Aware, Inc. Stock

Good afternoon, and welcome to Aware's Third Quarter FY '26 Conference Call. Joining us today are the company's CEO and President, A.J. Amlani; and CFO, David Traverse. Following their remarks, we will open the call to questions [Operator Instructions]

Before we begin today's call, I would like to remind everyone that the presentation today contains forward-looking statements that are based on current expectations and assumptions of Aware's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied.

Listeners should please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today, which will be available in the Investor Relations section of the company's website.

Aware wishes to caution you that information regarding important factors that could cause actual results to differ materially is contained in forward-looking statements and Risk Factors section of today's earnings release and in the company's SEC filings, including its most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made.

Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Additionally, this call contains certain non-GAAP financial measures as that term is defined by the SEC and Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, Aware has provided a reconciliation of these non-GAAP financial measures in the most directly comparable GAAP measures in the company's earnings release issued today available in the Investor Relations section of the company's website.

I would like to remind everyone that this presentation will be recorded and made available for replay via a link available in the Investor Relations section of the company's website.

Now I would like to turn the call over to Aware's CEO and President, A.J. Amlani. A.J.?

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 30, 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.

And 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-premises term license 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. Deep fakes, 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, a typical seasonal pattern of growth with a generally similar mix of recurring and nonrecurring 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, A.J. Now let's review our financial results for the third quarter ended September 30, 2026. Revenue for the quarter was $4.4 million compared to $5.1 million in the prior year period. Recurring revenue was $4 million compared to $3.6 million in the third quarter of 2025. The year-over-year decrease in total revenue was driven primarily by lower perpetual license sales, while the increase in recurring revenue was driven primarily by on-premise term licenses. Because a significant portion of term license is recognized upfront when the license is delivered, the timing of these term license sales and renewals can have an outsized effect on any single quarter.

Operating expenses for the quarter was $5.4 million compared to $6.4 million in the prior year period. The year-over-year change reflects the spending reductions we implemented earlier this year. As we said on our Q1 call, those actions were intended to reduce our operating expenses by approximately $4 million on an annualized basis, and Q3 reflects the first full quarter of those savings.

Operating loss for the quarter was $900,000 compared with an operating loss of $1.3 million in the third quarter of 2025. Net loss for the quarter was $800,000 or $0.04 per diluted share compared to $1.1 million or $0.05 per diluted share in the prior year period. Adjusted EBITDA loss was $500,000 compared to $800,000 in the prior year period.

Now turning to our results for the 9 months ended September 30, 2026. Total revenue was $11.1 million compared to $12.6 million in the prior year period. Recurring revenue was $9.6 million compared to $9.2 million in the prior year period. The year-over-year decrease in total revenue was driven primarily by lower perpetual license sales, while the increase in recurring revenue was primarily driven by on-premise term licenses.

Operating expenses were $18.4 million compared to $17.7 million in the prior year period. As a reminder, the year-over-year increase in our year-to-date expenses reflects onetime severance costs of $700,000 recognized primarily in the first quarter as well as higher compensation costs related to hires we made in 2025. As we noted on our Q1 call, we reduced operating expenses by $4 million on an annualized basis beginning in Q2 2026, and the underlying expense trend reflects those actions.

Net loss for the 9-month period was $6.8 million or $0.31 per diluted share compared to $4.4 million or $0.21 per diluted share in the prior year period.

Adjusted EBITDA loss was $6.1 million compared to $3.8 million in the prior year period. We ended the quarter with $15.4 million in cash, cash equivalents and marketable securities, and we have no debt.

Our balance sheet continues to provide us with flexibility. And we remain focused on a disciplined capital allocation. The objective of the cost actions we implemented this year was to better align our spending with the size of our business while preserving investment in the areas we believe are most important to the future growth, which is primarily the Awareness Platform.

We also expect fourth quarter operating expenses to remain generally consistent with the lower cost structure we established following the actions taken earlier this year. We will continue to make adjustments to our operating expenses as appropriate.

Quarterly variability remains a characteristic of our business. Revenue can move between periods based on the timing of licenses, renewals, procurement cycles, customer deployments and services activities. Our financial priorities remain straightforward: drive revenue growth, maintain expense discipline, preserve balance sheet flexibility and direct our resources to the platform and markets where we believe Aware can generate the strongest returns.

With that, I'll hand it back over to A.J. for closing remarks. A.J.?

Thanks, David. As we close, I want to reinforce where we stand. We are pleased with the progress we made during Q3, particularly in the new government agency customer win, establishment of a new important commercial customer relationship, improvement in recurring revenue and the impact of the cost actions we implemented earlier this year.

At the same time, we are not satisfied with simply pointing to signs of progress. Our revenue performance still needs to improve, and our responsibility is to turn the opportunities in front of us into more consistent financial results. That is what we are focused on as we finish 2026 and enter 2027. We have a more focused cost structure than we did at the beginning of the year. We have increasingly concentrated our strategy around the Awareness Platform and the liveness matching and orchestration capabilities it provides.

And we are beginning to see tangible progress in markets such as national security, where we have invested considerable time positioning the company to compete. The next steps are continuing to strengthen the Awareness Platform and focusing on execution. We need to expand the customers we already have, convert the opportunities we are pursuing, continue increasing the quality and durability of our revenue and remain disciplined about where we invest.

We believe the actions taken during 2026 have created a better foundation for that to work. That concludes our prepared remarks.

We will now open the call for questions. Delaney, please provide the instructions.

First question comes from John Phillips. Management previously noted that federal procurement activity returned to normal starting in May 2026. Now that we are in October, did clear DHS backlog flow into Q3 revenue as expected or are federal sales cycles still experiencing friction?

Furthermore, is Aware actively bidding as a prime or subcontractor on the upcoming $100 million-plus USCIS Immigration Biometrics and Identity Services, IBIS contract dropping this month?

Thank you, John, for your question. Yes, this is a really important question. And obviously, the Department of Homeland Security shutdown time, the record shutdown length was difficult for us, but it was obviously much more difficult for all the public servants to be able to get through. Now that DHS has reopened, we've seen a record number of procurements come out. It's coming out much faster. The time lines for being able to award are much smaller. We're seeing that the backlog is not getting cleared necessarily yet. There's still a significant amount still coming through.

And that federal activity did improve after operations normalized, but there's still quite a few additional procurements continuing to come out over the course of the next year to 1.5 years. We don't comment on specifics with regards to the contracts of whether or not we're bidding on specific active federal procurement or whether or not we're bidding as a prime or a subcontractor as our teaming strategy is kept confidential typically until an award is made.

But as mentioned, DHS agencies are looking to modernize legacy biometric systems. USCIS is certainly one such agency. And as you mentioned, the combined IBIS project will provide scalable and secure IT services supporting data analytics, machine learning, biometrics and identity management. And that's all consistent with the significant amount of work happening across DHS and other agencies as well.

As you know, federal and national security identity modernization remains an important focus for us. We're actively engaging with customers and partners around opportunities where our orchestration liveness and matching capabilities are relevant, and we'll disclose material wins when appropriate. Thank you so much for your question.

A.J. Next question also comes from John Phillips. We absorbed roughly $700,000 in onetime restructuring charges in Q2 to achieve $4 million in annualized cost savings. Can you quantify exactly how much of that run rate cost relief was realized on the bottom line during Q3?

And when do you expect the company to achieve a sustained net income breakeven baseline under this new cost structure?

All right. Thanks for the question. We did achieve the $4 million in annualized savings in Q3, which you can see in our operating expenses that declined from $5.4 million this quarter compared to $6.4 million last year. As far as breakeven, we're not giving a time line on that, but we do expect to maintain the lower cost structure and we will continue to make adjustments for operating expenses as appropriate.

Thank you, David. Next question also from John Phillips. As you migrate the business to the cloud-based Awareness Platform, can you provide an update on your annual recurring revenue growth for Q3?

Specifically, what percentage of the Q3 sequential improvement was driven by high-margin recurring SaaS subscription versus traditional model perpetual licenses? This one also goes to you, David.

Yes. No, thanks again for the question. Recurring revenue did grow in the quarter from $4 million to $3.6 million compared to last quarter. As we've talked about, the Awareness Platform is a strategic and important part of the evolution of the company as we transform Aware from a product and components business into a platform business. And -- but we've got to be clear, that won't happen in a single quarter. Many customers still require self-hosted deployments.

And while we expect that shift toward our cloud over time, our focus is on growing recurring revenue whether customers host it themselves or we host it for them. And we want to be very clear that recurring revenue can still vary from quarter-to-quarter. So we encourage investors to look at the trend over multiple quarters as we build a more durable recurring revenue foundation.

Thank you, David. One last question from John Phillips. It was great to hear about the year 2 subscription renewal with a top 15 global financial institution last quarter. Have you successfully expanded or cross-sold additional biometric features like passive liveness into that account during Q3? And what does the broader enterprise sales pipeline look like outside of that anchor client? This one goes to you, Brian.

Sure. Thanks for the question, John. So all of our relationships with customers are built on a land-and-expand model. It's very common in our industry. It allows us to improve the performance and the scalability of our technology and production environments. I can't speak to specific contracts or customer expansions. I can say that we do work every quarter with all of our customers to try to solve as many problems as they present to us with our technology. We do continue to see really good signals out of that work with indicators like continued strong net dollar retention performance across most of our entire business.

With respect to the broader commercial pipeline, as you've heard, we are super heavily focused on the Awareness Platform and the work there. We continue to see consistent market interest in that product and that offering. We remain enthusiastic about its potential impact on our revenue. Specifically as it relates to the land and expand customer approach that I talked about previously.

Thank you, Brian. Next question comes from Phil [indiscernible] and Glendon B. Nickerson Jr. They both asked a question regarding our stock price and NASDAQ listing requirements? This one is for you, David.

