Good afternoon, and welcome to Aware's Fourth Quarter and Full Year 2021 Earnings Conference Call. Joining us today is the company's CEO and President, Robert Eckel; and CFO, David Barcelo. [Operator Instructions]. 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 the 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. Although it may voluntarily do so from time to time, Aware undertakes no commitment to update or revise the forward-looking 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 that term is defined by the SEC and Regulation G. Non-GAAP financial measures should not 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 to the most directly comparable GAAP measures 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 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, Paul Eckel. Bob?

Thanks, Matt. Good afternoon, everyone, and thank you for joining us today. After the market close, we issued a press release announcing our results for the fourth quarter and fiscal year ended December 31, 2021. A copy of the press release is available in the Investor Relations section of our website. We're extremely excited to join you here today to review Aware's financial and operational progress. As we continue to execute on our growth strategy and business model transformation, we are becoming increasingly bullish about the near- and long-term prospects of the company. I'll start with a brief review of our 2021 accomplishments and discuss how Aware is well positioned for meaningful growth in 2022 and beyond. Then our CFO, Dave Barcelo, will review our financial results for the fourth quarter and full year 2021. Afterwards, I'll provide insight on our go-forward strategy and initiatives for 2022. Lastly, we'll open the call for questions. Our 2021 performance reflects the early success of our 3-part transformational growth strategy and validates that we are on the right track. This past year was highlighted by material growth in infrastructure improvements, solidifying the foundation and enabling Aware to scale and capitalize on increasing tailwinds in the authentication industry. We delivered $16.9 million in total revenue, marking the highest annual revenue level in the last 5 years. Additionally, within that top line revenue, our recurring revenue grew 46% year-over-year and our subscription revenue more than doubled. Dave will get into financials in more detail momentarily. In 2021, we strengthened our core offerings in our delivery and support systems. This enables sales expansion while preparing to launch our new SaaS offerings. We expect our December acquisition of Fortress Identity, a pioneering provider of digital ID verification and biometric authentication, to accelerate the time to market of our Aware ID SaaS platform, while providing a solid foundation for long-term growth going forward. In particular, Fortress ID's cloud-native platform, Fortress ID, uses biometric multifactor authentication to combine onboarding validation and due diligence for compliance and risk management. Second, it expands our offerings for electronic know your customer, or eKYC, applications and provides a strong foothold in cloud-based service offerings. These will include compliance and risk management for secure digital identities. Third, the acquisition accelerates our SaaS transformation by offering a rich portfolio of risk management authentication solutions for secure financial processing and data breach prevention. Lastly, it enables us to expand our strategic relationship with new partners and new customers around the world. Through the integration of Fortress ID and the continued execution of our 3-part growth strategy, our focus is now on accelerating growth and expanding recurring revenue. Before discussing our initiatives for 2022 and beyond in more detail, I'll turn the call over to Dave who will walk us through our financial results for the fourth quarter and full year. Dave, over to you.

Thank you, Bob, and good afternoon to everyone on the call. Let's turn to our financial results for the fourth quarter and fiscal year ended December 31, 2021. Our total revenue in the fourth quarter was $4 million, up 17% or $3.4 million in the same year ago period. For the full year ended December 31, 2021, our total revenue increased 49% to $16.9 million from $11.3 million in the same year ago period. And looking at our operating expenses. For the fourth quarter of '21, our operating expenses increased 5% to $5.5 million from $5.3 million in Q4 of last year. For the full year of 2021, our operating expenses increased 11% to $23 million from $20.7 million in the same year ago period. The quarterly and full year period increases in operating expenses were primarily due to higher sales and marketing as well as some general and administrative costs related to infrastructure build-out and the Fortress Identity acquisition in Q4. The corresponding operating loss for the fourth quarter of 2021 was $1.5 million, an improvement from an operating loss of $1.9 million in the same year ago period. The year-over-year decrease in operating loss was primarily due to higher revenues. Operating loss for 2021 was $6.1 million compared to an operating loss of $9.4 million in the prior year period. The decrease in operating loss was primarily the result of higher revenues and partially offset by increases in operating expenses. For the fourth quarter of 2021, GAAP net loss totaled $1.3 million or $0.06 per diluted share compared to a GAAP net loss of $1.6 million or $0.08 per diluted share in the same year ago period. GAAP net loss for 2021 totaled $5.8 million or $0.27 per diluted share. This was an improvement compared to a GAAP…

