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AI

AWARE INC /MA/ (AWRE)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue grew 33% year-over-year to $5.13M, with net loss improving to $(1.05)M or $(0.05) per diluted share; growth was driven by a $1.0M perpetual license expansion and a $0.6M new term license contract .
  • Operating expenses rose to $6.42M on targeted growth investments; management expects Q4 opex to further increase given full-quarter impact of Q3 investments, with operating leverage anticipated as revenue scales .
  • Strategic milestones: face verification earned FIDO Alliance certification and Aware launched Intelligent Liveness (sub-second capture, ~50% lower false negatives), strengthening competitive posture and procurement readiness .
  • Federal demand remains constructive but near-term bookings are affected by the U.S. government shutdown; management expects appropriations to resume and urgency to increase post-shutdown .
  • Estimate context: S&P Global Wall Street consensus EPS and revenue were unavailable for Q3; actual revenue reported was $5.129M . Values from S&P Global where noted.

What Went Well and What Went Wrong

What Went Well

  • Revenue acceleration and mix: +33% YoY to $5.13M on perpetual license expansion ($1.0M) and a new term license ($0.6M); adjusted EBITDA loss improved to $(0.8)M .
  • Certification and product innovation: “In October, our face verification stack…earned FIDO Alliance certification,” enabling reduced compliance friction and faster integrations; Aware also launched Intelligent Liveness, cutting false negatives ~50% and enabling sub-second capture .
  • Federal and enterprise traction: “We expanded our work with a major U.S. federal agency by adding our intelligent liveness to a previously successful program,” and secured new enterprise contracts in financial services and workforce management .

What Went Wrong

  • Operating expense intensity: Opex increased to $6.42M, and management expects Q4 opex to rise further due to full-quarter impact of investments .
  • Variability and YTD flatness: Year-to-date revenue was $12.63M, flat versus the prior year, highlighting deal timing variability even as Q3 grew strongly YoY .
  • Shutdown headwind: Federal appropriations delays from the U.S. government shutdown impacted near-term bookings, likely shifting revenue into later periods .

Financial Results

Income Statement Summary

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$3.608 $3.895 $5.129
Operating Expenses ($USD Millions)$5.460 $5.856 $6.424
Operating Loss ($USD Millions)$(1.852) $(1.961) $(1.295)
Net Loss ($USD Millions)$(1.598) $(1.769) $(1.053)
Diluted EPS ($USD)$(0.08) $(0.08) $(0.05)

Q3 Year-over-Year Snapshot

MetricQ3 2024Q3 2025
Total Revenue ($USD Millions)$3.849 $5.129
Net Loss ($USD Millions)$(1.167) $(1.053)
Adjusted EBITDA Loss ($USD Millions)$(1.106) $(0.810)
Operating Expenses ($USD Millions)$5.316 $6.424
Recurring Revenue ($USD Millions)$2.818 $3.555

Revenue Breakdown by Component

Metric ($USD Thousands)Q1 2025Q2 2025Q3 2025
Software Licenses1,316 1,420 2,525
Software Maintenance2,153 2,198 2,373
Services and Other139 277 231
Total Revenue3,608 3,895 5,129

Recurring vs. Non-Recurring Revenue

Metric ($USD Thousands)Q1 2025Q2 2025Q3 2025
Software Subscriptions (Recurring)531 549 1,182
Software Maintenance (Recurring)2,153 2,198 2,373
Total Recurring Revenue2,684 2,747 3,555
Software Licenses (Non-Recurring)785 871 1,343
Services and Other (Non-Recurring)139 277 231
Total Non-Recurring Revenue924 1,148 1,574
Total Revenue3,608 3,895 5,129

Margins

MetricQ1 2025Q2 2025Q3 2025
EBIT Margin %-51.3%*-50.3%*-25.2%*
Gross Profit Margin %93.2%*91.3%*90.4%*
EBITDA Margin %-47.3%*-46.7%*-22.4%*

