Aware Inc 2026 Q3 Earnings Call

Ajay. Thank you, Delaney, and good afternoon, everyone.

Revenue for the third quarter was $4.4 million, compared with $5.1 million in the prior year period. While revenue was down year-over-year, and that is not where we want it to be, there were several meaningful developments this quarter that gave us confidence in the direction of the business. We saw a stronger contribution from recurring revenue, continued to realize the benefit of the cost reductions implemented earlier this year, expanded activity with existing customers, increased pipeline engagement with U.S. federal government customers, and we reached an important milestone in our government strategy with a new government agency customer. The quarter reinforces the importance of the work we are doing to sharpen our focus, align our resources, and build a more scalable business around the areas where we believe Aware can be most competitive.

Let me start there. During the quarter, Aware was selected by a government agency customer to deploy Intelligent Liveness capabilities from the Awareness Platform. This is important for us for several reasons. First, it moves the Awareness Platform from the broader government opportunity pipeline into an active government agency-selected deployment opportunity. Since funding for most of the Department of Homeland Security was restored on April 30th, we have seen increased solicitation activity for the biometric identity programs we pursue as agencies look to allocate funding to improve national security, modernize legacy biometric and identity systems, and improve user experiences. Second, it gives us an opportunity to demonstrate how capabilities such as biometric orchestration and Intelligent Liveness can support high-assurance identity environments. Third, it represents progress against the government strategy we have discussed over the past several quarters, which has already generated additional government opportunities in recent months.

Federal and national security procurement cycles remain difficult to predict, and we do not expect progress in this market to occur in a straight line. But converting engagement into an active customer is an important step. We have spent much of the last year positioning Aware to compete more effectively for these types of programs. That includes continued investment in independent testing, certifications, government evaluations, interoperability, product, and other requirements that can help reduce barriers to adoption in mission-critical environments. These activities do not always produce immediate revenue, but they matter because government customers need confidence, not only in the technology itself, but also in its performance, security, interoperability, and readiness for deployment. We also continued to expand within our existing customer base. Our long-standing customer relationships across the U.S., U.K., Canada, Germany, Brazil, Turkey, and other countries gives us a strong foundation to grow from.

As we modernize our technology, we are upselling existing customers to additional capabilities and cross-selling the Awareness Platform, including liveness, matching, and orchestration into accounts that have historically relied on individual Aware products. We believe this expansion within our core base of flagship customers is an important driver of future revenue growth. Aware also continued to expand its commercial business, including a new relationship with Adobe Acrobat Sign's distributor, delivering biometric security for customers using Adobe Acrobat Sign with a new customer activity in Latin America and an additional customer interest from both North and South America. With the modernized Awareness Platform, we are seeing increased interest from commercial customers who want to be in control of their own biometric solutions rather than being locked into existing providers. Expansion within established customer relationships is an important part of the model we are building.

It reflects both the durability of our technology and our ability to support customers as their identity requirements expand into new products, geographies, and use cases. That expansion is showing up in our recurring revenue. Recurring revenue grew 11% to $4 million, compared with $3.6 million in the third quarter of last year, and represented more than 90% of total revenue for the quarter. That said, because part of our recurring revenue comes from on-premise term licenses, and the timing of those renewals can cause quarterly fluctuations. That is the type of business we are building around the Awareness Platform. Recurring revenue can still vary from quarter to quarter. Broadening that base through new customers, such as this quarter's government agency win and a new channel partner of Adobe Acrobat Sign, is a priority for us.

Over time, increasing the recurring component of our business should help us improve visibility and create a more consistent revenue foundation. We also continue to make progress on the cost side of the business. Earlier this year, we said we were taking approximately $4 million of annualized costs out of the business. Those actions are now increasingly visible in our operating results. Our operating loss for the quarter narrowed to $0.9 million, compared to $1.3 million in the third quarter of last year. We recognize that reducing expenses alone is not the objective. Ultimately, we need to pair a more efficient cost structure with stronger and more consistent revenue performance. Establishing the appropriate operating base gives us more flexibility to invest selectively in the products, customers, and markets where we believe Aware has the strongest opportunity to create value.

Our strategy remains focused on the Awareness Platform and its biometric orchestration capabilities, helping organizations more easily deploy, manage, and modernize biometric identity systems. That includes capabilities such as liveness detection and biometric matching, as well as the ability to incorporate technologies from other providers through a common orchestration and decisioning layer. The goal is not simply to sell customers another point solution. It is to give them greater control over an increasingly complex identity technology environment. We continue to believe that need is becoming more important as AI changes both the threat landscape and the pace at which organizations need to adapt their defenses. Deepfakes, synthetic identities, injection attacks, and other forms of AI-enabled fraud make it increasingly difficult to rely on a static identity architecture or a single technology indefinitely.

This is where the combination of true biometric and workflow orchestration with liveness, matching, and flexible decisioning becomes increasingly relevant. Looking ahead, we remain focused on execution rather than declaring that the transformation from a product and components business to a platform business is complete. We expect the fourth quarter to follow our typical seasonal pattern of growth with a generally similar mix of recurring and non-recurring revenue to what we saw in the third quarter while continuing to maintain the lower cost structure established this year. More broadly, the actions we have taken throughout 2026 are intended to put us in a better position entering 2027, a more focused platform approach, a lower operating cost base, greater emphasis on recurring revenue, ongoing engagement in the commercial, federal, and national security markets, and a platform designed to support a broader set of customer identity requirements.

With that, I will turn the call over to David to review our financial results in more detail. Over to you, David. Thank you, AJ.