Aware Inc (AWRE) Q1 2024 Earnings Call Transcript Highlights: Strategic Growth and Improved ...
Total Revenue: $4.4 million in Q1 2024, a 3% increase year-over-year.
Recurring Revenue: $3.2 million in Q1 2024, representing 71% of total revenue.
Operating Expenses: $5.7 million in Q1 2024, down 8% year-over-year.
Operating Loss: Improved by 32% year-over-year to $1.3 million in Q1 2024.
GAAP Net Loss: $1 million in Q1 2024, a 30% improvement year-over-year.
Adjusted EBITDA Loss: $1 million in Q1 2024, improved from a loss of $1.4 million year-over-year.
Cash and Equivalents: $28.5 million as of March 31, 2024.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Aware Inc (NASDAQ:AWRE) reported a year-over-year increase in total revenue and recurring revenue by 3% in Q1 2024, driven by an 18% increase in subscription maintenance revenue from contracts secured in Q3 2023.
The company achieved a significant reduction in operating loss by 8% or $0.6 million year-over-year, reflecting successful cost optimization initiatives and a streamlined cost structure.
Aware Inc (NASDAQ:AWRE) maintains a strong balance sheet with $28.5 million in cash, cash equivalents, and marketable securities as of March 31, 2024, providing financial flexibility for future growth opportunities.
The company has a solid foundation of recurring revenue that helps stabilize financial performance and supports sustainable growth.
Aware Inc (NASDAQ:AWRE) continues to expand its customer base and strategic partnerships, securing new customers in Latin America and expanding use cases with existing customers, which contributes to the growth of its recurring revenue base.
Negative Points
Despite overall growth, Aware Inc (NASDAQ:AWRE) experienced a slight decrease in cash and marketable securities from $30.9 million at the end of 2023 to $28.5 million by the end of Q1 2024, primarily due to operating losses and timing of collections.
The company reported a GAAP net loss of $1 million in Q1 2024, although this was a 30% improvement from the previous year.
Aware Inc (NASDAQ:AWRE) faces quarter-to-quarter fluctuations in financial results, which can impact the predictability and stability of its financial performance.
There were delays in subscription renewals which affected the expected growth rate, highlighting potential issues in sales cycle predictability.
The company is still working towards achieving profitability, with ongoing efforts needed to further reduce operating losses and achieve positive cash flow.
Q & A Highlights
Q: 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 in Turkey? A: (Craig Herman - Chief Revenue Officer) Sure, absolutely. The typical timeline really depends on a number of factors, right, complexity, products, resources etcetera. However, there are some pieces that can add velocity to an implementation just like what we saw in Turkey. In this case, we were engaged with a knowledgeable of a partner in Turkey, DVA. We have been working together with DVA for a number of years. They bring a lot of market and technology knowledge to the table. It is a it also a real a important piece is a customer that is motivated and has specific milestones and a timeline, which again, this customer did. And then finally, we are 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 kick off, got us out of the gate really fast. All of these items are ways that this project moved fast and how we anticipate future ones as well.
Q: 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? A: (David Traverse - Principal Financial Officer, Treasurer) Sure. Thanks, Matt. Yes. So, the quarter-to-quarter fluctuations that we expect to experience these, especially as a small company, they are 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.
Q: Craig, you mentioned the official launch of the market development funds 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? A: (Craig Herman - Chief Revenue Officer) Yes. Excellent question. In Q1, we made the first of many partner program enhancements. And one of them who was introducing our partner MDF program, the MDF program underscores our dedication to supporting our partnersa marketing efforts in promoting Aware technology as a standalone solution or integrated within their own solution. All the partners now can access funds covering up to 50% of select marketing activity costs that foster lead generation specifically. The activities include running digital marketing campaigns, social campaigns, trade shows and more. The program is funded with a portion of our broader marketing budget and not only provide 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 a couple of critical things. First, we incentivize our partners to promote Awareas technology specifically. The more partners promoting our brand, the more brand awareness we can develop and the more opportunities we are going to uncover. Second, we gained insight into the 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, etcetera. After completion of the activities, partners must submit proven performance, which includes detailed metrics on the activities performance, including reach, engagement, leads generated, etcetera. And financial documentation confirming the actual expenditure on the activity is critical. As we create closer alignment through our partner program enhancements like this new MDF program, our enablement programs, we anticipate tapping into the leverage of our expansion partner ecosystem that can provide in our overall go-to-market efforts.
Q: David, you mentioned the year-over-year increase in recurring maintenance revenue was largely driven by contracts awarded in Q3 2023. 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 timelines? A: (David Traverse - Principal Financial Officer, Treasurer) Yes. Thanks, Matt. No, I think we just talked about this a lot in the third quarter and the fourth quarter calls. So, what happens, we secured contracts for US government agency, as well as our largest BioSP customer. And what that did, that added over $1 million of the companyas annual recurring revenue. And now we are starting to see the benefit from that.
Q: What drove the substantial improvement in operating loss in Q1? A: (Robert Eckel - President, Chief Executive Officer, Director) Yes, I will take that. I would say the substantial improvement in operating loss reflected the success and the focus on our cost optimization initiatives. And these initiatives include a significant reduction in headcount across the organization while also strategically investing in the high-growth areas. So, by doing so, we are able to significantly streamline our cost structure and lower our revenue breakeven point.
Q: With approximately $29 million of cash, cash equivalents and marketable securities on your balance sheet, are you currently thinking about your capital allocation strategy going forward? What are the key priorities or focus areas you are considering when evaluating how to deploy this capital to drive the companyas continued growth and development? A: (Craig Herman - Chief Revenue Officer) Yes. Thanks, Matt. I can take this one. So, as I think we have been pretty consistent with this messaging in the last few quarters, we are always actively evaluating any opportunities that really have the potential to increase our scalability. However, we havenat identified any candidates that could contribute to our substantive growth at evaluation a 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. But in the meantime, we remain focused on accelerating our organic growth.
Q: Bob, given the company outperformed its expectations to grow ARR by at least 15% in 2023, how are you thinking about your outlook for 2024? A: (Robert Eckel - President, Chief Executive Officer, Director) Yes. In 2023, we achieved a 23% growth in annual recurring revenue, and we anticipate continuing this momentum through this year. And again, I am going to reiterate for 2024, we are targeting double-digit growth in both the revenue and ARR.
Q: Are you targeting double-digit growth in both ARR and revenue for this year? What opportunities in your
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