Thanks, Dave. For those of you who may be new to our company, let me step back for a moment and provide a brief overview of who we are and what we do. Aware is an authentication company. We're driven to create a world where you own your identity. Our mission is to solve everyday business problems using proven and trusted adaptive authentication. When I joined Aware in late 2019, the company was effectively a book-and-ship company with strong legacy offerings and supporting services, but it had an outdated business model. Even still, I was convinced Aware had a great future because of 4 key elements: its people, its products, its financials and a market that was looking to solve everyday business problems while improving privacy, security and data protection in a way that is low friction and can often be controlled by the individual. Not to mention the growing adoption and acceptance of the biometrics just to do that. I'm excited to say we have a great outlook for next year and beyond, and we've made significant progress to date. When I joined, I started Aware on a 3-part transformational growth strategy. As I shared with many of you during our earnings calls and discussions of our investor presentation, we shifted the company's focus to concentrate on our core offerings, bring them up the value chain and capitalize on the market trends and biometrics and authentication in general, like increased adoption, acceptance and use of the emerging infrastructure. We centered on our core markets, but we also penetrated new, growing and emerging markets. And we emphasized establishing leverage into the offering model, building recurring revenue streams and moving towards high-margin subscriptions over individual perpetual licenses. As part of this growth strategy, we are now 2 years into a 3-year…

[Operator Instructions]. Okay, Bob, before we get to questions, you've gotten a couple of mentions of choppy audio during your summary. Can you repeat your summary points?

Yes. Sure. Summary points. We grew our top line 49% in 2021, and we're targeting to grow greater than 20% in 2022. Our focus on building recurring revenue streams and transitioning to a subscription-centric model enabled us to deliver 45% growth in recurring revenue. And we also anticipate our recurring revenue to account for more than -- more of our total revenue in 2022. We're demonstrating the leverage of our revamped infrastructure and operating model. This is reflected by almost 50% top line growth, contrasted with a 10% increase in operating expenses. We believe we'll be able to cross over to EBITDA profitability in 2023, though the exact timing cannot be predicted. And we have a strong balance sheet to execute our growth strategy and to act on strategic opportunities that will allow us to scale more rapidly. In short, we're bullish on our future, and the entire team is focused on growth.

Are you seeing any change in deal size?

Matt, while the overall deal size hasn't changed significantly, the transformation from perpetual licenses to a subscription model, by definition, does spread out the size of a deal over a different period of time. So it can't be compared apples-to-apples in the financials. That said, we're still seeing total contract values fall within the typical range that we've been used to. In addition, we're also seeing existing customers with a given total contract value come back and add more to their deal size because they're happy with our product and/or are seeing higher-than-anticipated adoption rate by their customers.

Next question, any update on your SaaS offering?

Good question. We've got initial customers reviewing it as well as using our offering. And now we're looking at a combination of Fortress ID customers and our initial customers together to ensure that our offering is addressing the problem and their use cases that we set it out to solve.

Our next question, how many customers are you trialing with today?

Any customer that fits our criteria of our current, what I'll call, multi-tenant offering is welcome to try the offer. We're working with a selective set of prospective customers that are willing to provide us the feedback that we're going to use to adapt and enhance our offering. And that's what makes them selective because we want the feedback, and we're going through that process now.

Next question, do you think the sales team is fully built-out at this point?

Here's a question where we're going to continue to invest in our sales and marketing team as our sales traction continues to grow. We also -- we're mindful of our current cost basis, which we believe we're in a reasonable place. But part of our sales strategy is to partner with resellers, integrated product resellers and expand our reach. So we are continuing to invest in that area.

Next question, are you seeing any geographies of particular strength or weakness?

