Aware(US:AWRE)2021-04-28 02:31Financial 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]