Thanks. I appreciate the questions from Phil. And we understand the concern there, and we share it. And we believe our focus should be and is on executing our business plan, which we believe is the best path to building long-term shareholder value. We are aware of the NASDAQ requirements, and we'll address them if and when the time occurs. And of course, we'll keep the shareholders informed.

Thank you, David. This next question comes from Glendon B. Nickerson Jr. I noticed on the Aware website, you are listing many companies and organizations that rely on Aware. Are Santander Bank and Itaú Bank current clients of Aware? And this one, it can go to you, Brian?

Sure. Thanks, Glendon. I appreciate the question. Yes, all the current customer logos you noticed, we're glad you noticed in the recent website update are currently today Aware customers.

Thank you, Brian. One more question from Glendon Nickerson Jr. Aware has been focused on bidding for DHS contracts and for airport biometrics. There are so many other areas where state and federal governments are subject to fraud. Has Aware made any effort to target biometric sales for welfare fraud, food stamp fraud, unemployment fraud, SNAP, credit card fraud, checking account bank fraud, the list is endless. The cost of Aware's biometric software is pennies on the dollar versus the amount of potential fraud savings of hundreds of millions of dollars? A.J., you can take this question.

Yes. Thank you, Glendon, for this wonderful question. Biometrics do apply across all of these different use cases. And we see opportunities for biometrics well beyond border security and airports. Government benefits, banking, payments and other fraud sensitive use cases are just some of those. Our Awareness Platform actually is a wonderful solution to be able to apply across all of these different use cases as it allows customers to be able to utilize best-in-class technology from both Aware and from other third-party providers to be able to solve some of their most critical problems and be able to save a significant amount on fraud.

Billions are lost to fraud every single year and biometrics are the one tool that ties identity back to the human that's capable of being able to rectify identity back to the source of truth. We do have to be disciplined with regards to where we focus directly as well as through partners. And so focusing on the state market and some other customers, we have established partners and systems integrators to be able to reach a broader set of government and commercial opportunities.

But many of these challenges come back to the same question, right? Is the person accessing the service or account really who they claim to be. And our capabilities through the Awareness Platform and identity verification, liveness detection, matching, biometric orchestration really helps to address impersonation, synthetic identities and account takeover. But biometrics by itself is not a complete fraud solution. So we do rely on partners, and we do like to work with partners and allow for it to be a critical layer within a broader fraud prevention strategy.

Thank you, A.J., and thank you, everyone, who submitted questions. That completes our Q3 FY '26 broadcast. As a reminder, this presentation is recorded and made available for replay via a link available in the Investor Relations section of the company's website. Thank you, and you may now disconnect.

Good afternoon, and welcome to Aware's Second Quarter FY '26 conference call. Joining us today are the company's CEO and President, A.J. Amlani; and CFO, David Traverse.

[Operator Instructions]

Before we begin today's call, I would like to remind everyone that the presentation today contains forward-looking statements that are based on current expectations of Aware's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described. Listeners should please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today. Aware wishes to caution you that there are factors that could cause actual results to differ materially from the results indicated by such statements.

These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Additionally, this call contains certain non-GAAP financial measures as that term is defined by the SEC in Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, Aware has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today.

I would like to remind everyone that this presentation will be recorded and made available for replay via a link available in the Investor Relations section of the company's website. Now I would like to turn the call over to Aware's CEO and President, A.J. Amlani. A.J.?

Thank you, Delaney, and good afternoon, everyone. I want to begin with revenue for the quarter was $3.3 million compared with $3.9 million in the prior year period, a result that was below our expectations. Quarterly performance was affected by the timing and variability of our stand-alone product business as well as the slower federal procurement activity related to the government shutdown.

While the precise impact of the shutdown is difficult to quantify, it created a meaningful headwind during the quarter. The rapid advancement of AI is reinforcing the importance of the market we serve. As deepfakes synthetic identities, injection attacks and other AI-enabled threats become more sophisticated, identity is becoming critical infrastructure for government and enterprise organizations. That is why we are focused so deliberately on the Awareness Platform. we believe the platform directly addresses this tailwind and where the market is headed by bringing biometric orchestration, decisioning, liveness detection, matching and partner technologies together in one unified environment.

We expect the second half of the year to follow our typical seasonal pattern with revenue weighted more heavily toward the back half of the year compared to the first half of the year. 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. As we discussed last quarter, we are in the middle of an important transformation. We are moving away from a more fragmented product portfolio and focusing the company on the Awareness Platform, our SaaS-based biometric orchestration and decisioning platform. That transition takes time. It also creates near-term variability as we continue to support existing customers, pursue near-term opportunities and invest in the platform capabilities, we believe will define the next phase of growth for Aware.

Our priority is clear. We are building a more focused company around biometric orchestration, liveness detection matching and the federal government and enterprise opportunities where our technology, experience and collaboration create meaningful differentiation. During the quarter, we continued to make important progress against that strategy. This quarter, we made significant updates to the Awareness Platform to help organizations make smarter identity decisions in real time. The platform is built to serve as an intelligent control plane for identity, enabling organizations to design, deploy, run and optimize biometric workflows through one unified environment. This is important because many government and commercial organizations are navigating increasingly complex biometric environments, often managing multiple systems, vendors, data sources and decisioning workflows at once. That fragmentation makes it harder to evaluate performance, manage fraud risk and deliver consistent user experiences. We are hearing this directly in customer conversation and at recent trade shows.

This feedback is reinforced by our research, which found that 98% of organizations currently using biometrics are interested in biometric orchestration capabilities with organizations already using an average of 3 biometric vendors. The Awareness Platform is designed to address that challenge directly. It enables organizations to configure enrollment, verification, authentication and identification workflows, orchestrate multiple liveness detection matching and identity verification providers within a single transaction, evaluate and benchmark vendors in production, normalize outputs for more consistent decisioning across both government and commercial environments.

We were also pleased to welcome 2 new integrated technology partners, Rock and Mitek to the Awareness Platform. These partnerships strengthen the platform and expand what customers can do through a single biometric orchestration environment. Rock's biomatching technologies provide a high-performance foundation for identity decisioning workflows within the Awareness Platform. Mitek's identity verification and liveness detection capabilities bring additional high assurance fraud protection functionality into the platform. Together, these partnerships have reinforced one of the core principles behind our strategy. The future of identity is not only about better individual algorithms, it is also about better orchestration. Customers increasingly want flexibility, visibility and the ability to optimize performance across multiple technologies and vendors without disrupting live operations.

Second, we continue to advance our intelligent liveness capabilities. The fraud landscape is becoming more sophisticated, particularly as deep fakes injection attacks, synthetic identities, virtual cameras, device emulators and replay attacks become more accessible. Customers are looking for solutions that can strengthen security without adding unnecessary friction for legitimate users. Our latest intelligent liveness enhancements are designed to help address that need. These capabilities use advanced optical and spectral analysis to help verify the biometric images originate directly from a real device camera sensor in real time. Importantly, this remains a passive user experience and typically operates under -- in under 2 seconds without requiring users to blink, move their head or complete challenge response actions.

We believe this is a critical capability for the market. As AI-driven fraud continues to evolve, organizations need liveness technology that can adapt to increasingly complex attacks while preserving speed and usability. Third, we made meaningful progress in intelligent matching. We announced advancements who are matching algorithm that are designed to deliver approximately 10x lower false non-match rate compared to previous generations, along with a scalable architecture, intended to enable sub-second one-to-end matching across large biometric data sets. This matters because biometric matching performance and scalability are foundational to high-confidence identity systems, particularly in government border travel, financial services and other environments where accuracy and speed and scale are all essential.

Taken together, the progress we made across the Awareness Platform, intelligent liveness and intelligent matching strengthens our ability to help customers move from fragmented biometric systems to more intelligent optimized identity decisioning environment. We are seeing renewed activity across the federal government market particularly in areas tied to homeland security, border modernization, airport infrastructure, traveler processing and biometric identity verification. Importantly, May represented the first full month normalized operations for the Department of Homeland Security following the recent disruptions in government funding.

We want to recognize the dedication of DHS employees and the important work they continue to do in support of national security even through a challenging operating environment. Since activity has normalized, we have seen an increase in conversations, RFIs, procurement activity and program momentum in areas where biometric solutions are highly relevant. There are several publicly visible examples of this broader activity, including DHS traveler processing and [ vetting ] software, TSA's Gold Plus and secure identity management support initiative and DHS' interagency border inspection system. We believe this renewed activity aligns well with Aware's capabilities, particularly in biometric orchestration, liveness detection matching and high-assurance identity workflows.

It also supports a broader federal priority around modernizing security infrastructure, improving traveler border processing and leveraging trusted technology providers that can support mission-critical identity programs while the timing and revenue impact of these opportunities remains difficult to predict, the level of activity reinforces our confidence that the federal government market remains an important area of focus for Aware. We are also focused heavily on executing teaming agreements with key systems integrators and partners that are well positioned in these pursuits.

While the timing and revenue impact of these opportunities remains difficult to predict, the level of engagement reinforces our view that the market need is real and then a warehouse capabilities that are highly relevant to the direction federal identity infrastructure is moving.

Looking at the second half of the year, we expect revenue to improve from Q2 levels and expenses to be lower as those cost reduction actions we discussed last quarter became more visible in our results. We also expect certain subscription renewals and customer activity that are typically weighted toward the second half of the year to support a more normalized [indiscernible]. We will remain careful in how we discuss timing. Our business can be cyclical, and individual quarters can vary based on procurement timelines, renewal schedules and customer decision-making, but we do believe the second half of the year should reflect a stronger operating profile in Q2.

