Aware, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue for the quarter ended September 30, 2026, was $4.4 million, a decrease from $5.1 million in the prior-year period.
• Recurring revenue increased to approximately $4.0 million from approximately $3.6 million in the third quarter of 2025.
• Operating expenses decreased to $5.4 million from $6.4 million in the prior-year period, reflecting cost-reduction actions expected to generate $4.0 million in annualized savings.
• Operating loss narrowed to approximately $0.9 million from approximately $1.3 million in the prior-year period.
• Net loss was $0.8 million ($0.04 per diluted share), compared to $1.1 million ($0.05 per diluted share) in the prior-year period.
• Adjusted EBITDA loss improved to $0.5 million from $0.8 million in the prior-year period.
• For the nine months ended September 30, 2026, revenue was $11.1 million compared to $12.6 million in the prior-year period.
• Nine-month recurring revenue was approximately $9.6 million, up from approximately $9.2 million in the prior-year period.
• Nine-month operating expenses were $18.4 million, compared to $17.7 million in the prior-year period, including $0.7 million in one-time severance costs in Q1 2026.
• Nine-month net loss was $6.8 million ($0.31 per diluted share), compared to $4.4 million ($0.21 per diluted share) in the prior-year period.
• Nine-month Adjusted EBITDA loss was $6.1 million, compared to $3.8 million in the prior-year period.
• The company ended the quarter with approximately $15.4 million in cash, cash equivalents, and marketable securities and reported no debt.

Guidance and Future Outlook:

• Management stated that improving revenue consistency remains a priority to translate opportunities into predictable financial performance.
• The company aims to expand existing customers, convert pursued opportunities, and improve the quality and durability of revenue as it enters 2027.
• Federal procurement cycles remain difficult to predict, though solicitation activity has increased following the restoration of Department of Homeland Security funding.
• Management emphasized that reducing expenses must be paired with stronger and more consistent revenue performance.

Business Segments and Product Lines:

• A government agency customer was selected to deploy Intelligent Liveness capabilities from the Awareness Platform for high-assurance identity environments.
• A new commercial relationship was established with Adobe Acrobat Sign's distributor, generating new customer activity in Latin America.
• The release of the Awareness Platform and investments in its Intelligent Liveness module have reinvigorated the sales pipeline.
• Commercial customers are increasingly seeking to control their own biometric systems rather than depend on a single vendor.
• Software licenses revenue decreased to $1.9 million from $2.5 million in the prior-year quarter, while software maintenance revenue was $2.1 million compared to $2.2 million.
• Services and other revenue was $0.4 million for the quarter, down from $0.4 million in the prior-year period.

Market and Competitive Landscape:

• The biometrics market is seeing increased solicitation activity as agencies allocate funding to modernize legacy systems and improve national security.
• Customers are increasingly seeking to defend against AI-enabled fraud attacks by controlling their own biometric systems.
• Aware faces intense competition from other biometrics solution providers.
• The company derives a significant portion of revenue from government customers and third-party channel partners.

Risks and Challenges:

• Revenue may fluctuate significantly and is difficult to predict due to renewal timing, contract structures, and customer activity.
• Business performance may be adversely affected by changes in government contracting or fiscal policies.
• A significant commercial market for biometrics technology may not develop, or Aware may not be successful in that market.
• The company relies on third-party software and open source software, which could introduce defects or security risks.
• Operational systems and products face evolving cybersecurity risks that could result in data disclosure or financial losses.
• Expected cost savings may not be fully realized or sustained.

Management Commentary and Tone:

• CEO Ajay Amlani expressed encouragement regarding progress in customer expansion and recurring revenue growth.
• Management acknowledged that recurring revenue can fluctuate quarter-to-quarter but aims to increase its component over time to create a durable revenue foundation.
• The tone focused on execution, discipline regarding investments, and the need to convert new engagements into active customers.
• Management highlighted that converting the new federal government engagement into an active customer represents meaningful progress despite difficult procurement cycles.

Other Key Points:

• Cost-reduction actions implemented earlier in 2026 are expected to reduce the operating expense base by approximately $4.0 million on an annualized basis.
• The third quarter of 2026 reflected the first full quarter of savings from these cost-reduction actions.
• Aware hosts a webcast on October 28, 2026, at 5:00 p.m. Eastern time to discuss results and business conditions.
• The company is headquartered in Burlington, Massachusetts, and trades on the NASDAQ under the ticker AWRE.