AWRE - Earnings call transcript Q4 2023

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Matt Glover

Good afternoon, and welcome to Aware's Fourth Quarter and Full Year 2023 Conference Call.

Joining us today is the company's CEO and President, Robert Eckel; Principal Financial Officer; David Traverse; and CRO, Craig Herman. [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 indicated by such statements. These results 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. be light should these statements forward-looking considered of in factors. Any

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

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

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

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

Robert Eckel

XXXX. afternoon, and copy for Good XX, we reported year of you the model. website. XXXX of recurring full us began is a our a release subscription-first for transformation our the to fourth joining A of After Matt. Thanks, Investor everyone, impact our year and marked the December ended successful results the for thank press today. revenue the section Relations as business market closed, see quarter available record-breaking Aware we in to and

recurring optimizing by our efforts sustainable organizational growth revenue, strategy, and structure. our fit, accelerating product our to reflects enabling our continued prioritizing performance ecosystem, financial partner focusing Our market go-to-market drive annual

approximately ARR Headlining to my or this for Our was our our strategic an impressive level revenue recurring ARR, our $XX in transformational you annual revenue, in consider million markedly XXXX. first improved line XXXX. growth yielded expectations was in bringing especially execution of journey when $XX XX% total generating success year results, with million, a Aware in

Our on year-over-year have recurring of and XXXX QX, million highest see $X.X March in the revenue, since significant the In XX% to laying not efficiency revenue and reduction and base sustainable ability for establish in continue financial we level the impacted scalability. $XX.X sustainable future this We us a to the their million in million year-over-year now clients total year, net propelled the and has did write-off investment operational $X.X growth highest underscoring our reflecting also have did commitment the we momentum. in $X.X a a his Omlis strategic team marks it growth. generated financial revenue annual cash foundation XXXX. Furthermore, XX% revenue to in us a long but related burn million These strengthened achievements demonstrated recurring in history after and valuable only solid achieve do partners, focus growth. Limited. Overall, we to income quarter recurring year have cycles for securing level a position, growth. Craig cost and still company's in for positions XXXX. Moreover, strong optimization a by see negatively sales prudence our to our

onboarded strategy QX are Europe, to successes footprint including which Aware's customer program, geographies, a strategic in and emphasize Serban dedication for our few the to our impactful into our ecosystem. These technology core go-to-market our our partner our Africa successfully wins provider leading a and remains partner in in forging our defer global to bank. to poised a Middle clients in prominent key expanding commitment we dive Turkish North into to bolster third a tech Dubai, LatAm, several Northern unwavering. company America, Argentina, and across In the These XXXX, QX, recent highlight Solutions diverse markets. Furthermore, have months, I'd like I'll While wins. Notably, Craig deeper launched and market Group new and target integrated recent presence partnerships focus we Avanza East. was and and officially enhancing quarter, alliances verticals in spanning our on in

Serban our potential collaboration with a opportunities fact, across yielding with In is expansion results underscores fostering X direct beneficial growth outcome. and partnerships mutually our emerging verticals and that commitment already our markets. as promising to Group drive This focused

acknowledge progress. we quarterly updates, announce or important to intend every our not it's contract that secured in noted do previously in to As currently

highlighting competitive markets. worth additional highly leading and partnerships in resilient it's that identify technology opportunities Aware's to However, continue

future Although be robust as of growth. quarter-to-quarter, foundation we of mitigating basis fluctuations our of backlog. opportunities serves strong for pipeline the maintain our in there may providing and revenue from a fluctuations a force, impact some Moreover, solid a stabilizing these recurring

to Before over over us through for David year, the the the you. quarter review to to call results go-to-market. take discussing our financial turn David, I'll to Craig fourth full XXXX, and our and

David Traverse

Bob, good and everyone. you, afternoon, Thank

fourth higher same our full million, The to year-over-year revenue revenue. to in million software was XX, quarter due ago Total quarter Turning maintenance $X.X was the for financial ended year compared December XXXX. to $X.X improvement the largely results and year fourth for the period.

