AWRE - Earnings call transcript Q2 2022

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Matt Glover

Good afternoon, and welcome to Aware's Second Quarter 2022 Conference Call.

Joining us today is the Company's CEO and President, Robert Eckel; and Corporate Controller, David Traverse, filling in for our CFO, David Barcelo, who's on vacation.

Following their remarks, we'll open the call for questions.

If you'd like to submit a question, you can do so at any time using the built-in Ask a Question feature in the webcast player.

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. note the safe release. end take is paragraph please at included of should of harbor the that Listeners today's press paragraph be uncertainties statements major emphasizes inherent This forward-looking in and that today. making risks will management the Aware that cause wishes from results actual factors statements. such materially could indicated differ to by that to are you those caution there results Form Form These including its filings, risks Company's XX-K quarterly the and SEC and uncertainties in are XX-Q. reports on report also on outlined annual in light considered these Any factors. forward-looking be statements of should

You the are place to undue reliance which speak upon statements, cautioned not any only date forward-looking as of made.

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

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

I'd CEO Bob? to and Aware like President, call Eckel. to over Now, Bob the turn

Robert Eckel

business share call, that progress subscription-based join our Aware. close, we're making release XX, today's us quarter we for David for results. demonstrate joining you to additional available and XXXX. financial our transforming Traverse, you our in our announcing and points quarter Barcelo, today We're the that year-to-date quarterly is long-term prior commitment Corporate June review then this second copy on continued market Controller, growth XXXX and plan our some Dave who press Investor of us second our with on today is drivers afternoon, After I'll On to issued our David will be the execution model of A will could provide our update discuss I Thanks, drive everyone, in release on details Matt. Good section, could thank After for business on results for Relations and a glad filling ended scale. not website. CFO, a a Afterwards, this section personal and had strategic unfortunately us the the the outlook. David's call. press today. our

call in million the $X.X your the a in questions. quarter, challenging we despite economic open for we'll environment. top second delivered To revenue line Lastly, begin,

issues impact negative have rates supply in to not are the been current the are chain immune increasing macroeconomic interest news. the reported We headwinds that and by purchasing caused decisions. for Higher shortages inflation,

bank in mobile accounts banking. solutions investment which market such, growth solutions slows timing the Mexico of authentication the these financial that And changes Aware largest Turkey. and fewer biometrics-based result applications, often in the Brazil market seen in have Europe. address specifically, customers particularly secured credit our companies their in Furthermore, and and with partnerships our with already issues America two in that expect financial and to being and has largest fraud prevention continue of strategic banks onboarding consequently reviewing are workflows. existing services services As three through momentum financial of resellers. institutions Latin adding strong we target some Nevertheless, some in in of the opened banks fewer our for the

to solutions. priorities we biometric-based expanding our strategic of have mentioned, in second expense our that leverage of quarter, and top Throughout is expertise additional to partnerships P&L. partners without sales adding enable our to of reach us opportunities the strategic we one our global continue our the add expand partnerships number the previously XXXX. As These expand

been XX for typically their to ramp revenue. full see to It from We and with can it recurring looking X VARs integrated these thereby up in value-added does take has and base with current of takes for customers enterprises up are the subscription-based macro production. who safeguard solution of working resellers on focus total cash. XX% our product adoption our environment, into to QX in time to setting months. the resellers integrated drive Our which revenue, offerings, And our the anywhere represents many customers their

As a result, in a the some is robust this current Having improve. asset. environment conditions market customer macro position until launches are an being delayed cash

In that all onboarding on at response showcased Aware us biometrics attendees three transaction-related that we capital with strength weather economy office balance we invest shows the the $X.X a last facing as continues headwinds. and and This aligned expenses, volatility. compared and strengthened flexibility gain major offerings. cash has the for On have of adoption SaaS-based we accounting $X.X new and that this a strong expectations net us to market inorganic and supported impact for million. by in our growth million current business strategy additional to by the demonstrated road pursue The Mass of product our from portfolio position note, in to the and negative resilience growth investment our track. us year-to-date received cash. building macroeconomic revenue the enthusiastic year Fortunately, overall current solutions issues strong recently sheet demonstrated our strategic world. enables organic any authentication opportunities are our industry recent map sheet provides withstand balance as to we long-term use the leading-edge in recently to our over summary, After with a to face final are confidence in gives authentication sale our of the Bedford, trade of Furthermore, with is for

the our base. resellers partnerships and of of focused VARs integrated adoption number with are enterprises revenue on solutions overall and accelerate recurring to We and customer biometrics-based our growing expand

we execute multipronged enter our as of to phase our transition strategy to platform final continue We company. a the

our discussing financial I'll remainder for walk business over call drivers our over turn David before of us the through focus for second to quarter. XXXX, Now the to results you. and the to David,