To be clear, we are not where we want to be yet. Q2 is a difficult quarter, and we have more work to do, but we believe the actions we are taking are the right ones, focusing the company, building around the Awareness Platform, strengthening liveness and matching, pursuing near-term opportunities with discipline and aligning resources to the markets where we believe we can win. With that, I will turn the call over to David to review our financial results in more detail. Over to you, David.

Thank you, A.J. Let's review our financial results for the second quarter ended June 30, 2026. Revenue for the quarter was $3.3 million compared to $3.9 million in the prior year period. Software license revenue. Operating expenses for the quarter increased to $6 million compared to $5.9 million in the prior year quarter. The higher expenses include costs related to hires we made in 2025 that are partially offset by spending reductions we have made in the first half of this year. We will continue to make adjustments to our operating expenses as we focus on our strategic objectives.

Net loss for the quarter was $2.6 million or $0.12 per diluted share compared to $2 million or $0.08 per diluted share in the prior year period. Adjusted EBITDA loss was $2.3 million compared to $1.4 million in the prior year period.

Turning to our results for the 6 months ended June 30, 2026. Total revenue was $6.6 million compared to $7.5 million in the prior year period. The decrease reflects lower perpetual software license revenue. Operating expenses increased to $13 million compared to $11.3 million in the prior year period. The higher expenses include onetime severance costs of $700,000 as well as higher compensation costs related to hires we made in 2025. As we noted in our Q1 call, we reduced operating expenses by $4 million on an annualized basis starting in Q2 2026. And we will continue to make adjustments to our operating expenses as we continue to focus on our strategic objectives.

Net loss of $6 million or $0.28 per diluted share compared to $3.4 million or $0.16 per diluted share in the prior year period. Adjusted EBITDA loss was $5.5 million compared to $3 million in the prior year period. We ended the quarter with approximately $16.8 million in cash, cash equivalents and marketable securities and no debt. Our balance sheet remains strong and provides flexibility as we execute our strategic plan. We continue to manage expenses carefully while investing in our strategic priorities, including the Awareness Platform and pursue opportunities in the federal government and enterprise markets.

As A.J. noted, we expect the second half of the year to be stronger than the first half of the year from a revenue perspective based on typical seasonality supported by the timing of certain customer activity and subscription renewals that are typically weighted toward the back half of the year. We also expect lower expenses in the second half as the cost reductions we implement become more fully reflected in our results. That said, we expect quarter variability to continue.

Our revenue could be impacted by the timing of perpetual licenses, procurement cycles, renewals and service activity. For that reason, we continue to believe the business is best evaluated over multiple quarters rather than any single quarter in isolation. Our financial priorities remain unchanged: maintain discipline on expenses, preserve balance sheet flexibility, support our existing customers and align investment with the areas we believe create the greatest long-term value. With that, I'll turn it back over to A.J. for closing remarks. A.J.?

Thanks, David. We are confident that we are taking the right steps to position Aware for a stronger future as this transition continues. We have sharpened our strategy around the Awareness Platform, continue to advance our liveness and matching capabilities and are focusing our resources on the markets and opportunities where we believe we can compete most effectively. AI continues to reinforce the importance of that strategy. It is helping us accelerate aspects of product development while also increasing the urgency of the challenges and customers that our customers face. As sophisticated AI-driven fraud becomes more accessible, identity assurance is becoming even more critical across government and enterprise environments. At the core of our view is a simple principle, identity does not originate in a document or a database. It originates with the human being. Biometrics provides a digital translation layer that helps organizations establish trust in that human identity.

We are also encouraged by the renewed activity in the federal government market, with DHS operations normalized in May, we are seeing increased momentum in conversations. RFIs, procurement activity and programs tied to homeland security, border modernization, traveler processing and biometric identity verification. Our priorities for the second half are clear: execute against near-term opportunities, maintain expense discipline, support our customers and continue advancing the Awareness Platform. We know this transition will take time, but the market need is clear. Our technology is increasingly relevant. The Department of Homeland Security and other government customers remain open, and we believe Aware is moving in the right direction. That concludes our prepared remarks. We will now open the call for questions. Delaney, please provide the instructions.

[Operator Instructions]

First question, you've put a lot of emphasis on the government opportunity this quarter, how should we think about that translating into the commercial side of the business?

Yes. Actually, this is a really important one. Commercial organizations and government organizations, both face increasingly similar challenges. AI-enabled fraud, regulatory pressure, operational complexity and the need to deliver secure digital experiences without adding friction. All of these things are actually shared between both commercial organizations and government organizations. There's actually a really nice like 2-way exchange between commercial organizations and government organizations. Commercial organizations view technologies adopted by government vendors or -- by government as government grade, right? Like they look at it as a higher threshold, a higher bar for security, for accuracy, for scalability, for reliability. So commercial sort of looks at those types of government vendors favorably. Government, same way, right?

They actually look at commercial companies quite a bit that they do benchmarking against commercial companies to see what kinds of vendors they're picking for some of their most important needs. And they want to be able to operate at the speed of the commercial sector with the same kind of usability and flexibility that people expect. Commercial customers recognize biometrics are very disconnected. They have multiple vendors in different places and the workflows and the systems and the performance and the fraud risk. Those are all really important components.

This is where the Awareness Platform is highly relevant for both commercial and government customers, the SaaS-based biometric orchestration platform and decisioning platform, and that allows you to design, deploy, run, optimize workflows in one environment that Aware provides to our customers.

Through a single transaction, you can benchmark vendors in production, you can normalize out points from marcasite decisioning. It can perform liveness matching, identity verification, all through the Aware platform. So both commercial and government really have a need for real high-confidence identity decisions. And basically, there's a 2-way street here that basically allows us to benefit between government adoption and commercial adoption as both industries look at each other for benchmarking.

The next question comes from John Phillips. Has Aware had any involvement with the 2026 implementation of the Mexican government's unique population registry code, a national biometric ID system. Did Aware bid for any role in this project either directly or through a channel partner?

Yes. Thank you for your question, John. investing government's biometric initiative is actually a huge identity modernization effort. We believe it underscores the growing global adoption of biometric technology. As a matter of policy, we don't comment on specific customer pursuits or bids or potential opportunities, but we do and can say, right, that governments globally are leveraging biometrics is sort of the source of truth when it comes to identity frameworks. And that is because the physical document or verifying the physical document, digital drivers or a passport into a computer very easily, you can maybe take a picture of it, but you can't really tell if it's a real document. You could [indiscernible] the photo. There's a lot of different things that you can do with physical documents. But identity actually lives in the human. It's that -- and biometrics of that translation layer between the human identity and a digital format. And so biometrics are really very strong at being able to determine these fix and real live [indiscernible]. That's why we prioritize liveness within our capabilities.

And we also have a significant number of -- there are a significant number of AI-enabled threats to identity right now. If you look at most breaches, they're actually caused by compromised passwords or credentials and biometrics serve to be able to protect organizations from the bad actors that are getting more and more AI capabilities to try to break systems and organizations are turning to biometrics as primary defense mechanism, which provides a nice tailwind for our business.

Thank you, A.J. This next question also comes from John Phillips. Does Aware have any involvement in multilateral biometric data sharing agreements that the U.S. Department of State has signed with allied nations, such as the recent DHS Teracom partnership or other similar agreements.

Sure. Again, it's actually the Department of Homeland Security designed that specifically with [indiscernible] and -- but these are, again, specific government programs, which we do not comment on agreements, pursuit, et cetera. What we can say, though, is that there's an increased public activity around biometric modernization, interoperability, border security, traveler processing, identity verification. These are all areas where has a really deep experience where our technology is highly relevant and under new DHS policies, it's really well fit for companies like ours. There's a huge prioritization on buying American, American made software. Not any biometric companies and solutions providers are left here in the United States. In fact, we are the original U.S.-based biometrics company founded in 1986. And so we are being turned to by government organizations to provide solutions directly. And that's going to help us in a variety of these different initiatives that are being introduced.

Next question also from John Philips. What were the results of the Orlando MCO Airport biometric exit program trial that Aware participated in with iProve and others? Did Aware solutions demonstrate a competitive advantage over the other 2 solutions provided?

Yes. Thank you again for the detailed question. Yes, the program itself that was announced, but we don't comment on the specific programs, the results of pilots, right, or performance against any other vendors in those environments. But what we can say is biometric exit, identity verification and aviation. It's one of the biggest markets for biometrics, right? It's deployed globally. The United States is actually one of the laggards in terms of the adoption of biometrics at airports, whether you're traveling internationally everywhere across the globe, you're going through sophisticated biometric systems. They complement the officers that you are actually interacting with to provide additional information in Intel that allows them to be able to make the right decisions in terms of whether or not they should grant you access into different places. And so these are markets that are very large internationally and domestically, you're starting to see biometrics show up at TSA checkpoints when you're going through border security and on the back end, there's a lot of other biometric systems that are actually operating.

I can tell you like within the aviation industry in general. Like every time you go through a TSA checkpoint every time you log in and try to get your boarding pass and use face ID, every time you check a bag, these are all areas where biometrics are looking to supplement and complement the use of a human employee and that actually allows for better technological innovation, better customer experience, you're seeing consumers turning towards biometric solutions and choosing to go through biometric access instead of human-based programs. So it's able to improve security and reduce wait times at ARC and land borders across the board.

We've supplied all of the different providers in this market historically. They're all our customers have always did our customers. But what's different now is that the government and airports and airlines are wanting to be able to turn directly to Aware to be able to supply them with and configure identity workflows, orchestrate multiple biometric technologies, evaluate performance and production and make consistent identity decisions across complex operating environments. So the border aviation market continues to invest in modernization. We believe the combination of biometric orchestration, intelligent liveness, intelligent matching, U.S.-based company expertise, positions Aware really well for the opportunity ahead.

