Aware Q1 2023 Earnings Call Transcript

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May 2, 2023

There are 6 speakers on the call.

Operator

Good afternoon, and welcome to Aware's First Quarter 2023 Conference Call. Joining us today is the company's CEO and President, Robert Eckel CFO, David Barcelo and CRO, Craig Hermann. Following their remarks, we will open the call for questions. Herb. 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 Orest's management and involve inherent risks and uncertainties that could cause actual results to differ materially from those described.

Operator

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 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 results Hirsch indicated by such statements. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10 ks and quarterly reports on Form 10 Q. Any forward looking statements should be Hyrh, in light of these factors.

Operator

You are cautioned not to place undue reliance upon any forward looking statements, which speak as only 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 Herr, applicable securities laws. Additionally, the call contains certain non GAAP financial measures. As the term is defined by the SEC in Regulation G, non GAAP financial measures 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 these non GAAP financial measures to the most Herrick, comparable GAAP measure in the company's earnings release issued today.

Operator

I would like to remind everyone that this presentation will be recorded and made available for replay via a link available in the Relations section of the company's website. Now, I would like to turn the call over to Ware's CEO and President, Bob Eckel. Bob?

Speaker 1

Thanks, Matt. Herb. Good afternoon, everyone, and thank you for joining us today. After the market close, we issued a press release announcing our results for the Q1 ended Hirschfeld, March 31, 2023. A copy of the press release is available in the Investor Relations section of our website.

Speaker 1

We are pleased that Herr. On today's call, I will first discuss our financial and operational performance for the Q1. Then I'll review the progress we've made positioning Aware to drive scale and sustainable growth. Afterwards, Herrman. Our CFO, Dave Barcelo, will provide further details on our Q1 performance.

Speaker 1

Following Dave's remarks, our CRO, Craig Herrman, will discuss our Hirsch. Our strategic initiatives that are driving the company's go to market efforts to boost sales. Finally, I'll review our business drivers and 2020 Herr. Before I review our performance and current market dynamics in greater Herzl. I'd like to recap who we are and what we do for those of you who may be new to Aware in our industry.

Speaker 1

Hoehr. Wehr is an identity platform partner working to enhance trust in an increasingly connected world. Our mission is to balance security Herb. And the user experience through technology for the few and at scale. We solve everyday business and identity challenges by applying Herr.

Speaker 1

Data science, machine learning and AI to biometrics. Through this, we help our customers reduce fraud, enable Herr. Compliance and security needs as well as improved business efficiencies. Collectively, our offerings address identity challenges Hirsch. As of today, while preparing for identity challenges in the future.

Speaker 1

Specifically, these offerings facilitate digital onboarding, authentication and Herb. Lifecycle management of the user's biometric identity through proven and trusted multimodal adaptive biometrics. Herb. Over the last 30 years, we've led with deep rooted systems level technical expertise and algorithms Hirsch. Our reputation in biometric industry has earned us trusted Hirsch.

Speaker 1

We've been working with many governments and today our technology can be found in all three branches of the U. S. Federal government and more than 80 government agencies Herr, and over 150 law enforcement agencies worldwide. Our technology, which spans 4 technology platforms, Herb. To maintain our loyal customer base, we've actively shifted the company over the last 3 years.

Speaker 1

Our business model has changed, our culture has changed, Herb. Our infrastructure has changed and our target customers now include a growing portion of commercial clients, which contribute to over a quarter of our revenue. Hirsch. We focused our technology to provide enterprise solutions for digital onboarding and authentication across verticals and to maximize Herb. Those of you following our story for the past couple of years know that this transformation has been accomplished with significant shift Hirsch, towards recurring revenue.

Speaker 1

Our current recurring revenue of approximately $10,000,000 in 2022 is not far off from the total revenue achieved in Herr. So with that background, I'd like to discuss our operational and financial achievements for the Q1 Hoegh. After a successful transformational year with focus on rebuilding the front end of the business and introducing our SaaS offering, Hirsch. Hoegh. During Q1, we continued concentrating on evolving and enhancing our solutions, Herb.