David Traverse

Bob, to everyone on Thank good you, and afternoon the call.

was first second ended six compared June $X.X same our in to ago the XXXX billion results million year Turning million of XX, in $X.X for was and in revenue million, quarter XXXX, from up our financial $X.X the XXXX. period. the Total $X.X XX, months for ended revenue quarter ago the the to million same Year-to-date, period. $X.X year June total

result in of devices. Bob second in over As chain mentioned, year primarily their the from revenue software the our orders slight for fewer our was resulting provide partners biometric delays, period supply quarter to OEM we decrease prior whom the

Looking at expenses. operating our

of XXXX, operating decrease second due X% to quarter of lower $X.X million the primarily year. $X.X expenses For to The marketing our in decreased slightly was $XXX,XXX million from QX operating R&D expenses costs. and last in sales

due was operating ended period. from flat the for $XX.X was $X.XX same six second the For Operating June to loss million, million compared corresponding XXXX, loss of XXXX, year prior the The loss were improvement operating lower of our an a was period. year year-over-year operating period. improvement expenses million, XX, for the $X.XX June in year operating total compared XX% the XXXX in prior to The ago $X.X XX, expenses. quarter to the six months an ended million, operating primarily decrease loss months

ago loss loss totaled net GAAP XXXX, $X.XX ago $X.XX of $X.X GAAP diluted GAAP XXXX, compared quarter share million $X.X ended net period. in compared to of diluted June share period. share of same or per diluted net in or per $X.XX six $X.X loss share GAAP per second for net the a million diluted the loss same For the or or $X.XX months the million per million $X XX, year totaled a to year

GAAP Our the totaled we is for to our release, which compared ago loss period. earnings same adjusted with in which the $XXX,XXX, EBITDA flat net year loss reconciled quarter,

prior June ended compared loss adjusted XXXX, $X.X of adjusted million XX, the EBITDA an period. EBITDA six the in totaled year For loss $X million months to

in following with building and the million net Looking cash the our is the position my map provides road macro of close us of and with environment, an with In had and $XX.X $X.X at end and the quarter cash to robust compared enable at to the in to million $XX flexibility cash capital million of end an allocate Considering Bedford, asset. current strategic week the strive equivalents high scale financial opportunities second evaluate long-term quarter, strong resourcefully office continue plan quarter. Massachusetts at This completed prior organization. valuations, our to we our the that aligned maintain balance to cash of we ROI this potential. In a summary. the sheet, the us as in product cash that sale to position growth challenging believe opportunities we completes received our are we would actively proceeds. drive We

the would and Bob the our beyond. XXXX rest to insights back I Bob? of Now turn like call additional on key to for for initiatives

Robert Eckel

David. Thanks,

XXXX, half and focused of the adaptive the model in our three related we second expanding growth platform to derived revenue achieve company software on remains steady recurring phase order and authentication our to expansion progress. company transformation, accelerating The objectives this remain a from we're track book-and-ship and make strong transition to existing the on beyond. our a final second and a for In portfolio. focused revenue business on half recurring base continues XXXX from platform, of of our Our maintenance in of of subscriptions revenue, with cloud-based of launch

remain our partnerships with indirect First, vital. resellers

as We or current of accelerate our expect our operating and we our to SaaS introduce platform. leverage increase offerings scalability the sales partner-led

these refocusing accounts. our we're emphasis So around

around success a in model to drive Second, ultimately or recurring are stay for like factors, proof-of-concept SaaS-based users deployments recent efforts crucial as longer have particularly planned increase strong and end than biometrics a To stages address of we accelerate and team and driving we their to Aware's this begun is focus customer business seeing the users because as of expertise. to Having result anticipated. macroeconomic on revenue, end adoption our faster often move a adoption, success. we platform pilot customer

cultural is For many, mind biometrics change. shift. It a requires real a

we of from time biometric-based to of customers Aware's Commercial Officer. we the part the spend and solutions. Chief specific are them are success with customer we Officer efforts, transitioning a increasing enable And and partners biometrics Chief Revenue benefits our third, of to a As the leverage these advantages to

