Aware, Inc. (NASDAQ:AWRE) Q4 2021 Earnings Conference Call March 1, 2022 5:00 PM ET Company Participants Matt Glover - Gateway Group Robert Eckel - President, CEO & Director David Barcelo - CFO & Treasurer Conference Call Participants Matt Glover Good afternoon, and welcome to Aware's Fourth Quarter and Full Year 2021 Earnings Conference Call. Joining us today is the company's CEO and President, Robert Eckel; and CFO, David Barcelo. [Operator Instructions]. Before we begin today's call, I'd like to remind e ...

Aware, Inc. (NASDAQ:AWRE) Q3 2021 Earnings Conference Call October 26, 2021 5:00 PM ET Company Participants Matt Glover - Investor Relations Robert Eckel - President and Chief Executive Officer David Barcelo - Chief Financial Officer Conference Call Participants Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assis ...

Aware, Inc. (NASDAQ:AWRE) Q2 2021 Earnings Conference Call July 27, 2021 5:00 PM ET Company Participants Matt Glover – Investor Relations Robert Eckel – President and Chief Executive Officer David Barcelo – Chief Financial Officer Conference Call Participants Matt Glover Good afternoon, and welcome to Aware’s Second Quarter 2021 Earnings Conference Call. Joining us today is the company’s CEO and President, Robert Eckel; and CFO, David Barcelo. Following their remarks, we will open the call for questions. [O ...

Financial Data and Key Metrics Changes - Total revenue in Q1 2021 increased by 26% to $4.4 million from $3.5 million in Q1 2020, and sequentially increased by 29% from $3.4 million in the prior quarter [12] - Operating expenses rose by 21% to $5.9 million from $4.9 million in Q1 2020, primarily due to investments in sales and engineering resources and costs from the AFIX acquisition [13] - GAAP net loss for Q1 2021 was $1.4 million or $0.07 per share, compared to a net loss of $1.1 million or $0.05 per share in the same period last year [14] - Cash and cash equivalents at the end of Q1 2021 were $36 million, down from $38.6 million at the end of 2020 [15] Business Line Data and Key Metrics Changes - Subscription revenue growth was highlighted, with a record number of transactions protected by Knomi, surpassing 7 million in Q1 2021, compared to 11 million for the entire year of 2020 [15][21] - The company is transitioning from perpetual license contracts to subscription revenues, which may cause variability in quarterly results [10][28] Market Data and Key Metrics Changes - The global biometric system market is expected to grow at a CAGR of 18%, with the SaaS market also projected to grow at the same rate [19] - The healthcare biometrics market is expected to grow at a CAGR of 24% over the next four years, presenting significant opportunities for the company [24] Company Strategy and Development Direction - The company is focused on a three-part transformational growth strategy, which includes transforming existing platforms, expanding offerings, and shifting towards Biometric Identity Management as a Service [17][27] - The company aims to penetrate new and emerging markets while maintaining focus on government and financial services, with recent forays into healthcare [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the transition from pandemic-related headwinds to tailwinds, emphasizing the importance of customer engagement during this period [10] - The company anticipates continued growth in subscription revenue and transaction volumes as it transitions to a subscription-based model [28] Other Important Information - The company is actively pursuing external growth opportunities that complement its core capabilities [29] - A significant partnership with Intercede was announced, focusing on secure multi-factor authentication for federal agencies [25] Q&A Session Summary Question: Discussion on the company's future real estate plan - The company received an unsolicited request to purchase its office building as part of a bid for a government project, with uncertain timelines for the sale [32] Question: When will the company start disclosing subscription revenue? - Subscription revenues will be disclosed in the upcoming 10-Q, as they have not yet hit a materiality threshold [34] Question: Current progress in commercial biometrics - The split between government and commercial sales is roughly 40-60, with 40% from commercial customers, indicating good progress [37] Question: More context on the two new international wins - New customers were secured in Latin America and Europe, with subscription revenue recognized upfront for these customers [39] Question: Understanding consumption-based revenues - Transaction counts do not directly correlate with subscription revenue due to minimum commitments, leading to variability in quarterly revenue recognition [41] Question: Impact of recent M&A activity in the space - The company does not intend to compete directly with Nuance in speech recognition, focusing instead on speaker recognition [43] Question: Plans for vaccine passports and health applications - The company is monitoring developments around vaccine passports and is providing biometrics software to system integrators for these applications [47] Question: Indicators for the transformation speed - The company is in the initial stages of subscription transformation, with positive indicators such as increased transactions and minimum subscriptions [49] Question: Any significant license payments or initial subscription payments this quarter? - Revenue should be viewed on an annual basis, with some lumpiness expected due to upfront minimums in subscription contracts [52] Question: Subscription revenue for the quarter - Subscription revenue for the quarter was just under $800,000, with expectations for continued disclosure as it becomes material [56] Question: Share repurchase versus acquisitions - The company is evaluating the best use of cash, balancing between share repurchase and strategic acquisitions [58]

Revenue Performance - Total revenue for 2020 was $11.3 million, a decrease from $12.2 million in 2019, primarily due to lower services revenue [100]. - Software license revenue increased by 9% from $4.6 million in 2019 to $5.0 million in 2020, representing 45% of total revenue in 2020 compared to 38% in 2019 [102]. - Software maintenance revenue rose by 3% from $5.3 million in 2019 to $5.4 million in 2020, accounting for 48% of total revenue in 2020 [104]. - Services revenue decreased by 64% from $2.3 million in 2019 to $0.8 million in 2020, dropping to 7% of total revenue [106]. Expenses - Research and development expenses increased by 8% from $7.9 million in 2019 to $9.1 million in 2020, representing 87% of total revenue [112]. - Selling and marketing expenses surged by 50% from $3.6 million in 2019 to $5.4 million in 2020, making up 48% of total revenue [115]. - General and administrative expenses rose by 51% from $3.6 million in 2019 to $5.4 million in 2020, also 48% of total revenue [116]. Operating Loss - Operating loss for 2020 was $9.4 million, compared to a loss of $4.1 million in 2019 [100]. - Cash used by operating activities was $5.3 million in 2020, primarily due to a net loss of $7.6 million [122]. Cash Position - Cash and cash equivalents at the end of 2020 were $38.6 million, expected to fund operations for at least the next twelve months [126]. Financial Reporting and Accounting - The company does not have any off-balance sheet arrangements with unconsolidated entities, thus avoiding exposure to financing, liquidity, market, or credit risk [128]. - Revenue is recognized based on the transfer of control of promised goods and services, following the five-step model outlined in ASC 606 [130]. - Revenue is categorized into software licenses, software maintenance, and services, with software licenses recognized at a point in time upon delivery [131]. - As of December 31, 2020, the company had $8.7 million in deferred tax assets, fully offset by a valuation allowance of $8.7 million [141]. - The company adopted ASU No. 2019-12 on January 1, 2020, which simplified the accounting for income taxes without resulting in adjustments to financial statements [143]. - The company is assessing the impact of ASU 2016-13 on its consolidated financial statements, which changes the methodology for measuring credit losses [144]. Stock-Based Compensation - Stock-based compensation is measured at grant date fair value and recognized as an expense over the vesting period [136]. - The company uses the Black-Scholes model to estimate the fair value of stock options, considering various significant assumptions [137]. Revenue Recognition - Revenue from software maintenance is recognized over time on a straight-line basis over the contract period [131]. - The company makes judgments regarding the allowance for doubtful accounts based on a review of significant outstanding invoices [142].