Aware Inc. (AWRE, Financial) filed Quarterly Report for the period ended 2010-03-31.
Aware Inc. has a market cap of $49.8 million; its shares were traded at around $2.4984 with a P/E ratio of 41.6 and P/S ratio of 2.2. AWRE is in the portfolios of Jim Simons of Renaissance Technologies LLC.
The Company uses non-GAAP information internally to evaluate its operating performance and believes these non-GAAP measures are useful to investors as they provide additional insight into the underlying operating results. Our non-GAAP net income (loss) excludes the effect of stock-based compensation expense. Non-GAAP net income for the three months ended March 31, 2010, excluding the effect of $345,000 of stock-based compensation, was $367,000, or $0.02 per diluted share. We had a non-GAAP net loss for the three months ended March 31, 2009, excluding the effect of $391,000 of stock-based compensation, of $1.7 million, or $0.07 per diluted share. A reconciliation of GAAP to non-GAAP results is set forth in the table below (in thousands, except for per share amounts):
Product sales increased 65% from $2.8 million in the first quarter of 2009 to $4.7 million in the current year quarter. As a percentage of total revenue, product sales increased from 62% in the first quarter of 2009 to 83% in the current year quarter. The dollar increase in product sales was primarily due to a $0.9 million increase in revenue from the sale of test and diagnostic hardware and software, and a $1.0 million increase in revenue from the sale of biometrics software. The $0.9 million increase in revenue from the sale of test and diagnostic products was mainly attributable to a large hardware sale to an OEM customer that is deploying test equipment into a major service provider. The $1.0 million increase in revenue from the sale of biometrics software was primarily due to improving economic conditions in the current quarter, which led to increased customer demand.
Contract revenue decreased 84% from $1.3 million in the first quarter of 2009 to $0.2 million in the current year quarter. As a percentage of total revenue, contract revenue decreased from 28% in the first quarter of 2009 to 4% in the current year quarter. The dollar decrease was primarily due to a $0.7 million decrease in contract revenue from DSL technology contracts, and a $0.4 million decrease in contract revenue from biometrics professional services contracts. The $0.7 million decrease in contract revenue from DSL technology contracts was mainly attributable to a decline in revenue as a result of the sale of our licensing product line to Lantiq in November 2009. The $0.4 million decrease in contract revenue from biometrics professional services contracts was primarily due to the completion of a significant customer project during 2009.
At March 31, 2010, we had cash and cash equivalents of $39.0 million, which represented a decrease of $649,000 from December 31, 2009. The decrease in cash was primarily due to: i) $341,000 of cash used by operations; ii) $47,000 of cash used to purchase capital equipment; iii) $161,000 of cash used to pay withholding taxes for employees who surrendered shares of common stock in connection with an employee option exchange program; and iv) $100,000 of transaction expenses paid in the first quarter of 2010 that related to the 2009 sale of assets to Lantiq.
We used $341,000 of cash in operations in the first three months of 2010. This cash usage was primarily the result of $837,000 of cash used to fund working capital items, which was partially offset by net income of $22,000, and non-cash items related to depreciation and amortization of $129,000, and stock based compensation expense of $345,000.
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Aware Inc. has a market cap of $49.8 million; its shares were traded at around $2.4984 with a P/E ratio of 41.6 and P/S ratio of 2.2. AWRE is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
As a result of the Lantiq transaction, we will no longer derive DSL contract revenue from Infineon or Lantiq. Over the past several years, contract revenue from Infineon has ranged from $0.5 million to $1.0 million per quarter. We amended and restated the existing license agreement between us and Infineon to provide Lantiq (as successor to Infineon) certain non-exclusive licenses of our patent rights, and to continue Lantiq s royalty obligations to Aware. We also expect to continue to derive contract revenue for engineering support and royalties per our existing agreements with Ikanos Communications, Inc. (“Ikanos”). We will not be pursuing new silicon intellectual property licensing customers for DSL or home networking applications for the foreseeable future. In addition, Aware subleased certain office and lab space to Lantiq at its main facilities in Bedford, Massachusetts. In the first quarter of 2010, engineering expenses associated with our licensing product line decreased by approximately $1.8 million compared to the first quarter of 2009 as a result of the transfer of 41 engineers to Lantiq. We expect that quarterly engineering expenses in the second and third quarters of 2010 will decrease by $1.7 million to $2.0 million compared to the corresponding periods in 2009 as a result of the employee transfer.The Company uses non-GAAP information internally to evaluate its operating performance and believes these non-GAAP measures are useful to investors as they provide additional insight into the underlying operating results. Our non-GAAP net income (loss) excludes the effect of stock-based compensation expense. Non-GAAP net income for the three months ended March 31, 2010, excluding the effect of $345,000 of stock-based compensation, was $367,000, or $0.02 per diluted share. We had a non-GAAP net loss for the three months ended March 31, 2009, excluding the effect of $391,000 of stock-based compensation, of $1.7 million, or $0.07 per diluted share. A reconciliation of GAAP to non-GAAP results is set forth in the table below (in thousands, except for per share amounts):
Product sales increased 65% from $2.8 million in the first quarter of 2009 to $4.7 million in the current year quarter. As a percentage of total revenue, product sales increased from 62% in the first quarter of 2009 to 83% in the current year quarter. The dollar increase in product sales was primarily due to a $0.9 million increase in revenue from the sale of test and diagnostic hardware and software, and a $1.0 million increase in revenue from the sale of biometrics software. The $0.9 million increase in revenue from the sale of test and diagnostic products was mainly attributable to a large hardware sale to an OEM customer that is deploying test equipment into a major service provider. The $1.0 million increase in revenue from the sale of biometrics software was primarily due to improving economic conditions in the current quarter, which led to increased customer demand.
Contract revenue decreased 84% from $1.3 million in the first quarter of 2009 to $0.2 million in the current year quarter. As a percentage of total revenue, contract revenue decreased from 28% in the first quarter of 2009 to 4% in the current year quarter. The dollar decrease was primarily due to a $0.7 million decrease in contract revenue from DSL technology contracts, and a $0.4 million decrease in contract revenue from biometrics professional services contracts. The $0.7 million decrease in contract revenue from DSL technology contracts was mainly attributable to a decline in revenue as a result of the sale of our licensing product line to Lantiq in November 2009. The $0.4 million decrease in contract revenue from biometrics professional services contracts was primarily due to the completion of a significant customer project during 2009.
At March 31, 2010, we had cash and cash equivalents of $39.0 million, which represented a decrease of $649,000 from December 31, 2009. The decrease in cash was primarily due to: i) $341,000 of cash used by operations; ii) $47,000 of cash used to purchase capital equipment; iii) $161,000 of cash used to pay withholding taxes for employees who surrendered shares of common stock in connection with an employee option exchange program; and iv) $100,000 of transaction expenses paid in the first quarter of 2010 that related to the 2009 sale of assets to Lantiq.
We used $341,000 of cash in operations in the first three months of 2010. This cash usage was primarily the result of $837,000 of cash used to fund working capital items, which was partially offset by net income of $22,000, and non-cash items related to depreciation and amortization of $129,000, and stock based compensation expense of $345,000.
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