Good afternoon, and welcome to Aware's Fourth Quarter and Full Year 2022 Earnings Conference Call. Joining us today is the Company's CEO and President, Robert Eckel; CFO, Dave Barcelo; and CRO, Craig Herman. Following their remarks, we'll open the call for questions. [Operator Instructions] Before we begin today's call, I'd like to remind everyone that the presentation 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 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. 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, 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, the call contains certain non-GAAP financial measures as the term is defined by the SEC and 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. Accordingly, Aware has provided a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today. This presentation will be recorded and made available for replay via a link 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. Bob?

Thanks, Matt. Good afternoon, everyone, and thank you for joining us today. After the market close, we issued a press release with our results for the fourth quarter and fiscal year ended December 31, 2022. A copy of the press release is available in the Investor Relations section of our website. On today's call, I will begin by discussing our financial and operational performance for the fourth quarter and the full year 2022. Then I'll review the progress we've made positioning our company to realize greater scale and sustainable growth. Afterwards our CFO, Dave Barcelo, will provide additional details on our fourth quarter and full year 2022 performance. Next, our CRO, Craig Herman will discuss our strategic initiatives to bolster sales and advance our go-to-market efforts. Finally, I'll review our key business drivers and 2023 outlook before opening the call to questions. 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 identity platform partner working to enhance trust in an increasingly connected world. Our mission is to balance security and user experience through technology for the few and at scale. We reduced fraud and enable compliance and security needs as well as improve business efficiencies through offerings that address identity challenges of today while preparing for identity challenges in the future. These offerings facilitate digital onboarding, authentication and life cycle management of the user's biometric identity through proven and trusted multimodal adaptive biometrics, adaptive, meaning configured, sometimes preconfigured, it's based on the customer's technical capability, as well as the use case and the end user's risk profile. 2023 marks our 30th anniversary and has given me pause to reflect on both the old and the…

Thank you, Bob, and good afternoon to everyone on the call. Turning to our financial results for the fourth quarter and year ended December 31, 2022. Our total revenue in the fourth quarter was $4.1 million, up 35% sequentially and up 2% on from the $4 million in the same year ago period. The sequential improvement in revenue was largely driven by increases in revenue attributed to Knomi and BioSP For the 12 months ended December 31, 2022, total revenue was $16 million compared to $16.9 million in the same year ago period. The decrease in revenue was primarily the result of lower revenue from Perpetual Software Licenses and Services, which was partially offset by increases in software maintenance revenue and revenue from subscription-based licenses. As such, recurring revenue grew 7% to a record $9.7 million in 2022 as we progress further on our business model transformation. Now looking at our operating expenses. For the fourth quarter of 2022, our operating expenses increased to $6.1 million compared to $5.5 million in Q4 of last year. The operating expenses for the 12 months ended December 31, 2022, were $18.2 million, down from $23 million in 2021, which included the favorable impact of a $5.7 million gain in 2022 on the sale of our former corporate office. With regards to our profitability measures, operating loss for the fourth quarter of 2022 was $2 million, which compares to an operating loss of $1.5 million in the same year ago period. For the full year, operating loss was $2.2 million, compared to an operating loss of $6.1 million in 2021. Improvement in operating loss in 2022 was primarily due to the gain we recorded related to the sale of our corporate office, which was offset by a decrease in revenue, increase in sales and…

Thank you, Dave. It's a pleasure to be here with you today. Shifting to our sales and go-to-market initiatives. Bob touched on a few of the key customer wins that were a direct result of our customer success team and new product offerings. In particular, Aware ID opportunities have started gaining momentum, and we are exploring several new marketplaces to expand our reach. In support of our customers, our SaaS offering rounds out our portfolio to ensure deployment flexibility that meets our customers' needs. We are still in a transitionary phase with select customers, especially those in the financial services space. We prefer to have our solutions deployed on-prem or in their cloud instance to be controlled and managed by them. Nevertheless, we are still onboarding new Aware ID customers and working diligently to ramp customer adoption whether as managed services and therefore SaaS or a licensed subscription. In parallel with expanding Aware ID's reach, we are also realizing increased traction with Knomi, our mobile biometric authentication framework. Recently, we extended our contract in scope work as one of the largest banking institutions in Latin America, which have been leveraging Knomi to prevent bank fraud among its more than 50 million customers globally. In terms of our enterprise sales strategy, this year, we are applying intentional focus to three critical areas. First, we are centering efforts around gaining momentum in the Fintech market, Aware is a leader in banking fraud prevention, which is why we are trusted by some of the largest financial institutions around the world. With our reinvigorated sales process and newly introduced customer success team, we are poised to gain a meaningful share of the financial services market. Our second initiative is to continue evolving and strengthening our partnership programs. Awares technology is modular and agnostic, features…