Speaker 1

Product infrastructure and fulfillment strategies as well as expanding our recurring customer base. As a result of our reinvigorated sales team and go to market Hirsch. We've added new customers for Nomi and Aware ID, increasing our recurring revenue base. A driving force behind these new logos is the robust Herr. As you hear from Craig, we are working to cultivate a partnership Hoech.

Speaker 1

Ecosystem that will ultimately help us reach further into financial services and into new growth markets, while additionally expanding our footprint globally and in Herr. I will let Greg go into more detail on our go to market strategies and partnership programs, but I wanted to touch on a few key wins first. Herb. Craig and his customer success team's potential truly started to be realized so far this year. Recently, they were able to Herr.

Speaker 1

And on board an on prem customer in under a month, a process that would have taken 6 to 9 months or more Herb. The customer success team's ability to streamline the onboarding process, combined with the adaptability and out of box readiness Hershages. The industry has some interesting tailwinds and our pipeline remains robust with high quality opportunities. In Herb. In conjunction with our pipeline growing quarter over to quarter, we are also securing and activating new logos through shared partner Herr.

Speaker 1

This is enabling us to generate increased momentum across our product portfolio, including Aware ID. Hoehr. Although revenue from Aware ID remains a nominal portion of our total revenue today, we remain confident in our ability to meaningfully Hirsch. Scale its contribution based on the interest we are seeing from the customers as we optimize our product market fit. Herb.

Speaker 1

It's worth noting that one of the main reasons Aware continues to win in the market is because of our ability to listen to our customers Hirsch, and deploy our solutions that best fits their needs, whether that may be SaaS, hybrid or on prem. Herb. Lastly, with our healthy pipeline, reinvigorated efforts around customer success, strategic partnerships and unparalleled biometric authentication solutions, Hirsch. We believe we are well positioned to capitalize on a growing global biometric industry. Now before discussing our near term business Hirsch.

Speaker 1

Dave will walk us through our financial results for the Q1. Dave, over to you.

Speaker 2

Hoegh. Thank you, Bob. Good afternoon to everyone on the call. Turning to our financial results For the Q1 ended March 31, 2023, total revenue was $4,300,000 compared to $4,100,000 Hirsch, for the Q4 of 2022 $4,700,000 the same year ago period. The sequential increase in total revenue was due to higher software licenses in the period.

Speaker 2

A key focus area for us is building predictable recurring revenue streams. Hirsch. For Q1 2023, recurring revenue was $3,100,000 or 71% of total revenue. Herr. The $3,100,000 in recurring revenue was up 17% sequentially and 4% year over year.

Speaker 2

Herr. Looking at our operating expenses. Our Q1 of 2023 operating expenses were 6 Herr. $2,000,000 up slightly from $6,100,000 in the prior quarter and $6,000,000 in Q1 of last year, Hirsch, reflecting an increase in sales and marketing. Operating loss for the Q1 of 2023 Herr, was negative $1,900,000 an improvement from negative $2,000,000 in the prior quarter Hirsch, compared to negative $1,300,000 in the same year ago period.

Speaker 2

For the Q1 of 2023, Hirsch. GAAP net loss totaled negative $1,600,000 or 0 point 0 $7 per diluted share compared to a GAAP net loss of negative 1,800,000 Herzli, or $0.08 per diluted share in Q4 of 2022, a negative 1,300,000 Herb, or $0.06 per diluted share in the same year ago period. Our adjusted EBITDA loss for the quarter, Hirsch, which we reconciled to GAAP net loss in our earnings release, totaled $1,400,000 which compares to Adjusted EBITDA loss of $1,500,000 in the prior quarter and adjusted EBITDA loss of $600,000 in the same year ago period. Hirsch. Looking at our balance sheet, we ended the quarter with $27,300,000 in cash, cash equivalents and marketable securities.

