Q1 2024 Aware Inc Earnings Call
Good afternoon, and welcome to <unk> first quarter 2024 conference call joining us today are the company's CEO and President Robert Eckel printed.
Operator: Good afternoon, and welcome to Aware's first quarter 2024 conference call. Joining us today are the company's CEO and President, Robert Eckel, Principal Financial Officer, David Traverse, and Chief Revenue Officer, Craig Herman.
Operator: Financial Officer, David <unk>, and Chief revenue Officer, Craig Herman.
Operator: Following the remarks, we open the call to 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. Additionally, you'll notice there's also a survey available in the webcast player. Aware's management team values your insights and invites you to share your thoughts and experiences as an investor or potential investor in Aware. The survey can be answered at any time during the call.
Operator: Following their remarks, we'll open the call to 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.
Operator: Additionally, you'll notice there is also a survey available in the webcast player.
Operator: Whereas management team values your insights and invite you to share your thoughts and experiences as an investor or potential investor aware, Mr. Making me answered at any time during the call.
Operator: 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 risks inherent in forward-looking statements that management will be making today.
Operator: Before we begin todays call I'd like to remind everyone that the presentation. Today contains forward looking statements that are based on the current expectation of a wheres management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described.
Operator: Sir should please take note of the Safe Harbor paragraph that is included at the end of today's press release.
Operator: Paragraph emphasizes the major uncertainties and risks inherent in forward looking statements that management will be making today.
Operator: 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 that speak only as of the date made.
Operator: Aware wishes to caution you that there are factors that could cause actual results to differ materially from those results indicated by such statements.
Operator: 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.
Operator: Any forward looking statements should be considered in light of these factors you were cautioned not to place undue reliance upon any forward looking statements, which speak only as of the date made.
Operator: Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking statements, whether because 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 terms 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.
Operator: It may voluntarily do so from time to time.
Operator: We're undertakes no commitment to update or revise the forward looking statements, whether because of new information future events or otherwise, except as required by applicable securities laws.
Operator: Additionally, this call contains certain non-GAAP financial measures as the terms 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.
Operator: 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'd 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'd like to turn the call over to Aware's CEO and President, Bob Eckel.
Operator: Accordingly, or where 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.
Robert A. Eckel: I'd like to remind everyone that this presentation will be recorded and made available for replay via link available in Investor Relations section of the company's web site.
Robert A. Eckel: Now I'd like to turn the call over to where CEO and President Bob <unk> Bob.
Robert A. Eckel: Thanks, Matt Good afternoon, everyone and thank you for joining us today after the market close reported our results for the first quarter ended March 31, 2020 for a copy of the press release is available any investors relations section of our website.
Robert A. Eckel: Thanks, Matt. Good afternoon, everyone, and thank you for joining us today.
Robert A. Eckel: After the market closed, we reported our results for the first quarter ended March 31st, 2024. A copy of the press release is available in the Investors Relations section of our website. Before diving into our financial and operational highlights for the first quarter of 2024, I'd like to provide a brief overview of AWARE and what sets us apart in the biometric industry. AWARE is a global biometric identity platform company leveraging advanced data science, machine learning, and artificial intelligence to tackle complex business and identity challenges.
Robert A. Eckel: Before diving into our financial and operational highlights for the first quarter of 2024 I'd like to provide a brief overview of aware and what sets us apart in our biometric industry.
Robert A. Eckel: Whereas at global biometric identity platform company, leveraging advanced data science machine learning and artificial intelligence tackle complex business and identity challenges. Our mission is to enhance troughs in an increasingly connected world by.
Robert A. Eckel: Our mission is to enhance trust in an increasingly connected world by delivering innovative biometric technologies that strike the best balance between security and user experience. Ultimately, at a high level, we help organizations improve business results through biometrics.
Robert A. Eckel: By delivering innovative biometric technologies to strike the best balance between security and user experience.
Robert A. Eckel: Ultimately at a high level, we help organizations improve business results through biometrics.
Robert A. Eckel: For over three decades, Aware has been at the forefront of the biometrics industry, earning the trust of governments and commercial entities worldwide. Our expertise in digital onboarding, authentication, and lifecycle management of biometric identities, coupled with our secure, multimodal, adaptive biometrics, has solidified our position as a trusted partner. We take pride in our proven track record and comprehensive portfolio, which has enabled us to forge strong partnerships with core government agencies globally, including in the U.S., United Kingdom, Canada, Australia, and Germany.
Robert A. Eckel: For over three decades aware has been at the forefront of biometrics industry, earning the trust of government and commercial entities worldwide. Our expertise in digital on boarding authentication and lifecycle management, a biometric identities, coupled with our secure multimodal adaptive biometrics has solidified our position as a trusted partner.
Robert A. Eckel: We take pride in our proven track record and comprehensive portfolio, which has enabled us to forge strong partnerships with core government agencies globally, including in the U S, United Kingdom, Canada, Australia and Germany.