even We companies, the offering. today. week's initiatives, XX impacted product performance. and made enough will business from been strategic It management with in revenue scale in he's organizational an model best to and in thank in we organization our work still supported leading confidence management business account lines stages strong in are share our it the into account onetime to that success. positioned phase to of As combined progress the Aware business, Chief be impact operations existing final we'll QX contributions a what filing, incurring SaaS our with our cannot be by emphasizing and of as am including sales, success efforts, transformation, to our X-K We programs, XXXX the I helped to years new when the CCO from leaving future. our transition. SaaS wish By sales to background well Officer, has Officer departure. note we've and generation the are We're Chief on have many Rob lead with Aware will the him due macroeconomic a August all but shape Company expenses Aware's the in be pleased is final to Revenue by current a we partnership other Commercial development, to like execution as accelerate continued alignment this is and actions, sustainable These in last and encouraged XX. the environment. are a the Rob by his three noted enhanced commercial in him hiring certainly do, customer CRO for Mungovan, that some better expected over anticipating the customer has important drive made shifting we revenue-generating

a mix mix. resulting balanced Fortunately, we customers, in diversified a revenue having from benefit of

our our can Our product that and drive of portfolio commercial integrated our solutions partnerships and platform. of offerings is customers address advanced increasing biometrics-based as faster efforts of of and success summary, around to a government well SaaS from our customer facilitate authentication full adoption In growth production the requirements solutions the offers our and operating leverage as range priority broad customers. top our

sale provides with strategy, even giving our business growth of us organic opportunities continue or Our from to stability the the robust our investment this in multipronged us building return the whether economic stronger on in executing with highest prudently with the inorganic. environment also objectives challenging Bedford plan, made flexibility investing while that proceeds the position growth long-term including align and cash

is exact and Matt, The what to With at We is our on please continue to is top profitability we anticipate look EBITDA increasing that and we that, in team for still the to We instructions. line conditions. achieving we the support, dependent timing macroeconomic growth. XXXX. ahead adjusted remain base The recurring revenue our and unknown can continue are company confident ready provide appropriate appreciates and Aware your forward continued call questions. open for industry.

Matt Glover

Bob. you, Thank

using a hold populate As while in webcast player. Question a built-in feature submit the question the you we Ask a Please reminder, the question. can

David. question of for you, cash the impact building to First the What is your is position? sale

David Traverse

Matt. Thanks,

the perspective, at our or net included there's tax the With net of in $X.X strong of received sale the sale as the of cash of the million it quarter. cash end the tax end to of our the no disposals million income building, the loss in be gain sale we able to From the on a ordinary year. capital from position were of that already will be the of from will -- add Bedford building, the we the gains and $XX that

Matt Glover

anticipating a Thanks, mentioned to expenses David. onetime some those you from in costs? to transition a CRO. the Can onetime QX you CCO approximate due Bob,

Robert Eckel

Specific April employment were the the Rob to on agreements in our was filed statement XX. agreement latest of And X-K specific the July are available a SEC in that proxy copy with on included to filed XXXX. Mungovan, amendment the of

Matt Glover

you hiring new do Bob, a another When one for anticipate you. CRO?

Robert Eckel

date to sales, on And Mungovan have to comes to experience with after more partner an areas which time further August. we offer successful work with an transition. expected software, date, SaaS announcement. driving as we'll and in a revenue and to and several enterprise the in at individual off the CRO Rob made We've will be goes CRO any if until an such us details all issue descriptive person extensive new candidate sharing This we'll ensure the start start a and incoming in accepted, has about early plan, holding begin official to

Matt Glover

Bob. Thanks,

You back didn't you mention your expected growth rate. Are scaling your guidance?

Robert Eckel

visibility, XXXX recurring Well, in based expect on grow we line our to top current our with revenue. pipeline along and our

we our will However, given year we don't for a sure their because it's remarks, headwinds rate specific the more growth how commit prepared continued much prudent on these the to impact to not buying think macroeconomic the headwinds have customers that mentioned and decisions. macroeconomic in we're

Matt Glover

decreased? count patent your has Why

Robert Eckel

approximately the patent and/or patent by Between unnecessary while portfolio maintenance XXXX and family. the yearly has with reduced within jurisdictions and U.S. $XX,XXX affected $XXX,XXX furthermore, into process XXXX, in our patents And sequences. each deviations remove And to our process reduced one we per sacrifician IP the trace cost patent any of multiple guard secrets our optimization year approximately those to maintaining no trade of portfolio or by more value. count from our introduction X/X which was refines

our grow and critical cost. continue aligned when for fully better technology So us business. positioned breakthrough without getting patent to applications bank the with then of we And new also the sequence trade is protection any future we of and