Thanks, Craig. In 2022, we entered the final stage of our business model transition to a platform company with robust recurring revenue and unveiled our highly anticipated SaaS offering AwareID. This past year, we also generated significant momentum for our brand awareness and authentication solutions. These efforts have positioned us to enter the new year with an exciting pipeline of opportunities that are starting to convert at an encouraging pace. Our recurring revenue has essentially doubled over the last three years, as we retooled our business processes to enable transactional or term contracts or per user subscription offerings. At the same time, we upgraded our products to ensure that they supported the new business model and could be deployed and delivered across all customer installations, from single-tenant cloud and multi-tenant shared cloud services to customer-controlled on-premise or cloud infrastructure as determined and driven by the customers' security, business rules and processes. This capability, both from a business and product perspective, didn't exist at this level until October of 2022. Our current recurring revenue ending 2022 is not far off from the total revenue achieved in 2019 or 2020. With the ratio of our recurring revenue to total revenue was around 50%, we finished 2022 at $9.7 million in recurring revenue, which is a 61% ratio on total revenue. Said another way, we set a company record this past year by achieving almost $10 million in recurring revenue. When I came aboard a few years ago, I outlined the need for the company to transition the business and technology models to improve the quality and repeatability of revenue versus the onetime program and project wins. I'm excited for the progress to date and confident we'll continue in this direction. In 2023, we're continuing to focus on driving recurring revenue and increase…

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 questions. First question is for Bob. You mentioned a healthy pipeline. Can you provide some color on any contract or product wins?

Yeah. Thanks, Matt. As we mentioned in the earnings release, we signed seven new Knomi partners in 2022 and that's what covers throughout the world. I'd have to say that our Knomi product line is gaining momentum and will be a cornerstone of our growth in 2023 and that further fuels our confidence to increase our ARR by at least 15%. Already this year, we've extended one of our largest only customers, for an additional three years and more use cases. We are also working closely with our partner, Intercede on some interesting deals in the federal government. And lastly, I expect us to be announcing our first cloud-based award in U.S. Law Enforcement in the near future, along with other exciting firms.

Thanks Bob. What are the company's capital allocation plans for 2023?

Thanks, Matt. Yes, as you probably saw in the earnings release, we had $29 million of cash and marketable securities at the end of the quarter. at the end of Q3 and into Q4, we took advantage of the higher interest rates in the overall market and invested a large portion of our cash in highly liquid marketable securities. More broadly, the leadership team and I, and the Board, we continually evaluate opportunities that will provide the most attractive risk-adjusted returns for our shareholders. That includes repurchasing our stock, investing in internal growth opportunities and evaluating M&A and some strategic partnership opportunities that would drive our scale and accelerate our growth strategy.

Thanks, Dave. Next question. When do you anticipate Aware ID contributing to top-line revenue?

Yes. Thanks for the question. Aware ID nominally contributed to our top-line in Q4. But I'd say it's important to note that the focus is on ARR. So that's not exclusive to Aware ID in its deployment of SaaS. So our ARR will continue to have varying degrees of maintenance, subscription and SaaS makeup as we provide the fulfillment model that's of choice to our customers. So -- and this flexibility is central to how we stand out from the others in this space. So we offer a full portfolio of solutions and however they want it to be deployed in several ways that best meets their man. So it's important to know that it's -- we're looking at the ARR in particular, across the deployment methods.

Thanks, Bob. What was the number of Knomi transactions in Q4 as well as in 2022?

Yes, I can take that. So this question has popped up a couple of times. And while our Knomi transactions continue to grow each year, we believe that recurring revenue is the best metric to track the continued adoption of Knomi and our overall company's transition into a subscription-based platform company. Because now we're selling a mix of transaction-based, user-based and device-based subscriptions. So the transaction count would minimize our overall Knomi momentum. It's all encapsulated in recurring revenue. And in 2022, our recurring revenue totaled nearly $10 million or more than 60% of our total revenue for the year, which is an 80% increase from 2019 after which we started this transformation.

