Aware, Inc. — FY2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023; filed March 15, 2024. Aware sells biometric identity software, platforms, maintenance and related services to government and commercial customers, primarily through system integrators and other channel partners.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $18.244 million | $16.008 million |
| Operating loss | $8.540 million | $2.217 million |
| Net loss | $7.314 million | $1.726 million |
| Net loss per diluted share | $0.35 | $0.08 |
| Cash from (used in) operations | $1.823 million | $(5.042) million |
- Revenue increased 14%. Software license revenue rose to $9.529 million from $7.386 million, maintenance increased to $7.674 million from $7.111 million, and services and other revenue fell to $1.041 million from $1.511 million.
- Operating loss widened substantially; operating margin was approximately negative 47%, versus negative 14% in 2022. The 2023 net loss included a $2.695 million write-off of the Omlis note receivable. The 2022 comparison benefited from a $5.672 million gain on the sale of the former headquarters.
- Services and other revenue generated a gross loss of approximately $0.232 million in 2023, compared with gross profit of approximately $0.251 million in 2022; management attributed the change to the mix and profitability of customer projects.
- At year-end, cash and cash equivalents were $10.002 million and marketable securities were $20.913 million, totaling $30.915 million. Current assets were $35.824 million and current liabilities were $7.549 million. Management believes available cash and cash equivalents will fund operations for at least 12 months from filing.
- No borrowings are reported. Operating lease liabilities totaled $4.475 million; estimated undiscounted lease payments were $6.993 million. Operating cash flow turned positive, while investing activities used $3.144 million and financing activities used $0.426 million.
Changes, outlook and notable items
- License growth reflected increases in perpetual licenses and subscription-based licenses. SaaS revenue remained de minimis in 2023 and 2022, although management expects SaaS to become a significant offering over time and plans to transition Knomi into AwareID.
- Management expects research and development expense to decline in absolute dollars in the next year, then rise in following years; it expects to expand sales and marketing strategically. No quantified revenue or earnings guidance is provided.
- Engineering headcount declined slightly year over year, and the company reported additional actions reducing engineering headcount by approximately 10%. Management stated it believes the engineering organization is adequately staffed.
- The $2.5 million Omlis note, recorded at $2.6 million at year-end 2022, was written down to zero in 2023 because of liquidity and collectability concerns. Omlis and MIRACL petitioned to enter UK administration in January 2024.
- The FortressID earnout period ended without targets being met; the related contingent acquisition liability was reduced to zero, producing a $0.812 million 2023 fair-value adjustment.
- Aware repurchased approximately 300,000 shares for $0.506 million during 2023. Its $10 million repurchase program was extended through December 31, 2025. No dividends were paid in 2023 or 2022.
- One customer accounted for a material share of revenue and receivables. The filing gives inconsistent revenue concentration figures: 17% in the Business section and 18% in the notes. One customer represented 16% of year-end net accounts receivable and unbilled receivables.
- Principal risks include lumpy orders and government budget dependence, channel-partner reliance, intense competition, uncertain commercial and cloud adoption, privacy and biometric-data regulation, cybersecurity and software defects, and the ability to retain key personnel. The company reported no material cybersecurity incident in 2023 and no legal proceeding expected to have a material adverse effect.
- The independent auditor issued an unqualified opinion; revenue recognition was identified as a critical audit matter. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not audit internal control effectiveness.
Important facts for investors to verify
- Reconcile the filing’s 17% versus 18% disclosure for the largest customer’s 2023 revenue contribution, and assess customer and channel concentration.
- Evaluate the underlying drivers of the larger operating loss, including the Omlis write-off, higher selling and marketing expense, and the absence of the prior-year property-sale gain.
- Monitor operating cash flow quality and sustainability, particularly the contributions from receivables, deferred revenue and the tax refund.
- Track SaaS/AwareID adoption and revenue contribution; management reports no material SaaS revenue to date despite its stated growth ambitions.
- Assess potential recovery, if any, from the Omlis/MIRACL UK administration process and the implications for the fully written-off note.
- Consider ongoing lease commitments, repurchases, and the company’s ability to fund operations beyond management’s stated 12-month liquidity outlook.