Aware(AWRE) - 2025 Q2 - Quarterly Results

Company Overview and Strategic Context Aware, Inc. outlines its strategic transformation, core technology advancements, and leadership in biometric identity Introduction and Management Commentary Management highlighted Aware's strategic transformation, core technology advancements, and H2 focus on sales and growth - CEO Ajay Amlani emphasized the company's substantial progress in strategic transformation, core technology advancements, partner network expansion, and commercial execution[3] - The strategic roadmap is based on three pillars: advancing purpose-built platforms, strengthening go-to-market efforts, and deepening strategic partnerships in public and commercial sectors[3] - In the second half of 2025, the company will focus on converting growing late-stage sales leads, accelerating customer onboarding, and driving sustainable growth[4] About Aware Aware (NASDAQ: AWRE) is a global leader in biometric identity and authentication solutions, using its Awareness platform for identity verification and fraud prevention - Aware is a global leader in biometric identity and authentication solutions[12] - Its "Awareness platform" transforms biometric data into actionable intelligence for identity verification and fraud prevention, designed for mission-critical enterprise environments[12] Second Quarter 2025 Operational Highlights Aware achieved significant product innovations, including enhanced facial matching and mobile capture technology, alongside industry recognition and a key leadership appointment Product and Technology Innovations In Q2 2025, Aware made significant product innovations, including a 14x improvement in facial matching performance and smarter mobile facial capture technology - Developed new product innovations, including a 14x improvement in facial matching performance[5] - Launched smarter mobile facial capture technology[5] Industry Recognition and Leadership Appointments Aware was recognized as an industry leader in core identity technology and excelled in DHS RIVTD passive liveness detection tests, also appointing Lona Therrien as CMO - Recognized as an industry leader in core identity technology in Prism Project's deepfake and synthetic identity report[5] - Achieved best-in-class performance in the Department of Homeland Security Remote Identity Verification Technology Demonstration (RIVTD) passive liveness detection test[5] - Appointed Lona Therrien as Chief Marketing Officer, bringing 15 years of cybersecurity marketing experience[5] Financial Performance Summary Aware's Q2 and six-month 2025 financial results show revenue declines and increased net losses, primarily due to the timing of perpetual license sales and strategic investments Second Quarter 2025 Financial Results Aware's Q2 2025 revenue decreased to $3.9 million, driven by perpetual license sales timing, leading to an increased net loss of $1.8 million and an Adjusted EBITDA loss of $1.4 million, with cash and equivalents at $23.7 million | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | YoY Change | | :--------------------- | :-------------------- | :-------------------- | :--------- | | Revenue | $3.9 | $4.3 | -9.3% | | Operating Expenses | $5.9 | $5.7 | +3.5% | | Net Loss | $(1.8) | $(1.1) | +63.6% | | Diluted EPS | $(0.08) | $(0.05) | +60.0% | | Adjusted EBITDA Loss | $(1.4) | $(1.0) | +40.0% | - Revenue decline was primarily attributed to the timing of perpetual license sales, which can vary due to customer procurement cycles[6] - The increase in Adjusted EBITDA loss was mainly due to lower total revenue and higher personnel-related expenses, reflecting strategic investments in headcount[8] - Cash, cash equivalents, and marketable securities totaled $23.7 million as of June 30, 2025, down from $27.8 million as of December 31, 2024[8] Six-Month 2025 Financial Results For the first six months of 2025, Aware's revenue decreased to $7.5 million due to perpetual license sales timing, resulting in an expanded net loss of $3.4 million and an Adjusted EBITDA loss of $3.0 million | Metric | Six Months 2025 (in millions) | Six Months 2024 (in millions) | YoY Change | | :--------------------- | :---------------------------- | :---------------------------- | :--------- | | Revenue | $7.5 | $8.7 | -13.8% | | Operating Expenses | $11.3 | $11.3 | 0.0% | | Net Loss | $(3.4) | $(2.1) | +61.9% | | Diluted EPS | $(0.16) | $(0.10) | +60.0% | | Adjusted EBITDA Loss | $(3.0) | $(1.9) | +57.9% | - The six-month revenue decline was primarily attributed to the timing of perpetual license sales[9] - The increase in Adjusted EBITDA loss was primarily due to lower revenue[10] Detailed Financial Statements This section presents Aware's unaudited consolidated statements of operations and comprehensive loss, and condensed consolidated balance sheets, detailing revenue breakdown, expenses, assets, and liabilities Consolidated Statements of Operations and Comprehensive Loss This section presents Aware's unaudited consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2025 and 2024, detailing revenue by category and various costs and expenses leading to net and comprehensive losses | Revenue Category (in thousands) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :------------------------------ | :------ | :------ | :------ | :------ | | Software licenses | $1,420 | $1,815 | $2,736 | $3,962 | | Software maintenance | $2,198 | $2,154 | $4,349 | $4,314 | | Services and other | $277 | $353 | $416 | $467 | | Total revenue | $3,895 | $4,322 | $7,501 | $8,743 | | Cost of revenue | $339 | $270 | $579 | $546 | | Research and development | $1,960 | $1,867 | $3,881 | $4,049 | | Selling and marketing | $1,964 | $2,091 | $3,627 | $3,982 | | General and administrative | $1,593 | $1,435 | $3,226 | $2,769 | | Total costs and expenses | $5,856 | $5,663 | $11,313 | $11,346 | | Operating loss | $(1,961) | $(1,341) | $(3,812) | $(2,603) | | Net loss | $(1,769) | $(1,089) | $(3,367) | $(2,071) | | Net loss per share – diluted | $(0.08) | $(0.05) | $(0.16) | $(0.10) | Condensed Consolidated Balance Sheets This section provides Aware's unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing assets like cash and receivables, liabilities including accounts payable and deferred revenue, and total stockholders' equity | Balance Sheet Item (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $7,300 | $12,972 | | Marketable securities | $16,379 | $14,842 | | Accounts and unbilled receivables, net | $3,833 | $4,002 | | Total assets | $38,097 | $42,644 | | Accounts payable and accrued expenses | $1,711 | $2,341 | | Deferred revenue | $4,224 | $5,163 | | Operating lease liability | $4,112 | $4,244 | | Total stockholders' equity | $28,050 | $30,896 | | Total liabilities and stockholders' equity | $38,097 | $42,644 | Non-GAAP Financial Measures This section defines Aware's non-GAAP financial measures, including Adjusted EBITDA and recurring revenue, and provides reconciliations to GAAP net loss Definition of Non-GAAP Measures Aware defines Adjusted EBITDA as GAAP net loss adjusted for depreciation, amortization, stock-based compensation, other income/expense, and income tax provision, used for internal forecasting and performance evaluation, while recurring revenue reflects stable income from periodic arrangements like maintenance or subscriptions - Adjusted EBITDA is defined as U.S. GAAP net loss adjusted for depreciation and amortization of fixed and intangible assets, stock-based compensation expense, other (expense) income, net, and provision for income taxes[19] - Adjusted EBITDA is used for internal forecasting, operating budgets, and evaluating operating trends[19] - Recurring revenue is defined as the portion of Aware's revenue that is based on periodic arrangements and is expected to continue in the