Robert A. Eckel: Aware is widely recognized as a global leader in biometric data orchestration for border management and immigration. Our cutting-edge solutions enable seamless integration of biometric technologies into existing systems and infrastructures, streamlining processes and enhancing security at critical entry and exit points.
Robert A. Eckel: Aware is widely recognized as a global leader in biometric data orchestration for border management and immigration our cutting edge solutions enables seamless integration of biometric technologies into existing systems, and infrastructures streamlining processes and enhancing security is critical entry and exit points by leveraging our <unk>.
Robert A. Eckel: By leveraging our expertise in data management, identity verification, and risk assessment, we empower governments to effectively manage their borders while facilitating legitimate travel and trade. Our industry-leading solutions are trusted by some of the largest banks in the world for their onboarding and authentication needs. We take pride in being at the forefront of responsible technological development. By harnessing AI and machine learning, we have created biometric software offerings that ensure demographic neutrality and equity, underscoring our steadfast commitment to fair and impartial treatment of all individuals.
Robert A. Eckel: Expertise in data management identity verification and risk assessment, we empower governments to effectively manage their borders while facilitating legitimate travel and trade.
Robert A. Eckel: Our industry, leading solutions are trusted by some of the largest banks in the world for their Onboarding and authentication needs, we take pride in being at the forefront of responsible technological development by harnessing AI and machine learning, we have created biometric software offerings that ensure demographic neutrality and equity underscore.
Robert A. Eckel: Our steadfast commitment to fair and impartial treatment of all individuals.
Robert A. Eckel: Our rigorous research, design, development, testing, and refinement processes leverage some of the largest and most diverse data sets in the world to train our algorithms. This meticulous approach has secured us the number one position in minimizing and practically eliminating bias based on age, gender, or race, as independently tested and verified by NIST. We prioritize consent-based biometric technology, ensuring individuals only use our solutions if they expressly consent to them, except in specific forensic law enforcement, defense, and intelligence applications. Our agnostic approach provides customers with the flexibility to build upon existing investments rather than resorting to costly replacements. Prevalent industry practice often results in unnecessary waste.
Robert A. Eckel: Our rigorous research design development testing and refinement processes Leverages some of the largest and most diverse datasets in the world to train our algorithms. This meticulous approach is secured as the number one position in minimizing and practically eliminating bias based on age gender or race is independently tested.
Robert A. Eckel: And verified by NIST.
Robert A. Eckel: We prioritize consent based biometric technology, ensuring individuals' only use our solutions if the expressly consented, except in specific forensic law enforcement defense and intelligence applications are agnostic approach provides customers with the flexibility to build upon existing <unk>.
Robert A. Eckel: <unk>, rather than a resorting to costly replacements.
Robert A. Eckel: A prevalent industry practice, often resulting in unnecessary waste.
Robert A. Eckel: Our trusted status is further solidified by a comprehensive portfolio that addresses threats and upholds identity integrity in a future-proof manner. Aware does not outsource any biometric technology, serving as the sole provider for all our customers. This enables us to swiftly address emerging attack vectors without relying on third parties for upgrades or recertification. Aware leads the industry in liveness detection, as demonstrated by our top ranking in the independent NIST benchmarking study. We have achieved the number one spot in security for both impersonation and evasion detection for one of the presentation attack types, the only provider to do so.
Robert A. Eckel: Our trusted status has further solidified by comprehensive portfolio that addresses threats and upholds identity integrity and a future proof manner.
Robert A. Eckel: Where does not outsource any biometric technology, serving as the sole provider for all of our customers. This enables us to swiftly address the emerging attack vectors without relying on third parties for upgrades or re certifications.
Robert A. Eckel: <unk> leads the industry and liveliness detection as demonstrated by our top ranking in the independent NIST benchmarking study.
Robert A. Eckel: We have achieved the number one spot in security for bolt impersonation and evasion detection for one of the presentation attack types, the only provider to do so.
Robert A. Eckel: Furthermore, Aware ranks top 5 in security and top 10 in convenience across most presentation attack types for evasion, making us the only provider who has successfully struck the balance between user experience and security with the ability to configure solutions appropriately for every use case.
Robert A. Eckel: Furthermore, aware ranks top five in security and top 10 and convenience across modes presentation attack types for evasion, making us the only provider who has successfully struck the balance between user experience and security with the ability to configure solutions appropriately for every use case.
Robert A. Eckel: Finally, our platform and offerings are engineered to effortlessly scale with customers, adapt to changing environmental factors, risk profiles, and consumer demands, as well as proactively tackle future challenges. This allows us to uphold the level of customer satisfaction required to retain and grow the recurring revenue base we have diligently cultivated. Now that you have a clearer picture of Aware and our offerings, let's dive into our operational financial results for the first quarter of 2024.
Robert A. Eckel: Finally, our platform and offerings are engineered to efficiently scale with customers adapt to changing environmental factors risk profiles and consumer demands as well as proactively tackle future challenges.