Thanks. Dave. Next question. Is Aware working on software for the AI market? If not, do you plan to in the future?

Yes, I’ll take that Matt. Aware’s artificial intelligence or AI and deep learning are part and package to our advanced software solutions. And those are the ones we take to the market through offerings that can be on-prem or in the cloud. And Aware has and will continue to invest significantly in deep learning and with our team of in-house PhD scientists and engineers. So our extensive portfolio of platforms, frameworks and associated AI is used to vet improve identities and then protect them against known and emerging attack factors. With extensive access to operational data to train and optimize our portfolio, Aware is going to continue to use AI to improve performance of our offerings as well as introducing new features to respond to fast-changing security needs. This will enable organizations to take advantage of Aware innovations in extremely timely manner.

Thanks, Bob. Another one for you. Please comment on your assessment of company performance. And over the next 3.5 years, what circumstances influence your expectations of the future? And would the company consider a merger or sale if suboptimal performance persists?

Thanks for the question. When I took over as CEO in September of 2019, the company was doing approximately $12 million of revenue and recurring revenue is around 50% of that total. The operating state of the business when I assumed the CEO position was far more challenged than expected and required significant restructuring to position the company for growth and profitability. Part of that initial challenge was that the company was a strong innovator but did not have product -- did not have a product suite -- it had integral hardened and proven components that made the sales process overly complicated. And on top of this, the company do not have a proven go-to-market strategy for subscription and it was not properly equipped to sell. So if we fast forward three years, where it's growing its top line by nearly one-third, while simultaneously grown our recurring revenue by two-thirds. So to put that in perspective, our annual recurring revenue at the end of 2022 was approximately $10 million or approximately 80% of the company's total revenue in 2019. And we are able to achieve this business and technology transformation despite a global pandemic, which everybody knew about or knows about. And today, we have the right products, the right team, right strategy to scale our business to greater heights. And now that we have the foundation, our attention has turned to executing in sustainable ways that drive scale and improve profitability. While we're all encouraged by our operational progress and business momentum, the Board continually evaluates all strategic options that will produce the greatest long-term value for our shareholders.

Next question, what is the average deal size?

So this is a -- could be a complicated question, but I'll just give a quick simple view of it. So our deal size varies across product lines and business models, and there isn't such a metric that we view at a company level. But what I can say is our average Knomi customer contributed about $100,000 in 2022 revenues and our average BioSP customer which is a mixture of maintenance and services and licenses contribute to about $140,000 in 2022.

Dave, the next question is for you. How do you anticipate OpEx trending in 2023.

Yes. So Matt, we're very comfortable with our current cost structure. We're running at about $5.5 million to $6 million per quarter and we don't anticipate adding any significant OpEx in 2023.

Thanks, Dave. Craig, this next one is for you. Please list and describe your repeatable sales activities. What are you doing to sell your products and services not just show them at a trade show or list them with a reseller? How much did you actually go out and pitch new business in Q4 2022 and so far in Q1 2023.

Yes, absolutely. So for refined sales strategy, it's a pretty big topic. If I drill down into it, first, we are constantly going out and connecting directly with customers, supporting our partners in the sales process, whether it's new logos or expansion. But from a sales strategy or a sales process, the first piece is specialization. So by building out a customer success team that is focused on upsells, renewals, expansion. We have an A [ph] team that is focused on new logo growth, specifically as well as partner managers that are working and supporting our partners. We also added BDRs that are very focused on the leads that are coming in and then the follow-up. The second piece is territory product vertical focus and making sure that our messaging and our differentiation is unique for each one of those areas. So having the right message for the right vertical, the right product against the competition. And the third is a defined process, how do we qualify opportunities? How do we follow-up on opportunities? Again, what is our messaging? We've instituted some sales technology that helps us do this more efficiently and more effectively. So again, the sales strategy is encompassing a lot of different pieces, but those are some of the things we've instituted just in the last few months.

Thanks, Craig. Craig, another one for you. What is your refined sales strategy?

