Aware, Inc. (AWRE) Bundle
Understanding Aware, Inc. (AWRE) Revenue Streams
Understanding Aware, Inc.’s Revenue Streams
Revenue Overview: Aware, Inc. reported total revenue of $3.8 million for the three months ended September 30, 2024, a decrease from $6.4 million in the same period of 2023. For the nine months ended September 30, 2024, total revenue was $12.6 million, down from $13.9 million in 2023.
Breakdown of Primary Revenue Sources
- Software Licenses: Revenue from software licenses decreased by 73% from $4.4 million in Q3 2023 to $1.2 million in Q3 2024. For the nine months, software license revenue fell 32% from $7.5 million to $5.1 million.
- Software Maintenance: Revenue from software maintenance increased by 19% from $1.9 million in Q3 2023 to $2.3 million in Q3 2024. For the nine months, maintenance revenue rose from $5.5 million to $6.6 million.
- Services and Other Revenue: Services revenue increased from $0.1 million in Q3 2023 to $0.4 million in Q3 2024. For the nine months, it rose from $0.8 million to $0.9 million.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows a decline of 40% for Q3 2024 compared to Q3 2023, and a decrease of 9% for the nine-month period.
Contribution of Different Business Segments to Overall Revenue
| Revenue Source | Q3 2024 ($ million) | Q3 2023 ($ million) | Change (%) |
|---|---|---|---|
| Software Licenses | 1.2 | 4.4 | -73% |
| Software Maintenance | 2.3 | 1.9 | +19% |
| Services and Other | 0.4 | 0.1 | +300% |
| Total Revenue | 3.8 | 6.4 | -40% |
Analysis of Significant Changes in Revenue Streams
There has been a significant decline in software license revenue, primarily due to a drop in perpetual license sales, including a $2.9 million government contract recognized in Q3 2023. In contrast, software maintenance revenue has increased due to an expanding customer base actively using perpetual licenses.
Geographic Revenue Distribution
| Region | Q3 2024 ($ million) | Q3 2023 ($ million) |
|---|---|---|
| United States | 1.8 | 5.2 |
| United Kingdom | 0.8 | 0.3 |
| Rest of World | 1.2 | 0.8 |
| Total Revenue | 3.8 | 6.4 |
The revenue from the United States has seen a decline, whereas the UK and Rest of World have shown growth in their contributions to total revenue.
A Deep Dive into Aware, Inc. (AWRE) Profitability
A Deep Dive into Aware, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 65%, with total revenue of $3.8 million and cost of revenue of $1.3 million. In comparison, for the same period in 2023, the gross profit margin was 50% on revenue of $6.4 million and cost of revenue of $3.2 million.
Operating Profit Margin: The operating loss for the three months ended September 30, 2024, was $(1.5 million), resulting in an operating margin of -38.3%. This compares to an operating income of $0.7 million and an operating margin of 10.9% for the same period in 2023.
Net Profit Margin: The net loss for the three months ended September 30, 2024, was $(1.2 million), yielding a net profit margin of -30.4%. This is a decline from a net income of $1.1 million and a net profit margin of 17.9% in the previous year.
Trends in Profitability Over Time
Over the past year, there has been a noticeable decline in profitability metrics:
- Gross profit margin decreased from 50% in Q3 2023 to 65% in Q3 2024.
- Operating profit margin shifted from 10.9% in Q3 2023 to -38.3% in Q3 2024.
- Net profit margin dropped from 17.9% in Q3 2023 to -30.4% in Q3 2024.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average profitability ratios are:
- Gross Profit Margin: 55%
- Operating Profit Margin: 12%
- Net Profit Margin: 8%
Comparatively, Aware, Inc.'s profitability metrics are below the industry averages, indicating operational challenges and reduced efficiency in revenue generation.
Analysis of Operational Efficiency
Operational efficiency can be analyzed through the following metrics:
- Cost of Revenue: Decreased from $3.2 million in Q3 2023 to $1.3 million in Q3 2024, reflecting cost management efforts.
- Research and Development Expense: Reduced by 17% from $2.3 million in Q3 2023 to $1.9 million in Q3 2024.
- Selling and Marketing Expense: Decreased from $2.2 million in Q3 2023 to $1.9 million in Q3 2024.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | 65% | 50% | +15% |
| Operating Profit Margin | -38.3% | 10.9% | -49.2% |
| Net Profit Margin | -30.4% | 17.9% | -48.3% |
| Cost of Revenue | $1.3 million | $3.2 million | -59% |
| R&D Expense | $1.9 million | $2.3 million | -17% |
| S&M Expense | $1.9 million | $2.2 million | -14% |
Debt vs. Equity: How Aware, Inc. (AWRE) Finances Its Growth
Debt vs. Equity: How Aware, Inc. Finances Its Growth
Aware, Inc. has been navigating its financial structure with a focus on balancing debt and equity to fund its growth initiatives. As of September 30, 2024, the company reported a total debt of $0, indicating a reliance on equity financing rather than leveraging debt for its operational needs.