Robert A. Eckel: This allows us to uphold the level of customer satisfaction required to retain and grow the recurring revenue base, we have diligently cultivated.
Robert A. Eckel: Now that you have a clearer picture of aware in our offerings, let's dive into our operational and financial results for the first quarter of 2024.
Robert A. Eckel: After a record-breaking 2023, our Q1 results underscore our continued focus on optimizing our core structure, leveraging our partner ecosystem, and enhancing our go-to-market strategy to drive recurring revenue growth. Building upon our strategic cost optimization initiatives implemented throughout 2023 and in Q1 of 2024, we have significantly streamlined our cost structure and reduced our revenue breakeven point. In Q1, we drove an 8% or $1.6 million year-over-year decrease in operating loss.
Robert A. Eckel: After a record breaking 2023, our Q1 results underscore our continued focus on optimizing our cost structure, leveraging our partner ecosystem and enhancing our go to market strategy to drive recurring revenue growth.
Robert A. Eckel: Building upon our strategic cost optimization initiatives implemented throughout 2023 and in Q1 of 2024, we have significantly streamlined our cost structure and reduced our revenue breakeven point in Q1, we drove an 8% or <unk>.
Robert A. Eckel: $6 million year over year decrease in operating loss.
David Traverse: We anticipate continued improvement compared to our quarterly operating expense run rate in 2023, as demonstrated in the first quarter of 2024. Our commitment to enhancing our operational structure and customer success initiatives is producing sustained improvements, reflected in our Q1 performance. We continue expanding our recurring revenue customer base, resulting in a 3% year-over-year increase in both total revenue and recurring revenue. A large driver of this revenue was the 18% increase in subscription maintenance revenue related to contracts secured in Q3 of 2023, as well as our sustained momentum within the government space.
Robert A. Eckel: We anticipate continued improvement compared to our quarterly operating expense run rate in 2023 as demonstrated in the first quarter of 2024.
David Traverse: Our commitment to enhancing our operational structure and customer success initiatives is producing sustained improvements reflected in our Q1 performance. We continue expanding our recurring revenue customer base, resulting in a 3% year over year increase in both total revenue and recurring revenue.
David Traverse: A large driver of this revenue was the 18% increase in subscription maintenance revenue related to contracts secured in Q3 of 2023 as well as our sustained momentum within the government space.
David Traverse: Craig and his team have built a solid foundation for future scalability by securing strategic partners and valuable clients. I'll let him provide more details on their success this quarter, but I'd like to highlight a few key customer wins. During Q1, we successfully onboarded several new customers in Latin America, like Imply and OpenPass, as well as expanded our use cases with existing customers, such as a major federal government agency and a leading Turkish bank.
David Traverse: Greg and his team have built a solid foundation for future scalability by securing strategic partners and valuable clients.
David Traverse: I'll, let him provide more details on their success this quarter, but I'd like to highlight a few key customer wins. During Q1, we successfully on boarded several new customers in Latin America like imply an open pass as well as expanding our use cases with existing customers such as a major federal government agency and a leading Turkish.
David Traverse: Bank.
David Traverse: We expect these awards to meaningfully contribute to the ongoing expansion of our recurring revenue base. As mentioned in prior quarterly updates, we do not plan to announce every contract we've secured or are currently working on. However, it's important to note that Aware's advanced technology and strong partnerships are consistently generating new and exciting opportunities in competitive markets. While there may be some quarter-to-quarter fluctuations, we maintain a healthy pipeline with promising opportunities in our backlog.
David Traverse: We expect these awards to meaningfully contribute to the ongoing expansion of our recurring revenue base.
David Traverse: As mentioned in prior quarterly updates, we do not plan to announce every contract. We have secured are currently working on however, it is important to note that it whereas advanced technology and strong partnerships are consistently generate new and exciting opportunities in competitive markets. While there may be some quarter to quarter fluctuations we maintain.
David Traverse: A healthy pipeline with promising opportunities in our backlog.
David Traverse: Furthermore, we've cultivated a solid foundation of recurring revenue that acts as a stabilizer, helping to mitigate the impact of these fluctuations and laying a strong foundation for future growth. Before discussing our initiatives for 2024, I'll turn the call over to David to take us through our financial results for the first quarter. David will be joining me.
David Traverse: Furthermore, we've cultivated a solid foundation of recurring revenue that acts as a stabilizer, helping to mitigate the impact of these fluctuations in laying a strong foundation for future growth.
David Traverse: Before discussing our initiatives for 2024, I'll turn the call over to David to take us through our financial results for the first quarter David over to you.
David Traverse: Thank you Bob and good afternoon, everyone.
David Traverse: Thank you, Bob. Good afternoon, everyone. Turning to our financial results for the first quarter ended March 31st, 2024. Total revenue for the first quarter was $4.4 million, compared to $4.3 million in the same year-ago period. A 3% year-over-year increase was largely due to higher software maintenance revenue related to contracts awarded in Q3 of 2023.