Thank you, A.J. One more from John Phillips, when do you anticipate quarterly revenue will begin to sustain the growth?

Yes. Thank you, once again for the question. These actions we're taking are designed to create a stronger foundation for consistent performance over time. We're transitioning the business and transforming it. It's a more focused scalable platform strategy. We're moving away from a fragmented portfolio of components and SDKs, focusing on the resources of the awareness platform, intelligent liveness, intelligent matching. And so the government and commercial opportunities, we believe we can compete very effectively. We've also taken a lot of cost actions on the other end, right, to better align expenses with our strategic priorities. And while we continue to support customers and pursue near-term opportunities. In the second half of the year, we do expect revenue to be stronger than the first half. based on typical seasonality, customer activity, subscription renewals, while expenses should be lower as those cost actions that we took in the earlier part of the year become fully reflected.

Longer term, we expect this to continue as the Awareness Platform helps unlock on our scalable model by giving customers one environment to orchestrate biometric workflows. And then also, right, the tailwinds from the government market and AI-driven fraud, regulatory pressure, identity modernization, the strategy positions aware for a more sustainable growth over time.

Next question comes from someone called MS. Is Awareness market ready?

For this question, Brian Krause, our CRO, will take the answer to the question. Go ahead, Brian.

Sure. Thank you, A.J., and thank you for the question. The answer to the question is yes. The Awareness Platform was announced earlier this year. And today is market ready and available for customers to demo trial and procure. As you also heard on June 9 and read into today's release, we did actually add 2 new technology partners to the platform over the course of second quarter in Rock and Mitek, both of which we're very excited to have.

Next question also comes from MS. What competitive advantages does Aware have read biometric orchestration.

Thanks, Delaney. Thank you again for the question. It's a great question. We feel strongly that the Awareness Platform has a number of competitive advantages with respect to biometric orchestration. The first of which is that ecosystem of technology providers that we are integrating or have already integrated on to the platform essentially now allows customers one single API architecture development access to the very best biometric technology on the planet. So nowhere else can you connect to this depth of quality of technology in our space through a single API. And this road map for technology partners and the product design road map is also being managed by a company that has 35 years of expertise in this space and the team that has hundreds of collective years of experience and expertise in this space to make sure that those advantages stay defensible and continue to be fostered.

Next question also comes from MS. One year ago, you announced a key customer secured this quarter with a top 15 global financial institution. What is the current status of this new customer?

Sure. Yes. Thanks again for the question. The customer that we're referencing here, I'm happy to report it's still a customer. I'm also happy to report is in year 2 and is beyond renewal of that first year contract at this stage. Also very excited to report that over the course of Q2 that was just reported, we did work with this customer to help them test and evaluate some additional Aware technology for potential future use. So happy customer, renewed customer and hopefully expanding relationship for Aware into the coming quarters.

One last question from MS. How many sales pitches to new prospective customers demonstrating your products did you make at customer premises?

Thanks again for the question. I won't get into specific operating key results for the revenue function in particular. I will address the question by saying that both outside external market interest, understanding the awareness platform and our other technologies remains strong and steady. At the same time, the productivity of our revenue team remains at or above all expected benchmarks.

Thank you. That completes our Q2 FY '26 broadcast. As a reminder, this presentation is recorded and made available for replay via a link available in the Investor Relations section of the company's website. Thank you, and you may now disconnect.

Good afternoon, and welcome to Aware's First Quarter FY '26 Conference Call. Joining us today are the company's CEO and President, Ajay Amlani; and CFO, David Traverse. Following their remarks, we will open the call to questions. [Operator Instructions]

Before we begin today's call, I would like to remind everyone that the presentation today contains forward-looking statements that are based on current expectations of Aware's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described. Listeners should please take note of the safe harbor paragraph that is is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today. Aware wishes to caution you that there are factors that could cause actual results to differ materially from the results indicated by such statements. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Additionally, this call contains certain non-GAAP financial measures as that term is defined by the SEC and Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, Aware has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today.

I would like to remind everyone that this presentation will be recorded and made available for replay via a link available in the Investor Relations section of the company's website. Now I would like to turn the call over to Aware CEO and President, Ajay Amlani. Ajay?

Thank you, Delaney, and good afternoon, everyone. First, let me start with our performance this quarter. Revenue for the first quarter was $3.4 million, which was below our expectations. Transparently, we underestimated the pace at which the market was shifting and the degree to which our existing product infrastructure and architecture needed to evolve to meet it.

The rapid advancement of AI has simultaneously raised the stakes and expanded the threat surface for biometric systems, making liveness detection and identity assurance more critical than ever, while making the job of protecting against spoofing and deepfakes more demanding. We did not move fast enough to get ahead of that reality, and this for quarter's results reflect that.

As part of our ongoing transformation, we took deliberate steps during the quarter to further align the business with our platform-first strategy. This included removing approximately $4 million in expenses and simplifying our go-to-market operating model. These actions represent a meaningful reset of our cost structure and are designed to support a more focused, efficient organization, aligned with our highest return opportunities.

Stepping back, this quarter marks the next phase of our transformation. 2025 was about building the foundation, strengthening our technology, expanding certifications and deepening our understanding of customer requirements. We are now in step 2, focusing the company around a single scalable platform strategy. At the center of that strategy is the Awareness Platform. We are moving away from a fragmented portfolio of components and FI biometric orchestration platform designed to serve both federal government and enterprise customers at scale. We believe biometric orchestration represent a critical layer in modern identity infrastructure, enabling organizations to integrate, manage and scale biometric systems and workflows across their environments with increased efficiency and simplicity.

More importantly, this is not just a product decision. It is grounded in market demand and data. In our recently published market research, the state of biometric security in the age of AI fraud, an astounding 98% of organizations already using biometrics said they're interested in investing in orchestration capabilities. Additionally, nearly 90% report concerned over AI attacks targeting biometric systems, further illustrating why they need visibility into orchestrating biometric workflows. The report is available on our website, and I'd encourage you to read it.

Taken together, this feedback reinforces that we are aligned with where the market is headed, allowing us to build with a clear understanding of the opportunity in front of us.

We also believe Aware is uniquely positioned to lead in this category. Our decades of experience, our deep scientific foundation and our strong intellectual property portfolio, particularly in liveness detection represent a durable competitive advantage. It is the critical capability that will determine winners and losers in this space, and it is where we have historically been strong and intend to lead.

As part of this shift, we are prioritizing investment in the Awareness Platform and aligning our resources accordingly. This includes downshifting investment in certain legacy product areas, including portions of our law enforcement-focused offerings while continuing to fully support our existing customers and deliver on our commitments. At the same time, we are increasing our focus on the federal government, where our foundational capabilities have long proven and where we continue to see demand for [indiscernible].

In parallel, we have gained important insight from enterprise customers whose requirements are increasingly centered around cloud-based multi-tenant architectures. This feedback has directly shaped the design of the Awareness Platform, which is built to support scalable enterprise-grade deployments. The platform continues to evolve, and we are actively engaging with customers to refine capabilities and ensure strong product market fit. We are encouraged by the feedback we are seeing and believe this positions us as we plan for a broader platform rollout later this year.

Step 3, which we expect to begin in the coming quarters and accelerate into the fall, is about scaling, bringing expanded platform capabilities to market, including continued advancements in liveness and providing single integration access to top-performing systems so that customers can test and evaluate performance as well as quickly deploy biometrics anywhere across their business.

As we move through this transition, we expect near-term variability to continue. Our focus is not on optimizing for quarter-to-quarter results but on building a more durable, modern and scalable business that can deliver steady, long-term growth and broader adoption of the platform. While this business did not meet our expectations this quarter, we are confident that the actions that we have taken position us more effectively for the future.

A key example of continued progress is our performance in independent real-world government evaluations. During the quarter, we delivered strong results in the DHS Remote Identity Validation Rally, Track 3, where our Intelligent Liveness solution demonstrated the ability to stop sophisticated attack vectors while maintaining a high-quality user experience. We view results like these as more than technical milestones. They are a direct reflection of our commitment to building a high assurance, production-ready technology that can operate at scale with speed and accuracy in the most demanding environments. These validations are critical prerequisites for winning large government and enterprise deployments, and they reinforce our confidence in the platform as we are continuing to build.

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

Thank you, Ajay. Let's review our financial results for the first quarter of 2026, which ended on March 31, 2026. Revenue for the quarter was $3.4 million compared to $3.6 million in the prior year period. This decrease reflects lower perpetual software license revenue and was partially offset by higher maintenance and services and other revenue.

Operating expenses for the quarter increased to $7 million compared to $5.5 million in the prior year quarter. The higher expenses included onetime severance costs of $700,000 as well as higher compensation costs related to hires we made in 2025. As Ajay noted earlier, we have reduced operating expenses by $4 million on an annualized basis starting in the second quarter of 2026, and we continue to make adjustments to our operating expenses as we continue to focus on our strategic objectives.

Net loss for the quarter was $3.5 million or $0.16 per diluted share compared to $1.6 million or $0.08 per diluted share in the prior year period. Adjusted EBITDA loss was $3.2 million compared to $1.5 million in the prior year period. We ended the quarter with approximately $19.6 million in cash, cash equivalents and marketable securities, and we have no debt.

Our balance sheet remains strong and provides flexibility as we execute on our strategic plan. We expect the savings of the actions taken this quarter to be more visible as we align our expenses with our strategic priorities.

Given the nature of our business and the transition underway, we expect quarterly variability to continue. And as a result, we continue to believe performance is best evaluated over multiple quarters. With that, I'll get it back to Ajay for closing remarks. Ajay?