Values retrieved from S&P Global.*

Cash and Liquidity

MetricQ1 2025 (Mar 31)Q2 2025 (Jun 30)Q3 2025 (Sep 30)
Cash, Cash Equivalents, and Marketable Securities ($USD Millions)$24.8 $23.7 $22.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating ExpensesQ4 2025N/AExpect Q4 opex to increase due to full-quarter impact of Q3 investments Raised opex outlook
RevenueFY2025No formal guidance provided No formal guidance; timing variability from license mix noted Maintained “no guidance”
Operating LeverageFY2026N/AExpect operating leverage as top line expands New qualitative outlook
Federal Program Revenue TimingNear-termN/AShutdown delays appropriations; revenue conversions likely shift post-shutdown Timing delayed

Earnings Call Themes & Trends

TopicQ-2 (Q2 2025)Q-1 (Q1 2025)Q3 2025Trend
AI/Technology initiativesBest-in-class DHS passive liveness; 14x face matching improvement Platform repositioning; science-forward go-to-market FIDO face verification certification; Intelligent Liveness launch Strengthening
Federal demand & appropriationsExpanding pipeline; national ID programs via partner Positioning across U.S. agencies; Board/leadership reset Demand constructive; shutdown delays appropriations Near-term headwind, medium-term tailwind
Revenue model & variabilityEnterprise licenses focus; recurring transformation Transitional year; rebuild pipeline License timing variability; push to more recurring revenue Improving mix, still variable
Certifications/complianceDHS validation; industry recognition Platform openness, standards focus FIDO certification; roadmap to ISO/FedRAMP Acceleration
Opex and operating leverageOpex up on growth investments Expenses to rise with growth investments Q4 opex to increase; leverage expected with scaling Investment phase; leverage later

Management Commentary

  • “Q3 reflects disciplined execution…we delivered 33% year-over-year revenue growth while improving our bottom line” .
  • “In October, our face verification stack…earned FIDO Alliance certification…reduces compliance friction in enterprise procurements and accelerates integrations” .
  • “Revenue in the third quarter is $5.1 million…driven by a $1 million perpetual license expansion… and a $600,000 new term license contract” .
  • “Operating expenses…were $6.4 million…we do expect an increase in our operating expenses in the fourth quarter…to support our growth strategy” .
  • “Overall, federal demand continues to grow…however, the federal shutdown has slowed…appropriations” .

Q&A Highlights

  • Revenue variability and sustainability: Management highlighted timing effects of license mix and emphasized building recurring, predictable revenue; expect smoother results over time .
  • Federal shutdown impact: Near-term bookings affected, but management expects funds to flow post-shutdown with heightened urgency to modernize identity systems .
  • Competitive posture: Biggest competition is “build vs. buy”; Awareness Platform designed to orchestrate best-in-class components, reducing lock-in and accelerating deployments .
  • Certifications roadmap: ISO/FedRAMP and FIDO viewed as critical gating factors; Aware is investing and advocating for stronger standards against deepfake/injection attacks .
  • Cost outlook and leverage: Opex will increase where it drives top-line growth; focus on efficiency and operating leverage as revenue scales .

Estimates Context

  • S&P Global consensus EPS and revenue for Q3 2025 were unavailable; actual Q3 revenue was $5.129M reported by the company .
  • Without published consensus, we cannot assess beat/miss; watch for future estimate updates as certification milestones and federal appropriations timing clarify.

Key Takeaways for Investors

  • Revenue inflection with improved profitability metrics and stronger recurring contribution sets a constructive base heading into 2026, aided by enterprise term/subscription momentum .
  • Certification wins (FIDO) and Intelligent Liveness materially enhance sales enablement and integration velocity, improving win rates in regulated enterprise verticals .
  • Near-term risk: U.S. government shutdown defers federal conversions; medium-term tailwind as appropriations resume and modernization urgency rises .
  • Operating expenses will step up in Q4 to support growth; management targets operating leverage as scale improves—monitor gross margin durability and opex productivity .
  • License timing variability remains a factor; stronger recurring revenue mix is central to smoothing quarterly results .
  • Pipeline quality is improving across financial services, travel, workforce, and law enforcement; platform- and partner-led strategy mitigates “build vs. buy” risk .
  • Tactical catalysts: additional certifications (ISO/FedRAMP), federal program awards post-shutdown, and large enterprise deals converting to production—each could drive narrative and stock reaction .