Overview of the Company's Debt Levels
The company maintains a conservative approach to debt, with no long-term or short-term debt recorded in its financial statements. This strategy allows the company to avoid interest obligations that could strain cash flow during periods of lower revenue.
Debt-to-Equity Ratio and Comparison to Industry Standards
With zero debt, Aware, Inc. has a debt-to-equity ratio of 0.0. In comparison, industry averages for technology companies often range from 0.1 to 0.5, indicating a more aggressive use of debt financing in the sector. The absence of debt positions Aware, Inc. favorably in terms of financial risk.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
As of the latest financial reporting, Aware, Inc. has not engaged in any recent debt issuances or refinancing activities. The company's strategy emphasizes maintaining a debt-free balance sheet, which enhances its creditworthiness and financial flexibility.
How the Company Balances Between Debt Financing and Equity Funding
Aware, Inc. primarily utilizes equity funding to support its operations and growth. The company's total stockholders' equity as of September 30, 2024, stood at $31.9 million, reflecting a consistent investment from shareholders. The company has issued stock through employee stock purchase plans and has occasionally repurchased shares, thereby managing its equity base effectively.
| Financial Metric | Value |
|---|---|
| Total Debt | $0 |
| Debt-to-Equity Ratio | 0.0 |
| Total Stockholders' Equity | $31.9 million |
| Cash and Cash Equivalents | $11.2 million |
| Marketable Securities | $16.2 million |
| Cash Used in Operations (9 months ended Sept 30, 2024) | $3.8 million |
This balanced approach between maintaining no debt and leveraging equity funding positions Aware, Inc. to pursue its strategic objectives while minimizing financial risk.
Assessing Aware, Inc. (AWRE) Liquidity
Assessing Aware, Inc.'s Liquidity
The liquidity position of Aware, Inc. can be evaluated through its current and quick ratios, which provide insights into its short-term financial health.
Current and Quick Ratios
As of September 30, 2024, Aware, Inc. reported:
- Current Assets: $27.4 million
- Current Liabilities: $15.5 million
- Current Ratio: 1.77
The quick ratio, which excludes inventory, is calculated as:
- Quick Assets: $27.4 million - $0 (no inventory reported) = $27.4 million
- Quick Ratio: 1.77
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, stood at:
- Working Capital: $27.4 million - $15.5 million = $11.9 million
Comparatively, at December 31, 2023, working capital was:
- Previous Working Capital: $30.0 million - $16.0 million = $14.0 million
This indicates a decrease in working capital of 16.4% from the end of 2023 to Q3 2024.
Cash Flow Statements Overview
A summary of cash flow activities for the nine months ended September 30, 2024 is as follows:
| Cash Flow Category | Amount (in thousands) |
|---|---|
| Net Cash Used in Operating Activities | ($3,844) |
| Net Cash Provided by Investing Activities | $5,040 |
| Net Cash Provided by Financing Activities | $25 |
| Net Increase in Cash and Cash Equivalents | $1,221 |
| Cash and Cash Equivalents at End of Period | $11,223 |
Potential Liquidity Concerns or Strengths
Despite the decrease in working capital, the current and quick ratios indicate a strong liquidity position. However, the net cash used in operating activities of ($3,844) thousand raises concerns regarding operational cash flow sustainability. The increase in cash and cash equivalents to $11,223 thousand at the end of Q3 2024 suggests that the company can meet its short-term obligations.
Moreover, the cash provided by investing activities, primarily from net sales of marketable securities, reflects a proactive approach to maintain liquidity. Overall, while there are some liquidity concerns due to operational cash outflows, the company maintains a solid liquidity position as of September 30, 2024.
Is Aware, Inc. (AWRE) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key valuation ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is N/A due to the company reporting a net loss in the most recent quarter.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 0.82. This is calculated using a book value of equity of $31.9 million and a current market capitalization of approximately $39.8 million.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is N/A as the company has reported negative EBITDA for the current period.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $1.25 and a high of $2.50. As of the latest trading day, the stock price closed at $1.88.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, resulting in a dividend yield of 0%.
Analyst Consensus on Stock Valuation
The analyst consensus is a Hold rating, with a price target range between $1.50 and $2.00 based on current financial performance and market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 0.82 |
| EV/EBITDA Ratio | N/A |
| 12-Month Low Stock Price | $1.25 |
| 12-Month High Stock Price | $2.50 |
| Current Stock Price | $1.88 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Aware, Inc. (AWRE)
Key Risks Facing Aware, Inc. (AWRE)
The financial health of Aware, Inc. is influenced by various internal and external risk factors that can significantly impact its operational and financial performance. Below is an overview of the key risks identified as of 2024.
