Aware, Inc. (NASDAQ: AWRE), a
leading authentication company applying proven and trusted adaptive
authentication to solve everyday business challenges with
biometrics, today reported financial results for the second quarter
ended June 30, 2023.
Second Quarter 2023 and Recent Operational
Highlights
- Generated $3.2 million of revenue,
compared to $4.3 million in the first quarter of 2023 and $4.2
million in the second quarter of 2022.
- Reaffirmed expectation to grow total
revenue and annual recurring revenue (ARR) by 15% in 2023 and to
achieve neutral operating cash flow exiting 2023.
- Contracted to expand an existing
European government system by introducing facial recognition and
securing a five-year, $5 million contract plus options up to $8
million.
- Expanded Aware’s Knomi footprint in
the Middle East by introducing contract management use cases.
- Secured two additional AwareABIS
contracts, including Aware’s first cloud ABIS award.
- Integrated AwareID’s identity
verification technology into Canadian-based mobility app “A Safer
Walk” enabling women to join the verified walk network rapidly and
securely.
- Showcased Aware’s advanced authentication solutions for
commercial organizations, law enforcement and government agencies
globally at IACP Tech Conference, Identity Week Europe 2023,
America Digital Mexico, Febraban Tech 2023 and Border Security
Expo.
Management Commentary “We continue to focus on
driving annual growth and building our recurring revenue as we
strive to reduce volatility between quarters,” said Robert Eckel,
Aware’s Chief Executive Officer and President. "During the second
quarter we focused on protecting, securing and expanding our
customer base commitments along with rolling out several product
improvements. Although not yet reflected in our revenue, we signed
several significant contracts in Q2 that have established the
foundation for future recurring revenue growth and more revenue
from partnerships. Furthermore, our technical team reinforced the
capabilities of AwareID's facial authentication, improved Knomi's
liveness detection excellence, and upgraded our orchestration to
address new identity verification use cases with document
authentication."
“The fidelity of our pipeline continues to improve,” added
Eckel. “In addition to opportunities we are generating directly,
our partners are bringing us high-quality opportunities with new
end customers that have the potential to expand our market share,
giving us the confidence to reiterate our expectation to grow total
revenue and ARR by 15% in 2023. Furthermore, we anticipate exiting
the year with neutral operating cashflow. Backed by an enhanced
product portfolio and robust partnerships, we are confident in our
ability to achieve our financial goals for the second half of the
year and look forward to building upon the foundation we have laid
in these first two quarters.”
Second Quarter 2023 Financial ResultsRevenue
for the second quarter of 2023 was $3.2 million, compared to $4.3
million in the first quarter of 2023 and $4.2 million in the same
year-ago period. The sequential and year-over-year decline in
revenue was primarily due to lower revenue from software
licenses.
Net loss for the second quarter of 2023 totaled $2.7 million, or
$(0.13) per diluted share, which compares to net loss of $1.6
million, or $(0.07) per diluted share, in the first quarter of 2023
and net loss of $1.3 million, or $(0.06) per diluted share, in the
same year-ago period.
Adjusted EBITDA loss (a non-GAAP metric reconciled below) for
the second quarter of 2023 totaled $2.4 million, compared to
adjusted EBITDA loss of $1.4 million in the first quarter of 2023
and adjusted EBITDA loss of $0.8 million in the same year-ago
period. The increased year-over-year increase in adjusted EBITDA
loss was primarily due to lower revenue.
Six Month 2023 Financial ResultsRevenue for the
six months ended June 30, 2023 was $7.5 million, compared to $8.9
million in the same year-ago period. The decrease in revenue was
primarily due to lower revenue from software licenses.
Net loss for the six months ended June 30, 2023 totaled $4.2
million, or $(0.20) per diluted share, which compares to net loss
of $2.6 million, or $(0.12) per diluted share, in the same year-ago
period.
Adjusted EBITDA loss (a non-GAAP metric reconciled below) for
the six months ended June 30, 2023 was $3.8 million, compared to
adjusted EBITDA loss of $1.4 million in the same year-ago period.
The larger adjusted EBITDA loss was primarily due to lower
revenue.
