Summary
Aware opened fiscal 2021 with revenue of $4.42 million in the quarter ended March 31, 2021, up 25.6% from $3.52 million in the prior-year quarter. That marked the third consecutive quarter of growth. Management tied the gain to subscription revenue that rose with transaction volume from existing customers and to upfront recognition of fixed minimum amounts from two new international wins. Subscription revenue is already approaching fiscal 2020 levels, and the company reported a fivefold year-over-year increase in that line. The AFIX acquisition, closed in the fourth quarter of 2020, added product revenue to the mix as well.
Profitability went the other way. Operating loss widened to $1.45 million from $1.35 million in the prior-year quarter, and net loss widened to $1.45 million from $1.06 million. Diluted loss per share was $0.07, compared with $0.05 a year earlier. Operating margin was negative 32.8%, better than negative 38.3% a year ago by 5.5 percentage points. Adjusted EBITDA loss, a non-GAAP measure, was $1.1 million, level with the prior-year quarter.
Costs climbed with the expanding business. Research and development expense rose 5%, selling and marketing expense rose 29%, and general and administrative expense rose 26%, each measured against the prior-year quarter. Management cited higher employee costs from added headcount, contracted sales agents and professional services. The spending is deliberate: Aware is funding sales and engineering resources for newer product lines while the revenue base scales.
Backlog pointed in the right direction. Deferred revenue was $3.54 million, up 35.4% from $2.62 million, and remaining performance obligations were $1.90 million, up 35.7% from $1.40 million. Cash did not keep pace. Operating cash flow was negative $2.47 million, a wider outflow than negative $0.55 million in the prior-year quarter, with the net loss and working capital changes absorbing cash. Management said it believes its cash and cash equivalents will fund operations for at least the next twelve months, while cautioning that it cannot assure investors no additional financing will be needed.
Operationally, the Knomi mobile liveness product processed more than 7 million transactions in the first three months of 2021, compared with 11 million transactions for all of 2020. Aware partnered with Intercede to power its MyID solution, and the pair has already booked an initial order under a ten-year contract with the U.S. Department of State, delivered through Guidehouse. The company passed the NIST PFT III evaluation and named cybersecurity executive Gary Evee to its board.
Management gave no numeric guidance for the second quarter or for the full fiscal year 2021. The CEO said 2021 should bring material growth by the end of the year and described pipeline expansion and execution on the subscription model as the near-term priorities. Pandemic disruption is the largest near-term risk: travel restrictions have blocked customer meetings, product demonstrations and trade shows, and the filing states that COVID-19 effects likely hurt revenue in the quarter and will likely hurt revenue over the next several quarters. The risk list also includes heavy dependence on government customers and channel partners, intense competition, rapid technological change, software defects, cybersecurity exposure, limited intellectual property protection and acquisition integration. Aware kept a full valuation allowance against its net deferred tax assets, an indication that management does not yet expect sustained taxable income. It also flagged that operating results fluctuate and are difficult to predict.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $4.4M | $3.4M | +29.0% | $3.5M | +25.6% |
| Gross profit | $4.0M | $3.1M | +30.2% | — | — |
| Gross margin | 91.3% | 90.5% | +0.9 pp | — | — |
| Research & development | $2.4M | $2.1M | +16.0% | $2.3M | +5.5% |
| Sales & marketing | $1.7M | $1.6M | +0.7% | $1.3M | +28.6% |
| General & administrative | $1.4M | $1.2M | +15.1% | $1.1M | +26.3% |
| Total operating expenses | $5.9M | $5.3M | +11.1% | $4.9M | +20.6% |
| Operating income (loss) | -$1.4M | -$1.9M | +21.9% | -$1.3M | -7.6% |
| Operating margin | -32.8% | -54.2% | +21.4 pp | -38.3% | +5.5 pp |
| Net income (loss) | -$1.4M | -$1.6M | +11.5% | -$1.1M | -36.6% |
| Net margin | -32.8% | -47.8% | +15.0 pp | -30.1% | -2.6 pp |
| Diluted EPS | -$0.07 | -$0.08 | +$0.01 | -$0.05 | -$0.02 |
Risks
COVID-19 restrictions prevented face-to-face customer meetings, in-person software demonstrations, trade shows and conferences, and meetings with prospective strategic partners. Management states these effects adversely impacted revenue in 2020 and the quarter ended March 31, 2021 and will likely have an adverse impact on revenue over the next several quarters.
Revenue rose 25.6% to $4.42 million in FY2021 Q1, but operating loss widened to $1.45 million from $1.35 million and net loss widened to $1.45 million from $1.06 million, primarily due to higher operating expenses from increased headcount in sales and engineering resources. Operating cash flow also decreased 350.1% to negative $2.47 million.
In February 2021 Aware became aware that a small number of email accounts were subject to a cyber-attack. The company says it does not believe it experienced material losses and the incident did not interrupt business, but the filing warns that evolving cyber risks could lead to data disclosure, regulatory penalties and financial losses.
Cash and cash equivalents were $36.0 million, a decrease of $2.5 million from December 31, 2020, with $2.5 million used in operations in the first three months of 2021. Management still believes cash and cash equivalents will fund operations for at least the next twelve months.
Summary, forecast, risks and KPIs are extracted from AWARE INC /MA/'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.