increase XX, XX, The of to recurring due December revenue. Annual revenue $XX.X XXXX, million, million to ARR, XXXX, software higher to increased compared total December XX, months to as $X.X was in in was ended increase as an primarily revenue, or XXXX. million, XX license million December the $XX $XX of revenue For XXXX. compared total

million million, QX year-over-year The revenue revenue. recurring increase. of total XX% in revenue represented $X.X recurring $X.X was XX% a or For XXXX,

revenue $XX million XX ended December months an XX% increase compared XX, recurring XXXX, of was the in For million, $X.X XXXX. to

$XXX,XXX FortressID as the of well loss, in consideration $X.X to gain XXXX. Omlis related $X.X QX XXXX of the which our the and gain our the write-off onetime as of onetime the million XXXX, sale fourth in July to to onetime the includes to Looking the quarter closeout XXXX of related related at acquisition, operating Limited building of in of investment and actions expenses our related operating million XXXX in in company's contingent

loss in quarter $X.X and $X.X of XXXX. loss XXXX million, in $X.X the December XXXX, XXXX fourth Our and million months ended period. expenses for fourth XXXX. Operating compared XX, XX, for $X.X months were QX as mentioned was in were million, of the XX up included operating which, loss same $X.X ended from onetime year. million December the $XX.X last $X year an to $XX.X expenses was Operating in XXXX million, ago million, operating the XX XXXX of the million for Operating million from earlier, compared actions in to quarter up

the onetime mentioned GAAP turning Now earlier. also which net to transactions includes loss,

the For $X.X loss or of totaled share $X.X diluted quarter in per net XXXX, million $X.XX net of million or diluted per of GAAP GAAP a last fourth $X.XX share, year. QX to loss compared

For the year. $X.XX XXXX, totaled million compared or per of or of share, GAAP year full loss in $X.XX GAAP net $X.X $X.X per diluted net to the prior loss share million diluted

EBITDA adjusted in of period. to loss year-over-year which in ago revenue. was compares $X.X adjusted due primarily same million the higher million, Our quarter totaled The to for year $X.X a improvement loss EBITDA the

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

of previously $XX.X in compared on million our cash end marketable and and quarter $X.X balance to sheet, at the at prior we claim the of $XX Looking million cash, an able IRS equivalents carryback the was long-term with we services our collect that as revenue. ended out a were million securities, project close unbilled year to

part cost the XXXX, our with backed the XXXX, repurchased flexibility the my the cash of strategy. That and program, we $XXX,XXX balance to us initiatives. stock during which our now As year. Entering sheet to discuss turn on over summary. potential share to call we growth Craig? ROI December XXX,XXX financial to made to our to are a completes Craig all previously like we progress shares a expedite go-to-market that evaluate extended common of at of I'd offers buyback And by announced the strong we position XX, opportunities

Craig Herman

Thanks, and to our and contributed year, segments, be. concerted and and it core stage highlighted exceptional to an expand set XXXX in commitment partnerships, our be Bob Aware, the business expected earlier, retain advance as the the steadfast we customer base for strategic in would product for to efforts performance and remain David. the AwareID. These through important proved we success our and growth scale of Throughout year market as fit continued future.

customers. enhancements the we by further our business. We advanced in of by front-end During guided series a in our the strategy across XXXX, from introducing latter strategically key valuable feedback our our portfolio year, investing of prioritized of investments, areas product part go-to-market

Solutions, of added integrated in in X has a initiatives our with our XX goals our QX, of in structure optimization Serban solutions. Presently, markets. strengthened market launch in organizational Aware with our which firms, to is to the partner materials can connections digital ability and enterprises November, impact. was knowledge launch ecosystem across of propelled dedicated presence and financial partner Avanza to and and this collaborative success. In position our financial success in partnerships leverage and achieve these amplify and governments development power namely formal to additions to and partners to Serban pivotal selling maximize program enablement were deep the business Additionally, among Aware's program others. our growth its to expect market commitment access XXXX. in the Europe, and our Serban partner These we the the Group partner and program. our collectively to and increase network comprised of underscore Group a LatAm quarter, high-growth the been is in formal our year. Since our our have commercial consulting bolster QX reach partner These their co-marketing and active we leader notable our actively refining of partners, partner third support and Group technology portal service effort expanding Central of where we for

new stemmed opportunities In have fact, already relationship. we X from conversation in that this

was to program partner Solutions. Avanza Another the recent addition

Middle With across the be and trusted Solutions our in will Avanza helping the regionalized, in Middle collaboration instrumental expertise region. East East, scale specialized maximize their us opportunity and with