Cash, cash equivalents and marketable securities totaled $25.1
million as of June 30, 2023, compared to $29.0 million as of
December 31, 2022.
WebcastAware management will host a webcast
today, August 1, 2023, at 5:00 p.m. Eastern time to discuss these
results and provide an update on business conditions. A
question-and-answer session will follow management’s prepared
remarks.
Date: Tuesday, August 1, 2023Time: 5:00 p.m. Eastern time (2:00
p.m. Pacific time)Webcast: Register Here
The presentation will be made available for replay in the
investor relations section of the Company’s website. The audio
recording will be available for approximately 90 days following the
live event.
About AwareAware is a global authentication
company that validates and secures identities using proven and
trusted adaptive biometrics. Aware’s software and SaaS offerings
address the growing challenges that government and commercial
enterprises face in knowing, authenticating and securing
individuals through frictionless and highly secure user
experiences. Aware’s algorithms are based on diverse data sets from
all over the world and can be tailored to the unique security and
requirements of each customer. The company empowers users to have
control over identities through clear, intuitive opt-in/opt-out
features, helping them feel secure and improving their lives. Aware
is a publicly held company (NASDAQ: AWRE) based in Burlington,
Massachusetts. To learn more, visit www.aware.com or
follow Aware on Twitter @AwareBiometrics.
Safe Harbor WarningPortions of this release
contain forward-looking statements regarding future events and are
subject to risks and uncertainties, such as estimates or
projections of future revenue, earnings and non-recurring charges,
and the growth of the biometrics markets. Aware wishes to caution
you that there are factors that could cause actual results to
differ materially from the results indicated by such
statements.
Risk factors related to our business include, but are not
limited to: i) our operating results may fluctuate significantly
and are difficult to predict; ii) we derive a significant portion
of our revenue from government customers, and our business may be
adversely affected by changes in the contracting or fiscal policies
of those governmental entities; iii) a significant commercial
market for biometrics technology may not develop, and if it does,
we may not be successful in that market; iv) we derive a
significant portion of our revenue from third party channel
partners; v) the biometrics market may not experience significant
growth or our products may not achieve broad acceptance; vi) we
face intense competition from other biometrics solution providers;
vii) our business is subject to rapid technological change; viii)
our software products may have errors, defects or bugs which could
harm our business; ix) our business may be adversely affected by
our use of open source software; x) we rely on third party software
to develop and provide our solutions and significant defects in
third party software could harm our business; xi) part of our
future business is dependent on market demand for, and acceptance
of, the cloud-based model for the use of software: xii) our
operational systems and networks and products may be subject to an
increasing risk of continually evolving cybersecurity or other
technological risks which could result in the disclosure of company
or customer confidential information, damage to our reputation,
additional costs, regulatory penalties and financial losses; xiii)
our intellectual property is subject to limited protection; xiv) we
may be sued by third parties for alleged infringement of their
proprietary rights; xv) we must attract and retain key personnel;
xvii) our business may be affected by government regulations and
adverse economic conditions; xviii) we may make acquisitions that
could adversely affect our results, xix) we may have additional tax
liabilities; and xx) we believe the effects caused by the COVID-19
pandemic will likely have an adverse impact on our revenue over the
next several quarters.
We refer you to the documents Aware files from time to time with
the Securities and Exchange Commission, specifically the section
titled Risk Factors in our annual report on Form 10-K for the
fiscal year ended December 31, 2022 and other reports and filings
made with the Securities and Exchange Commission.
