Core Insights - Aware, Inc. (AWRE) experienced a 4.7% decline in share price following its earnings report for the year ended March 31, 2025, contrasting with a 2.3% gain in the S&P 500 Index during the same period [1] - The company reported total revenues of $3.6 million for Q1 2025, an 18.4% decrease from $4.4 million in the same quarter last year, primarily due to a 38.7% drop in software license sales [2] - A net loss of $1.6 million was recorded for Q1 2025, widening from a loss of $0.9 million a year earlier, with net loss per diluted share increasing to $0.08 from $0.05 [3] Revenue and Profitability - Recurring revenues fell 14.7% to $2.7 million from $3.1 million year-over-year, influenced by the timing of license renewals [2] - Operating expenses decreased by 3.9% to $5.5 million, yet the operating loss expanded to $1.9 million from $1.3 million in the prior year [4] - Cash, cash equivalents, and marketable securities totaled $24.8 million at the end of the quarter, down from $27.8 million at the end of 2024 [4] Segment Performance - Software maintenance revenue remained stable at $2.2 million, while software subscriptions dropped 46.1% to $0.5 million [5] - Non-recurring software license revenue decreased by 32.4%, whereas service-related revenue increased by 21.9% [5] Management Strategy - CEO Ajay Amlani described the quarter as transitional, focusing on long-term scalable growth and realigning the go-to-market strategy [6] - The company is engaging with Fortune 500 firms for biometric solutions aimed at identity verification and fraud prevention [6][7] - CFO David Traverse indicated that 2025 is a foundational year, with strategic changes expected to show more impact in 2026 [10] Leadership Changes - Key leadership changes were made, including the appointment of Brian Krause as Chief Revenue Officer and Gary Evee as chairman of the board, reflecting a commitment to a disciplined commercialization strategy [11]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $3.6 million, down from $4.4 million in Q1 2024, primarily due to lower software license sales [13] - Recurring revenue decreased to $2.7 million from $3.1 million year-over-year, attributed to the timing of subscription term license renewals [14] - Operating expenses were reduced to $5.5 million, down 5% from $5.7 million in the prior year [14] - GAAP net loss was $1.6 million or $0.08 per diluted share, compared to a net loss of $1.0 million or $0.05 per diluted share in Q1 2024 [14] - Adjusted EBITDA loss for the quarter was $1.5 million, compared to a loss of $1.0 million in the prior year [15] - Cash, cash equivalents, and marketable securities totaled $24.8 million as of March 31, 2025, down from $27.8 million at the end of 2024 [16] Business Line Data and Key Metrics Changes - The company is focusing on high-impact customers and sectors where biometric authentication is critical, leading to active conversations with several Fortune 500 companies [7][8] - The leadership team has been strengthened with the appointment of a new Chief Revenue Officer and a chairman with extensive experience in cybersecurity [9] Market Data and Key Metrics Changes - There is strong interest in biometric solutions across various sectors, including financial services, healthcare, and e-commerce, as enterprises recognize the inadequacy of traditional authentication methods [30] - The U.S. Federal government's commitment to biometric modernization remains strong, providing a significant market opportunity [20][37] Company Strategy and Development Direction - The company is undergoing a strategic transformation with a focus on durable, scalable growth and a streamlined go-to-market strategy [5][6] - Key strategic priorities include deepening partnerships, advancing core technology, and scaling the business sustainably [6][10] - The Awareness platform is being developed as an open, flexible architecture that allows customers to integrate best-in-class algorithms, differentiating the company from competitors [22][34] Management's Comments on Operating Environment and Future Outlook - Management views 2025 as a foundational year for the company, with expectations of building momentum heading into the second half of the year [12][25] - There is confidence in the strategic groundwork laid, which positions the company for leadership in the biometrics industry [25][39] Other Important Information - The company has revitalized its brand presence and increased visibility at key industry events [11][24] - A culture of transparency and accountability has been instilled within the organization to support the transformation [11] Q&A Session Summary Question: Will Aware continue to pursue growth in annual recurring revenues via sales of the Aware ID product? - The focus is on solving large-scale identity challenges for enterprises and government agencies rather than driving growth through a single product [28] Question: Has Aware made progress in adding customers or growing sales on the AWS Marketplace or any of the other partner programs? - The top priority is direct engagement with customers, and partnerships will be selective, focusing on those that add strategic value [29] Question: Could you provide more color on the types of industries or use cases these companies are exploring with Aware's biometric solutions? - Strong engagement is seen across industries such as financial services, healthcare, and e-commerce, where secure identity verification is critical [30] Question: How should we think about the timing and potential revenue contribution from some of the new strategic opportunities? - 2025 is viewed as a foundational year, with expectations for early wins later in the year and contributions building over time [32][33] Question: How does the open architecture approach differentiate Aware from competitors? - The Awareness platform offers an open modular architecture, allowing customers to choose algorithms and ensuring scalability and future-proofing [34] Question: Are there specific programs or initiatives where you feel particularly well positioned today? - The company is well positioned across the U.S. Government portfolio, focusing on secure digital identity and modernization initiatives [36][37] Question: What early indicators are you seeing that give you confidence Aware is on the right trajectory for scalable, sustainable growth? - Tangible progress is noted in pipeline expansion, leadership installation, and growing customer interest in Aware's technology [38]