Industry Competition
Competition within the biometrics and imaging software industry is intense. Aware, Inc. is facing challenges from established players and new entrants, which could lead to pricing pressures and reduced market share. As of September 30, 2024, the company's software license revenue decreased by 73%, from $4.4 million in Q3 2023 to $1.2 million in Q3 2024.
Regulatory Changes
Changes in regulations related to data privacy and security can affect operational costs and compliance requirements. The company must continually adapt to evolving laws, which may require increased investments in compliance measures.
Market Conditions
The overall market conditions impact Aware, Inc.'s revenue generation capabilities. For the nine months ended September 30, 2024, the total revenue was $12.6 million, a decrease from $13.9 million in the same period of 2023.
Operational Risks
Operational risks are highlighted by the company's recent restructuring efforts, which included a 10% reduction in its workforce. This was part of cost-control measures implemented in late 2023 and early 2024. The operational loss for the three months ended September 30, 2024, was $1.5 million, compared to an operating income of $0.7 million in Q3 2023.
Financial Risks
Aware, Inc. reported an operating loss of $4.1 million for the nine months ended September 30, 2024, which was consistent with the operating loss reported in the same period of 2023. The company has also experienced fluctuations in interest income, which decreased from $0.4 million in Q3 2023 to $0.3 million in Q3 2024.
Strategic Risks
The company's strategic direction, including its focus on expanding into new commercial biometrics markets, carries inherent risks. Revenue from subscription-based contracts increased from $399,000 in Q3 2023 to $779,000 in Q3 2024, indicating potential growth but also uncertainty in market acceptance.
Mitigation Strategies
Aware, Inc. has implemented various cost-control measures to mitigate financial risks, including reductions in operating expenses. For the nine months ended September 30, 2024, operating expenses decreased by $1.2 million compared to the same period in 2023.
| Risk Factor | Details | Impact |
|---|---|---|
| Industry Competition | Intense competition in biometrics and imaging software | Revenue decline of 73% in Q3 2024 |
| Regulatory Changes | Compliance with evolving data privacy regulations | Increased operational costs |
| Market Conditions | Overall market conditions affecting revenue | Total revenue decreased to $12.6 million in 2024 |
| Operational Risks | Workforce reduction of 10% | Operating loss of $1.5 million in Q3 2024 |
| Financial Risks | Consistent operating losses | Operating loss of $4.1 million in 2024 |
| Strategic Risks | Focus on new commercial markets | Subscription revenue increased to $779,000 |
| Mitigation Strategies | Cost-control measures implemented | Reduced operating expenses by $1.2 million |
Future Growth Prospects for Aware, Inc. (AWRE)
Future Growth Prospects for Aware, Inc. (AWRE)
Analysis of Key Growth Drivers
Several factors are positioned to drive growth for the company moving forward:
- Product Innovations: The company continues to enhance its biometric solutions, focusing on integrating machine learning and artificial intelligence technologies. The latest developments include the AwareID platform, which is expected to capture a significant share of the biometric market.
- Market Expansions: The company is actively seeking to penetrate new commercial biometrics markets while maintaining its legacy in government sectors. Recent revenue generation from international markets indicates potential for further growth.
- Acquisitions: The acquisition of Fortr3ssID for $3.4 million in December 2021 is expected to bolster the company’s capabilities in biometric identity management, although revenue targets for contingent payments have not been met.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenue was reported at $12.6 million, down from $13.9 million in the same period of 2023. Revenue breakdown includes:
| Category | 2024 Revenue (in millions) | 2023 Revenue (in millions) |
|---|---|---|
| Software Licenses | $5.1 | $7.5 |
| Software Maintenance | $6.6 | $5.5 |
| Services and Other | $0.9 | $0.8 |
Future growth is projected based on increased adoption of SaaS offerings, which generated approximately $0.1 million in revenue for the three months ended September 30, 2024.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company has initiated plans to expand its sales force and marketing efforts, which could enhance its reach in emerging markets. Partnerships with technology firms for product integrations are also being explored to increase market competitiveness.
Competitive Advantages that Position the Company for Growth
Aware, Inc. holds several competitive advantages that may facilitate growth:
- Established Brand Presence: The company has a strong foothold in the government biometrics sector, which provides a stable revenue base.
- Innovative Technology: Continuous investment in research and development, with R&D expenses of $5.9 million for the nine months ended September 30, 2024, supports the development of cutting-edge solutions.
- Diverse Revenue Streams: The shift towards subscription-based models is expected to stabilize revenue flows, with maintenance contracts contributing significantly to total revenues.
Financial Overview
The financial health of Aware, Inc. reflects a challenging yet potentially rewarding landscape:
- Cash Position: Cash and cash equivalents stood at $11.2 million as of September 30, 2024.
- Net Loss: The company reported a net loss of $3.2 million for the nine months ended September 30, 2024.
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Article updated on 8 Nov 2024
Resources:
- Aware, Inc. (AWRE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Aware, Inc. (AWRE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Aware, Inc. (AWRE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.