tremendous the This data to the fact, a East opportunity for and Middle world services for financial the e-commerce. presents Aware. region points becoming in In economic fastest-growing

network, Latin In expanding across key we America this as regions onboarded the Middle quarter and new several such successfully partner to our customers addition beyond. East,

in mentioned Dubai additions notable provider technology a Bob include in company earlier, Turkish portfolio. bank tech As another a our to Argentina, and

fraud, of testing have enhanced Aware's collaboration into a online XXX presence share global with exams opportunity. built is across expanded momentum we and combat with our partnerships us home, more partnering the company PeopleCert we an and market to to are Aware in sector. With ARR. partnered generate burgeoning cases. growth our and deploying than be strong PeopleCert that territories, have technology U.S. Furthermore, we this offering significantly the DMV the leverage self-serve PeopleCert administers drive kiosks millions By to market to at extensive our countries increasing can globe, across relationships foundational in proxy foundation drive to we across continuing confident for vast Here a tapping markets our a ITI, customer increase has platform use and future

and opportunities to we focus SaaS-based center to ecosystem leveraging product in on and driving initiatives Bob XXXX. to platform, to markets. I'd capitalize back market discussion call core our our for revenue, As XXXX, of partner team's additional the the sharpen subscription-based on turn our of our entered on now incremental like our for increasing continuing fit target pipeline the Bob?

Robert Eckel

revenue is will short-term off when I from company years. the began time Craig. which revenue, million at with the entered pay amount now to the beginning annual evidenced $XX in positive of total cash Thanks, same the in as revenue and of pay XXXX. continue off flow achieved this by shift This for machine generated journey recurring transformational a a approximately company is first to the to recurring book-and-ship XXXX We've end

our robust go-to-market will center Our and use Identity ecosystem Platform. cases targeted enabled Biometric XXXX for our in around partner strategy

growth customer be and build adding towards business anticipate timing base our for quality prioritize upselling in ARR sustainable to logos. will we'll existing due onetime to new still commitment on and to fluctuations over awards. Furthermore, our we quarterly focus we specific profitability. scale, revenue. will of maintaining efficiency as We expanding both We'll in And continue

of we $X annual and our XXXX. engineering more fact, our was possible and our reduced by product operating strategy cost product fit. by made lines, in further resources QX than targeted efforts In leveraging million market to our optimize go-to-market This

QX able and recurring confident coming arises its upon in foundation the to additional address provide double-digit growth well solid available open Aware to warrants everyone's XXXX, is opportunity profitability. We the momentum towards are the cash and year continued to we're now instructions. we our an that investment, success performance if course, continued established appreciate paving Of call additional please with we that drive positioned it And as way ready support. and solid and for revenue, appropriate given resources. Building and sustain build that, the in the questions. Matt, we'll our

Matt Glover

quarter, First Instructions] [Operator within you traction you space. provide the Craig, question. update you on gaining Can last mentioned an gaming momentum were seeing? the

Craig Herman

with in a space gaming and we've gaming opportunities. diligently in in partners with strategic will presence market. QX our the global XXXX and in Yes, partner working product And show potential We've expand we February. integrated Yes, been trade January to been absolutely. events this -- gaming started working events, on co-marketing

several year. for lined events have gaming We the this in up additional space

also integration. websites launch the of of large of website our that WooCommerce platforms the used one tens of and platforms management worldwide. WordPress of These and millions by gaming number companies extremely leading are globally. is a with excited are are WordPress by We retail

By to process plug-in any integration this other with the that e-commerce well. the no-code sites, cases expand use in leveraging the vertical for sites transactions. in door verticals market-leading industry our WordPress sets any to Our technology, other platform opens WordPress's stage use WooCommerce in as

about So specific hand gaming been the though, question space our the has offering. response back to in the enthusiastic overall, to

Matt Glover

in article May partnerships. questions IDEMIA through Imprivata about couple published A an and biometric from facial health update care launching XXXX about for biometrics Aware of

on is still taken or recognition why rollout per aware? Second, just IDEMIA a or a transaction long? And First, involved fee? compensated facial it it is is is has the so Aware finally, flat

Craig Herman

The is -- of with of and Imprivata the product. a adoption We Sure. an go-to-market And our different the ways integrated consumers facial responsibility in of the reseller multiple Imprivata partners. product. partner and is multiple recognition Imprivata

