Aware, Inc.

Good afternoon, and welcome to AWARE's second quarter 2022 conference call. Joining us today is the company's CEO and president, Robert Eckel, and corporate controller, David Traverse, filling in for our CFO, David Barcelo, who is on vacation. 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 AWARES 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. are 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. You are cautioned not to place undue reliance upon any forward-looking statements which speak only as of the date made. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

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 second quarter ended June 30, 2022. A copy of the press release is available in the Investor Relations section of our website. We're glad that you could join us today for this quarterly update on AWARE. On today's call, I will discuss the progress we're making transforming our business to a subscription-based model and share some points that demonstrate our continued execution on our long-term strategic growth plan to drive scale. Afterwards, our corporate controller, David Traverse, will provide additional details on our second quarter and year-to-date financial results. David is filling in today for our CFO, Dave Barcelo, who had a prior personal commitment and unfortunately could not be with us on this call. After David's section, I'll then review our 2022 business drivers and outlook. Lastly, we'll open the call for your questions. To begin, in the second quarter, we delivered $4.2 million in top-line revenue, despite a challenging economic environment. We are not immune to the negative impact caused by the current macroeconomic issues that are being reported in the news. Higher inflation, increasing interest rates, and Lona Therrien. Our biometrics-based solutions that address fraud prevention have seen particularly strong momentum with financial institutions in Latin America and Europe. AWARE has already secured some of the largest banks in Brazil and Mexico and three of the largest banks in Turkey. And we expect to continue adding customers in the financial services market through our partnerships with strategic resellers. As we have previously mentioned, expanding the number of strategic partnerships is one of our top priorities in 2022. These partnerships enable us to leverage our expertise and expand our sales opportunities without adding additional expense to our P&L. Throughout the second quarter, we continue to add strategic partners that expand the global reach of our biometric-based solutions. Our focus has been on working with value-added resellers of ours and integrated product resellers and enterprises who can drive the adoption of our subscription-based offerings, thereby setting up the base for our recurring revenue. which in Q2 represents 49% of our total revenue. It does take time for these customers to ramp up to their integrated solution into full production. We typically see it takes anywhere from six to 18 months. And in the current macro environment, many customers are looking to safeguard their cash. As a result, some customer launches are being delayed until the market conditions improve. Having a robust cash position in this current macro environment is an asset. We are supported by a strong balance sheet that enables us to withstand this current market volatility. Furthermore, we recently strengthened our balance sheet with the sale of our office building in Bedford, Mass. for $8.9 million. After accounting for transaction-related expenses, we received $8.6 million in net cash. This additional capital provides us with the flexibility to invest in our long-term organic growth strategy and to pursue any strategic inorganic investment opportunities. Thank you for joining us today. Aware has demonstrated resilience in the face of the negative impact of recent macronomic issues facing the overall economy, as demonstrated by revenue year-to-date growth as compared to last year, and have a strong cash position to weather the headwinds. We are focused on growing the overall number of partnerships with VARs and integrated resellers and enterprises to accelerate customer adoption of our biometrics-based solutions and expand our recurring revenue base. We continue to execute our multi-pronged strategy as we enter the final phase of our transition to a platforming company. Now, before discussing our focus and business drivers for the remainder of 2022, I'll turn over the call to David to walk us through our financial results for the second quarter. David, over to you.

Thank you, Bob, and good afternoon to everyone on the call. Turning to our financial results for the second quarter ended June 30, 2022. Total revenue was $4.2 billion. as Bob mentioned, the slight decrease in our second quarter revenue over the prior year period was primarily the result of supply chain delays resulting in fewer orders from our OEM partners to whom we provide software for their biometric devices. Looking at operating expenses, for the second quarter of 2022, our operating expenses decreased 4% to $5.6 million from $5.8 million in Q2 of last year. The $200,000 decrease in operating expenses was due primarily to slightly lower R&D and sales and marketing costs. For the six months ended June 30, 2022, our operating expenses were $11.6 million, flat compared to the prior year period. The corresponding operating loss for the second quarter of 2022 was $1.35 million, an improvement from an operating loss of $1.54 million in the same year-ago period. The year-over-year improvement in operating loss was primarily due to lower total operating expenses. Operating loss for the six months ended June 30, 2022 was $2.6 million, a 12% decrease compared to the prior year period. For the second quarter of 2022, gap net loss totaled $1.3 million, or $0.06 per diluted share, compared to a gap net loss of $1.5 million, or $0.07 per diluted share, in the same year-ago period. Gap net loss for the six months ended June 30, 2022 totaled $2.6 million or $0.12 per diluted share compared to a gap net loss of $3 million or $0.14 per diluted share in the same year-ago period. Our adjusted EBITDA loss for the quarter, which reconciled the gap net loss in our earnings release, totaled $800,000, which is flat compared with the same year-ago period. When the six months ended June 30, 2022, adjusted EBITDA loss totaled $1.4 million, compared to an adjusted EBITDA loss of $2 million in the prior year period. Looking at our balance sheet, we had $25 million in cash and cash equivalents at the end of the quarter compared to $25.1 million at the end of the prior quarter. In the week following the close of the second quarter, we completed the sale of our office building in Bedford, Massachusetts and received $8.6 million in net cash proceeds. In this challenging macro environment, We believe our strong cash position is an asset. We strive to maintain a robust cash position that provides us with the flexibility to resourcefully allocate capital to opportunities with high ROI potential. Considering current evaluations, we continue to actively evaluate strategic opportunities that align with our long-term growth plan and product roadmap and would enable us to drive scale as an organization. This completes my financial summary. Now I would like to turn the call back to Bob for additional insights on our key initiatives for the rest of 2022 and beyond. Bob?