Executive Summary

Q2 revenue of $3.90M declined 9.9% YoY but improved sequentially from $3.61M; net loss widened to $(1.77)M and diluted EPS to $(0.08) as license timing and higher personnel costs weighed on results .
Recurring revenue was $2.75M (+1.5% YoY), with maintenance driving stability while subscriptions remained modest; management emphasized pipeline conversion in 2H but did not provide formal revenue guidance .
Technical validation was a bright spot: Aware achieved best-in-class performance in DHS RIVTD for passive liveness and was named a Luminary in Prism’s deepfake/synthetic identity report, supporting the product quality narrative .
Strategic wins and late‑stage pipeline advances include national ID programs for two Middle Eastern governments and engagement with a top 15 global financial institution; CFO reiterated limited visibility on revenue timing near term, tempering expectations for immediate acceleration .
Stock reaction catalysts: independent validations (DHS/Prism), platform performance improvements (14x faster face matching), and public/commercial pipeline expansion, offset by lack of formal guidance and persistent non‑GAAP losses .

What Went Well and What Went Wrong

What Went Well

Platform performance upgrades (14x faster face matching; improved mobile capture) and third‑party validations (DHS RIVTD best‑in‑class; Prism Luminary) strengthen competitive positioning and enterprise deployability .
Pipeline progress: national ID contracts in two Middle Eastern countries via a new partner and engagement with a top 15 global financial institution signal quality and scale of opportunities .
Stable recurring revenue and robust balance sheet ($23.7M cash and securities) provide runway to invest in customer success and commercial execution; CFO emphasized disciplined spending aligned to revenue opportunities .

Selected quotes:

“We achieved best‑in‑class performance in DHS’s…RIVTD testing for passive liveness detection” .
“Up to 14x faster 1:N face search…significantly reducing response times for high‑volume identity checks” .
“We secured national ID programs for two Middle Eastern governments…a top 15 global financial institution” .

What Went Wrong

Non‑recurring (license) revenue timing drove YoY revenue decline and wider losses; adjusted EBITDA loss worsened YoY on lower revenue and higher personnel expense .
Management did not issue formal guidance and noted limited visibility on H2 revenue timing, delaying the ability to translate late‑stage pipeline into near‑term revenue .
GAAP results remain negative with operating loss of $(2.0)M and net loss of $(1.8)M; sequential improvement in revenue wasn’t sufficient to offset elevated OpEx and personnel investments .

Financial Results

Headline P&L vs prior year and prior quarter

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$4.32	$3.61	$3.90
Operating Loss ($USD Millions)	$(1.34)	$(1.85)	$(1.96)
Net Loss ($USD Millions)	$(1.09)	$(1.60)	$(1.77)
Diluted EPS ($USD)	$(0.05)	$(0.08)	$(0.08)
Gross Margin %	93.0%*	93.2%*	91.3%*
EBIT Margin %	(38.1%)*	(51.3%)*	(50.3%)*
EBITDA Margin %	(34.4%)*	(47.3%)*	(46.7%)*

Values with * retrieved from S&P Global.

Revenue breakdown and mix

Metric ($USD Millions)	Q2 2024	Q1 2025	Q2 2025
Software licenses	$1.82	$1.32	$1.42
Software maintenance	$2.15	$2.15	$2.20
Services & other	$0.35	$0.14	$0.28
Total revenue	$4.32	$3.61	$3.90

Note: The “Revenue Breakout” table in the release shows non‑recurring software licenses of $0.87M for Q2 2025, while the consolidated statements show $1.42M; we anchor on GAAP consolidated statements for category amounts and note the breakout may reflect classification differences .

Recurring vs non‑recurring composition

Metric ($USD Millions)	Q2 2024	Q1 2025	Q2 2025
Subscriptions (recurring)	$0.58	$0.53	$0.55
Maintenance (recurring)	$2.13	$2.15	$2.20
Total Recurring	$2.71	$2.68	$2.75
Total Non‑recurring	$1.62	$0.92	$1.15
Total revenue	$4.32	$3.61	$3.90

Additional KPIs and balance sheet

Metric	Q2 2024	Q1 2025	Q2 2025
Operating expenses ($USD Millions)	$5.66	$5.46	$5.86
Adjusted EBITDA loss ($USD Millions, non‑GAAP)	$(0.96)	$(1.53)	$(1.44)
Cash + marketable securities ($USD Millions)	—	$24.8	$23.7
Deferred revenue ($USD Millions)	—	$4.54	$4.22
Weighted‑avg diluted shares (Millions)	21.10	21.27	21.35