Thanks, David. We have been transparent with you today about where we fell short. We underestimated both the fit and capability demands of the current market and the speed at which AI is reshaping what customers need from biometric infrastructure. That is on us, and the restructuring actions we have taken this quarter reflect genuine accountability, not a reaction to 1 quarter, but a deliberate reset towards our opportunity to lead us as a biometric orchestration platform player.

We are intentionally moving away from products that will not be relevant in our new paradigm and concentrating our resources on the areas where we have a proven, durable advantage. Chief among those is our liveness capability to help combat AI-powered spoofing and deepfake threats and our proven track record serving the federal government. The Awareness Platform is how we bring this to market at scale, giving customers a single integration point to access, evaluate and deploy best-in-class biometric capabilities across their environments. The early feedback reinforces that this is the right direction, and we remain focused on executing the rollout with discipline. We are building toward consistent, long-term growth from a sharper, more defensible position. We believe the path forward is clear, and we are committed to it.

That concludes our prepared remarks. We will now open the call for questions. Delaney, please provide the instructions.

Thank you, Ajay. At this time, there are no questions. That completes our Q1 FY '26 broadcast.

As a reminder, this presentation is recorded and made available for replay via a link available in the Investor Relations section of the company's website. Thank you, and you may now disconnect.

Good afternoon, and welcome to Aware's Fourth Quarter and Full Year 2025 Conference Call. Joining us today are the company's CEO and President, Ajay Amlani; and CFO, David Traverse. [Operator Instructions]

Before we begin today's call, I'd like to remind everyone that the presentation today contains forward-looking statements that are based on the current expectations of Aware's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described. Listeners should please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today. Aware wishes to caution you that there are factors that could cause actual results to differ materially from those results indicated by such statements. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K and quarterly reports on Form 10-Q.

Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance upon any forward-looking statements, which speak as only of the date made. Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Additionally, the call contains certain non-GAAP financial measures that are [indiscernible] the term is defined by the SEC and Regulation G. Non-GAAP financial measures should be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, Aware has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today. I would like to remind everyone that this presentation will be recorded and made available for replay via link available in the Investor Relations section of the company's website.

Now I'd like to turn the call over to our CEO and President, Ajay Amlani. Ajay?

Thank you, Matt, and good afternoon, everyone. Fiscal 2025 was a foundational year for Aware. While revenue timing dynamics, particularly within the federal market, created variability in our financial results, the year was defined by meaningful strategic progress across our technology platform, leadership team, certifications and market positioning. We strengthened the foundation of the business, expanded our competitive reach and positioned Aware as a trusted biometric identity solutions provider. To reiterate, our efforts this year have focused on progressing our 3-pronged transformation. First, advancing our core biometric technology with a focus on liveness and biometric orchestration. Second, strengthening our science forward customer-obsessed approach go-to-market model. And third, deepening strategic partnerships and certifications that build trust and scale.

Starting with our first strategic pillar, advancing core biometric technology. Liveness remains one of the most critical vulnerabilities in remote biometric systems today. Biometric injection attacks, deep fakes and presentation attacks continue to evolve rapidly. Throughout fiscal 2025, we invested significantly in our science and research teams to remain a leader in this domain. Our next-generation Intelligent Liveness combines deep biometric expertise with advanced boot protection to deliver their viable proof of person hood.

In the [ NIS-IR8491 ] evaluation, aware achieve best-in-class gender and race parity, earning the lowest ratio bias rating in the market and ensuring fair consistent performance across users at every high-risk touch point, critical for secure digital ecosystems. Aware Intelligent Liveness delivers subsecond capture speeds while materially reducing false negative rates and improving adaptability to emerging spoofing threats without introducing friction. We believe Liveness is not simply a feature. It is foundational infrastructure for secure digital identity. Innovation will continue to be at the heart of our progress in this area. At the same time, we have continued to evolve our biometric orchestration capabilities, which you may recognize as our Awareness platform.

Our orchestration framework is designed to maximize system uptime, enable modular integration of multiple biometric modalities and simplify deployment in complex customer environments. We are focused on building out our open architecture biometric infrastructure to bring civil and criminal identity management together in a single secure and highly scalable environment. By eliminating vendor lock-in and supporting a broad range of biometric systems, it gives organizations the flexibility to modernize on their own terms. We are working diligently to ensure enterprise-grade security, interoperability and scalability of our orchestration platform.

Beyond orchestration, customer testing activity across our broader portfolio remains strong in both government and commercial sectors. Much of the demand is centered on defending against facial devices, injection and presentation attacks and threats that are evolving in real time. Organizations are actively evaluating vendors capable of mitigating these risks at scale. Initial customer feedback has been encouraging, particularly around algorithm accuracy, ease of integration and flexibility of deployment. These evaluation cycles are often lengthy especially in government, but the depth and rigor of engagement signal, meaningful intent.

We are also seeing continued engagement in fingerprint biometrics, where our long-standing expertise continues to differentiate us. A driving force behind our technology is the Aware team. Over the course of fiscal 2025, we strengthened leadership across engineering, product, sales and marketing. We recently welcomed a new Head of Engineering and a new Head of Product both of whom brought immediate domain expertise and began implementing operational improvements from day one. These leaders are building upon Aware's strong scientific foundation while driving tighter alignment between product development and customer requirements.

Our third pillar centers on building trust and scale through strategic relationships and certifications. Despite procurement delays stemming from the lasting effects of the government shutdown, including delayed appropriations and slower procurement cycles, we saw continued engagement across U.S. and international government and commercial markets. During Q4, we successfully deployed our first mobile biometric solution within a U.S. federal agency. Law enforcement customer growth also continued with the onboarding of additional U.S. agencies. While individually modest, these wins demonstrate growing international trust and institutional trust in our technology. We are expanding direct engagement with U.S. federal agencies at a time when [indiscernible] America priorities and supply chain considerations are increasingly relevant.

As a U.S.-based biometric provider, we believe we are well positioned to compete both directly for federal buyers and indirectly through system integrator partners. Both channels remain core components of our federal strategy. While procurement timing remains dynamic, biometric modernization continues to be an area of focus within DHS and related agencies. Internationally, we continue to deepen relationships across both advanced and developing markets where digital identity systems are increasingly recognized as foundational national infrastructure.

In the fourth quarter, we launched a pilot program with the Caribbean nation to deploy biometric time and attendance systems for government employees, further expanding our global footprint. We also are seeing expanding engagement in aviation and border-related use cases. During Q4, we successfully tested biometric boarding in Orlando International Airport, which now serves as a flagship reference or a direct travel and border strategy in partnership with the Greater Orlando Aviation Authority and U.S. Department of Homeland Security.

Our technology supports contactless passengers processing under the Biometric Exit Program. This program demonstrates how biometric orchestration can improve throughput, reduce document handling and enhance traveler experience in one of the busiest airports in the United States. We also continued to expand our partner ecosystem through new strategic relationships, including integrations with digital workflow providers and collaborations with biometric hardware vendors. These initiatives remain in early stages, but we believe they strengthen our long-term go-to-market strategy and broaden our reach over time.

We also continue to perform strongly in independent government-led evaluations, including DHS related biometric testing programs. Our face and fingerprint algorithms have improved meaningfully in accuracy, bios mitigation and scalability. During the year, we successfully completed DHS River phase matching evaluations and achieved ISO-30107 Level 3 certification for [ presentation ] attack detection, placing us among a small group of global providers that meet the highest standards for liveness detection.

In the [ selfie to document match track ] operating under the first [indiscernible], Aware was one of only 5 vendors to meet all DHS high-performance benchmarks. We were also one of just 3 to achieve 0 to 0 failure to extract rates for both selfie and document images, and we delivered the lowest false match rate among that group, including against demographically [ similar imposters ]. These results highlight the accuracy, resilience and real-world readiness of our platform at scale. We also achieved ISO 27001 certification, a leading international standard for information security management. As enterprise and government customers increasingly require formal validation of security practices before engaging with vendors, this certification strengthens our ability to compete in larger and more regulated opportunities.

We also completed independent biometric bias testing inducted by [indiscernible] NVLAP accredited lab under the ISO IEC-19795-10 standard. The full system evaluation covering both liveness and matching under real-world conditions delivered outstanding results. These results reinforce the accuracy, consistency and fairness of our technology across critical applications, including border control, national ID, financial onboarding, mobile authentication and enterprise access control.

Finally, in addition to our biometric and liveness evaluations, where recently achieved 502 Server Certification, validating our ability to support secure task-based authentication layered with biometric verification. This certification confirms compliance with FIDO Alliance standards for cryptographic authentication and interoperability, capabilities that are increasingly expected in regulated high assurance environments such as payments and financial services.

When combined with our Intelligent Liveness technology, this approach helps verify real user presence, reduce fishing and automated attack risk and deliver fast seamless identity experiences. These certifications are not simply badges. ISO-30107 Level 3 demonstrates our technology can defend against increasingly sophisticated presentation, deep fake and injection attacks. ISO-27001 validates our corporate security posture and operational rigor. Together, they materially strengthen our credibility with both enterprise and government buyers. More importantly, these validations are how Aware becomes a trusted provider for top Tier 1 enterprises and leading government agencies worldwide.

The largest institutions require proven performance, independent verification and enterprise-grade security before they deploy biometric infrastructure at scale. Our certifications and evaluation results meaningfully expanded the universe of opportunities we could pursue and have already enabled us to compete in several large engagements that previously would not have been accessible.