We've got strong traction in Latin America and also with the U.S. government. We're also looking to strengthen our customer base in the EMEA region and the rest of the world where we've been working with several partners. We'll also continue to seek partners and expand our customer base beyond where we have the current footholds because we believe in the benefits that biometrics can achieve. So we're trying to leverage partners wherever we can, given that we don't want to set up a huge base of door-to-door salespeople.

Great. How should we think about OpEx ramping this year?

We don't expect any significant changes to the operating expenses. And any changes we plan would grow in line with last year's percentages of approximately 10% to 15%.

Next question, we've received a couple of questions about Knomi transactions. What were Knomi transactions in Q4? How should we think about this ramping in 2022?

Well, for the year, we saw over 42 million transactions. But as we go forward, we're seeing traction both with user-based and transaction-based recurring revenue. So we plan on focus on recurring revenue as a whole rather than categorizing that revenue as one or another. So we're getting requests for user-based, there's transaction-based, enterprise-based subscription, and so we're going to look at recurring revenue as a whole.

Has Omicron pushed deals out to the right?

Well, we've still been seeing an effect from Omicron, for sure. It depends and it impacts us a lot on our face-to-face activities. It's just it's hard to say what could have been done sooner. Nevertheless, it's still a factor, especially with our face-to-face sales activities, but we are seeing and are able to start to get to more shows and more trade shows now.

Next question, how does Anonybit's technology differ from homomorphic encryption?

Matt, that's a pretty technical question. I'll try to answer it the best I can. And homomorphic encryption requires an encrypted computation to be implemented inside an encrypted database. So the implication is that the biometric algorithms would be coded with the homomorphic encryption in the databases and restricted to the functions and performance supported by those algorithms. And as such, any improvements to the algorithm, which we know happens frequently, would also require upgrades, bringing about risk and cost. And we've seen this happen too frequently. Some of our organizations that we deal with keep the old and suboptimal systems because they don't want to deal with the impact of the changes. So this model is contrary to our aspiration of sovereign identity and owning your identity because homomorphic encryption comes through data-hosting organization and they're the sole owner. Anonybit provides a network-based decentralization approach to distribute the biometric data and activities across the network nodes and eliminates the shortcomings of the homomorphic encryption. And so, in our opinion, the way we're doing this is the implication of decentralization leads to better securing of the keys, securing of the matching, easy use of biometrics from the user on any device and considerably simplify the compliance related to data ownership and compliance requirements. So we're in the early stages there, but there is a difference.

Great. Got a few questions around Anonybit partnership. Can you tell us why it's good for Aware? And what's so exciting about it?

Well, we believe the partnership will enable customers to enjoy all the benefits of the latest biometric technology since it combines the Aware's best-in-class biometric technology and Anonybit's approach to storing data throughout a vast peer-to-peer network in the form of anonymized bits. So it gives users, in our opinion, confidence that their individual biometric data cannot be stolen or compromised.

Can you elaborate on the technical alignment between Fortress Identity and Aware?

Yes. The acquisition of Fortress Identity has enabled us to integrate their digital ID verification platform, Fortress ID, into our own SaaS offering, Aware ID. This expands our offerings around eKYC or know your -- electronic know customer. Fortress ID and Aware ID are complementary platforms, and they enhance each other's capabilities. Fortress ID had a strong capability in risk management and online onboarding, things that they did like due diligence checks for anti-money-laundering, counterterrorism finance, politically exposed persons. And Aware ID has strong capabilities in biometrics, document validation and the orchestration of onboarding and authentication. And by integrating Fortress ID into Aware ID, customers have the comprehensive solution with more options to address digital onboarding and authentication, so they can choose how they want to do it.

We got a couple of questions on the stock buyback plan. Could you provide additional details on the 10b5-1 plan that was filed today?

Matt, let me take this one. As you mentioned, we filed an 8-K with our 10b5-1 plan, along with our earnings release today. We've implemented this 10b5-1 plan to support our common stock in a more systematic manner. The share repurchase trading plan will permit our common stock to be purchased at times when we're might otherwise be precluded from doing so or we're under insider trading laws or self-imposed trading restrictions. This 10b5-1 plan is administered by an independent broker, and it's subject to a preset price volume and timing restrictions that we set with that broker. So any actual repurchases under the Rule 10b5-1 plan will be disclosed in periodic reports, which we'll file under the Exchange Act. There's no assurance as to the amount or the timing or the prices of these repurchases. They're all based off of various market conditions and other factors, and they're subject to the parameters that we set forth in the plan.