Non‑GAAP note: Adjusted EBITDA reconciles GAAP net loss by adding D&A, stock‑based comp, income taxes, and removing interest income; management uses it to assess operating trends and stability of recurring revenue .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	2H 2025	None	No formal guidance; timing visibility limited	Maintained: No formal guidance
OpEx focus	FY 2025	Invest with discipline	Focused spending on customer success and commercial execution	Clarified focus
Strategic priorities	FY 2025–2026	Platform/go‑to‑market/partnerships	Same priorities; emphasis on pipeline conversion	Maintained

Management did not provide quantitative ranges for revenue, margins, or tax rate; commentary emphasized execution and onboarding over near‑term forecasting .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024)	Previous Mentions (Q1 2025)	Current Period (Q2 2025)	Trend
Platform innovation	Strategic reset; priorities to advance core tech	Consolidating under Awareness platform	14x faster matching; improved mobile capture; enterprise‑grade enhancements	Strengthening
Federal/government pipeline	Largest spender; focus on partnerships	Well‑positioned across federal programs	Expanded U.S. visibility; two Middle East national ID wins; law enforcement ABIS traction	Accelerating
Commercial enterprise demand	Reset go‑to‑market, pricing, customer success	Fortune 500 engagement; solution‑first selling	Top 15 global FI engagement; digital marketplace; airport pilot; customer‑obsessed execution	Broadening
Recurring revenue transformation	Recurring 69% of FY24 revenue	Recurring $2.68M; renewals timing	Modest growth to $2.75M; focus on enterprise licensing recurring models	Improving mix
Guidance/visibility	Anticipated near‑term headwinds	Foundational year, rebuild pipeline	No formal guidance; limited H2 timing visibility	Stable caution
Third‑party validation	—	—	DHS RIVTD best‑in‑class; Prism Luminary in core identity	Positive validation
M&A	Evaluate opportunistically	—	Focus on internal execution; no near‑term M&A need	De‑emphasized

Management Commentary

“We continued to make tangible progress…advancing our core technology, expanding our partner network, and strengthening our commercial execution to sustainably scale Aware” .
“Our late‑stage pipeline is growing…with many opportunities progressing…pricing, contracting, and proof‑of‑value testing” .
“We remain well‑capitalized…focus on spending on areas that directly support growth…accelerate pipeline conversion, improve onboarding readiness” .
“We secured national ID programs for two Middle Eastern governments…a top 15 global financial institution” .

Q&A Highlights

H2 revenue timing: CFO emphasized progress on pipeline and onboarding but “really don’t have line of sight” on revenue timing; no formal guidance .
Sales cycle velocity: Strengthened end‑to‑end process and proof‑of‑value success rates to shorten cycles; focus on customer‑obsessed alignment .
G&A uplift: Performance‑based stock option expense and timing of one‑time events; expect steadier G&A in 2H .
Pipeline momentum and retention: Pipeline volume/value accelerated significantly; retention metrics consistent with prior years .
Revenue model: Emphasis on enterprise infrastructure licensing and recurring, long‑term relationships as transformation progresses .

Estimates Context

S&P Global consensus for Q2 2025 appeared unavailable for AWRE; no EPS or revenue consensus mean values were returned in our query. Actual revenue was $3.90M (reported) . Values retrieved from S&P Global.*

Metric	Period	Consensus	Actual	Surprise
Revenue ($USD Millions)	Q2 2025	N/A*	$3.90	N/A*
Primary EPS ($USD)	Q2 2025	N/A*	$(0.08)	N/A*

Values retrieved from S&P Global.*

Implication: Without published consensus, estimate‑driven beat/miss framing is not possible; investor interpretation should focus on YoY/sequential trends and commentary on pipeline conversion .

Key Takeaways for Investors

Narrative quality is improving: DHS/Prism validations and 14x matching speed upgrades enhance credibility and should aid enterprise adoption; these are tangible catalysts for pipeline conversion in 2H/2026 .
Mix stability: Recurring revenue held at ~$2.75M, with maintenance anchoring; subscriptions modest but strategic shift to enterprise licensing aims to increase recurring durability .
Near‑term caution: No formal guidance and limited revenue timing visibility constrain near‑term conviction; expect variability in non‑recurring license sales to remain a swing factor .
Investment posture: Strong liquidity ($23.7M cash/securities) supports focused spend on customer success and onboarding to accelerate deployment and reduce conversion friction .
Strategic wins: Early traction in national ID and top‑tier financial services indicates potential for multi‑year, higher‑quality revenue streams if onboarding milestones are met .
Monitor Q3/Q4 milestones: Watch for contract finalizations, pilots moving to production, and any shift in subscriptions/ARR; absence of guidance makes operational proof points pivotal .
Risk balance: Competition, long sales cycles, and government budget dynamics remain key risks; execution on pipeline conversion and recurring model shift is the core driver of re‑rating potential .

AWARE INC /MA/ (AWRE)·Q2 2025 Earnings Summary