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

Thank you, Ajay. Let's review our financial results for the fourth quarter and full year. which ended on December 31, 2025. Starting with the fourth quarter. Revenue in the fourth quarter was $4.7 million compared to $4.8 million in the prior year period. The slight decrease reflects lower perpetual software license revenue, partially offset by higher maintenance and services and other revenue. Operating expenses for the quarter improved to $6.1 million compared to $6.3 million in the prior year quarter. The lower expenses largely reflects the onetime costs incurred in the prior year period related to the former CEO's transition, which includes severance and acceleration of stock-based compensation expense of $600,000. As we noted in our last earnings call, we continue to expect operating expenses to reflect the strategic investments we are making.

Net loss for the quarter was $1.5 million or $0.07 per diluted share compared to a net loss of $1.2 million or $0.06 per diluted share in the prior year quarter. Adjusted EBITDA loss was $800,000 for both Q4 2025 and the prior year quarter.

Turning to our results for the full year. For the full year, revenue was $17.3 million compared to $17.4 million in 2024. The slight year-over-year decrease was driven by lower perpetual license revenue, which was partially offset by increases in maintenance and services and other revenue. Net loss of $5.9 million or $0.28 per diluted share compared to a net loss of $4.4 million or $0.21 per diluted share in the same period last year. Adjusted EBITDA loss for the year was $4.6 million compared to an adjusted EBITDA loss of $3.9 million in the prior year period. [indiscernible] ended the year with $22.3 million in cash, cash equivalents and marketable securities and no debt. Our balance sheet reflects the increased investments we've made throughout the year to enhance our team, advance our core technology and certifications and support go-to-market initiatives.

We will continue to allocate capital to our strategic priorities and build a stronger, more competitive business. While we remain confident in our long-term positioning, we believe we will continue to experience quarterly results that remain uneven given the nature of our procurement cycles and customer conversion timing. This is particularly true in government and large enterprise markets, where funding and execution time lines can shift from quarter-to-quarter. As a result, quarterly results may not fully reflect the underlying progress we're making. For that reason, we believe performance is best evaluated over multiple quarters.

With that, I'll hand it back over to Ajay for closing remarks. Ajay?

Thanks, David. As David noted, variability remains a feature of our business, particularly as we advance complex government and enterprise opportunities where procurement and funding timing can shift between quarters. During the fourth quarter, multiple large identity solution providers progressed into testing and evaluation phases. These processes can be lengthy and technically rigorous and not at all evaluations -- not all evaluations, result in near-term deployments. While timing remains uncertain, continued participation in these evaluations, expands our relationships and informs future opportunities. Retention performance remained strong and well above industry benchmarks and approximately 3/4 of our current pipeline consists of new logos with the balance representing expansion within existing accounts. .

This year marked the beginning of a comprehensive revitalization of the Aware brand. We've launched a fully redesigned website, our digital storefront with a modern look and feel that reflects the strength and innovation of our technology. At the same time, we sharpened our market positioning to clearly align Aware as a biometric identity solutions company. We also restructured and repositioned our product suite to better align with buyer needs and decision-making priorities, supported by refreshed messaging that clearly communicates our differentiated value across biometric identity, liveness and authentication solutions. While still early, search visibility has improved meaningfully, and we are seeing increased inbound engagement.

On the technology front, we continued advancing our intelligent liveness capabilities to defend against increasingly sophisticated presentation, deep fake and injection attacks. We also achieved ISO-30107 Level 3 certification for presentation attack detection and ISO-27001 certification for information security management, strengthening our credibility with enterprise and government customers that require independently validated performance and enterprise-grade security.

Stepping back fiscal 2025 was about building the foundation and getting us out Intelligent Liveness front of key customers. We strengthened our core technology, expanded certifications, deepened partnerships and continued evolving toward a more integrated biometric solutions platform, execution and conversion will take time, and we expect variability to remain part of the near-term landscape. However, we believe the structural progress achieved over the past year strengthens our competitive position and supports our long-term opportunity in biometric identity.

As we move into 2026, our focus is disciplined execution, converting pilot programs, strengthening the awareness platform, scaling revenue and delivering durable long-term growth. We are building a more predictable and scalable biometric identity business, one that balances innovation with discipline and positions aware to lead in the next era of digital identity.

That concludes our prepared remarks. We'll now open the call for questions. Matt, please provide the instructions.

Thank you, Ajay. [Operator Instructions] First question is for Ajay, federal procurement timing has created some variability in results and 2025 revenue was essentially flat year-over-year. How should investors think about the drivers of potential growth going forward, particularly given the mix of federal, commercial and international opportunities?

Thank you very much for the question. In 2025, we did see some programs move slower than expected during the year. As you know, government procurement cycles can vary in timing from quarter-to-quarter. We also had a pretty significant slowdown in government shutdown that also impacted the responsiveness of [indiscernible], the federal government, public servants that we're going through a very difficult point in time in their careers and in their lives trying to suffer through what was one of the longest shutdowns in the history in the U.S. government.

Coming out of that, we've seen increased activity in federal government meetings, which have resulted in significant pipeline acceleration and opportunities here in the U.S. federal government work. We continued working though, on the international front and in commercial markets to convert our pipeline, expand our pipeline and expand our brand to make sure that the business continues to stay in a growth path as we expand our product portfolio and our certifications.

Our next question is for David. How should investors think about the mix between perpetual licenses, recurring software, services and maintenance going forward?

What we're seeing is the mix will likely continue to evolve depending on the types of programs we're secure. As you know, historically, we've had a combination of perpetual license, maintenance and services and that's particularly in larger government deployments. Exact mix can vary from quarter-to-quarter depending on [indiscernible] the revenue is driven by platform licenses, recurring software sales or cloud-based solution-based programs. So rather than targeting a specific mix, what we're focused on is expanding our presence in these large programs where our software platform can be deployed and maintained over multiple years.

Thanks, David. Our next question. You mentioned several evaluations and testing phases with potential partners. What is the process and time line from evaluation to production deployment? .

Yes. I mean many of these opportunities start with an evaluation after we've included establishing ourselves as a repeatable company to be able to participate. These evaluations can basically move on to pilot programs and then the customers will validate the technology within their environment to decide if they want to be able to move forward. The process typically moves into production deployments which can expand over time depending upon the scope of the program. Well, our goal is to start small, honestly, with an onboarding a customer, keeping expectations in check and then continuously exceeding those expectations. And then from there, as long as we continue to exceed expectations, they'll grow the amount of work that they do with Aware and don't feel comfortable being able to feed more business and more opportunities our way, particularly in government and large enterprise environments.

That's balanced obviously, with procurement cycles budget availability, but the focus is continuing to advance those evaluations and making sure that we can improve conversion and growth as our platform evolves and we end up in a land-and-expand strategy.

Ajay, another one for you. How did the recent certifications and platform enhancements strengthen Aware's competitive position and support future opportunities with customers and partners?

So I really do applaud the amount of work that goes into the development of these new certifications around biometrics. We -- people globally are really pushing the envelope in terms of being able to make sure that the technology can keep up with current threats in the market. There are a lot of threats that are based in this market, especially with AI and AI generated identity that can basically trick systems. And so continuing to stay not just one step ahead of it, whereas you could potentially be breached, you need to stay 2 steps ahead of it. And that's where these certifications come into play and become very important.

These certifications are typically listed within procurement from major customers, and it's very important to be able to meet these certifications. In a lot of ways, these are just basically ways to be able to make sure that aware is qualified to be able to bid, but not all parties are usually qualified with these different types of certifications. So it is an ability and a strategic differentiator for us to be able to advocate on behalf of including these certifications in the customers' requests and then also being able to meet these certifications puts us in a competitive set that's smaller than the more broader set of people that you would normally consider for a solution by proving who's better and who's been able to meet certifications that are available in the industry.

Our next question, why are deals not announced as they are signed?

Thanks, Matt. I can kind of break that down to 2 parts. One is from an SEC requirement standpoint and the other one is more from a customer standpoint. So the first one, the SEC, we make sure all our disclosures and we comply SEC disclosure requirements. Most of the contracts we do sign are within our ordinary core business and don't require a separate disclosure on the SEC side. On the commercial side, many of our government and security-focused customers also have confidentiality provisions. And in addition, our business -- in our business, the signing of a contract is not always the most meaningful milestone as programs often progress through pilots employments over time.

Another question received. Are you seeing any new AI native competitors or customers in-sourcing by building their own algorithms using LLMs? What moats or risks does your business have from an AI disruption relative to other SaaS companies?

Our company is actually really well positioned to be able to take advantage of the LLMs and the technology that's in place to be able to improve our efficacy, improve our productivity and also decrease our costs. We look towards the development of these capabilities is a really big strategic differentiator for us. Our existing presence in the market with existing customers and data allows us to be able to work with that data to be able to train our models in a more effective fashion. And we can also utilize it to be able to work on better co-development, upgrading the code and being able to serve our customers in a more effective fashion.

As you know, we have a [indiscernible] list of existing customers, including Department of Homeland Security Department of Defense and many others globally, that are really the who's who in terms of government agencies. So being able to expand the services that we actually do with our existing customers to be able to surprise and delight them with new capabilities and functionalities would typically take a lot of effort on our side to be able to invest behind that capability, whereas with all of the different tools that are now existing in the marketplace, we can be able to do that more effectively because we have a lot of inherent knowledge in the market in terms of what the customers need. We're in cost of communication with the customers in terms of what they would like and how they'd like to improve their systems. And we're in the right place to be able to ask the right questions to the tools to be able to develop capabilities, whereas most people don't even know what to ask.

You described 2025 as foundational. What should investors look for in 2026 to measure success?

Sure. So 2025 was really about strengthening the foundation in our product platform and our go-to-market execution. We're now in front of most of the major customers for biometrics. They know of us. They have a positive opinion of us. We're being included in a lot of their evaluations. And as we move into 2026, the proof points that investors should look around or look for really around improving execution, stronger conversion of our pipeline into actual program wins, recurring software deployments, larger solution-based programs, particularly in government markets are definitely things that investors can look to.

