Executive Summary / Key Takeaways

• Aware, Inc. is undergoing a strategic transformation, pivoting from a historically project-dependent model to a focus on scalable, recurring revenue streams driven by its advanced "Awareness Platform" and a "science-forward, customer-obsessed" go-to-market strategy.
• The company demonstrated significant top-line momentum in Q3 2025, with a 33% year-over-year revenue increase to $5.1 million, primarily fueled by a surge in software license sales, signaling early traction from its strategic shift.
• Technological leadership is a core differentiator, highlighted by best-in-class performance in DHS passive liveness detection benchmarks, FIDO Alliance Certification for face verification, and the launch of "Intelligent Liveness" which reduces false negatives by 50% and increases capture speed to under one second.
• While 2025 is a transitional year with anticipated revenue headwinds and increased operating expenses due to strategic investments, management expects to exit the year stronger and achieve sustainable growth in 2026, driven by large federal and enterprise opportunities.
• Aware's competitive advantage lies in its open, modular Awareness Platform, offering flexibility and interoperability that contrasts with competitors' proprietary stacks, positioning it as a trusted partner in an era of escalating AI-driven identity fraud.

A Legacy of Trust Meets the Future of Identity

Aware, Inc. (NASDAQ:AWRE) stands at a pivotal juncture, leveraging a three-decade legacy in biometric innovation to address the escalating challenges of digital identity in an AI-driven world. Founded in 1986 by MIT graduates in response to an FBI request for standardized fingerprint technology, Aware has been a foundational force in biometrics, playing an instrumental role in national security since 9/11 by preventing major terrorist attacks. Today, as AI-driven fraud, deepfakes, and sophisticated impersonation attempts proliferate, the need for robust, user-friendly identity verification has never been more critical. This environment elevates liveness detection from a mere feature to an indispensable control for fraud prevention and trust.

Aware's core business revolves around providing biometric software products and services to government agencies and commercial entities globally. Its comprehensive portfolio includes solutions like Knomi for mobile authentication, AwareABIS for large-scale identification, and the AFIX suite for law enforcement. These offerings are distributed through a multifaceted strategy involving systems integrators, OEMs, VARs, partners, and direct sales. The company's overarching strategy, particularly under new CEO Ajay Amlani, appointed in February 2025, is a three-pronged transformation: advancing core biometric technology, strengthening its "science-forward, customer-obsessed" go-to-market model, and deepening strategic relationships and partnerships.

Technological Edge: The Awareness Platform and Intelligent Liveness

At the heart of Aware's strategic pivot is the Awareness Platform, a unified, system-agnostic architecture that integrates core biometric capabilities with best-in-class third-party algorithms. This platform is designed for choice, speed to value, and standards alignment, offering an open, modular approach that differentiates Aware from competitors who often lock customers into proprietary stacks. This flexibility is particularly attractive to large enterprises and governments seeking scalable and future-proof identity solutions.

The platform's technological prowess is evident in several key differentiators. Its Passive Liveness solution achieved best-in-class performance in the Department of Homeland Security's remote identity validation benchmark, providing clear third-party validation of its effectiveness against real-world identity fraud with reduced friction. Further solidifying its security credentials, Aware's face verification stack, which combines advanced liveness with facial matching, earned FIDO Alliance Certification in October 2025. This certification is one of the most rigorous global benchmarks in biometric security, validating Aware's approach and reducing compliance friction for enterprise procurements and integrations.

A significant innovation is the recently launched Intelligent Liveness solution, which merges the convenience of passive detection with the precision of active verification without burdening the user. This breakthrough technology reduces error rates and false negatives by 50% and dramatically increases capture speed from 3-4 seconds to under one second. Furthermore, Intelligent Liveness compresses R&D timelines for adapting to new spoofing techniques from 9-12 months down to as little as three weeks, demonstrating a highly responsive and adaptive security posture. These quantifiable benefits directly translate into enhanced security, improved user experience, and a stronger competitive moat for Aware, enabling it to command premium positioning in critical identity verification markets.

Competitive Positioning in a Dynamic Market

Aware operates in a competitive landscape dominated by larger, diversified technology companies and specialized biometric firms. Direct competitors include giants like NEC Corporation (NIPNY) and Thales Group (THLLY), as well as smaller players such as Bio-Key International (BKYI).

NEC, with its global scale and advanced AI-driven accuracy, particularly in facial recognition, often targets large-scale enterprise and public safety implementations. Thales Group, leveraging its Gemalto heritage, excels in secure authentication and government ID systems, emphasizing end-to-end security ecosystems. In contrast, Bio-Key focuses on fingerprint and multi-factor authentication, primarily in North America.

