Aware, Inc.

Good afternoon and welcome to Aware's second quarter 2021 earnings conference call. Joining us today is the company's CEO and President, Robert Eckel, and CFO, David Barcelo. Following their remarks, we will open the call for questions. If you'd like to submit a question, you can do so at any time using the built-in ask a question feature in the webcast player. Before we begin today's call, I would like to remind everyone that the presentation today contains four looking statements that are based on the current expectations of Aware's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described. Listeners should please take note of the Safe Harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in forward-looking statements that management will be making today. Aware wishes to caution you that there are factors that could cause actual results to differ materially from those indicated by such statements. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of these factors. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as of the date made, although it may voluntarily do so from time to time or undertakes no commitment to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. Additionally, this call contains certain non-GAAP financial measures as the term is defined by the SEC in Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, AWARE has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure in the company's earnings release issued today. I would like to remind everyone that this presentation will be recorded and made available for replay via link available in the investor relations section of the company's website. Now I would like to turn the call over to Aware's CEO and President, Bob Eckert. Bob.

Thanks, Matt, and good afternoon, everyone, and thank you for joining us today. After the market closed, we issued a press release announcing our results for the second quarter ending June 30, 2021. A copy of the press release is available in the investor relations section of our website. On our third earnings call together, I am proud to report that we continue to see the initial impacts of the restructuring that we began just over 18 months ago. I am thankful for the opportunity to address all of you and reiterate why we believe AWARE is poised for rapid growth in the coming years. Today, I plan to discuss the progress we've made throughout the second quarter and why we're looking forward to what is ahead. On this call, I provide you with a high-level overview of this quarter's operational results. I will then turn it over to our CFO, Dave Barcelo, to review more of the details on the financial results for the quarter, and then take some time to discuss what we have on the near and long-term horizons. After that, we'll open the call for your questions. In the second quarter of 2021, we made several key advancements on ongoing initiatives that have and will prepare us well for our future. One of the most notable is the successful integration of the AFIX product line, which we acquired in November of last year. Financially, we are seeing an immediate top-line uplift, which will pay for itself in a relatively short time span. This quarter also marks the fourth consecutive quarter of record NOMI transactions, with the more than 18 million transactions in the first half compared to 11 million in all of 2020, we're already at five times the number of transactions in the first half of 2020. As our transformation continues and subscription customers begin to record transactions beyond contract minimums, we expect these to convert to a stable growing revenue stream. More and more government agencies and subject matter experts are paying attention to our unique value proposition. This is evidenced by a considerably large and growing pipeline and base. Unlike some others in the biometric space who offer point solutions or a single modality for specific applications, we can provide multimodal, multifunction applications that interface with all kinds of devices, systems, and hardware via our biometric middleware. This advantage enables us to compete and effectively beat entry-level and single offering players in the market. On the other end of the spectrum, there are identity leaders competing for complex programs and deliveries that require a full suite of hardware and an integrated software solution. While we are not a systems integrator and therefore do not directly bid for these large-scale projects, we can and do partner with many of these leaders and others. to provide our hard and proven software as requested. Our unique approach to biometrically accessibility complemented by our core offerings provides us exposure to customers of all size in all geographies. I'm looking forward to talking about what lies ahead on the horizon in a little bit, but for now, I'll turn it over to Dave Barcelo who will walk us through our financial results for the quarter. Dave, over to you.

Thank you, Bob. Good afternoon to everyone on the call. Let's turn our attention to the financial results for the second quarter ended June 30th, 2021. Our total revenue in the second quarter was up 2.3 times the same year ago period, the 4.3 million up from 1.9 million in 2020. This compares to revenue of 4.4 million in the first quarter. Year to date for the six months ended June 30th, 2021, Our total revenue increased 61% to $8.7 million, up from $5.4 million in the same year-ago period. The increase in revenue was primarily due to increased subscription-based revenue from growing transaction volume with existing customers and the upfront recognition of fixed minimum transaction amounts from two new international wins. With regards to our operating expenses, For the second quarter of 2021, our operating expenses increased 4% to $5.8 million from $5.6 million in Q2 of last year. For the six months ended June 30, 2021, our operating expenses increased 12% to $11.7 million from $10.5 million in the same year-ago period. The quarterly and six-month period increases were due primarily to sales and marketing resources acquired in our AFIX acquisition. Corresponding operating loss from the second quarter of 2021 was negative 1.5 million compared to an operating loss of negative 3.7 million in the same year-ago period, an improvement of 58% over last year. The year-over-year decrease in operating loss resulted primarily from the aforementioned increase in revenue. Operating loss for the six months ended June 30th, 2021 was negative 3 million compared to an operating loss of negative 5 million in the prior year period. The decrease in operating loss was primarily the result of increased revenues. For the second quarter of 2021, gap net loss totaled negative 1.5 million or negative 7 cents per diluted share compared to a gap net loss of negative 3.1 million Thank you for joining us. This compares to an adjusted EBITDA loss of negative 3.3 million in the same year ago period. For the six months ended June 30th, 2021, adjusted EBITDA loss totaled negative 2 million compared to an adjusted EBITDA loss of negative 4.5 million in the prior year period. On the balance sheet, we had 35.2 million in cash and cash equivalents at the end of the quarter. compared to $38.6 million as of December 31, 2020. For the six-month period, the use of cash was primarily from operations. Aware maintains a strong and strategic cash position that enables us to allocate capital to high ROI opportunities as they present themselves. We're actively evaluating opportunities to ensure that we're making strategic investments to realize growth and scale as an organization. Organically, we have seen significant growth from our Nomi subscription accounts. We recorded more than 18 million transactions in the first half, which is five times the number of recorded transactions in the first half of 2020. This is compared to 11 million in all of 2020. The growing volumes attest to the strength and scalability of this product line. and the success is paving the way for future growth as new customers onboard based on the recommendations of our current customer base. This completes my financial summary. Now, I'd like to turn the call back to Bob for additional insights on our operational progress, our key initiatives and our priorities in 2021 and beyond.