David Traverse: Current revenue for Q1 2024 was $3.2 million, or 71% of total revenue, a 3% increase from the prior year quarter. Looking at our operating expenses, Our first quarter 2024 operating expenses were $5.7 million, an 8% year-over-year decrease compared to 6.2 million in Q1 of last year. Operating losses for the first quarter of 2024 improved approximately 32% year-over-year to 1.3 million compared to an operating loss of 1.9 million in the same year-ago period.
David Traverse: Turning to our financial results for the first quarter ended March 31 2024.
David Traverse: Total revenue for the first quarter was $4 4 million.
David Traverse: Compared to $4 3 million in the same year ago period.
David Traverse: At 3% year over year increase was largely due to higher software maintenance revenue related to contracts awarded in Q3 of 2023.
David Traverse: Recurring revenue for Q1, 2024 was $3 2 million or <unk>.
David Traverse: 71% of total revenue, a 3% increase from the prior year quarter.
David Traverse: Looking at operating expenses, our first quarter 2024, operating expenses were $5 7 million and.
David Traverse: An 8% year over year decrease compared to $6 2 million in Q1 of last year.
David Traverse: Operating loss for the first quarter of 2024 improved approximately 32%.
David Traverse: Year over year to $1 3 million compared to an operating loss of $1 9 million in the same year ago period.
David Traverse: For the first quarter of 2024, the gap net loss totaled $1 million, or $0.05 per diluted share, a 30% improvement to reach a gap net loss of $1.6 million, or $0.07 per diluted share, in Q1 of last year. I adjusted the EBITDA loss for the quarter, which reconciled the gap in income and our earnings for these total $1 million, which compares to a loss of 1.4 million in the same year-ago period.
David Traverse: For the first quarter of 2024, GAAP net loss totaled $1 million or <unk> <unk> per diluted share is.
David Traverse: 30% improvement to GAAP net loss of $1 6 million or <unk> <unk> per diluted share in Q1 of last year.
David Traverse: Our adjusted EBITDA loss for the quarter, which we reconcile to GAAP net income in our earnings release totaled $1 million, which compares to a loss of $1 4 million in the same year ago period.
David Traverse: The year-over-year improvement in net loss and adjusted EBITDA was primarily due to continued lower operating expenses. Looking at our balance sheet, cash, cash equivalents, and marketable securities total $28.5 million as of March 31st, 2024. This compares to $30.9 million as of December 31st, 2023. The decrease is in line with our expectations and is primarily due to our operating loss as well as the timing of collections of accounts receivable at year end and in addition to traditional payments made in the first quarter.
David Traverse: The year over year improvement in net loss and adjusted EBITDA was primarily due to continued lower operating expenses.
David Traverse: Looking at our balance sheet cash cash equivalence and marketable securities totaled $28 5 million as of March 31, 2020 for.
David Traverse: This compares to $30 9 million as of December 31, 2023.
David Traverse: The decrease is in line with our expectations and is primarily due to our operating loss as well as timing of collections of accounts receivable at year end.
David Traverse: In addition to traditional payments made in the first quarter.
Craig A. Herman: As we move through 2024, we're backed by a strong balance sheet and cash position, offering us the flexibility to evaluate any high ROI opportunities that have the potential to accelerate our growth roadmap. Our robust financial standing provides us with the resources necessary to explore strategic initiatives and make prudent investments to drive further innovation and market expansion. We remain committed to carefully evaluating any opportunities that align with our long-term vision. Rest assured, we will approach any such opportunities with the same rigor and diligence that have enabled us to reach this point.
David Traverse: As we move through 2024 are backed by strong balance sheet and cash position offering us the flexibility to evaluate any high ROI opportunities.
Craig A. Herman: The potential to accelerate our growth roadmap.
Craig A. Herman: Our robust financial standing provides us the resources necessary to explore strategic initiatives and make prudent investments to drive further innovation and market expansion.
Craig A. Herman: We remain committed to carefully evaluate any opportunities that align with our long term vision.
Craig A. Herman: Rest assured we will approach any such opportunities with the same rigor and diligence to have enabled us to reach this point.
Craig A. Herman: Our focus remains steadfast on driving profitability, expanding our recurring revenue base, and delivering exceptional values to our shareholders over the long term. This completes my financial summary. I'd like to now turn the call over to Craig to discuss the progress we've made on our go-to-market strategy.
Craig A. Herman: Our focus remains steadfast on driving profitability.
Craig: Expanding our recurring revenue base and delivering exceptional value to our shareholders over the long term.
Craig: This completes my financial summary.
Craig A. Herman: I'd like to now turn the call over to Craig to discuss the progress we've made on our go to market strategy.
Craig A. Herman: Craig.