Dave, another one for you, why isn't there more insider buying of Aware stock?

Yes. Thanks, Matt. The Aware executives and our employee base participate in an employee stock purchase program where we provide funds to purchase shares on predetermined date. Since this is all predetermined, our executives and our employees avoid potential overlap between purchasing shares and being in possession of material nonpublic information. The filings are different for these type of planned purchases, so I can understand how this might indicate a lack of insider buying. However, our team is confident in the future direction of the company as indicative by active participation in this plan.

You announced a 10-year lease. Does that mean the building has sold?

So yes, we disclosed in today's 8-K on March 1 that we entered into an agreement to lease approximately 20,000 rentable square feet in Burlington, Mass for a term of 10 years and 6 months. We'll intend to use this as our principal executive offices going forward. The term of the lease commences on the date that the landlord notifies us that the construction on the premises has been substantially complete. So additional details on this lease can be found in our 10-K when we file that for the year ended December 31, 2021. We have not yet closed on the purchase sale of our Bedford office building. We expect that transaction to close prior to our next earnings call, and it will be disclosed in an 8-K upon completion.

How's Q1 2022 looking so far?

Well, we think our overall performance and execution of our strategy is best measured on a 12-month period. So I'd encourage you and investors to focus on our annual guidance and our performance instead.

Next question, any color context in private market valuations? What were the general types of multiples observed perhaps 6 months ago versus where multiples generally appear to be at the moment?

Yes. Thanks, Matt. This has been a point of analysis for Aware over the last 12 months. The market valuations for strategic initiatives that we're pursuing have been increasing over time. And most recently in the last couple of quarters, they've been extremely high, I'd say, probably 10% to 20% higher than what you were seeing at the beginning of the year.

Next question, can you give us a sense of number of Fortress ID customers you acquired, their size, SMB, large corporation, et cetera?

Yes. So Fortress was a nice little acquisition for us. Their customer base is fairly small but aligned with the type of customers that Aware is interested in, primarily financial institution, banks. The customers were not numerous. Our acquisition was more aligned to the capabilities and the ability to accelerate our Aware ID offering. So the customer base was not the primary focus.

Our next question, you mentioned $30 million to $40 million in revenue in the next 3 to 4 years. Can you get there organically? Or does that assume M&A?

Yes. Thanks, Matt. So our projections are primarily focused on organic growth. We are taking a very opportunistic approach to M&A. And as I mentioned, valuations have been high, so we're doing everything we can to reach those numbers with everything at our disposal.

How do you define recurring revenue? Which line items are included within that?

Yes. Our recurring revenue is made up of our maintenance stream as well as our subscription stream, both of which are disclosed in our financial statements. And these revenues are recurring on an annual basis for customers that are locked into recurring contractual terms.

What was subscription revenue in the quarter? How much of that was upfront recognition of annual minimums?

Our fourth quarter subscription revenue was about $0.5 million. And as we continue to execute and renew on customers, these annual minimums are more and more recurring. So along those lines, we did not recognize the same type of spike that we did last quarter, and we anticipate it smoothing out as we go forward.

Great. At this time, this concludes our question-and-answer session. If your question wasn't answered, please e-mail Aware's IR team at awre@gatewayir.com. I'd like to now turn the call back over to Bob for closing remarks.

Thanks, Matt. I'd like to thank everyone for joining us on the call today. I'd also like to remind you that -- about the investor presentation that's available on our website. We just updated that. So if you haven't already downloaded it, I invite you to do so and learn more about the overall strategy, especially some of you that are new, maybe. And I'd like to also, as usual, thank our employees, our partners, investors once again for their continued support. And we look forward to updating you on our next call. Matt?

Thanks, Bob. A recording of today's call will be available for replay via link in the Investor Relations section of the company's website. Thank you for joining us today for Aware's Fourth Quarter and Full Year 2021 Earnings Conference Call. You may now disconnect.