Summary
Aware, Inc. posted second quarter fiscal 2022 revenue of $4.24 million, down 0.6% from $4.26 million in the prior-year quarter. Losses narrowed. Net loss came in at $1.29 million versus $1.54 million a year earlier, and the diluted loss per share was $0.06 versus $0.07. The operating loss of $1.35 million narrowed from $1.54 million, and operating margin improved to -31.9% from -36.2%, a gain of 4.3 percentage points. First-half fiscal 2022 revenue was $8.93 million, up 2.9% from $8.68 million. The six-month net loss of $2.57 million narrowed from $2.99 million, the six-month operating loss of $2.64 million narrowed from $2.99 million, and six-month operating margin was -29.6% against -34.5%, up 4.9 percentage points.
The mix kept shifting toward licenses. Software license revenue rose 17% from the prior-year quarter, lifting licenses to 48% of total revenue from 40%. Software maintenance revenue rose 3%, and its share of revenue moved from 41% to 43%. Services and other revenue fell, and its share of total revenue dropped from 18% to 9%. Management tied the slight year-over-year revenue decline to the macro environment and to supply chain delays that reduced orders from OEM partners buying software for their biometric devices. Across the first six months, license revenue rose 14%, maintenance rose 5%, and services and other revenue declined. Recurring revenue reached 56% of total revenue in the first half of fiscal 2022.
Operating expenses came down, led by lower research and development spending and lower selling and marketing expense. Adjusted EBITDA loss, a non-GAAP measure, narrowed to $0.8 million in the second quarter from $0.9 million a year earlier, and to $1.4 million for the six months from $2.0 million. The quarterly improvement came mostly from lower operating expenses, while the six-month improvement reflected higher revenue along with higher depreciation, amortization and stock-based compensation. Operating cash flow was an outflow of $0.18 million for the quarter versus an outflow of $0.85 million a year earlier, and an outflow of $2.56 million for the six months versus an outflow of $3.32 million. Capital expenditures were $0.01 million in the first six months, down from $0.02 million. Deferred revenue rose 19.9% to $3.53 million from $2.95 million a year earlier, and remaining performance obligations rose 14.3% to $2.40 million from $2.10 million.
Cash improved after quarter-end. Aware closed the sale of its Bedford, Massachusetts office building on June 29, 2022 for $8.9 million, and it received $8.6 million in net cash shortly after June 30. Those proceeds are not in the June 30 cash position. Management said its cash and cash equivalents will fund operations for at least the next twelve months and give it room to invest in organic growth and acquisitions. The company recorded no income tax benefit for the three or six months and keeps a full valuation allowance against its net deferred tax assets.
Risks are numerous and familiar. Aware draws a significant portion of revenue from government customers and from third party channel partners. It faces intense competition, rapid technological change, and no certainty that a broad commercial market for biometrics develops. The safe harbor list also names software defects, reliance on third party and open source software, demand for the cloud-based model, cybersecurity threats, limited intellectual property protection, potential litigation, key personnel retention, government regulation, acquisition risk, tax liabilities, and an expected adverse revenue impact from COVID-19 over the next several quarters. Supply chain delays and the macro environment already trimmed OEM orders in the second quarter. Management gave no numeric guidance for the third quarter or the full fiscal year. Its commentary stayed directional, with the CEO citing momentum with financial institutions in Latin America and Europe, more regional reseller partnerships for the Knomi mobile authentication platform, and confidence in growing recurring revenue and the top line.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $4.2M | $4.7M | -9.7% | $4.3M | -0.6% |
| Gross profit | $3.9M | $4.4M | -10.6% | $4.0M | -1.0% |
| Gross margin | 92.3% | 93.3% | -1.0 pp | 92.8% | -0.4 pp |
| Research & development | $2.2M | $2.4M | -8.0% | $2.4M | -5.7% |
| Sales & marketing | $1.4M | $1.8M | -20.7% | $1.5M | -5.9% |
| General & administrative | $1.6M | $1.5M | +11.3% | $1.6M | -0.5% |
| Total operating expenses | $5.6M | $6.0M | -6.5% | $5.8M | -3.7% |
| Operating income (loss) | -$1.4M | -$1.3M | -5.0% | -$1.5M | +12.3% |
| Operating margin | -31.9% | -27.4% | -4.5 pp | -36.2% | +4.3 pp |
| Net income (loss) | -$1.3M | -$1.3M | -0.8% | -$1.5M | +16.4% |
| Net margin | -30.4% | -27.3% | -3.2 pp | -36.2% | +5.7 pp |
| Diluted EPS | -$0.06 | -$0.06 | ±$0.00 | -$0.07 | +$0.01 |
Risks
MD&A states software license sales depend on winning proposals to supply software for biometrics systems projects, and services revenue depends on winning similar projects. A decrease in services and other revenue in the three and six months ended June 30, 2022 reflects less services performed with system integrators.
Services and other revenue decreased from $0.8 million in the three months ended June 30, 2021 to $0.4 million in the three months ended June 30, 2022, and cost of services and other revenue as a percentage of services and other revenue increased from 40% to 81% in the current quarter. Continued project timing and mix shifts could pressure gross margins.
MD&A states the company is expanding into new commercial biometrics markets but is unable to predict future revenue from these emerging markets. This creates uncertainty for growth assumptions outside legacy government biometrics.
Cash and cash equivalents were $25.0 million at June 30, 2022, a decrease of $5.0 million from December 31, 2021, with $2.6 million used in operations and $2.5 million used in investing in the first six months of 2022. The company believes cash is sufficient for at least twelve months but may need additional financing.
MD&A notes that inflation has not had a material impact on financial results to date but states there can be no assurance that inflation will not adversely affect future financial results.
SaaS KPIs
All quarters →Adjusted EBITDA loss
Summary, forecast, risks and KPIs are extracted from AWARE INC /MA/'s SEC filings for Q2 FY2022 (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.