Craig A. Herman: Thanks, David. During the first quarter, we remained steadfast in our commitment to scale through strategic partnerships, expand and retain our core customer base and business segments, and fortify the product market fit of Aware ID. These coordinated efforts led to gradual improvements in our quarterly performance and laid the foundation for continued growth and success going forward. As Bob mentioned, we achieved several notable customer successes this quarter. One of the more significant wins was the expansion of our relationship with a major U.S. federal government agency.
Craig: Thanks, David during the first quarter, we remain steadfast in our commitment to scale through strategic partnerships expand and retain our core customer base and business segments and fortify the product market fit of aware.
Craig A. Herman: These coordinated efforts led to gradual improvements in our quarterly performance and laid the foundation for continued growth and success going forward.
Craig A. Herman: As Bob mentioned, we achieved several notable customer successes this quarter one of the more significant wins was the expansion of our relationship with a major U S. Federal government agency, we were able to increase this large three letter agencies use cases to include enrolling biometric and bio graphic data of their employees and contractors.
Craig A. Herman: We were able to increase this large three-letter agency's use cases to include enrolling biometric and biographic data of their employees and contractors. Aware's technology is utilized across dozens of agencies within all three branches of the U.S. federal government.
Craig A. Herman: Whereas technology is utilized across dozens of agencies within all three branches of the U S. Federal government and these contract expansions underscore the security and user friendliness of our products.
Craig A. Herman: And these contract expansions underscore the security and user-friendliness of our product. In addition to growing our domestic footprint, we also continue making progress in our global expansion. In Q1, we renewed and expanded a significant multi-year contract with one of the largest international police organizations in Europe.
Craig A. Herman: Growing our domestic footprint. We also continued making progress in our global expansion in Q1, we renewed and expanded a significant multiyear contract with one of the largest international police organizations in Europe. This contract is part of our growing portfolio and border management and immigration, which is rapidly accelerating market.
Craig A. Herman: This contract is part of our growing portfolio in border management and immigration, which is a rapidly accelerating market with promising opportunities for AWARE. We also onboarded several new customers in Latin America, such as Imply and OpenPass. Imply is a leading provider of ticketing, access control, cashless solutions, ATMs, and LEDs in Brazil, while OpenPass is a prominent online financial platform in Argentina.
Craig A. Herman: With promising opportunities for where.
Craig A. Herman: We also onboarding several new customers in Latin America, such as imply an open past imply as a leading provider of ticketing access control cashless solutions Atms and Leds in Brazil, while open past as a prominent online financial platform in Argentina. We are excited to get these contracts lives.
Craig A. Herman: We are excited to get these contracts live and anticipate they will contribute to recurring revenue in the future. The final customer win I'd like to highlight is our successful go-live with another leading bank in Turkey, which was signed in Q4 2023. The swift turnaround from securing the contract to getting the customer live is a testament to the excellence of our customer success team and the out-of-the-box readiness of our enhanced product. Furthermore, this quarter, we showcased Aware's cutting-edge technology at several industry events, including Training Magazine's Training 2024 Conference and Expo, Channel Partners Conference and Expo, and the more recent ISC West in April. The reception of our products at these trade shows has been fantastic, and we are seeing tremendous excitement for our biometric solutions among a multitude of potential leads.
Craig A. Herman: The final customer win I'd like to highlight is our successful go live with another leading bank in Turkey, which was signed in Q4 2023, the swift turnaround from securing the contract and getting the customer lives is a testament to the excellence of our customer success team and the out of the box readiness of our enhanced products.
Craig A. Herman: Furthermore, this quarter, we showcased whereas cutting edge technology at several industry events, including training magazine's trailing 2024 conference and Expo Channel Partners Conference and Expo and the more recent ISC West in April.
Craig A. Herman: Our partner program remains instrumental in expanding and securing our recurring revenue base. Since its inception, we have continuously worked to enhance all aspects of this ecosystem to maximize its ROI. This past quarter, we optimized marketing expenses and strategy within our formal partner program by expanding their access to and improving the ease of use for co-branded marketing materials.
Craig A. Herman: Additionally, as mentioned on our last call, in Q4, we rolled out a dedicated partner portal where partners can access enablement and co-marketing materials to increase their knowledge and selling power of Aware Solutions. We are continuing to build on this with focused, ongoing product and sales enablement. We also officially launched our Marketing Development Fund Program, NQ1, for partners that qualify. This will help us invest more deeply with those partners who are looking to aggressively expand our footprint in their markets.
Craig A. Herman: Grant in Q1 for partners that qualify.
Craig A. Herman: Ensuring our partners have ample resources to succeed is at the forefront of our go-to-market strategy, and this commitment is translating into increasing momentum across the globe that we can leverage to drive future ARR. Looking ahead, our team's initiatives remain focused on accelerating the product market fit for Aware ID, generating incremental subscription-based revenue, and leveraging our partner program to convert our promising Opportunity Pipe. I'd now like to turn the call back to Bob for additional details on our key growth drivers and the outlook for 2024. Thanks, Craig. As we look to the full year, we are reiterating our
Robert A. Eckel: Craig, as we look to the full year, we are reiterating our expectations to achieve double-digit revenue and annual recurring revenue growth in 2024. Looking to the future, our expanding pipeline of opportunities and increasing partner acquisition momentum, combined with our growing base of recurring revenue and enhanced operating leverage, position us well to achieve sustainable growth and positive cash flow. With these advantages, we are well positioned and have the resources to strategically invest in customer acquisition, enablement, and back-end fulfillment to support our growth objectives.