Speaker 2

Hirsch. We repurchased 191,000 common shares of stock at an average price of $1.79 per share Hirsch, as part of our previously announced share buyback program. Our strong cash position Hirsch. And no debt provides us with significant resources to weather any macro pressures, while at the same time it affords us with the optimal flexibility to allocate capital Herb, toward opportunities with high ROI potential aligned with our long term growth potential. To that end, we're seeing increase in activity Herr, on both the buy and sell side and will continue to evaluate strategic opportunities that will enable us to drive scale as an organization and maximize shareholder value.

Speaker 2

Herb. This completes my financial summary. Craig will now discuss our enterprise sales strategy. Hoegh.

Speaker 3

Craig? Thanks, Dave. It's great to be here with you all today. As Bob touched on, our partner centric go to market strategy continues to gain momentum. Hoegh.

Speaker 3

We're seeing more and more opportunities arise through our partner network, while at the same time our customer success team is actively collaborating Hirsch, with existing customers to expand deployments and increase our wallet share. To that end, our long standing customer base Hirsch. And high renewal rates, which exceeded 90% in 2022, provides us with a significant opportunity to increase wallet share and overall Hirsch. To recap our strategy, our multi channel partner focus involves expanding our base of VARs, Hirsch, including local and regional integrated resellers, system integrators, OEMs and distributors. In parallel, we're building a deeper network of consulting partners who can introduce, recommend and add Aware services and solutions into a larger ecosystem for customers on a global or regional basis.

Speaker 3

Herb. The third leg of our partnership strategy is technology partners who can integrate our offerings based on target markets, vertical solutions and marketplaces, Herb, which allows us to increase the accessibility of Aware's technology to the partner's customer base. Bob already mentioned a couple of our key Herr. Customer wins that resulted from our advanced product offerings and customer success team, but I would like to go a bit more in-depth into these achievements. Herbst.

Speaker 3

First, we are committed to gaining traction in the FinTech market. Aware is already a proven leader in fraud prevention Herb. We are trusted by some of the largest financial institutions in target countries around the world. With our customer success program streamlining the onboarding process Herbst and enhancing customer interactions, we are confident that we can capture meaningful market share in the FinTech space. Herb.

Speaker 3

Our next initiative is to continue expanding our partnership programs. As I touched on, with these partnership programs, we strategically seek out specialized partners Herr. We can leverage to generate momentum for other biometric solutions as well as in other markets. A great example of this is our recent partnership with UQuad, Herb, where our Noemi technology has been integrated into UQuad's Middle East based contract management platform. This is not only expanding Noemi's use cases, Herb, but also opening the door to future customers in the Middle East and surrounding areas.

Speaker 3

In line with extending Aware's footprint in the Middle East, We secured a partnership with Anyline, who is integrating Nomi capabilities into the electronic Know Your Customer identity verification process Herb, for one of the largest banks in Pakistan. Furthermore, Pakistan has been working towards consolidating its financial sector for several years, much like the biometric industry. Hoehr. We believe with our strong foothold and growing presence in the Middle East, Aware can capitalize on this unification to gain significant market share. Lastly, We are focused on expanding our reach in the U.

Speaker 3

S. Commercial market. Despite being recognized as a leader globally, our breakthrough into the U. S. Commercial market has been gradual.

Speaker 3

Herb. However, with our recent partnership with SoftwareONE to prepare Aware's world class biometric authentication solutions for availability on the AWS Herr. In the marketplace, we are one step closer to accelerating adoption of our biometric authentication solutions in the space Hirsch, and expanding Aware's reach in both the U. S. And Latin America.

Speaker 3

In particular, we are confident Aware will excel in the Latin American market Herb. With our advanced fraud prevention technologies and demonstrated track record of success amongst major financial institutions in Brazil, Herb, U. S. Federal Agencies and Governments around the world. Overall, our enhanced enterprise sales strategy is Herr.

