AWARE INC /MA/ Q3 FY2024 earnings call

• Continued to execute long-term growth strategy focused on expanding ARR and improving bottom line, with operating expenses down $1.3 million in the first 9 months of 2024 compared to 2023.
• Recurring revenue grew 29% year-over-year in Q3, strengthening long-term growth foundation. Delays in some larger deals pushed to Q4 or early Q1 2025, but a $1 million booking in mid-October post-Q3 is expected to boost Q4 and 2024 end.
• BioSP platform enhanced in 2024 with features like off-line biometric enrollment, contributing to winning a $1 million European government deal. Expanded ABIS portfolio with 2 new term contracts and 5 ABIS accounts, expected to generate steady revenue over next 5 years.
• Access control remains a growth area with traction in Brazil and increasing adoption in regions like Middle East and Latin America. AwareID launched as no-code plug-in on WordPress Marketplace, expanding reach in industries like online gaming, retail, etc.
• Enhanced partner program with new pillars and hosted Partnership Summit, launching new partner ecosystem site.

In Q3 2024, total revenue was $3.8 million, down year-over-year mainly due to timing of contract closures and a significant one-time license sale in Q3 2023. Recurring revenue grew 29% year-over-year to $2.8 million. For the 9 months ended September 30, 2024, total revenue was $12.6 million, down from $13.9 million in the same period of 2023. Recurring revenue grew 19% year-over-year to $8.7 million, making up 69% of total revenue. As of September 30, 2024, cash, cash equivalents and marketable securities totaled $27.4 million.

• On track to achieve double-digit revenue growth in 2024, with the $1 million European government booking expected to contribute to Q4 results.
• Confident in closing delayed deals in Q4 or early Q1 2025, seeing delays as extended timelines not lost opportunities.
• ABIS projects expected to generate steady revenue stream over next 5 years and beyond.

• Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially. Risks and uncertainties outlined in company's SEC filings, including annual report on Form 10-K and quarterly reports on Form 10-Q.

Q: What do you anticipate your run rate revenue will be by year-end?

A: We're on track to achieve double-digit revenue growth in 2024. This, along with 7 new contracts, including expanding partnerships across sectors like access control and digital education, sets us up for a strong recurring base in 2025 that we're excited about.

Q: Can you provide more details about the $1 million European government bookings secured in October specifically, what were the key factors that led to winning this deal? And how do you see it contributing to future recurring revenue?

A: The $1 million booking with the European government in October was a result of enhancements to our BioSP solution, including multimodal biometric data orchestration capabilities and off-line biometric enrollment. The deal is expected to contribute to Q4 results and build foundation for future recurring revenue as the government rolls it out to additional use cases.

Q: Can you discuss the impact of the launch of AwareID as a plug-in on the WordPress Marketplace? How significant do you expect this to be in terms of customer acquisition and market penetration, particularly in sectors like online gaming and e-commerce?

A: The launch of AwareID as a plug-in on WordPress Marketplace opened up new customer acquisitions in sectors like online gaming, e-commerce and retail. It enables businesses of all sizes to integrate secure biometric authentication, and we expect it to accelerate recurring revenue growth in high-risk industries like online gaming.

Q: With the delays in contract closure shifting some deals to Q4, early Q1, what is your level of confidence in closing these deals within that timeframe? Can you elaborate on the nature of the delays and how they impact your overall revenue forecast?

A: We remain confident in closing delayed deals in Q4 or early 2025. Delays were due to additional scope discussions and expansions requested by customers. These delays are extended timelines, not lost opportunities, and will ultimately result in greater long-term value.

Q: What will be the focus areas for the executive strategic adviser?

A: The adviser will focus on enhancing Aware's market position, refining its product road map and providing strategic guidance to drive growth and competitiveness without direct operational responsibilities.

Q: What is the Board's plan if a new CEO has not been appointed by year-end?

A: The Board is focused on finding the right candidate and ensuring a seamless transaction. We estimate we'll recognize approximately $900,000 of onetime expenses in the fourth quarter related to the search for the new CEO, transition and hiring of the executive strategic adviser.