Summary
Aware grew third-quarter 2021 revenue 68.8% year over year, to $4.2 million from $2.5 million. Management attributed the gain to subscription revenue tied to higher Knomi transaction volumes from existing customers, new Knomi contracts, and fixed-fee license deals. Software license revenue rose 176% and accounted for 53% of total revenue, up from 32% a year earlier. Revenue for the nine months ended September 30, 2021 was $12.9 million, up 63.1% from $7.9 million in the prior-year period, and the first nine months have already topped all of fiscal 2020.
The bottom line improved but stayed negative. Operating loss narrowed to $1.6 million for the quarter from $2.5 million a year earlier, a 37.3% improvement, and the operating margin went to -37.8% from -101.9%. Net loss was $1.6 million, or -$0.07 per diluted share, against $1.8 million, or -$0.08 per diluted share, in the prior-year quarter. Over the nine months, the net loss was $4.6 million, or -$0.21 per diluted share, compared with $6.0 million, or -$0.28 per diluted share. Adjusted EBITDA loss, a non-GAAP measure, was $1.0 million for the quarter versus $2.1 million a year earlier, and $3.0 million for the nine months versus $6.6 million.
Expenses kept climbing. Selling and marketing expense rose 25% and general and administrative expense rose 30%, driven by higher headcount, contracted sales agents and professional fees, though both fell as a share of revenue, to 39% from 53% and to 38% from 49%. Total engineering costs dropped to 61% of revenue from 100% a year earlier. That is the clearest evidence of operating leverage so far. Management also said OEM revenue, where the software development kit is built into hardware, has rebounded significantly.
Cash remains the weak spot. Operating cash flow was -$1.9 million for the quarter, up 15.6% from -$2.2 million a year earlier, but the nine-month figure of -$5.2 million is down 24.5% from -$4.2 million in the prior-year period. Capital expenditures were just $21 thousand for the nine months, down 95.5%, so the burn comes from operations rather than investment. Aware recorded no income tax benefit in either 2021 period, unlike a year earlier, and it holds a full valuation allowance against its net deferred tax assets. Management said cash and cash equivalents will fund operations for at least the next twelve months from the filing date.
Backlog gives a mixed read. Deferred revenue of $3.1 million was up 3.5% year over year, while remaining performance obligations of $2.2 million were down 8.3% from $2.4 million. Knomi processed 12 million transactions in the quarter, lifting the year-to-date count to 31 million, against 11 million for all of 2020. The company points to that usage as the engine behind subscription revenue; the reported backlog measures told a more mixed story.
No numeric guidance was issued for the fourth quarter or for the full fiscal year. The CEO said the company is confident in delivering solid results as it works toward the end of the fiscal year and continues to evaluate strategic opportunities to accelerate growth and add scale. The disclosed risks are familiar: results fluctuate and are hard to predict, a significant portion of revenue comes from government customers and third-party channel partners, competition is intense, a broad commercial market for biometrics may not develop, acquisitions could hurt results, and COVID-19 is expected to weigh on revenue over the next several quarters.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $4.2M | $4.3M | -2.1% | $2.5M | +68.8% |
| Gross profit | $3.9M | $4.0M | -0.6% | $2.3M | +69.1% |
| Gross margin | 94.2% | 92.8% | +1.4 pp | 94.0% | +0.2 pp |
| Research & development | $2.3M | $2.4M | -2.4% | $2.3M | -1.1% |
| Sales & marketing | $1.6M | $1.5M | +8.7% | $1.3M | +24.9% |
| General & administrative | $1.6M | $1.6M | -3.7% | $1.2M | +30.4% |
| Total operating expenses | $5.8M | $5.8M | -0.9% | $5.0M | +15.2% |
| Operating income (loss) | -$1.6M | -$1.5M | -2.4% | -$2.5M | +37.3% |
| Operating margin | -37.8% | -36.2% | -1.7 pp | -101.9% | +64.0 pp |
| Net income (loss) | -$1.6M | -$1.5M | -2.4% | -$1.8M | +11.1% |
| Net margin | -37.8% | -36.2% | -1.7 pp | -71.8% | +34.0 pp |
| Diluted EPS | -$0.07 | -$0.07 | ±$0.00 | -$0.08 | +$0.01 |
Risks
Due to the COVID-19 pandemic, the company has been unable to conduct face-to-face meetings with customers, present in-person software demonstrations, attend trade shows, or meet prospective strategic partners. Management states these effects adversely impacted revenue in 2020 and the three and nine months ended September 30, 2021 and will likely adversely impact revenue over the next several quarters.
The filing discloses a February 2021 cyber-attack in which a small number of email accounts were accessed. The company states it does not believe it experienced material losses and the attack did not interrupt business, but the risk factor describes potential remediation costs, litigation, regulatory actions, and insurance deductibles or coverage limits.
The company's market strategy depends on expanding into new commercial biometrics markets, but management states it is unable to predict future revenue from commercial markets because these are emerging markets.
SaaS KPIs
All quarters →Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from AWARE INC /MA/'s SEC filings for Q3 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.