Aware, Inc.

Good afternoon and welcome to AWARE's first quarter 2022 conference call. Joining us today is the company's CEO and President, Robert Eckel, and CFO, David Barslow. Following their remarks, we'll 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 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 risk 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 results 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. Your caution 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 forelooking 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 and Regulation G. Non-GAAP financial measures should be considered in isolation from or a substitute for financial information presented in compliance with GAAP. Accordingly, AWARE has provided a reconciliation of these non-GAAP financial measures in 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 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 Echol. 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 first quarter ended March 31, 2022. A copy of the press release is available in the Investors Relations section of our website. We are pleased to join you today, and on today's call, I will discuss how the progress we've made on our strategic roadmap during the first quarter has paved the way for continued long-term predictable growth for AWARE. After the high-level overview of our operational progress, our CFO, Dave Barcelo, will provide additional details on our first quarter financial results. Then I'll review our 2022 focus in business drivers and outlook. Lastly, we'll open the call for questions. Our first quarter financial results demonstrate the continued progress we have made towards building a solid recurring revenue base as we continue to transition AWARE into a subscription base Our top line increased 17% sequentially and 6% year-over-year to $4.7 million, marking the highest quarterly revenue level since 2018. Even more encouraging, recurring revenue grew 30% year-over-year, driven by a 73% increase in subscription revenue over Q1 of last year. The 73% growth in subscription revenue reflects the expansion of existing partners and the addition of new partners all over the world. As I talked about on our call in March, adding strategic partners is a top priority for us this year. It allows us to create a foundation for growth without increasing costs as well as expanding our reach into new geographies and end markets. Several new customers are currently ramping their integrated solution anticipation of a full launch in the coming quarters. In Q1, we announced two strategic partnerships, the first with Anonabit and the other with Miracle. These partnerships align seamlessly with the capabilities of Fortress ID, which we acquired in December and whose integration into our platform is ongoing. When combined, we expect these three parts and technology to enable us to accelerate the development of our solutions aimed at the financial services market. The partnership with Anonybit, which we announced in February and briefly mentioned on our call in early March, specifically addresses biometric data privacy concerns. Anonybit's decentralized approach to identity data storage uses anonymized data in a distributed network to thwart data breaches and enhance data privacy. We are working closely with the Anonybit team to bring highly secure, privacy-enhanced, This will allow customers to utilize all the benefits of AWARE's best-in-class biometric technology while remaining confident that their individual biometric data will be protected from it. We anticipate the combined offering to be deployed across a range of use cases including passwordless authentication, access control, time and attendance, and visitor management. In March, we announced a strategic partnership with Miracle, a cybersecurity software company that specializes in single-step, secure multi-factor authentication. The Miracle partnership enhances our cloud-based biometric authentication technology to protect against data breaches and ransomware. By adding Miracle's risk management functionality to our platform, we can deliver greater value to our customers and increase the number and variety of our easily integrated cloud and SaaS-based Adaptive Authentication Services to best fit our customers' needs and flexibility requirements. The added MFA solution to AWARE's biometrics allows us to deliver more layers of security beyond passwords, one-time passwords, two-factor authentication, and others. In addition, it significantly enhances the security of consumer identity and better supports regulatory compliance. The combined solution easily integrates with single sign-on, or SSO, solutions and adapts better to growing and emerging cybersecurity threats. It is important to note that while these technologies are layers, they are carefully orchestrated to not add complexity or friction. As such, we still maintain speed and a frictionless experience. The partnership with a miracle is structured as a mutual reseller arrangement So each company can sell each other's products and integrate them within their own product lines, thereby accelerating the market availability of passwordless, multi-factor authentication that incorporates advanced biometrics. We also made a $2.5 million strategic investment in a convertible note issued by the parent company of Miracle, Omlis Limited, to support its growth. Facilitating market adoption of Nomi is a key aspect of growing our recurring revenue base. To that end, we now support Flutter application framework in Nomi version 5.0, transforming the application development process for biometric onboarding and authentication by empowering developers to build and deploy advanced applications across web, mobile, and desktop environments with a single code base. Developers are now able to integrate Nomi's state-of-the-art multiple biometric authentication capabilities into advanced, customized applications more quickly and cost-effectively, expanding Nomi's reach while accelerating customers' time to market. Overall, we made tremendous progress in the first quarter, executing our partner strategy, continuing to build a strong recurring revenue base, and setting the foundation for continued long-term growth. Now, before discussing our focus for 2022, I'll turn the call over to Dave to walk us through our financial results for the first quarter. Dave, over to you.

Thank you, Bob, and good afternoon to everyone on the call. Turning to our financial results for the first quarter, it did March 31st, 2022. Revenue was $4.7 million, an increase of 17% compared to $4 million in the fourth quarter of 2021, and an increase of 6% compared to $4.4 million in the same year-ago period. As Bob mentioned, the year-over-year increase in revenue was primarily the result of higher subscription-based revenue as well as higher maintenance revenue. Looking at our expenses, for the first quarter of 2022, our operating expenses increased 2% to $6 million from $5.9 million in Q1 of last year. The $100,000 increase in operating expenses was due primarily to higher sales and marketing costs. The corresponding operating loss for the first quarter of 2022 was $1.3 million, an improvement from an operating loss of $1.4 million in the same year-ago period. The year-over-year improvement in operating loss was primarily due to higher revenues. For the first quarter of 2022, GAAP net loss totaled $1.3 million, or $0.06 per diluted share compared to a gap net loss of $1.4 million or $0.07 per diluted share in the same year-ago period. Our adjusted EBITDA loss for the quarter, which we've reconciled a gap net loss in our earnings release, totaled $0.6 million. This is an improvement from adjusted EBITDA loss of $1.1 million in the same year-ago period. Looking at our balance sheet, we had $25.1 million in cash and cash equivalents at the end of the quarter compared to $30 million at the end of the prior quarter. For the three-month period, we used $2.5 million for our strategic investment in Miracle and $2.5 million for operations. AWARE maintains a strong and strategic cash position that enables us to allocate capital to high ROI opportunities. We continue to actively evaluate strategic opportunities to drive growth and scale as an organization. We also continue to see significant growth from our NOMI subscription accounts. Historically, we disclosed transaction volumes because it was an early indicator of NOMI adoption. However, with the continued growth in recurring revenue and a mix of subscription contracts based off the number of transactions or based off the number of users, we believe recurring revenue is a more reflective indicator of the continued adoption of NOMI and our companies transition into a subscription-based SaaS platform company. This completes my financial summary. Now, I'd like to turn the call back to Bob for additional insights on our key initiatives for 2022 and beyond.