Speaker 3

Positioning Aware to capture new markets through multichannel partnerships, broadening the capabilities of our biometric authentication solutions Herbst, and global customer wins. With these initiatives in place and our accelerated onboarding process, I am confident we can scale our business to drive Hirsch. Sustainable growth in sales for 2023 and beyond. Now, I'd like to turn the call back to Bob for additional insights into our business drivers. Herb.

Speaker 3

Bob?

Speaker 1

Thanks, Craig. We entered 2023 in the final phase of our business model transition to a platform Herr. We're excited now that we have Aware ID in the market and starting to gain traction. Herb. Furthermore, our pipeline contains promising prospects with the potential to drive recurring revenue Hirsch, as our partners begin to bring in more and more deals.

Speaker 1

To best convert our pipeline into tangible results and drive recurring revenue, we're focused on Herr. 3 key initiatives. 1st, to propel growth by focusing on scaling through partners and marketplaces Hirsch. 2nd, to protect the base by retaining and expanding our core customers and business segments and finally, Hoehrlich, to establish Aware ID's product market fit through a targeted adoption in strategically selected industry verticals. Herb.

Speaker 1

As I've noted in the past, our business will continue to be subject to quarterly variations in financials due to timing of awards and adoption. Herr. So our emphasis remains on the full year outlook and performance. Looking ahead, our expectation is to grow total revenue and annual recurring revenue Herr, by at least 15% in 2023. We also continue to expect operating cash flow exiting 20 Herr.

Speaker 1

To be neutral to positive, which means we will manage both inflows and outflows towards profitability, while Hurl, taking into consideration seasonal timing of cash outlays. As we work towards achieving our cash flow goals, we remain confident in our ability to deliver robust Hirsch. While we progress along our strategic growth roadmap to strong recurring revenue and sustainable future growth. Herr. We truly appreciate everyone's continued support and are excited about the future of Aware.

Speaker 1

With that, we are ready to open the call to questions. Matt, please provide the

Operator

Hurst. Hoehr. Hoehr. Dave, how should investors be thinking about operating expenses this year? Hoehr.

Operator

Thanks,

Speaker 4

Matt. As I mentioned in my prepared remarks, our Q1 operating expenses were up slightly quarter over quarter. Hirsch. And as we talked a bit on last call, we expect to run around $5,500,000 each quarter during 2023. This Herb.

Speaker 4

So as we target getting close to positive cash flow, Hirsch. We expect to optimize our cost structure rather than continue to invest.

Operator

Hoehr. Another one for you. What is the progress on the share repurchase plan?

Speaker 4

Hoegh. During the Q1, we repurchased about 191,000 shares. That was about 1% of our outstanding shares. Hirsch. And average price this quarter was $1.79

Operator

Thanks, Dave. Hoehr. Next question. Can you provide an update on the cloud Avis contract you mentioned last quarter?

Speaker 3

Yes, thanks for the question. Yes, we anticipate the Particular contract will go live this summer. So while we can't formally announce it right now, all the details, We are excited to get this customer onboarded and in the cloud with Avis. It's a large scale biometric ID and deduplication service. Hirsch.

Speaker 3

This contract will have a positive impact on recurring revenue as we continue our transition to a platform company.

Operator

Hirsch.

Speaker 3

As we've highlighted previously, keep in mind that our business is subject to quarterly variations in financials because of the timing of awards and adoptions. Hirsch. We are winning contracts every quarter. However, some deals take longer to realize the revenue than others. Therefore, we are largely focused on our full year performance and outlook.

Operator

Hoehr. Thanks, Craig. We've got a multipart question next. Please clarify the implied revenue growth for 2023 Q4 Herr. 4 of approximately 50% year over year under the stated assumptions of steady quarterly expenses for 2023 versus Herr.

Operator

We expect 0 to negative growth in the 1st 3 quarters and all of 2023 growth to occur in the 4th

Speaker 4

Hoehr. Yes. Thanks, Matt. Let me unpack that a little bit. Hirsch.

