Aware, Inc.

Good afternoon and welcome to Aware's third 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'd like to remind everyone that the presentation today contains forward-looking statements that are based on the current expectations of Aware's management Thank you. Thank you. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K, 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, AWARE 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 that 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 measures 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 a link available in the investor relations section of the company's website. Now I would like to turn the call over to our CEO and President, Bob Eckel. Bob.

Thanks, Matt. Good afternoon, everyone, and thank you for joining us today. After the market closed, we issued a press release announcing our results for the third quarter ending September 30th, 2021. A copy of the press release is available in the Investor Relations section of our website. Today, I plan to discuss the progress we made in the third quarter and why we are looking forward to what is ahead. After I provide a high-level overview of this quarter's operational results, our CFO, Dave Barcelo, will review more details on the financial results for the quarter. Afterwards, I will discuss the opportunities on the horizon and then we will open the call for questions. At a high level, during the third quarter, we continued to make strong progress in building our sales pipeline and securing new partnerships. We were able to upgrade certain customers to long-term commitments based on their confidence level in our suite of products. We expanded our presence in Europe and Latin America by adding new customers and renewing commitments with the existing customers. Our OEM revenue, where our SDKs are built into hardware providers, has also rebounded from last year. Our sales and operational traction enabled us to generate approximately 70% year-over-year revenue growth. In addition, our revenue for the first nine months of 2021 exceeded our total revenue for all of 2020 by approximately 14% already. Our impressive growth rates serve as a proof point to the effectiveness of our strategy, and this is position aware for continued success in the years ahead. Q3 marked the fifth consecutive quarter of record NOMI transactions. We recorded more than 12 million transactions protected by NOMI, bringing the total for 2021 to 31 million compared to 11 million in all of 2020. These remarkable numbers are a testament to the growing adoption of biometrics and the value proposition offered by NOMI. During the third quarter, We highlighted the ability of Nomi to meet the high demand for touchless authentication solutions in the wake of the COVID-19 pandemic. Mentioning even more use cases for this trusted platform. We expect this increasing number of Nomi transactions to convert to a stable growing revenue stream as subscription customers begin to record transactions beyond their contract minimums. We are becoming increasingly well-recognized by our biometrics industry at large because, unlike others 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 quarter, we are able to demonstrate our expertise in person at demonstrations at ConnectID, Identity Week London, and the International Association for Identification's annual conference. Our team was excited to get back in person to engage directly with customers and prospects, and we are gaining additional traction from these events. Moreover, we continue to build our thought leadership position in biometrics and digital identity. Our team published several articles in industry trade publications and was recognized and quoted in multiple articles as well. As we continue to build our profile, we will look to increase the number of companies that we partner with so we can expand our reach in existing verticals and broaden our new reach. Before I continue, I'll turn it over to Dave who will walk us through our financial results for the quarter.

Thank you, Bob, and good afternoon to everyone on the call. Let's turn to our financial results for the third quarter ended September 30th, 2021. Our total revenue in the third quarter was $4.2 million, essentially flat from the prior quarter, and up 69% from $2.5 million in the same year-ago period. For the nine months ended September 30, 2021, our total revenue increased 63% to $12.9 million from $7.9 million in the same year-ago period. The increase in revenue was primarily due to higher software license sales from our fixed fee contracts, as well as an increased subscription-based revenue related to growing transaction volume from existing customers and upfront recognition of fixed minimum transactions from new international wins. With regards to our operating expenses, for the third quarter of 2021, our operating expenses increased 15% to $5.8 million from $5 million in Q3 of last year. For the nine months ended September 30th, Our operating expenses increased 13% to $17.4 million from $15.5 million in the same year-ago period. The quarterly and nine-month period increases in operating expenses were due primarily to sales and marketing resources acquired in our ASICS acquisition, as well as an increase in stock-based compensation expense and investments in IT infrastructure. The corresponding operating loss for the third quarter of 2021 was negative 1.6 million, an improvement from an operating loss of 2.5 million in the same year-ago period. The year-over-year decrease in operating loss was primarily due to the aforementioned increase in revenue. Operating loss for the nine months ended September 30th was negative 4.6 million compared to an operating loss of 7.6 million in the prior year period. The decrease in operating loss was primarily the result of increased revenues. For the third quarter of 2021, gap net loss totaled $1.6 million, or $0.07 per diluted share, compared to a gap net loss of $1.8 million, or $0.08 per diluted share, in the same year-ago period. Gap net loss for the nine months ended September 30, totaled $4.6 million, or $0.21 per diluted share, compared to a gap net loss of $6 million, or 28 cents per diluted share in the prior year period. Our adjusted EBITDA loss for the quarter, which we reconcile in our earnings release, totaled $1 million. This compared to adjusted EBITDA loss of $2.1 million in the same year-ago period. For the nine months ended September 30th, adjusted EBITDA loss totaled $3 million. This compared to adjusted EBITDA loss of $6.6 million in the prior year period. On the balance sheet, we had $33.3 million in cash and cash equivalents at the end of the quarter compared to $38.6 million as of December 31, 2020. The nine-month period, the use of cash was primarily for operations. AWARE continues to maintain a strong and strategic cash position as we explore strategic investment opportunities both internally and externally to capitalize on the macro biometric trends and our long-term vision. Organically, we have seen significant growth from our NOMI subscription accounts. As Bob mentioned, we've recorded 12 million transactions protected by NOMI in the third quarter alone, bringing our nine-month total to more than 31 million transactions. This compares to 11 million transactions in all of 2020. The growing volumes attest to the strength and scalability of this product line, and this 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 in Q3, key initiatives and priorities for the remainder of 2021 and beyond.