Summary
Aware's second quarter of 2023 showed a sharper revenue decline and a wider loss than the prior-year quarter. Revenue was $3.18 million, down 24.9% from the same quarter last year. The company said lower software license revenue drove the drop. For the six months ended June 30, 2023, revenue was $7.49 million, down 16.1% from the prior-year period. The quarterly operating loss widened to $2.94 million. The six-month operating loss widened to $4.80 million. Net loss for the quarter widened to $2.65 million. The diluted loss per share widened to $0.13. The six-month net loss widened to $4.22 million. The diluted loss per share for the six months widened to $0.20. Operating margin was -92.2% for the quarter, down 60.3 percentage points from the prior-year quarter, and -64.2% for the six months, down 34.6 percentage points.
Operating cash flow was negative $2.21 million for the quarter, down from a smaller use of cash in the prior-year quarter, and negative $3.70 million for the six months, down 44.6% from the prior-year period. Capital expenditures were $0.02 million year to date, up 45.5% from the prior-year period. Deferred revenue was $4.36 million, up 23.4% from the prior-year quarter. Remaining performance obligations were $4.00 million, up 66.7% from the prior-year quarter. Those two forward-looking balance sheet items suggest some bookings momentum even as reported revenue falls. Adjusted EBITDA loss, a non-GAAP measure, was $2.4 million for the quarter, compared with an adjusted EBITDA loss of $0.8 million in the same year-ago period. For the six months, adjusted EBITDA loss was $3.8 million, compared with an adjusted EBITDA loss of $1.4 million in the prior-year period.
Management pointed to several contract wins that have not yet shown up in revenue. Aware contracted to expand an existing European government system by introducing facial recognition and securing a five-year, $5 million contract plus options up to $8 million. The company expanded its Knomi footprint in the Middle East by introducing contract management use cases. It secured two additional AwareABIS contracts, including its first cloud ABIS award. AwareID's identity verification technology was integrated into the Canadian-based mobility app A Safer Walk. The company also showcased its authentication solutions at IACP Tech Conference, Identity Week Europe 2023, America Digital Mexico, Febraban Tech 2023, and Border Security Expo. Management said the second quarter's signed contracts established a foundation for future recurring revenue growth and more revenue from partnerships.
Guidance remains unchanged. Aware reaffirmed its expectation for full-year 2023 total revenue and annual recurring revenue growth of 15%, and it expects to exit 2023 with neutral operating cash flow. That is full-year guidance, not a quarterly target. The company continues to expect software license revenue to fluctuate because it depends on project timing with customers and partners. Risks include a significant portion of revenue from government customers, whose contracting and fiscal policies can change; the possibility that a significant commercial market for biometrics may not develop; reliance on third-party channel partners; intense competition; rapid technological change; cybersecurity threats; and the need to attract and retain key personnel. Aware also reported no income tax benefit for the three and six months ended June 30, 2023, and it maintained a full valuation allowance against net deferred tax assets. The company said inflation has not had a material impact on results to date, though it cannot assure that will continue.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $3.2M | $4.3M | -26.0% | $4.2M | -24.9% |
| Gross profit | $2.9M | $4.0M | -28.6% | $3.9M | -27.0% |
| Gross margin | 89.8% | 93.1% | -3.3 pp | 92.3% | -2.6 pp |
| Research & development | $2.3M | $2.4M | -4.9% | $2.2M | +1.6% |
| Sales & marketing | $2.0M | $2.0M | -1.8% | $1.4M | +38.5% |
| General & administrative | $1.6M | $1.5M | +4.7% | $1.6M | -3.2% |
| Total operating expenses | $6.1M | $6.2M | -0.9% | $5.6M | +9.5% |
| Operating income (loss) | -$2.9M | -$1.9M | -57.1% | -$1.4M | -117.0% |
| Operating margin | -92.2% | -43.4% | -48.8 pp | -31.9% | -60.3 pp |
| Net income (loss) | -$2.7M | -$1.6M | -69.1% | -$1.3M | -105.7% |
| Net margin | -83.3% | -36.4% | -46.9 pp | -30.4% | -52.9 pp |
| Diluted EPS | -$0.13 | -$0.07 | -$0.06 | -$0.06 | -$0.07 |
Risks
Software license revenue decreased 49% in the three months ended June 30, 2023 compared with the prior-year period, and 32% in the six months ended June 30, 2023, driven by lower perpetual license sales. The company expects software license revenue to continue to fluctuate based on the timing of customer and partner projects.
Operating loss widened to $2.94 million in FY2023 Q2 from $1.35 million in FY2022 Q2, and net loss widened to $2.65 million from $1.29 million, primarily due to lower software license revenue and higher expenses. Operating cash flow was negative $2.21 million in FY2023 Q2 compared with negative $0.18 million in FY2022 Q2.
Selling and marketing expense increased 38% to $2.0 million in the three months ended June 30, 2023, due to higher employee costs from increased headcount and contracted sales agents. Total engineering costs as a percentage of total revenue increased from 60% to 81% over the same period.
Revenue depends on winning biometrics systems projects directly or through channel partners, and software license sales are tied to the timing of customer and partner projects. The company's strategy includes expanding into new commercial biometrics markets, but it is unable to predict future revenue from those emerging markets.
Cash, cash equivalents and marketable securities decreased $3.9 million from December 31, 2022 to $25.1 million at June 30, 2023, primarily due to $3.6 million of cash used in operating activities and $0.3 million for common stock repurchases. The company believes current cash is sufficient for at least the next twelve months but future needs depend on growth and operating results.
SaaS KPIs
All quarters →Recurring Revenue
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from AWARE INC /MA/'s SEC filings for Q2 FY2023 (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.