Aware's Awareness Platform provides a distinct competitive edge by offering an open, modular architecture. This contrasts with NEC and Thales, which often provide more integrated, proprietary systems that can lead to vendor lock-in. Aware's approach offers customers greater flexibility and choice in orchestrating best-in-class algorithms, a significant draw for large enterprises and governments seeking interoperability and future-proofing. While NEC and Thales benefit from broader diversification and stronger revenue streams, Aware's agility and focus on customizable software for niche markets allow it to compete effectively.

Against Bio-Key, Aware's broader multimodal biometrics (e.g., face, voice, iris) offer more comprehensive solutions compared to Bio-Key's fingerprint-centric products. Aware's emphasis on integration with mobile and cloud platforms also gives it a stronger market position in evolving digital spaces.

The company's strategic focus on certifications like FIDO Alliance and strong performance in DHS benchmarks further validates its technology, reducing compliance friction and accelerating integrations, which are critical differentiators in a market demanding proven security and interoperability. Aware's primary competition for its platform is often the "buy versus build" decision within large enterprises, where its plug-and-play solution can be deployed in weeks, offering significant time and cost savings over internal development.

Financial Performance and Operational Momentum

Aware's financial performance in Q3 2025 reflects early successes in its strategic transformation. Total revenue increased by a robust 33% year-over-year to $5.1 million, primarily driven by a 115% increase in software license revenue, reaching $2.5 million. Software maintenance revenue also saw a modest 5% increase to $2.4 million. However, services and other revenue decreased by 45% to $0.2 million, reflecting the project-dependent nature of this segment.

For the nine months ended September 30, 2025, total revenue remained largely flat at $12.6 million compared to the prior year. This flat year-to-date trend, despite strong Q3 growth, underscores the variability inherent in the company's license-heavy business model and the impact of timing on customer decisions. Management is actively addressing this by sharpening its focus on driving more recurring and predictable revenue. Annual recurring revenue for 2024 grew 9% year-over-year, demonstrating progress in building a stable revenue foundation.

Operating expenses for Q3 2025 increased to $6.4 million from $5.4 million in the prior year, reflecting targeted investments in sales, marketing, and product development to execute the growth strategy. Despite these investments, the net loss for Q3 2025 improved slightly to $1.1 million, or $0.05 per diluted share, compared to a net loss of $1.2 million, or $0.06 per diluted share, in Q3 2024. Adjusted EBITDA loss also improved to $0.8 million from $1.1 million in the prior year quarter.

The company maintains a strong balance sheet, with cash, cash equivalents, and marketable securities totaling $22.5 million as of September 30, 2025, and no debt. This provides the financial flexibility to continue investing in growth initiatives while maintaining expense discipline. Cash used in operating activities for the nine months ended September 30, 2025, was $6.4 million, primarily contributing to the decrease in cash and marketable securities from year-end 2024.

Outlook, Guidance, and Risks

Aware anticipates 2025 to be a transitional year, with management acknowledging potential near-term revenue headwinds due to the variability in non-recurring revenue and the ongoing implementation of its strategic approach. Operating expenses are expected to increase in the latter half of 2025, particularly in Q4, as the company incurs the full impact of investments in sales, marketing, and product development. Engineering expenses are projected to rise to support strategic product development initiatives, and selling and marketing expenses will increase to backfill key positions and support pipeline growth.

Despite these near-term challenges, management expresses confidence in exiting 2025 in a significantly stronger position, laying the groundwork for sustainable growth beginning in 2026. Key growth levers for 2026 and beyond include continued federal government work, expansion in the law enforcement market, and significant opportunities in the commercial sector. The U.S. federal government, as the largest investor in biometric technologies, presents substantial opportunities, with an anticipated $44 billion spend in fiscal year 2026 within the Department of Homeland Security for border security and technology modernization.

However, several risks could impact this outlook. The biometrics industry operates in long cycles, and macroeconomic headwinds and government budget constraints, including potential federal shutdowns, can cause delays in bookings and revenue recognition. While management expects these delayed budgets to eventually flow with higher urgency, the timing remains uncertain. The rapid evolution of AI-driven fraud also presents a continuous challenge, requiring ongoing investment in advanced technologies like liveness detection to stay ahead of sophisticated threats.

Conclusion

Aware, Inc. is actively reshaping its future, moving beyond its foundational role to become a leader in the next generation of biometric identity solutions. Under new leadership, the company is executing a clear strategic transformation, prioritizing its technologically advanced Awareness Platform and a disciplined, customer-centric go-to-market approach. The strong Q3 2025 revenue growth, coupled with critical certifications and innovative product launches like Intelligent Liveness, underscores the early success of this pivot.

While 2025 is a period of foundational investment and transition, the strategic groundwork being laid positions Aware for sustainable growth in 2026 and beyond. The company's strong balance sheet provides the necessary flexibility to fund these initiatives. By focusing on its technological differentiators, expanding its presence in high-value federal and enterprise markets, and building a more predictable recurring revenue model, Aware is poised to unlock significant value for investors in a world where secure and seamless digital identity is paramount.