Speaker 4

So as you saw, we generated about $4,300,000 in revenue in Q1. That was an improvement Hirsch from the prior quarter and down slightly from Q1 2022. And while we don't provide quarterly guidance Hirsch. On how our revenue will be trending throughout 2023, we do expect the growth for the year to be at least Hirsch. 15%, both total revenue and ARR.

Speaker 4

Now, if you look back, you can see there's some historical seasonality to our revenue, Hirsch. But the quarterly variability tends to be less than the 50% in this question. Hirsch. So if I kind of unpack a little bit further, in the question you mentioned implied revenue growth Hirsch. And presumably, that's based on our target of exiting 2023 as operating cash flow neutral.

Speaker 4

Hirsch. So along those lines, again, we don't focus on quarterly results, but I will note that our average operating cash burn across the last four Hirsch. Quarters was right around $1,000,000 So that provides you some guidance as to how much growth we have left to go Herb before we can hit cash flow neutral.

Operator

Great. Thanks, Dave. Next question, can you discuss the technology roadmap for Aware? Hirsch. Yes.

Speaker 5

It's just to give you an overview, Robert, it's constantly evolving, expanding its portfolio Hirsch, based on the current growth and emerging and future use cases. So in order to do this, we provide Herbst and applied artificial intelligence machine learning to the biometrics to solve the complex identity management problems that we've had over for 10 years now. Hoegh. So to that end, we've advanced our technology roadmaps along multiple vectors. One of them is machine learning and AI, Hirsch.

Speaker 5

Another is data science and data engineering, biometric modalities, base, voice, fingerprint, iris and behavioral. Hirsch. Software engineering and applications, the infrastructure and deployment methodology, whether it's on prem SaaS Hirsch. And make sure we adapt to the customers' environment. Mobile applications and then non Herr.

Speaker 5

My metric where we have some several active programs looking at document authentication and document liveness Hirsch. And then, our deep research group relative to new technologies.

Operator

Hirsch. Dave, the next question is for you. How does commercial revenue compare from the prior quarter and year over year?

Speaker 4

Hirsch. Yes, good question. So as I mentioned in my prepared remarks, Herz. Our commercial revenue accounts for over a quarter of our total revenue. So that means in Herb.

Speaker 4

Well, specifically in Q1 of 2023, it was about $1,300,000 And so that's up about Herb. 5% or so from Q1 of 2022.

Operator

Thanks, Dave. Next question Hirsch. Craig, what is the current addressable market size and growth dynamics within Aware's portion of the biometrics industry?

Speaker 3

Hirsch. Sure. The global market for biometric technology is expected to grow at a compounded annual rate of about Herr. 20%. This will reach a total addressable market of approximately $71,000,000,000 by 2027.

Speaker 3

Hoegh. There are several factors that are driving demand for biometric technologies, including new government regulations, businesses need Herb. For convenience and operational efficiencies as well as an increased rate of identity fraud and data breaches. Hirsch. With Aware's out of the box readiness and lightning fast adaptability, we believe our company is well positioned to capitalize on this Hirsch.

Speaker 3

Lucrative market opportunity supported by robust industry tailwinds and drivers.

Operator

Hirsch. And then one for Craig. How do recent U. S. Government budget proposals impact Aware's government business?

Speaker 3

Hirsch. Yes, there is a lot happening on this side of the business. We anticipate the most recent budget proposal to have a positive effect Herr. On our government business as a whole, since we work with all three branches of the U. S.

Speaker 3

Federal Government. More specifically, Hirsch. The latest proposal includes additional funding for U. S. Customs and Border Protection to strengthen and improve security technologies at and between ports of entry, Herr.

Speaker 3

Our security strategy and the anticipated digital theft executive order presents more potential opportunity for Aware. We are continuously monitoring the federal government's activities in the space and submit proposals regularly. The timing of awards and subsequent implementation can vary depending on the

Operator

Herr. How has the macro environment affected the pipeline? Are deals still being pushed Hurst further out.