Core Viewpoint - Aware, Inc. is navigating a transitional phase while focusing on long-term growth strategies, including strengthening leadership and enhancing its market approach [2][4]. Financial Results - Revenue for Q1 2025 was $3.6 million, down from $4.8 million in Q4 2024 and $4.4 million in Q1 2024, primarily due to lower software licenses revenue [6][10]. - The net loss for Q1 2025 was $1.6 million, or $(0.08) per diluted share, compared to a net loss of $1.2 million, or $(0.06) per diluted share in Q4 2024 and a net loss of $1.0 million, or $(0.05) per diluted share in Q1 2024 [7][10]. - Adjusted EBITDA loss for Q1 2025 was $1.5 million, compared to a loss of $0.8 million in Q4 2024 and a loss of $1.0 million in Q1 2024, attributed to lower total revenue [8][10]. Operational Highlights - The company is focusing on scaling its presence in the U.S. commercial market and expanding in the U.S. government sector [3]. - Aware is enhancing its biometric technology platform and integrating complementary solutions, with ongoing discussions with Fortune 500 companies [3][4]. - The leadership team has been strengthened with the appointment of Brian Krause as Chief Revenue Officer to accelerate commercial execution [10]. Balance Sheet - As of March 31, 2025, cash, cash equivalents, and marketable securities totaled $24.8 million, down from $27.8 million as of December 31, 2024 [9][10]. - Total assets were $39.9 million as of March 31, 2025, compared to $42.6 million as of December 31, 2024 [18][19]. Revenue Breakdown - Recurring revenue for Q1 2025 was $2.7 million, down from $3.1 million in Q1 2024 [10][24]. - Non-recurring revenue was $924,000 in Q1 2025, compared to $1.3 million in Q1 2024 [10][24].

Financial Data and Key Metrics Changes - The company achieved record first quarter results for total revenue of $1.6 billion, a 1% increase year-over-year, but a 2% decline on an organic basis [14][25] - Adjusted EBITDA reached $149 million, a 5% increase from the prior quarter, with an adjusted EBITDA margin of 9.6%, marking a first quarter record [27][15] - The company reported a book-to-bill ratio of 1.1 times, driven by strong win rates of 68% and large contract wins [17][33] Business Line Data and Key Metrics Changes - In the Federal Solutions segment, total revenue decreased by 7% year-over-year, but excluding the confidential contract, revenue increased by 86% on an organic basis [27][28] - The Critical Infrastructure segment saw a revenue increase of $86 million or 14% year-over-year, driven by organic growth of 8% and contributions from recent acquisitions [28][29] - Adjusted EBITDA for the Critical Infrastructure segment increased by 51% year-over-year, with a record adjusted EBITDA margin of 10.3% [29] Market Data and Key Metrics Changes - The company reported a record total backlog of $9.1 billion, with 69% funded, and a pipeline of $55 billion, including over 100 opportunities worth more than $100 million each [23][34] - The Middle East infrastructure business continues to excel, with significant growth driven by major projects aligned with Saudi Vision 2030 and other regional initiatives [11][12] Company Strategy and Development Direction - The company is focused on capitalizing on unprecedented spending in North America and Middle East infrastructure markets, with a strong emphasis on hard infrastructure projects [8][9] - The strategic direction includes being an advanced solutions integrator that differentiates with software, aligning with national security priorities and leveraging technology leadership in emerging markets [13][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong financial results, citing long-term tailwinds in both the Critical Infrastructure and Federal Solutions segments [22][23] - The company anticipates continued growth in the federal budget, particularly in defense spending, with expectations for a $1 trillion defense budget in fiscal year 2026 [12][61] Other Important Information - The company completed the acquisition of TRS Group for $37 million, enhancing its environmental remediation capabilities [21] - The company was named one of the world's most ethical companies for the sixteenth consecutive year, reflecting its commitment to ethics and integrity [21] Q&A Session Summary Question: Inquiry about Critical Infrastructure segment margins - Management confirmed that the strong margins in the Critical Infrastructure segment were due to underlying business performance without any favorable adjustments [41][43] Question: Expectations for the balance of the year regarding Critical Infrastructure - Management indicated that they expect the Critical Infrastructure margin to be around 9.1% for the full year, with strong performance anticipated in the upcoming quarters [45] Question: Clarification on the Middle East growth and contract ramp-up - Management noted that larger contracts in the Middle East experienced slower ramp-up due to holidays but expect double-digit growth for the full year [48][50] Question: Resilience of the federal solutions award environment - Management expressed optimism about the federal solutions segment, expecting a book-to-bill ratio over 1.0 for the full year [55] Question: Update on the confidential contract and its impact - Management confirmed that the confidential contract is currently at an 80% run rate and anticipates a surge in activity following a review period [66][95] Question: Hiring dynamics in light of Doge and federal workforce availability - Management reported strong employee retention and a positive hiring environment, with an emphasis on hiring cleared federal personnel [106] Question: Expectations for M&A activity - Management expects to complete two to three acquisitions this year, with a robust pipeline in both federal and critical infrastructure sectors [75]