AWARE, INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share
data)(unaudited) |
|
|
|
|
|
Three Months
EndedJune 30, |
|
|
Six Months
EndedJune 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses |
|
$ |
1,039 |
|
|
$ |
2,018 |
|
|
$ |
3,145 |
|
|
$ |
4,646 |
|
Software maintenance |
|
|
1,767 |
|
|
|
1,819 |
|
|
|
3,602 |
|
|
|
3,481 |
|
Services and other |
|
|
378 |
|
|
|
401 |
|
|
|
743 |
|
|
|
803 |
|
Total revenue |
|
|
3,184 |
|
|
|
4,238 |
|
|
|
7,490 |
|
|
|
8,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and other revenue |
|
|
325 |
|
|
|
324 |
|
|
|
623 |
|
|
|
638 |
|
Research and development |
|
|
2,265 |
|
|
|
2,229 |
|
|
|
4,646 |
|
|
|
4,653 |
|
Selling and marketing |
|
|
1,956 |
|
|
|
1,412 |
|
|
|
3,947 |
|
|
|
3,193 |
|
General and administrative |
|
|
1,574 |
|
|
|
1,626 |
|
|
|
3,079 |
|
|
|
3,086 |
|
Total costs and expenses |
|
|
6,120 |
|
|
|
5,591 |
|
|
|
12,295 |
|
|
|
11,570 |
|
Operating loss |
|
|
(2,936 |
) |
|
|
(1,353 |
) |
|
|
(4,805 |
) |
|
|
(2,640 |
) |
Interest income |
|
|
284 |
|
|
|
64 |
|
|
|
585 |
|
|
|
73 |
|
Net loss |
|
$ |
(2,652 |
) |
|
$ |
(1,289 |
) |
|
$ |
(4,220 |
) |
|
$ |
(2,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – basic |
|
$ |
(0.13 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.12 |
) |
Net loss per share – diluted |
|
$ |
(0.13 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.12 |
) |
Weighted-average shares –
basic |
|
|
20,968 |
|
|
|
21,655 |
|
|
|
21,001 |
|
|
|
21,649 |
|
Weighted-average shares –
diluted |
|
|
20,968 |
|
|
|
21,655 |
|
|
|
21,001 |
|
|
|
21,649 |
|
AWARE, INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(In
thousands)(unaudited) |
|
|
|
|
|
June 30,2023 |
|
|
December 31,2022 |
|
ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,313 |
|
|
$ |
11,749 |
|
Marketable securities |
|
|
21,748 |
|
|
|
17,229 |
|
Accounts and unbilled receivables, net |
|
|
6,837 |
|
|
|
6,246 |
|
Tax receivable |
|
|
1,498 |
|
|
|
1,362 |
|
Property and equipment, net |
|
|
652 |
|
|
|
726 |
|
Goodwill and intangible assets, net |
|
|
5,719 |
|
|
|
5,926 |
|
Note receivable |
|
|
2,663 |
|
|
|
2,601 |
|
Right of use assets |
|
|
4,402 |
|
|
|
4,538 |
|
Othe assets, net |
|
|
840 |
|
|
|
815 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
47,672 |
|
|
$ |
51,192 |
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
Accounts payable and accrued expense |
|
$ |
1,483 |
|
|
$ |
1,921 |
|
Deferred revenue |
|
|
4,359 |
|
|
|
3,733 |
|
Operating lease liability |
|
|
4,576 |
|
|
|
4,517 |
|
Contingent acquisition payment |
|
|
812 |
|
|
|
812 |
|
Total stockholders’ equity |
|
|
36,442 |
|
|
|
40,209 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
47,672 |
|
|
$ |
51,192 |
|
|
|
|
|
|
|
|
Non-GAAP Measures
We define adjusted EBITDA as U.S. GAAP net loss plus
depreciation of fixed assets and amortization of intangible assets,
stock-based compensation expenses, other (expense) income, net, and
income tax provision. We discuss adjusted EBITDA in our quarterly
earnings releases and certain other communications, as we believe
adjusted EBITDA is an important measure. We use adjusted EBITDA in
internal forecasts and models when establishing internal operating
budgets, supplementing the financial results and forecasts reported
to our Board of Directors, and evaluating short-term and long-term
operating trends in our operations. We believe that the adjusted
EBITDA financial measure assists in providing an enhanced
understanding of our underlying operational measures to manage the
business, to evaluate performance compared to prior periods and the
marketplace, and to establish operational goals. We believe that
the adjusted EBITDA adjustments are useful to investors because
they allow investors to evaluate the effectiveness of the
methodology and information used by management in our financial and
operational decision-making.