Speaker 3

Yes, we talked about this last quarter about a few customers pushing out their start times. Herr. A number of government customers delayed going live, which shifted that revenue to the right. However, in Q1, we finally started to see some of these deals materialize Hirsch. As we have onboarded those customers, we believe we've weathered the macroeconomic storm and are beginning to see our resilience pay off Herb.

Speaker 3

The healthy pipeline of high quality opportunities around the globe.

Operator

Next question. What kind of traction are you seeing with Aware ID? Herr.

Speaker 5

Greg, you want to take this one since you're in the field?

Speaker 3

Sure. As Bob mentioned earlier, accelerating adoption and establishing the product Herr. Market fit for Aware ID is one of our key focuses for 2023. Leveraging our partnerships like our collaboration with SoftwareONE Herr, is crucial to our go to market strategy. When Aware ID enters the AWS marketplace later this summer, we will tap into the vast reach of the platform to generate strong momentum for the solution.

Speaker 3

Herbst, to generate strong momentum for the solution. Interestingly, with enterprise customers, Aware ID has been an intriguing offering to open doors Hirsch. Conversations that may otherwise have been closed. Some of these conversations lead to a proof of concept project with the prospects. Hirsch.

Speaker 3

Others lead to prospects realizing that a SaaS offering isn't exactly what they want and they're more interested in Nomi, which is on premise. Hirsch. The bottom line comes down to the depth and breadth of our portfolio, a strength that affords customers the flexibility to deploy Hirsch. World class biometrics in the manner in which they need to.

Operator

Thanks, Craig. Next question, what are the company's capital allocation plans in 2023? Hirsch.

Speaker 4

I'll take that, Matt. We ended the quarter with about $27,300,000 in cash and marketable securities. Herr. In Q1, we continued to take advantage of the increasing interest rates in the broader market. Hirsch.

Speaker 4

And we also progressed with our previously announced share buyback plan, as I talked to before. Hirsch. So overall in 2023, we are maintaining a robust cash position, no debt, Hirsch. And it allows us the strength to navigate any of the macro headwinds, build the flexibility to evaluate Hirsch. Strategic opportunities that could help us drive scale as an organization and maximize shareholder value.

Operator

Hirsch. Next question, when will you break out SaaS revenue?

Speaker 4

Hoehrlich. Yes. Thanks for that, Matt. As you've heard from our commentary, we're continuing to focus on building our SaaS base. Craig just went through that.

Speaker 4

Hirsch. And while we don't anticipate SaaS revenue to be a significant revenue source in 2023, Hirsch. TAS customers are being added monthly, momentum is building, all the good stuff Craig was just talking to. So we're Hirsch. Optimistic about reaching our ARR goals, and we can offer these nimble, flexible Hirsch.

Speaker 4

Deployments, no one else can. And so once our revenue generated from SaaS contract reaches a material amount, Hirsch. We will break it out separately on our income statement. Our Q1 SaaS revenues were nominal.

Operator

Hirsch. Thanks, Dave. Our next question, what are the target markets and typical use cases for Aware ID? Herr. Craig?

Speaker 3

Yes. So where we're really focused with Aware ID right now is an offset of the financial services industry, which is Herb, where we've had a lot of traction success with Nomi. We're really focused on more FinTech, mid market, Herb. Credit unions, banks on the financial services side. We're also really starting to see a lot of traction across the education Hirsch.

Speaker 3

Market and certifications, so online certified certifications to prove that someone taking the test is the actual person. Hirsch. This has gained more and more as people are doing more contract work and a lot more remote work. Herb. And then finally, those 2 are really online, but then we really see the offline world of access control really starting to take hold with Hirsch.

Speaker 3

Some recent opportunities that we're going down the path with. The ability to use to be able to easily implement Herr. Aware ID without a lot of resources and then have full biometrics to use in buildings, Herr. Rooms, etcetera, has really gotten some traction lately.

Operator

Thanks, Craig. Your next question, how long does it Hirsch typically take to get a new customer operational with Aware ID, BioSP and NoMe respectively?

Speaker 3

Hirsch. Sure. So Aware ID this is really the uniqueness of what we do. So Aware ID really can take days Herzog to set up and running. And again, it's low code, it's in the cloud.