Bob: Greg as.
Robert A. Eckel: We continue to advance Aware, and in this next stage of growth, as a biometric identity platform provider, we are going to further strengthen our offerings as a biometric solutions provider to deliver industry sector-specific solutions for their common use cases. This will be done by providing platforms for partners to build solutions and providing our own targeted solutions. Through this, we can further accelerate the adoption that drives our top line. Ultimately, at a high level, we are here to help organizations improve business results through biometrics. Lastly, before moving to the Q&A portion of our call, please take a few moments to answer the survey built into the webcast player. Matt, please provide the appropriate instructions.
Matt Glover: Thank you, Bob. As a reminder, you can submit a question using the built-in Ask a Question feature in the webcast player. Please hold while we populate the question. Craig, you highlighted the rapid turnaround in signing and going live with the Turkish Bank in Q1. Can you provide some context around the typical timeline for such an implementation and what were the primary factors that drove the expedited timeline in this specific case with the Bank of Turkey? Sure.
Craig A. Herman: Sure, absolutely. You know, the typical timeline really depends on a number of factors, right? Complexity, products, resources, etc. However, there are some pieces that can add velocity to an implementation, just like what we saw in Turkey. In this case, we are engaged with a knowledgeable partner in Turkey, DVA. We've been working together with DVA for a number of years. They bring a lot of market and technology knowledge to the table. You know, it is also a real important piece is a customer that is motivated and has specific milestones and a timeline, which this customer did.
Craig A. Herman: And then finally, we're able to move fast due to our understanding of the market biometrics and their needs that we had gathered throughout the sales process. And when we reviewed that kickoff, got us out of the gates really fast. All of these items are ways that this project moved fast and how we anticipate future ones as well.
David Traverse: David, can you provide some additional context around the nature of the subscription renewal delays and any insights into the underlying factors that contributed to this lower-than-expected growth?
David Traverse: Yeah, so the quarterly fluctuations that we expect to experience these, especially as a small company, they're largely due to the timing of revenue recognition. So, for example, in Q1, there was a delayed reorder from a large on-prem international agency within our partner ecosystem that we now expect will be completed in the second quarter instead of traditionally in the first quarter. When it is completed, it should contribute to our software subscription revenue in Q2, as well as beyond.
Craig A. Herman: Craig, you mentioned the official launch of the Market Development Fund during the quarter. Can you provide some additional details on what this initiative entails? What are the key elements or components of the Market Development Fund? How do you anticipate it will support your go-to-market efforts going forward?
Craig A. Herman: Yeah, excellent question. In Q1, we made the first of many partner program enhancements, and one of them was introducing our partner MDF program. The MDF program underscores, you know, our dedication to supporting our partners' marketing efforts in promoting Aware technology as a standalone solution or integrated within their own solution. Eligible partners now can access funds covering up to 50% of select marketing activity costs that foster lead generation specifically. The activities include, you know, running digital marketing campaigns, social campaigns, trade shows, and more.
Craig A. Herman: The program is funded with a portion of our broader marketing budget and not only provides financial support but also ensures that our joint lead generation efforts are effective in the marketplace. By making the funds available, we are able to achieve a few, a couple of critical things. First, we incentivize our partners to promote AWARES technology specifically. The more partners promoting our brand, the more brand awareness we can develop, and the more opportunities we're going to uncover.
Craig A. Herman: Second, we gain insight into marketing practices and corresponding results from our partners. In order to qualify for the funds, partners must submit a request that defines the market activity, specific objectives, target audience, timeline, budget, etc. After completion of the activities, partners must submit proof of performance, which includes detailed metrics on the activity's performance, including reach, engagement, leads generated, etc. Financial documentation confirming the actual expenditure on the activity is critical. You know, as we create closer alignment through our partner program and enhancements like this new MDF program, as well as our enablement programs, we anticipate tapping into the leverage of our expansive partner ecosystem to provide in our overall go-to-market ethic.
Craig A. Herman: Is critical.
Craig A. Herman: As we create closer alignment through our partner program in hamlet enhancements like this new Mds program.
Craig A. Herman: Our enablement programs.
Craig A. Herman: Anticipate tapping into the leverage of our expanded partner ecosystem that can provide and our overall go to market efforts.
Craig A. Herman: Thanks, Craig another one for David you mentioned the year over year increase in recurring maintenance revenue was largely driven by contracts awarded in Q3 2023.
Matt Glover: Thanks Craig. Another one for David.
