeline and stronger market engagement. With that foundation in place, I'll turn it over to David for a closer look at our Q1 financials. Over to you, David.

Speaker 3

Thank you, A. J. Let's take a look at our financial results for the first quarter, which ended on 03/31/2025. Total revenue was $3,600,000 compared to $4,400,000 in Q1 of last year. The year over year decrease was primarily driven by lower software license sales and a project driven and fluctuate from period to period.

Speaker 3

Recurring revenue was $2,700,000 compared to $3,100,000 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 5,500,000 down 5% from $5,700,000 in Q1 of twenty twenty five. Operating loss was $1,800,000 compared to an operating loss of $1,300,000 in the same prior year period. GAAP net loss was $1,600,000 or $08 per diluted share compared to GAAP net loss of $1,000,000 or $05 per diluted share in Q1 of twenty twenty four.

Speaker 3

Our adjusted EBITDA loss for the quarter, which we reconciled GAAP in our earnings release was $1,500,000 compared to adjusted EBITDA loss of $1,000,000 in the prior year period. The decline was primarily due to 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.

Speaker 3

As we move through Q2 and into the second half of twenty twenty five, 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 are critical to driving long term sustainable growth. Now finally turning to the balance sheet. As of 03/31/2025, we had cash, cash equivalents and marketable securities totaling $24,800,000 compared to $27,800,000 at 12/31/2024. Now I'll hand the call over to our new CRO, Brian Krausz.

Speaker 3

Welcome, Brian.

Speaker 4

Thank you, David. It's a privilege to join Aware at such a pivotal time in its transformation. I joined Aware by a year history of pioneering research, deep technical expertise and a trusted presence in some of the most demanding environments, particularly across U. S. Federal agencies.

Speaker 4

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's strength. Large enterprises increasingly recognize the urgency of securing digital interactions with fast, accurate, scalable and science driven technologies.

Speaker 4

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.

Speaker 4

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.

Speaker 4

We're transforming our demand gen model by embedding domain experts to lead each market vertical, ensuring deeper engagement and relevance. We're 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 specific use case and deployment needs.

Speaker 4

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, that differentiates Aware today and positions us for leadership into the future.

Speaker 4

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 AJ.

Speaker 2

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 are leaning into it with urgency and discipline. In q one, 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.

Speaker 2

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 Aware 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.

Speaker 2

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.

Speaker 2

Matt, please provide the instructions.

Speaker 1

Thank you, A. J. 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. First question, will Aware continue to pursue growth in annual recurring revenues via sales of the Aware ID product?

Speaker 1

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?

Speaker 2

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.

Speaker 1

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

Speaker 2

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.

Speaker 1

Thanks, Ajei. 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?

Speaker 2

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, health care, 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.

Speaker 2

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.

Speaker 1

Thanks, A. J. 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 twenty twenty five and into 2026?

Speaker 3

Thanks, Matt. I can take that one. While we don't give specific guidance for 2025 on revenue, we're viewing 2025 really as that this foundational year for We Are with the new leadership. And as we discussed on our last call, and as AJ kinda 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, the so the sales sale vary, can be a a few months to to a longer sales cycle.

Speaker 3

So what we're doing is we're 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.

Speaker 1

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

Speaker 2

Absolutely. The Awareness platform is a fundamental shift for both Aware and for the biometric industry. Rather than force customers into a closed stack, 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.

Speaker 2

It's a science forward customer obsessed approach, And it's how we intend to lead the next wave of biometrics adoption.

Speaker 1

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?

Speaker 2

We feel well positioned across the full U. S. Government portfolio of opportunities. The U. S.

Speaker 2

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 proving 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.

Speaker 1

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

Speaker 2

We're actually seeing tangible progress on several fronts. First, our pipeline has materially expanded over the last ninety days, including opportunities with Fortune 500 companies and also new federal programs. Second, we've installed the leadership team necessary to drive disciplined execution. Brian joining as 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 towards a science driven customer first model.

Speaker 2

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.

Speaker 1

Thanks, A. J. At this time, this concludes our question and answer session. If your question wasn't answered, please e mail Aware's IR team at awregateway grp dot com. I'd now like to turn the call back over to A.

Speaker 1

J. For closing remarks.

Speaker 2

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.

Speaker 1

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

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