We define recurring revenue as the portion of Aware revenue that
is based on an annual term or shorter arrangement and is likely to
continue in the future, such as annual maintenance or subscription
contracts. We use recurring revenue as a metric to communicate the
portion of our revenue that has greater stability and
predictability. We believe that recurring revenue assists in
providing an enhanced understanding of effectiveness of our efforts
to transition to a subscription-based business model.
Adjusted EBITDA and recurring revenue are non-GAAP financial
measures and should not be considered in isolation or as a
substitute for financial information provided in accordance with
U.S. GAAP. These non-GAAP financial measure may not be computed in
the same manner as similarly titled measures used by other
companies. We expect to continue to incur expenses similar to the
financial adjustments described above in arriving at adjusted
EBITDA and investors should not infer from our presentation of this
non-GAAP financial measure that these costs are unusual, infrequent
or non-recurring. The following table includes the reconciliations
of our U.S. GAAP net loss, the most directly comparable U.S. GAAP
financial measure, to our adjusted EBITDA for the three and six
months ended June 30, 2023 and 2022 and for the three months ended
March 31, 2023 and (ii) our U.S. GAAP revenue, the most directly
comparable U.S. GAAP financial measure, to our recurring revenue
for the three and six months ended June 30, 2023 and 2022.
AWARE, INC.Reconciliation of GAAP Net loss
to Adjusted EBITDA(In
thousands)(unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
Net loss |
|
$ |
(2,652 |
) |
|
$ |
(1,568 |
) |
|
$ |
(1,289 |
) |
Depreciation and Amortization |
|
|
148 |
|
|
|
149 |
|
|
|
221 |
|
Stock based compensation |
|
|
403 |
|
|
|
335 |
|
|
|
379 |
|
Interest Income |
|
|
(284 |
) |
|
|
(301 |
) |
|
|
(64 |
) |
Adjusted EBITDA |
|
$ |
(2,385 |
) |
|
$ |
(1,385 |
) |
|
$ |
(753 |
) |
|
|
Six Months
EndedJune 30, |
|
|
|
2023 |
|
|
2022 |
|
Net loss |
|
$ |
(4,220 |
) |
|
$ |
(2,567 |
) |
Depreciation and Amortization |
|
|
298 |
|
|
|
446 |
|
Stock based compensation |
|
|
737 |
|
|
|
808 |
|
Interest Income |
|
|
(585 |
) |
|
|
(73 |
) |
Adjusted EBITDA |
|
$ |
(3,770 |
) |
|
$ |
(1,386 |
) |
AWARE, INC.Revenue
Breakout(In
thousands)(unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
March 31 |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Recurring revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software subscriptions |
|
$ |
304 |
|
|
$ |
1,227 |
|
|
$ |
258 |
|
|
|
1,532 |
|
|
|
1,545 |
|
Software maintenance |
|
|
1,767 |
|
|
|
1,835 |
|
|
|
1,820 |
|
|
|
3,602 |
|
|
|
3,481 |
|
Total recurring revenue |
|
|
2,071 |
|
|
|
3,062 |
|
|
|
2,078 |
|
|
|
5,134 |
|
|
|
5,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software licenses |
|
|
735 |
|
|
|
878 |
|
|
|
1,759 |
|
|
|
1,613 |
|
|
|
3,101 |
|
Services and other |
|
|
378 |
|
|
|
365 |
|
|
|
401 |
|
|
|
743 |
|
|
|
803 |
|
Total non-recurring revenue |
|
|
1,113 |
|
|
|
1,243 |
|
|
|
2,160 |
|
|
|
2,356 |
|
|
|
3,904 |
|
Total revenue |
|
$ |
3,184 |
|
|
$ |
4,305 |
|
|
$ |
4,238 |
|
|
$ |
7,490 |
|
|
$ |
8,930 |
|
Aware is a registered trademark of Aware,
Inc.
Company Contact |
Investor Contact |
Gina Rodrigues |
Matt Glover |
Aware, Inc. |
Gateway Group, Inc. |
781-687-0300 |
949-574-3860 |
grodrigues@aware.com |
AWRE@gateway-grp.com |
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