David Traverse: You mentioned the year-over-year increase in recurring maintenance revenue was largely driven by contracts awarded in Q3 2023. Could you provide some additional context around what caused the delay in recognizing the revenue from those deals? Were there any specific factors or circumstances that led to the delayed revenue recognition compared to your typical timeline?
David Traverse: Can you provide some additional context around what caused the delay in recognizing the revenue from those deals.
David Traverse: Are there any specific factors or circumstances that led to the delayed revenue recognition compared to your typical timelines.
David Traverse: Yeah.
David Traverse: Yeah, no, thanks, Matt. Yeah, no, I think we just talked about this a lot in the third and fourth quarter calls, so what happened, we secured contracts for U.S. government agencies, as well as our largest BioSP customer, and what that did, that added over a million dollars to the company's annual recurring revenue, and now we're starting to see the benefit from that.
Speaker Change: Yeah. Thanks, Matt Yeah, No I think we just talked about this a lot in the third and fourth quarter calls.
David Traverse: What happens we secured contracts for U S government agency as well as our largest <unk> customer and what that did that added over $1 million of the company's annual recurring revenue and now we're starting to see the benefit from that.
Robert A. Eckel: The next question is, what drove the substantial improvement in operating loss in Q1?
Robert A. Eckel: Yeah, I'll take that. I'd say the substantial improvement in operating loss reflected the success and the focus on our cost optimization initiatives, and these initiatives included a significant reduction in headcount across the organization while also strategically investing in high-growth areas. So, by doing so, we were able to significantly streamline our cost structure and lower our revenue break-even.
Speaker Change: Yes, I'll take that.
Robert A. Eckel: I'd say the substantial improvement in operating loss reflected the success and the focus on our cost optimization initiatives and these initiatives included a significant reduction in head count across the organization. While also strategically investing in the high growth areas and so by doing so we're able to significantly.
Robert A. Eckel: Dreamliner cost structure and lower our revenue breakeven point.
Robert A. Eckel: Thanks, Bob the next question with approximately $29 million in cash cash equivalents in marketable securities on your balance sheet how are you.
Matt Glover: Thanks, Bob. The next question. With approximately $29 million in cash, cash equivalents, and marketable securities on your balance sheet, how are you currently thinking about your capital allocation strategy going forward? What are the key priorities or focus areas you're considering when evaluating how to deploy this capital to drive the company's continued growth and development?
Matt Glover: Thinking about your capital allocation strategy going forward.
Matt Glover: Our key priorities are focus areas youre, considering when evaluating how to deploy this capital to drive the company's continued growth and development.
David Traverse: Yeah, thanks Matt. I can take this one.
David Traverse: So, as I think we've been pretty consistent with this messaging the last few quarters, we're always actively evaluating any opportunities that really have the potential to increase our scalability. However, we haven't identified any candidates that could contribute to our sustainable growth at a valuation that matches our valuation criteria. That said, we do have a robust cash position that gives us the flexibility to pursue any promising opportunities that may arise. In the meantime, we remain focused on accelerating our organic growth.
David Traverse: We do have a robust cash position that gives us the flexibility to pursue any promising opportunities that may arise.
Robert A. Eckel: Bob, given the company outperformed its expectations of ARR by at least 15% in 2023, how are you thinking about your outlook for 2024? Yeah, you know,
Robert A. Eckel: Yeah, you know, in 2023, we achieved 23% growth in annual recurring revenue, and we anticipate continuing this momentum through this year. And again, I'm going to reiterate, for 2024, we're targeting double-digit growth in both revenue and ARR.
Craig A. Herman: Are you targeting double-digit growth in both AR and revenue for this year? What opportunities in your pipeline are giving you confidence in these projections?
Craig A. Herman: Sure, I'll take that. You know, aside from the contracts and customers we mentioned on the call, we have a robust pipeline of opportunities that are in varying stages across the sales process. To name a few more immediate examples, we are currently in the final stages of negotiation with three very exciting opportunities for Q2. The first is a multi-year deal in the Middle East to employ our NOMI solution for digital identity management.
Craig A. Herman: Second, we are continuing to expand BioSP's international footprint with an international government contract. And third, we are in the process of securing our largest contract for our ABUS platform. The breadth and diversity of these opportunities showcases the power and flexibility of the Aware biometric identity platform, and we're looking forward to expanding on these further in our upcoming calls.
Craig A. Herman: Thanks, Craig. The next question is, will partnerships help in gaining more U.S. customers?
Craig A. Herman: Yes, absolutely. It is a big focus for us, and I'll speak to it pretty shortly. We were at the ISC West show, where the focus was access control. So we really see a market for biometrics in access control that is speeding towards adoption. A lot of that is driven by larger players outside of the biometrics space that are now deploying them, including a company like Amazon with a palm print at Whole Foods, using your palm to pay at Whole Foods.
Craig A. Herman: So we're now seeing access control moving closer to biometrics to be able to get away from things like using a fob or a key card, things that can be lost or misplaced. And we're getting a lot of attention and interest from groups like MSPs and as well as hardware providers in the access control space. So that's one area where we really see Focus on Partners is going to drive that in private and public spaces across the U.S.
