Summary
Third quarter revenue at Aware was $6.38 million, up 111.6% from the prior-year quarter. Net income was $1.14 million, down 56.0%. Diluted EPS was $0.05, down 58.3%. Operating income was $0.75 million, down 69.4%. The nine-month period looks different. Revenue for the nine months was $13.87 million, up 16.1%. Operating income was a loss of $4.06 million, down from the prior-year nine-month period. Net income swung to a loss of $3.08 million. Diluted EPS was negative $0.15, down from the prior-year nine-month period. The quarter's profit depended on higher software licenses revenue, and the company says license revenue will keep fluctuating.
Operating cash flow was $2.46 million for the quarter, up 222.7% from the prior-year quarter. For the nine months, operating cash flow was negative $1.24 million, up 72.8%. Deferred revenue was $5.91 million at September 30, 2023, up 55.3% from the prior-year quarter. Remaining performance obligations were $3.70 million, up 60.9%. Operating margin was 11.7% for the quarter, down 69.4 percentage points. For the nine months, operating margin was negative 29.3%, down 27.6 percentage points. Capital expenditures were $0.00 million for the quarter, down 100%, and $0.02 million for the nine months, down 88.9%.
Non-GAAP adjusted EBITDA was $0.4 million in the quarter, compared with adjusted EBITDA loss of $2.5 million in the prior-year quarter and $2.4 million in the second quarter. Recurring revenue was $2.2 million, up 4% from $2.1 million in the prior-year quarter. For the nine months, recurring revenue was $7.3 million, up 3% from $7.1 million. The company secured a $3.4 million U.S. government contract with five years of annual maintenance options that could value the total contract at $5.1 million. It deployed AwareABIS to three law enforcement agencies. The $5 million contract with its largest BioSP customer in the second quarter and the new government deal are expected to contribute over $1.5 million to annual recurring revenue. Aware also launched a formal partner program, enhanced its AwareID platform with facial identification and a developer hub, and its facial presentation attack detection algorithms ranked a top performer in a NIST Face Analysis Technology Evaluation test of 82 algorithms.
Management reiterated full-year guidance for total revenue and annual recurring revenue growth of 15% and to exit the year with neutral operating cashflow. It cited a partner-centric sales strategy, a positive customer renewal rate, expansion with existing customers, and a high-fidelity pipeline of opportunities. The company also repurchased 81,083 common shares at a weighted average price of $1.52 per share under its buyback program. Risks include reliance on government customers and changes in their contracting or fiscal policies, dependence on third-party channel partners, intense competition, rapid technological change, possible software defects, use of open source software, reliance on third-party software, uncertain demand for cloud-based software, cybersecurity threats, limited intellectual property protection, the need to attract and retain key personnel, government regulations, adverse economic conditions, acquisitions, and additional tax liabilities.
The quarter's revenue jump was driven by software license revenue, including a government contract, which management says will fluctuate. The nine-month operating loss and net loss show that profitability remains uneven. Deferred revenue and remaining performance obligations increased, which gives some visibility into future work. Still, hitting the full-year guidance depends on the fourth quarter and on neutral operating cashflow, while the mix of government deals and channel partners leaves results exposed to timing and policy shifts.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $6.4M | $3.2M | +100.4% | $3.0M | +111.6% |
| Gross profit | $6.0M | $2.9M | +108.8% | $2.7M | +118.5% |
| Gross margin | 93.6% | 89.8% | +3.8 pp | 90.7% | +2.9 pp |
| Research & development | $2.3M | $2.3M | -0.0% | $2.3M | -0.7% |
| Sales & marketing | $2.2M | $2.0M | +11.0% | $1.9M | +15.8% |
| General & administrative | $1.6M | $1.6M | +1.7% | $1.8M | -11.4% |
| Total operating expenses | $5.6M | $6.1M | -7.9% | $571.0K | +886.7% |
| Operating income (loss) | $747.0K | -$2.9M | +125.4% | $2.4M | -69.4% |
| Operating margin | 11.7% | -92.2% | +103.9 pp | 81.1% | -69.3 pp |
| Net income (loss) | $1.1M | -$2.7M | +143.1% | $2.6M | -56.0% |
| Net margin | 17.9% | -83.3% | +101.2 pp | 86.2% | -68.3 pp |
| Diluted EPS | $0.05 | -$0.13 | +$0.18 | $0.12 | -$0.07 |
Risks
A single government contract contributed $3.0 million of license revenue in FY2023 Q3, helping drive total revenue up 111.6% versus FY2022 Q3. Reliance on large, irregular government awards can cause revenue and operating results to fluctuate sharply.
MD&A says software license sales have historically fluctuated and are expected to continue fluctuating because sales are based on the timing of projects with customers and partners. Software license revenue rose 439% in FY2023 Q3 and 38% year to date, but such swings may not be repeatable.
The strategy includes expanding into new commercial biometrics markets, but MD&A states it cannot predict future revenue from these emerging markets. This creates uncertainty around growth outside legacy government biometrics markets.
Services and other revenue decreased 75% in FY2023 Q3 and 31% year to date, while cost of services and other revenue increased 45% in FY2023 Q3. Cost as a percentage of services and other revenue rose to 406% in FY2023 Q3 from 68% in FY2022 Q3, and gross margins on these services are expected to continue fluctuating.
Operating income decreased 69.4% to $0.75 million in FY2023 Q3 from $2.44 million in FY2022 Q3, and operating loss widened to $4.06 million year to date from $0.20 million. MD&A attributes the prior-year benefit to a one-time $5.7 million gain on the sale of the corporate office, making current profitability look weaker by comparison.
SaaS KPIs
All quarters →Recurring Revenue
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from AWARE INC /MA/'s SEC filings for Q3 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.