So yes, I think I kind of went through that. But basically, again, the focus is on making sure that the message that we are going out with based on the product, the solution that's needed, the problems that our customers and prospects are facing that aligns with both our product and our skill sets here.

Thanks, Craig. Dave, of the $2.6 million recurring revenue in Q4, how much was subscription and how much was maintenance?

Thanks, Matt. That's an easy one. We had $1.7 million of maintenance in Q4 and about $800,000 of subscription in 2022. Those numbers are about $6.7 million of maintenance, $3.1 million of subscription.

Great. Thanks. Our next question, please explain the new CloudABIS contract coming soon.

Yes. So we're extremely excited that we're not at a point where we can actually announce the name, but ABIS is, again, a large-scale biometric ID and duplication service, deduplication service. We are one of the few companies globally that can offer this in the cloud and hosted. Most of them are on-premise. This obviously has an impact on recurring revenue and it is an area of focus for people to be able to get into this product at an easier price point and can get stood up and running faster and more efficiently. So, we're extremely excited as being one of the leaders in this market. And we're looking forward to the announcement pretty soon.

That's great. Next question. Can you address the stated sales from Q3 2022 that were delayed/pushed to Q4?

Yes. I can take that, Matt. So yes, our -- as you know, our Q3, we faced some headwinds, as we talked about last quarter. We had a number of government customers that we were expecting to go live. They were delayed. They have materialized here in Q1, actually. So not much that pushed into Q4, but Q1, we've got the launch of a couple of great government projects and some other revenue that shifted over to the right. So we're happy to see that.

Our next question, what is the size of your current share repurchase plan? And do you plan to continue to buy back stock?

Yes. Thanks, Matt. Our published plan is $10 million. So we can buy up to $10 million of stock. And at this point in time, we plan on continuing that stock buyback plan. If that changes, if we were to cancel the plan, we would publish that decision.

Thanks, Dave. Next question, what range of total revenue do you expect in 2023?

Yeah, I'll take that. I mean we're looking at, as I said earlier, in the script, but then even earlier than that. We're looking at a 15% annual recurring revenue increase, and we're looking at the same amount at the total top. So that gives you the ranges when you multiply it out, we finished at $16 million for this year.

Great. Thanks, Bob. Does Aware expect to burn cash in 2023? And if so, how much?

Yeah, I'll take that, Matt. So Aware is currently a cash user, our goal, of course, is to become profitable. We believe that, as we hit the end of the year, we plan on exiting the year as cash neutral to cash positive. In the meantime, our usage will continue much the same or I should specify our operating cash usage should continue much the same as it has for the last few quarters. There are cycles to it. Q1, we typically use more cash than we do in the other quarters. You can look at our track record in 2022. And we are incrementally improving each quarter until we get to that cash flow breakeven.

Bob, can you talk about the competitive environment?

Yeah. You know what I'm going to do – I'm going to have Craig put a little color on this as he's been talking to -- he's been out in the field. So let me give a new perspective on it. Craig?

Yeah, sure. Again, this tracks back a little bit to the sales strategy, depending on the product that we're running – the solution that we're talking about, the geography that we're in, the competitive differentiation shifts. What I will say is, we face pressures from on price. We faced pressures on functionality. But in the end, where we – where we are kind of standing out from a differentiation standpoint when it comes to competition is the fact that, we are a platform that can be delivered in a variety of ways, specifically in the cloud or on-premise are two of the big ones that we see right now. So typically, we're running against competition that does it one way or the other. And then the other piece is the customization that can be done with Knomi, which is the on-premise leveraging our partner network. So again, our partners are able to take this tool and solve customer problems that are very unique and custom using our workflow tools in Knomi.

Thanks, Craig. 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 now like to turn the call over to Bob for closing remarks.

Yeah, I'd just like to say thanks all of you for joining us on today's call. And I want to thank our employees, partners and our investors for your continued support. And if anyone would like to learn more about our strategy, please keep an eye on for an updated investor presentation. I'm going to make that available on our website in Q2. And as the final stage of our multiyear transformation continues, we're energized by our progress to date. Our strong momentum kicking off 2023 and we're confident in the bright future that lies ahead. We look forward to updating you on Aware's progress on our next call. So, Matt?

Thanks, Bob. As a reminder, 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 Fourth Quarter and Full Year 2022 Earnings Conference Call. You may now disconnect.