Speaker 3

Nomi and BioSP are Typically much more customized to the company's infrastructure, Hirsch. What they're looking for, their specific workflows, and other things that we're connecting into. So in some cases, Hirsch. We're a part of the overall solution. Some cases, we are the solution.

Speaker 3

So in those cases, that can take, again, months Herbst to do a full implementation and scope out. And that's why we're really excited about the ability Hirsch. To marry Aware ID and Nomi so that the world isn't one size fits all and we really do have solutions that fit Hirsch. What customers need right now. And so it really does depend on the implementation and the customer.

Operator

Hoehr. Our next question is for Dave. The language achieve neutral to positive operating cash flow exiting 2023. Hirsch. Please for the sake of absolute clarity confirm this does not include any balance sheet driven from interest received.

Speaker 4

Hirsch. Yes. Let me provide a little color on this. Hoehr. We say positive operating cash flow exiting 2023 because at any given time going forward, Hirsch.

Speaker 4

There is a fluctuation. Our cash flow, like our revenue, has some historical seasonality to it. Hirsch. Specifically, Q1 is always almost always our highest cash flow usage. So Herb.

Speaker 4

That's the reason we word it as exiting 2023. Not every quarter will be cash flow positive. Hirsch. But we plan to exit with revenues reaching the levels of our Herb. Expenses in that ballpark and so that we can achieve our Q4 of neutral to positive Hirsch.

Speaker 4

Cash flow. So it had nothing to do with balance sheet driven interest received.

Operator

Hoehr. Thanks, Dave. We've got a 2 part question. How much balance sheet cash is Hoehr. Excess from cash required to operate the business.

Operator

Relatedly, is there anything preventing the company from pursuing a tender offer in light of the present market valuation, which ascribes Nearly no value at all to the company's underlying business.

Speaker 4

Yes. Hirsch. So with regards to the cash required to operate the business, I think I mentioned earlier, our operating cash Hirsch. Has averaged a usage of about $1,000,000 a quarter for the last few quarters. So you can Hirsch.

Speaker 4

You use that to determine roughly how much it has cost us over the last year and we are trending favorably. Hirsch. So with a cash balance of $27,000,000 subtract that out and that's the excess cash acquired. Hirsch. And of course, we are trending towards cash flow neutral to positive.

Speaker 4

So from there, pursuing a tenure offer, I mean, Hirsch. So in general, we are always open to any strategic alternatives Hirsch. That helped the company. There's nothing specifically preventing us from a tender offer. Hirsch.

Speaker 4

We are evaluating all opportunities as they are presented to us.

Operator

Hirsch. Next question. How is the competitive environment?

Speaker 3

Yes. So I'll take this Herb. It really does align again with a few different things. So Aware ID, there is a large startup community, Hirsch. Very focused on biometrics, where we are competing in that facet.

Speaker 3

We are competing again with Hirsch. Some of the bigger players in the space when it comes to financial services, federal. And then there's the geography piece Hirsch. Where we have local players, especially in Latin America, local players in the Middle East, where we have strong foothold as well as here in North America. Hirsch.

Speaker 3

So in a word, the competitive environment is frothy. There is we are competing in every deal Herb. With competitors that we know based on typically the size of business, the market that they're in and the geography.

Operator

Hirsch. Thanks, Craig. At this time, this concludes our question and answer session. If Herr. Now I'd like to turn the call back over to Bob for closing remarks.

Speaker 5

Herr. Yes. I just want to say thank you for joining today's call. And I'd like to thank all our employees, partners and shareholders for their continued support. Hirsch.

Speaker 5

And you can learn more about our strategy. We have an updated investor presentation that's now available on our website. Hirsch. And we look forward to updating you on Aware's progress on our next call. Matt?

Operator

Thanks, Bob. I'd like to remind everyone that a Herr. Thank you for joining us today for Ware's Q1 2023 conference call. You may now disconnect.

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