Craig A. Herman: As well as hardware providers in the access control space. So that's one area, where we really see.
Craig A. Herman: Our focus on partners is going to drive that for <unk>.
Craig A. Herman: Private and public spaces across across the U S.
Speaker Change: Great. Thanks, Greg.
Craig A. Herman: Can you talk about the change in competitive dynamics over the last six months?
Craig A. Herman: Can you talk about the change in competitive dynamics over the last six months.
Craig A. Herman: Sure.
Craig A. Herman: Sure, you know, one of the changes is that we've entered into some new markets. So, you know, we are now, you know, we've been spending a considerable amount of time in the gaming market, which has brought up a number of needs that this market has that they haven't thought of before biometrics. So adding biometrics to KYC, specifically for gaming, has opened up the door for us to now compete with folks that we have not competed with in the past.
Craig A. Herman: Yeah.
Craig A. Herman: One of the one of the changes as we've entered into some new markets. So we are now we've been spending.
Craig A. Herman: Certain amount of time in the gaming market, which has brought up a number of <unk>.
Craig A. Herman: Need that this market has.
Craig A. Herman: That they havent thought of before biometric, so, adding biometrics to <unk> specifically for gaming.
Craig A. Herman: <unk> has opened up the door for us to now compete with folks that we have not competed with in the past and one of the key pieces of this is building out the ability for our integration and Thats something that we have spent on the product side as being able to open up to a lot of different.
Craig A. Herman: And one of the key pieces of this is building out the ability for our integration. And that's something that we have worked on on the product side, being able to open up to a lot of different types of products outside of our platform to give more choices and more value to customers. So, instead of being a closed system, being an open system, that's integrating with, you know, our most recent integration was with WooCommerce, which is a division of WordPress, which is specific to the gaming industries, where the majority of gaming platforms are on this platform.
Craig A. Herman: Types of products outside of our platform.
Craig A. Herman: To give more choices and more value to customers. So so instead of being a closed system being an open system, that's integrating with our most recent.
Craig A. Herman: Integration was was with wound commerce, which is a division of Wordpress, which is specific for the gaming industries, where the majority of gaming platforms are on this platform. So now we have a plug and play integration that gives us a competitive advantage for folks that are using.
Craig A. Herman: So now we have a plug and play integration that gives us a competitive advantage for folks that are using that specific platform. It also gives us a lot more targets to go after. So, you know, again, we're seeing as we get into these different verticals, really specific needs. And then on the other side of the platform, you really, or on the other side of the fence, you're really starting to see a lot more market adoption, which is what we're excited about, where people are getting much more accustomed to using biometrics, whether that's palm, finger, face, or voice. You really see that's going to help us continue to grow.
Craig A. Herman: That specific platform. It also gives us a lot more targets to go after so again, we're seeing as we get into these different verticals really specific needs and then on the on the other side of the platform you release or the other side of the fence Youre really starting to see a lot more market adoption, which is what we are.
Craig A. Herman: We're excited about where people are getting much more accustomed to using biometrics whether thats.
Craig A. Herman: Finger face voice.
Craig A. Herman: We really see that is going to help us continue to grow.
Craig A. Herman: Okay.
Speaker Change: Great. Thank you Craig at this time. This concludes our question and answer session. Your question wasn't answered. Please E mail <unk> IR team at AWS at Gateway.
Matt Glover: Great. Thank you, Craig. At this time, this concludes our question and answer session. If your question wasn't answered, please email AWARE's IR team at awre.gateway-grp.com. I'd now like to turn the call back over to Bob for closing remarks.
Bob: Gateway cash ERP dot com.
Matt Glover: I would now like to turn the call back over to Bob for closing remarks.
Bob: I'd just like to thank everyone for joining us on today's call.
Robert A. Eckel: I'd just like to thank everyone for joining us on today's call and also thank our employees, partners, and shareholders for their continued support. And as a reminder, we welcome your feedback and insight through the survey built into the webcast player. In addition, you can learn about our strategy and the investor presentation that's available on our website. And we look forward to updating you on Aware's progress on our next call.
Robert A. Eckel: Also thank our employees partners shareholders for their continued support and as a reminder, we welcome your feedback and insight through the survey built into the webcast player.
Robert A. Eckel: You may learn about our strategy and the Investor presentation. That's available on our website and we look forward to updating you on <unk> progress on our next call overdue amount.
Matt Glover: Thank you, Bob. I'd like to remind everyone that a recording of today's call will be available for replay via link in the investor section of the company's website. Thank you for joining us today for Aware's first quarter 2024 conference call. You may now disconnect.
Speaker Change: Thank you Bob I'd like to remind everyone that a recording of today's call will be available for replay via a link in the investors section of the company's website. Thank you for joining us today for <unk> first quarter 2024 conference call you may now disconnect.