Progression from pilots and evaluations into production employment is another one. And third, while results can be uneven quarter-to-quarter given the nature of government opportunities, especially, we expect to see greater consistency in bookings and revenue over time as those efforts begin to take hold.

Thank you, Ajay and David, at this time. This concludes our question-and-answer session. If your question wasn't answered, please e-mail Aware's IR team at [email protected]. Before we conclude, I'd like to remind everyone that a replay of today's call will be available via link in the Investor Relations section of Aware's website. Thank you for joining us for Aware's Fourth Quarter 2025 conference call. You may now disconnect.

Good afternoon, and welcome to Aware's Third Quarter 2025 Conference Call. Joining us today are the company's CEO and President, Ajay Amlani; CFO, David Traverse; and CRO, Brian Krause. [Operator Instructions]

Before we begin today's call, I'd like to remind everyone that the presentation today contains forward-looking statements that are based on the current expectations of Aware's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described. Listeners should please note the of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today. Aware wish to caution you that there are factors that could cause actual results to differ materially from those results indicated by such statements. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking statements whether as result of new information, future events or otherwise, except as required by applicable securities laws.

Additionally, this call contains certain non-GAAP financial measures as the term is defined by the SEC and Regulation G. Non-GAAP financial measures should be considered in isolation from or a substitute for financial information presented in compliance with GAAP. Accordingly, Aware has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today.

I would like to remind everyone that this presentation recorded available for replay via link available in the Investor Relations section of the company's website.

Now I'd like to turn the call over to Aware's CEO and President, Ajay Amlani. Ajay?

Thank you, Matt, and good afternoon, everyone. Q3 reflects disciplined execution and continued progress in a Aware's transformation strategy. This quarter, we delivered 33% year-over-year revenue growth while improving our bottom line. We recognize there's still important work ahead to build consistency and scale, and we expect near-term quarterly results may vary based on timing of customer decisions and license mix. These results reinforce our 3-pronged transformation, which centers on first: advancing core biometric technology with a focus on Liveness and the Awareness Platform; second, strengthening our science forward customer-obsessed go-to-market model; and third, deepening strategic relationships and partnerships and certifications that build trust and scale.

Before diving into Q3 highlights, let me set some market context. As I shared at the Gateway Conference in September, customer perceptions around biometrics have fundamentally shifted, everyday use of face ID and biometric travel checkpoints has made biometrics both familiar and expected. In the age of AI, it's not only getting harder to prove identity. Individuals must also prove they're human in real-time against increasingly sophisticated stooping attempts. This elevates Liveness Detection from a nice-to-have into a critical control for fraud prevention and trust. Against this backdrop, our strategy is to meet customers where risk is rising most, delivering adaptive liveness, interoperable matching and a platform architecture that allows enterprises and agencies interoperable orchestration without vendor lock-in. Aware isn't just selling technology, we're delivering solutions that help customers maintain uptime while solving their most pressing trust and safety challenges. Aware is a U.S.-based company with 3 decades of biometric innovation and a blue-chip customer base across government and enterprise. That foundation of trust matters as buyers raise the bar on security, privacy and interoperability. And as governments increasingly emphasize domestic providers for critical identity infrastructure.

On the government side, we see tailwinds from broader funding for biometric modernization within DHS agencies coupled with a strong Buy American orientation, having helped launch some of the earliest biometric programs at DHS, I've seen firsthand how federal adoption sets global standards and Aware is uniquely positioned to lead as a U.S.-based science-led provider.

On the commercial side, enterprises are moving to anchor digital identity on a biometric backbone with strong privacy controls, replacing fragile combinations of passwords and device trust with biometric proof of presence and proof of person. Our platform is designed for choice, speed to value and standards alignment, a differentiator that customers and partners increasing value. Our Awareness platform integrates matching engines, adaptive liveness and anti-spoofing and interoperability layers to deliver flexibility at scale. Earlier this year, our Passive Liveness achieved best-in-class performance in the Department of Homeland Security remote identity validation benchmark, providing clear third-party validation that we're solving real-world identity fraud with less friction.

In October, our face verification stack, combining advanced liveness with facial matching, earned FIDO Alliance Certification. This is 1 of the most rigorous global benchmarks in biometric security. It not only validates our approach but also reduces compliance friction in enterprise procurements and accelerates integrations with major partners and identity ecosystems. It also complements our road map to build additional certifications that customers expect. Over the past several quarters, we've upgraded leadership across revenue, marketing and product, aligning the organization to scale with discipline. We are focused on prioritizing large durable opportunities in federal and the enterprise market that can translate into multiyear recurring revenue and product leverage. With this team in place, we are executing across 2 core markets. First, government, building a direct presence with agencies, aligning to Buy American requirements and modernization initiatives across the Department of Homeland Security, the Department of War and many other related programs in departments where liveness and interoperability are central. Growing demand for mobile identity and modernization of legacy systems plays directly to our ABIS and mobile capture strengths.

Second, commercial enterprises, companies are adopting biometric-anchored journeys for both workforce and customer use cases, emphasizing privacy, standards and interoperability all well aligned with our Awareness Platform and AwareSDK. Our strategy is translating into both top line momentum and better operating discipline.

I'll now hand it over to David to review our third quarter financial performance in more detail. Over to you, David.

Thank you, Ajay. I'll now walk through our third quarter financial results. Revenue in the third quarter was $5.1 million, an increase of 33% year-over-year. The increase was primarily driven by a $1 million perpetual license expansion sale with an existing customer and a $600,000 new term license contract, partially offset by typical fluctuations in perpetual license and lower services and other revenue.

Operating expenses for the quarter were $6.4 million compared to $5.4 million in the prior year quarter. The increase reflects targeted investments in sales, marketing and product development as we execute our go-to-market strategy. Looking ahead, we do expect an increase in our operating expenses in the fourth quarter, reflecting the full quarter impact of the investments made during the third quarter to support our growth strategy.

Net loss for the quarter was $1.1 million or $0.05 per diluted share, an improvement compared to a net loss of $1.2 million or $0.06 per diluted share in the prior year quarter.

Adjusted EBITDA loss was $800,000, an improvement compared to a loss of $1.1 million in the prior year quarter.

Turning to our results for the first 9 months of 2025. Revenue was $12.6 million, similar to last year. Net loss was $4.4 million or $0.21 per diluted share compared to a net loss of $3.2 million or $0.15 per diluted share in the same period last year.

Adjusted EBITDA loss year-to-date was $3.8 million compared to an adjusted EBITDA loss of $3 million in the prior year period. We ended the quarter with $22.5 million in cash, cash equivalents and marketable securities and no debt. The change primarily reflects the operating loss for the period as well as normal fluctuations in working capital, including the timing of accounts receivable collections. Our balance sheet provides us with flexibility to continue investing in growth while maintaining a disciplined approach to expenses.

Our Q3 results reflect progress towards sustainable growth. We are executing with discipline, scaling revenue and positioning the company for operating leverage as our top line continues to expand.

With that, I'll hand it over to Brian to provide more color on our product, customers and go-to-market progress.

Thank you, David. Building on the strong financial results, I'd like to provide more details on the customer and go-to-market side. We continue to see diverse demand for biometric solutions across both government and enterprise sectors. Organizations are under pressure to not only authenticate identities but also to ensure that users are live and present without adding friction. That combination, security plus usability is where Aware has the opportunity to win. We are also seeing growing demand in the local government sector with focus on modernizing biometric systems for civil and criminal investigations. In the third quarter, we expanded our work with a major U.S. federal agency by adding our Intelligent Liveness to a previously successful program. This builds on days of trust Aware has established in government and underscores our ability to bring new technology into mission-critical programs. Overall, federal demand continues to grow as a result of the new priorities at the federal level that have created both new and expansion opportunities for biometric solutions within these programs. However, the federal shutdown has slowed these actual appropriations which means that some of these programs will likely see delays until that is resolved.

On the commercial side, we secured new enterprise contracts and financial services and workforce management sectors where customers are looking to reduce fraud and streamline onboarding. These deployments highlight the flexibility of our platform to integrate into existing identity ecosystems, support multiple modalities and deliver high-performance biometric capabilities. These contracts also represent solid progress in our land-and-expand approach. Over the past 6 months, we've continued to make progress in strengthening our pipeline and partner ecosystem as well. Our direct federal team is engaged across multiple U.S. and international government programs, and our partner strategy is helping us scale without an overinvestment in a direct sales force. These investments in expanding and establishing relationships with system integrators and technology partners not only validates our tech but also extends our reach into larger enterprise and government track vehicles are key buying criteria. We continue to see strong customer retention and growth opportunities and expect this to continue for the rest of this year. Looking forward, our go-to-market priorities are clear. Within the U.S. federal government deepen our direct engagement across all agencies, while aligning with the Buy American requirements.

On the commercial side, expand in fraud-prone verticals in areas where biometric adoption is growing such as financial services and travel.

On the partner side, broaden our ecosystem of system integrators, identity platforms and device partners to accelerate adoption and scale across the globe, aligned tightly with our customers. Most importantly, continue to deliver great products as they grow their use of biometrics to protect and automate their businesses. Our customers and partners consistently tell us that Aware stands out for combining science-driven innovation with enterprise-grade delivery. That's a differentiator that is working effectively and one we intend to continue building on.

With that, I hand it back to Ajay for closing remarks and the outlook before Q&A. Ajay?