Our the focus to in need they partners to go is way supporting our market.

usage-based are from our growth a We partnering pricing. with also on them based standpoint

So that the we headed. initial are by and excited direction the it's partnership

Matt Glover

much Thanks, $X.X Craig. David, maintenance? generated the in company revenue. recurring that subscription versus million of was QX, in How

David Traverse

Thanks, Matt.

which came contracts. maintenance million this the and legacy the was XX% in a subscription-based revenue, prior the conversion both $X.X the contributed multiyear customer million, to new of while So the remaining quarter, -- a about $X.X a $X.X year growth recurring the about contract XX% included million from revenue importantly, during from of prior about And subscription the quarter.

Matt Glover

to question. Thanks, with seems recurring sale this of stream? there to this Is annual Aware's onetime a The David. The sale residual Was next potential Knomi system this Is fully revenue implemented. during relationship? quarter? with be online maintenance brought QX PeopleCert growth revenue the

Craig Herman

and that not great in question, business use the but Yes, ]. John their live Aware did [ is sale, go This subscription-based of QX. a a engagement, PeopleCert grow onetime grows. as will

with them that opportunity part our recurring very we revenue have of the and growth growth this that for are are model. partners excited future We by like

Matt Glover

from comment authentication you AwareID sale? achievable authentication to to DEA or significant Aware you expect source? products Do is become And compliance lastly, revenue other Aware on primarily When ID you revenue product you. from do an to Can this this provided uniquely revenue has Imprivata? another the Imprivata one also? suited expect Is a with revenue is recurring the Craig, implementation? enable

Craig Herman

but as or cases responsibility industry specifically wide strength the stream. on-prem in of recurring either a is compliance not Aware situation. engagements, be for Aware revenue is that this range of the They can deployment. DEA as configured products and -- SaaS this leveraging The are solutions. products, for of specific A Imprivata is our use well This AwareID a

Matt Glover

are measuring How performance the in channel? one. partner you Another

Craig Herman

Yes.

we've a As our serves co-marketing, materials. ecosystem previously, discussed to as partners resource sales access hub enablement central for training our and

the effectiveness various the to These process for the resource projects, assess also last partner program new on addition metrics our meticulously us considerably addition of comprehensive a engagements, each RevOps building performance and partners, helped active a of to and to pipeline of metric a enabling ecosystem a metrics reporting year to mechanics. of In valuable the name volume the level track established both indicators, few. has the like tracking, key as and itself of portal, us resource as serve the facilitates out continually. The new volume

the joined He's companies. partner lead our also us We to has efforts. started of and with Head Jarvis expanding Todd Todd began search for has of a this partner Partnerships start-ups global our to am oversee strategic go-to-market. week. that building to arm I the enterprise and excited global set engaged had ecosystems announce extensive experience to extremely

to forward organization our across and partner looking are he We have will impact the ecosystem.

Matt Glover

Bob, grow XXXX? ARR by the XX%. company in thinking are in at Craig. exceeded XXXX, Thanks, you momentum about least expectations How to

Robert Eckel

ask. great figured question. a it's somebody Well, I would

So the impact ARR, performance our greater of in especially model and years success business positions really XXXX, our even ahead. transformation in strong for in the Aware XX% growth demonstrate the

revenue, for that million build total we've Aware annual coming baseline to revenue. end XXXX. at about I and continued year was company established drive sustain looking in And of and its and for entered the additional as double-digit of growth Aware a performance is we're joined QX positioned this foundation, profitability. XXXX, recurring in momentum is solid we're $XX to and well same pave that when towards XXXX and So recurring we success confident the this solid the amount with building the And of the way the generated upon revenue

Matt Glover

you targeting highlighted ITI, call, what partnership market. you in recent expanding with Can testing the North into other America? are Craig, on you Thank a you, which Aware is Bob. share industries the

Craig Herman

speak approach targeting. to to generally I'm our regarding Absolutely. happy more

on vertical. and industry geography is targeting twofold, Our based really

America on focus LatAm, we East. the and hard Based Middle geography, to for establish on relevant region. have We footholds the worked industry verticals North in

as across geographies. as example, our a and target know, target LatAm Middle is gaming the you all East. financial For shared in service target a We've

Of course, our foundations on in North as have strong we government and America to well. targets Europe build

space continue the our U.S. disrupt offering. We law the to with in Aware Avis enforcement

and our to partner the position and verticals maintain through America a planning other and North are We grow to look around ecosystem here world our in in number of direct.

