Summary
Aware, Inc. reported third quarter 2022 revenue of $3.02 million, down 27.8% from the same quarter a year earlier. The decline reflected persistent macroeconomic headwinds and customer orders that were postponed to the fourth quarter of 2022, according to management. Operating income swung to $2.44 million from a loss in the prior-year quarter. Net income was $2.60 million, or $0.12 per diluted share. Operating margin was 81.1%, up sharply from the prior-year quarter. The quarter's profit included a one-time gain from the July 2022 sale of the company's Bedford, Massachusetts headquarters. Without that gain, the operating picture would look much weaker. Software license sales dropped sharply, while maintenance revenue held up better.
For the first nine months of 2022, revenue was $11.94 million, down 7.1% from the same period of 2021. The company reported an operating loss of $0.20 million, compared with an operating loss in the prior-year period, a 95.7% improvement. Net income for the nine months was $0.03 million, or $0.00 per diluted share. The year-to-date operating margin was -1.6%, up from the prior-year period. The lower operating loss was primarily due to the building sale gain, which was partly offset by lower revenue. Excluding that gain, the nine-month result would have been a loss.
Aware continued its SaaS transition. Recurring revenue for the first nine months reached $7.1 million, an increase of $0.3 million from the same period last year. Deferred revenue was $3.81 million at September 30, 2022, up 21.0% from a year earlier. Remaining performance obligations were $2.30 million, up 4.5%. Those metrics offer some support for the subscription story. Still, adjusted EBITDA loss was $2.5 million in the third quarter, compared with an adjusted EBITDA loss of $1.0 million in the prior-year quarter. For the nine months, adjusted EBITDA loss was $3.9 million, compared with $3.0 million a year earlier. The adjusted EBITDA loss widened in the third quarter because of lower revenue.
Cash generation remains a weak spot. Operating cash flow was -$2.00 million in the third quarter, a 5.6% decline from the prior-year quarter. For the nine months, operating cash flow was -$4.56 million, a 12.6% improvement from a year earlier. Capital expenditures were $0.13 million in the third quarter, up from the prior-year quarter. Year-to-date capital expenditures were $0.14 million, up 585.7%. The company sold its Bedford headquarters in July 2022 and moved to Burlington, Massachusetts. Management described the balance sheet as strong, but the business continues to burn cash.
The company did not offer specific financial guidance for the next quarter or the full fiscal year. It did say it expects AwareID, launched early in the fourth quarter at the Money2020 conference, to drive higher sales and recurring revenue in the future. Aware appointed Craig Herman as Chief Revenue Officer to lead a more focused enterprise sales effort and expand partner programs. The main risks include a significant portion of revenue from government customers, reliance on third-party channel partners, intense competition, rapid technological change, potential software defects, cybersecurity threats, limited intellectual property protection, the need to retain key personnel, and the possibility that a significant commercial market for biometrics may not develop. Management also cited COVID-19 as a factor that could hurt revenue over the next several quarters.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $3.0M | $4.2M | -28.9% | $4.2M | -27.8% |
| Gross profit | $2.7M | $3.9M | -30.2% | $3.9M | -30.5% |
| Gross margin | 90.7% | 92.3% | -1.7 pp | 94.2% | -3.5 pp |
| Research & development | $2.3M | $2.2M | +2.2% | $2.3M | -1.2% |
| Sales & marketing | $1.9M | $1.4M | +32.7% | $1.6M | +14.9% |
| General & administrative | $1.8M | $1.6M | +11.2% | $1.6M | +14.9% |
| Total operating expenses | $571.0K | $5.6M | -89.8% | $5.8M | -90.1% |
| Operating income (loss) | $2.4M | -$1.4M | +280.6% | -$1.6M | +254.7% |
| Operating margin | 81.1% | -31.9% | +113.0 pp | -37.8% | +118.9 pp |
| Net income (loss) | $2.6M | -$1.3M | +301.6% | -$1.6M | +264.6% |
| Net margin | 86.2% | -30.4% | +116.6 pp | -37.8% | +124.0 pp |
| Diluted EPS | $0.12 | -$0.06 | +$0.18 | -$0.07 | +$0.19 |
Risks
Software license revenue decreased 63% from $2.2 million in Q3 2021 to $0.8 million in Q3 2022, primarily due to lower perpetual license sales, and fell to 27% of total revenue from 53%. This dependence on volatile license deals contributed to a 27.8% decline in total Q3 revenue.
Q3 2022 operating income of $2.4 million and net income of $2.6 million benefited primarily from a $5.7 million gain on the sale of the corporate office, which masked a decline in software license revenue and indicates core operations may not be profitable without asset sales.
Operating cash flow was negative $4.56 million for the nine months ended September 30, 2022, and negative $2.00 million in Q3 2022, with Q3 operating cash flow down 5.6% versus the prior-year quarter. Continued cash use in operations may pressure liquidity.
Total engineering costs as a percentage of total revenue increased from 61% in Q3 2021 to 85% in Q3 2022. Cost of services and other revenue as a percentage of services and other revenue increased from 54% to 68% in Q3 2022, reflecting lower service revenue and less favorable project mix.
Selling and marketing expense increased 15% in Q3 2022 compared to Q3 2021 primarily due to severance costs related to the August 2022 termination of the Chief Commercial Officer position. Executive turnover may disrupt sales execution and commercial market expansion.
General and administrative expense increased 15% in Q3 2022 compared to Q3 2021 primarily due to bad debt expense, suggesting deteriorating customer credit quality or collection issues.
Services and other revenue decreased from $0.5 million in Q3 2021 to $0.4 million in Q3 2022, and from $1.7 million to $1.2 million for the nine months ended September 30, 2022, primarily due to less services performed with system integrators. This reduces a less volatile revenue stream.
SaaS KPIs
All quarters →Recurring Revenue
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from AWARE INC /MA/'s SEC filings for Q3 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.