Thanks, Brian. As you've heard today, Aware is executing on a clear strategy, delivering trusted biometric solutions that combine adaptive liveness, best-in-class interoperability and enterprise-grade performance. These capabilities are not just differentiators. They are becoming requirements in a world where fraud is accelerating and digital identity is central to every interaction. Looking forward, we are focused on prioritizing large durable opportunities in federal and enterprise that can translate into multiyear recurring revenue and product leverage. That means driving deeper adoption within DHS and other federal agencies, sometimes directly and sometimes through value partners as biometric modernization accelerates. Expanding in enterprise verticals, where identity, fraud and compliance costs are highest, financial services, travel, workforce management. And finally, continuing to build the certifications, integrations and partnerships that reduce adoption friction and extend our reach. We believe this strategy positions Aware to deliver not just growth but sustainable value creation. As we scale, you should expect to see increasing operating leverage, stronger recurring revenue contributions and a disciplined balance between innovation and profitability. I'm proud of the progress our team is making and the validation we're seeing from customers, partners and industry benchmarks. With 3 decades of biometric leadership, a strong foundation of trust and a clear strategy, we believe Aware is positioned to lead in this next era of digital identity. That concludes our prepared remarks. We'll now open the call for questions. Matt, please provide the instructions.

Good afternoon, everybody. Before we move to Q&A, I just want to note that Ajay is traveling back from the Money20/20 Conference. His return flight was delayed and there may be some airport noise in the background as we answer questions.

Thanks, David. [Operator Instructions] Our first question is for David. Q3 revenue grew 33% year-over-year, but was flat year-to-date. Can you elaborate on the drivers of that variance and how investors should think about the sustainability of that top line growth in 2026?

Yes. Thanks, Matt. So we're striving to build a more sustainable revenue model, but we still have a meaningful license component business that the timing can create some variability. The strong year-over-year growth in Q3 shows that demand is there, but the flat year-to-date trend reflects the timing dynamic. With the management changes that we made this year, we really are sharpening our focus on driving more recurring and predictable revenue. So over time, you can expect smoother results and a more consistent growth.

Thanks David, another 1 for you. You mentioned that quarterly results may fluctuate based on the timing of customer decisions and license mix. Can you give more color to the pipeline conversion patterns? How much visibility you have in the near-term deals and recurring revenue contribution?

Yes. Thanks again, Matt. It's kind of similar to the other question. With the new management team, we really put a stronger emphasis on building a disciplined go-to-market engine and improving how we are able to forecast and manage the pipeline. What we're really seeing is healthy engagement and good visibility into opportunities, though the timing of customer decisions can still affect the quarterly results. As our process matures and the team gains traction, we do expect to be able to see more consistency and better conversion across the pipeline over time.

Thanks, David. Next question is for Ajay. Ajay you called out the federal budget delays and shutdown impacts on appropriations. How significant has that been the near-term bookings? And are those revenues expected to shift into FY '26?

Yes. The government shutdown has impacted businesses across the board. And most -- I feel most sorry for obviously, the people that are furloughed. Those individuals are going through a very difficult time now trying to sustain their livelihoods and pay the rent, pay for their families daily expenses. For us, there is an impact to near-term bookings. However, most of the conversations are still occurring. And we would expect to see all of that money still flow and a higher urgency to be able to deploy that budget coming through in the near term. So we anticipate significant volume of deal flow and conversations once the shutdown is over. The total amount of budget allocated is still going to remain the same and the urgency to deploy the capital, to improve the systems, the antiquated systems of the federal government on the identity system is still going to have a very high sense of urgency.

Great. Thanks, Ajay. Another 1 for you. As enterprises move towards biometric anchored digital identity, who do you view as your primary competitors in the space? What differentiates Aware's Awareness platform technically and commercially?

Sure. From a competitive set, on the Awareness platform in particular, I'll [ think ] of the platform first. This is very much a buy versus build competitive set. So with regards to existing large enterprises looking to try to deploy biometrics at scale, our largest competition is actually internal development and a desire to be able to add and own your own platform and continue to increase and modernize its capabilities. What we see is significant overlap between all of these different companies that are looking to try to build these types of platforms and that they would turn to a model where economies of scale will help them to save money and increase capacity and capability much faster through an outside vendor such as Aware.

With regards to the individual components and the products that we actually serve and develop internally, there are other competitors in the market that develop different styles of biometric capabilities with different strengths. Those partners are -- those companies are, in fact, partners for us in the Awareness platform. while we still have an element of competition when it comes to proving who's best at which component of the technology overall. What's most important for us is that customers get the best [indiscernible] in the market to serve their individual needs and their use cases so that they have [ plausible ] experiences for their consumers, for their customers and secure experiences. And that could be different in a physical environment, as you can imagine, in an airport environment, in a border environments, those styles of biometrics and types of biometric technologies that you would deploy in those environments will be very different than the style of technology that you would deploy over people's mobile devices to be able to onboard into a financial services product remotely, which will be very different than the style of product that you want to use on a desktop computer, allowing a workforce application to protect, let's say, new hires or password resets to secure your enterprise against the largest vulnerability today in cybersecurity attacks, which is password compromises. So the different components of biometric technology. We go into it at Aware knowing we can't be the best at everything. So we select the specific components that we believe we'd like to be the best in, that are the most important and also that we have the capability of being the best in. And we look to partner with others who we feel in certain use cases are the best technology for our customer base.

Thanks, Ajay. Another 1 for you. How do you prioritize new certifications like ISO or FedRAMP in your road map? And are there any gating factors for certain federal or enterprise contracts?

ISO FedRAMP and other certifications, such as the FIDO Certification that we most recently announced are incredibly important certifications for customers to pay attention to, to require in their RFP processes when they're looking for vendors, to request vendors to adhere to and to continue to push the envelope with the certification organizations to protect their enterprises against the most modern threats that are in the market. And there are quite modern threats in the market. Cybersecurity attackers continue to get better. They continue to collaborate using commercial tools and a worldwide attack vector. Nation state actors are continuously trying to penetrate the most critical assets of our country. And as a nation and as a globe, we need to come together to have a unified set of standards to hold vendors accountable to continue to be able to communicate the importance of protecting them against things like liveness or generative AI deepfake attacks that basically can impersonate other people online through video calls, through voice calls with very minimal sophisticated tools. You can imagine with sophisticated tools in the hands of attackers, what they can do is quite dangerous. So pushing the envelope and staying ahead of the attackers with certifications that can push the vendors beyond what they have today to better protect our customer systems is what we actually here at Aware advocate for daily. We're talking to all the different testing organizations globally. We're pushing them to address better standards to understand how to protect against digital injection attacks and other extremely important vectors of attack that need to be secured, but doing so in a standardized fashion so customers know that if a vendor comes to you saying that they're the best in the market at something, they have proof to back it up. So we will continue to invest in these different standards. We'll continue to advocate to customers and to the actual certification organizations to push the envelope to become better because we at Aware, view ourselves as a premium provider of biometric systems, the best in the market with the best depth of technology and expertise to protect against these next generative -- next-generation generative AI attacks where the only way to determine if somebody is a human and the right human in a digital environment is through the utilization of biometrics.

Thanks, Ajay. Our next question is for David. David, operating expenses rose due to investments in sales, marketing and products. How should we go about expense levels and operating leverage in FY '26 as revenue scales?

Yes. Thanks, Matt. So yes, so operating expenses as expected and as we kind of mentioned last quarter, did increase as we invested in the sales and marketing and go-to-market and product positioning for the company growth. And we will continue to invest there when we see a clear line of driving top line revenue expansion. When the opportunity is there, we'll lean in and invest and accelerate growth so -- while also keeping a disciplined focus on efficiency.

Ajay, can you share any color on the national ID contract?

Sorry. But at this point in time, we're not in a position to be able to share any color on the national ID contract other than what was already shared. We are still in a position where we want to be able to pursue global business through partners in such a way that we can make sure that we can cover the globe and the needs of all countries with our identity needs, but focus our resources specifically towards direct conversations that we have here in the Americas. So we're spending the majority of our resources here on the Americas, North America in particular, given our domestic focus, given our large base of U.S. citizen biometric scientists and given the desires and the demands here in the market, along with the larger scale here in the market. But we believe that national ID program not to be ignored, but rather addressed. So we're constantly looking for the best partners in the market. And I would encourage any partners globally looking to work with countries to advance their national ID programs to better secure the needs of their citizens and residents to be able to increase their access the federal government benefit systems, whether it's United States or globally to reach out to our partnership team here at Aware and be able to encourage them to choose best-in-class technology with a partner they can trust that will have their backs in the global fight against nation state actors that are doing bad things.

Thanks, Ajay. We received another question for you. Has Aware considered enabling interactions with smaller platforms?

That's a great question. I would love to have a little bit more color and a little bit more follow-up with [ them ] after to specifically address which smaller platforms that they're requesting and talking about. But as we've went through the years, smaller platforms can grow very quickly in this economy. And we've seen if you have the right team, the right investor base and the right customer relationships and the right product, pretty expansive scale. So while most companies are only choosing to be able to work with the largest partners in the market, the ones that have raised the $200 million to $400 million to deploy identity systems and identity verification capabilities, we are also paying attention to the smaller vendors in the market and the smaller partners in the market. But we are prioritizing the ones that we believe have the most opportunity for scale based on the management team, based on the customer contacts, based on the products that they have and the capabilities for scale because we can't serve and be everything to everyone. So a prioritization process and the vetting process ahead of time is extremely important for us so that we can align resources effectively and better serve our partners and enable them for the kind of growth that they deserve.

Thank you, Ajay, David. At this time, this concludes our question-and-answer session. If your question wasn't answered, please e-mail Aware's IR team at [email protected].

Before we conclude, I'd like to remind everyone that a replay of today's call will be available via link in the Investor Relations section of Aware's website. Thank you for joining us for Aware's Third Quarter 2025 Conference Call. You may now disconnect.