Matt Glover

that million operating annual than by David, you can further more tell reduced the mentioned you $X you What about recurring operating us in XXXX. anticipate? QX cost Bob costs

David Traverse

Matt. Thanks,

specifically on we're focused really be to kind spending. But the discipline revenue earlier. continue also the we maintaining of in also that mentioned revenue we -- growth and So Bob our recurring

that So quarters, did the year. made with to the $X made towards saving And second quarters, quarter changes second of million the timing talked savings of begin we the few including some benefits Bob in initiatives year. in past the of we the past last of in first that the we in on quarter drive in that profitability. Based about continue was the to see XXXX, cost we'll we few some half to this actions addition the the over of of that cost should

Matt Glover

can what share Craig, David. customer legacy Thanks, you about conversions?

Craig Herman

Sure.

with actively was start emphasize subscription-first are clear expanding looking our business to primary our revenue at our our customer on partner we logos new said, that me That ecosystem. really recurring focus we let's First, being streams. and as model, base

leveraging our efforts During model. formed this XXXX, regard newly intensified our success we in customer by

customers to on as we and Our our subscription the fluctuations. success brings subscription, us having license. The versus is converting advantage XXXX, our we help significant are minimize more cloud to converted This during our to perfect fourth revenue predictability positive in and a advantage subscription customers. In to quarter-to-quarter model incentivizing a annual to which models. take been all our drive of one position well has are of continue quarter, team feedback will legacy offerings. the sides, teams additional subscription-based legacy as for In we an show customers increasing OEM example,

Matt Glover

expert. Another company's had you, has What Last this operations Craig. brought one you quarter, a on for sales in revenue the process? changes

Craig Herman

about our brought upgrading we bit in RevOps processes XXX-degree on person our a technology a help and QX to give focus talked view I and earlier, her bet. sales to has us in of is with what time. so happening partners impact Aware advantage The can our The see in all and members of customers. now is tremendous. been real customers our far You near that

follow-up, a process visibility invest which us to KPIs growing messaging sales also to have focused marketing is give the track combination This to lead and to impact areas from been overall handoff, and technology our can funnel. on leads focus the ensure in flow critical touch opportunities. business. is again lead This and and the for of won to funnel of first closed that a We specific our process we corresponding throughout and ability improve

Matt Glover

what And perspective, XXXX? Craig, from technology areas are in a focused you on

Craig Herman

demand. by to We continually anticipating and advance adapting market Aware's technology

addressing the numerous experience. product we challenges of confident enhancements Following user Biometric our maintaining and enhancing top-tier are Platform, year, while in current this security Identity robustness industry-recognized of effectively capable

Platform We and unique to gaming, product bespoke of financial our further These recognize industry, our are reach of and and target certification services, through offerings requirements access to testing. expand include control, of poised of family Identity our tools, adoption tailored online Biometric the the introduction sectors.

Matt Glover

see next you the based to impact could border the potential immigration question, business on problem? or positive of legal solutions to a in proposed Our any your a

Craig Herman

global But large spike the there saw Absolutely. governments This influx with transactions is U.S. other had have as we areas up. It see of government. with a And as right hitting now. where more is worked immigrants, well global was this. we where home we experience where we've

based for also the is up. our on So as pricing, as additional transaction, need usage-based services, which additional technology, goes well

So bottom typically an yes, impact our will -- will this on have have line.

Matt Glover

this Thank this our time, At question-and-answer you, session. concludes Craig.

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

Robert Eckel

on look a call. in on provide. And learn they us support more presentation strategy investor Over our We our as available forward you, that's our our Matt. for Aware's website. continued to reminder, progress updating like the to on partners, to next I'd may the on you like I'd about you call. everybody thank today's to employees, joining shareholders thank our our also Yes. for that

Matt Glover

via remind in for recording of Thanks, that Thank us Call. will joining for for Full call link you website. XXXX section Quarter of like the Bob. today's replay Fourth available and a Conference Investors to Year Aware's be company's the I'd everyone today

may disconnect. now You

Aware (AWRE) 12 Mar 242023 Q4 Earnings call transcript