Matt Glover

Thanks Bob.

on by year? How this next environment be the question. confident end ability the an push into cash are to basis macro XXXX? Does your operating out you breakeven Next in of

Robert Eckel

we'll We of by still anticipate this environment We're adjusted profitability to end over And point. the at cross the EBITDA macro unknown the managing reiterate, we although XXXX. I'll is best again, exact can. the timing

Matt Glover

your Bob, capital next question. plan? Any color you on can add allocation

Robert Eckel

doesn't All are our or investment announcements that opportunities to return I enables to plan prior on inorganic, both. plan. getting don't are to growth cash is highest those position that market on it our say road specifics general we're and if looking a And strong can invest product I this the long-term have with area. matter in map that in at organic us into our aligned we're fortunate And

Matt Glover

Bob. Thanks

for Aware quarter? the second David. is any question Next you, in repurchases make share Did

David Traverse

Yes.

did nominal the shares, shares with has we line in purchase we'll and approved continue a So repurchase of repurchase number that program set. to share been

Matt Glover

Thank you. Mungovan terminated? was Rob Why

Robert Eckel

a the It account Well, shift be Commercial as this a realignment, enhanced in to what Rob in realigning us him we'll we're the And grow of putting lines CRO. I certainly new the CCO customer strategic I position SaaS he's has a stated position. years, we product from elimination for as revenue stated earlier, management, and and emphasizing service initiatives, then thank And to the enough over can't done. and existing better impact organization made Officer supported from Chief an by success customer XX the to offering. earlier, resulted with

Matt Glover

Thanks sales Bob. current macro strategy? your plans hiring or Has changed

Robert Eckel

has or current environment sales The changed hiring strategy. macro our not

we're we need and will our prepared to our the we on them. of As them hires get into into positioned production We have with And both incoming to focus can work reallocation input and any and guide personnel resources, mentioned in CRO on we've prepared success we to strategic through changes identify anticipate well our customers remarks, their do into sales implement them and that strategies, remain hiring internal it. so strengthened customer and adoption. full

Matt Glover

Bob. Thanks,

How many a the are one customers When trialing? contributor? can is Next SaaS be our meaningful regarding offering. offering SaaS

Robert Eckel

our we meaningfully as of believe we're assurance we for a been more adding SaaS couple it overwhelmingly in very That will contribute been to or has we as process on. experience our -- great select revenue optimal Their offering on positive helpful a that half SaaS more can year And functions. on now us quarters they're the we're quality and the for assure with coming has and feedback and basic to as trialing constructive an of the dozen going XXXX. availability, be and have currently so track platform, general now, trial well speak. customers in second right we baseline needed the are Well, feedback, user in so some relative our providing FY

Matt Glover

Dave, revenue? the was subscription next for you. What one is

David Traverse

last year. $X.X So year-to-date, that been and compares the subscription has million, revenue $X.X million to

Matt Glover

seen Bob, next you deal macro? slow of you. Have the question for because activity

Robert Eckel

commercial seeing some deals before, of generally, As the to in some of budgets must are contrast, their budgets due are In decisions plans on that the situation. can on. some government more and the as be we mentioned applications, more I timing we with evaluate the in the decisions closure commercial know in of impact place line executed investment definitely be side, macroeconomic and discretionary. But the longer-term companies are

slow. regardless we seeing yes, of environment, some So the activity deal are

have we us customer as year. diversified as to increase and revenue a overall compared year-to-date including revenue, mix, a last However, to allowing recurring the percentage maintain it's and of

Matt Glover

concludes At Bob. session. this question-and-answer our time, this Thanks

e-mail IR I'd If like call to back over remarks. turn to now your team please question wasn't awre@gatewayir.com. the at answered, for Aware's Bob closing

Robert Eckel

forward I'd you for again to on continued and our Well, to partners everyone haven't I'd like our And downloaded our call. to you available you, we I call. updating website. remind already I as you investors strategy. about thank more And to also do today joining this and employees, presentation us learn like all to next the always, if Over that's our to Matt. their investment you so, thank it, once overall look want invite on for about on support,

Matt Glover

Thank replay available Relations Thanks Bob. a XXXX call. Investor quarter us Company's you second the will today the today's Aware's link of section call for of for earnings joining be in A recording conference for website. via

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Aware (AWRE) 27 Jul 222022 Q2 Earnings call transcript