Aware, Inc. Reports Fourth Quarter and 2012 Financial Results

        Aware, Inc. Reports Fourth Quarter and 2012 Financial Results

PR Newswire

BEDFORD, Mass., Feb. 12, 2013

BEDFORD, Mass., Feb. 12, 2013 /PRNewswire/ --Aware, Inc. (NASDAQ: AWRE), a
leading supplier of biometrics software and services and DSL service assurance
software products, today reported financial results for its fourth quarter and
year ended December 31, 2012.

Revenue for the fourth quarter of 2012 was $5.7 million, an increase of 9%
compared to $5.2 million in the same quarter last year. Operating income
before patent related income in the fourth quarter of 2012 was $1.7 million
compared to $1.2 million in the fourth quarter of 2011.

Net income for the fourth quarter of 2012 was $6.0 million, or $0.27 per
diluted share, which compares to net income of $1.0 million, or $0.05 per
diluted share, in the fourth quarter of 2011. Net income in the fourth
quarter of 2012 included income from a patent arrangement of $1.1 million and
an income tax benefit of $3.1 million.

Additional information regarding fourth quarter 2012 results is as follows:

  oThe improvement in operating income before patent related income compared
    to the fourth quarter of last year was primarily due to increased
    profitability in our biometrics business and lower general and
    administrative expenses.
  oThe income from a patent arrangement of $1.1 million relates to an
    agreement we entered into several years ago with an unaffiliated third
    party under which we assigned patents in return for royalties on proceeds
    from its patent monetization efforts. Based on information provided to us
    by the third party, we may receive additional income from this arrangement
    in the first quarter of 2013. We estimate that income could be in the
    range of $400,000 to $800,000 depending on a variety of factors. Beyond
    the first quarter of 2013, we are unable to predict how much more income
    we might receive from this arrangement, if any, because we do not know
    whether any patent monetization efforts by the third party will be
    successful.
  oThe income tax benefit of $3.1 million in the fourth quarter of this year
    was primarily due to three unrelated factors: i) a $1.8 million reversal
    of the valuation allowance we had established on our deferred tax assets
    in previous periods; ii) a determination, based on a project we completed
    in December 2012, that more of our research and development tax credits
    were available to reduce income tax expense than we previously estimated;
    and iii) the utilization of foreign tax credits that we had previously
    been unable to use.

For the year ended December 31, 2012, revenue increased 2% to $19.9 million,
compared to $19.5 million in the year ended December 31, 2011. Operating
income before patent related income in 2012 was $4.3 million compared to $3.3
million in 2011.

Net income for the year ended December 31, 2012 was $72.3 million, or $3.28
per diluted share, which compares to net income of $2.6 million, or $0.12 per
diluted share, for the year ended December 31, 2011. Net income in 2012
included the following items: i) gains from the sale of patent assets of $86.4
million; ii) income from the aforementioned patent arrangement of $1.1
million; iii) income from discontinued operations of $0.4 million; less iv)
income tax expense of $20.2 million.

Additional information regarding full year 2012 results is as follows:

  oThe $1.0 million improvement in operating income before patent related
    income in 2012 was primarily due to increased profitability in our
    biometrics business and lower general and administrative expenses, which
    were partially offset by higher losses in our DSL service assurance
    software business.
  oAs we previously disclosed, we completed two significant patent sales in
    the second and third quarters of 2012. We received $91.0 million total
    proceeds on these patent sales, and recorded a net gain of $86.4 million
    after transaction costs.
  oWe completed the shutdown of our DSL service assurance hardware business
    in 2012 and recorded after tax income of $0.4 million.
  oWe recorded a $20.2 million income tax expense for 2012, but our actual
    income tax liability to federal and state governments was $7.8 million.
    The difference between our book tax expense and actual tax liability
    arises because a substantial portion of the deferred tax assets we used in
    2012 comprised cumulative deductions for stock options in excess of book
    expense. Under income tax accounting rules, that portion of tax benefits
    attributable to such deductions must be recorded as an adjustment to
    equity versus a reduction of income tax expense.

Rick Moberg, Aware's co-chief executive officer and chief financial officer,
said, "2012 was a profitable year for the Company. Our patent monetization
activities unlocked the value of patent assets we no longer needed for the
business, as well as tax assets we had previously reserved. Successful patent
transactions put us in a position to pay dividends of $2.95 per share, or
$66.0 million in total in 2012, and still retain $73.1 million of cash and
investments as of December 31, 2012.

We completed the shutdown of our DSL service assurance hardware business in
2012, which allows us to focus our business strategy on being a provider of
software and services. Our biometrics business had a record year in terms of
both revenue and profitability. Our DSL service assurance business made good
progress in enhancing its Line Diagnostics Platform software product. We look
forward to building on our core software operations and growing a profitable
business in 2013 and beyond."

About Aware

Aware is a leading software and technology supplier for the biometrics,
telecommunications, and healthcare industries. Aware's biometrics software
products and services are provided to solution vendors and system integrators
for use by government agencies towards applications including border
management, secure credentials, law enforcement, and national defense. Aware's
DSL Service Assurance Group offers test and diagnostics software products that
enable broadband service providers to manage their DSL networks. Aware also
provides standards-based medical imaging software products to the healthcare
industry. Aware is a publicly held company (Nasdaq: AWRE) based in Bedford,
Massachusetts. www.aware.com

Safe Harbor Warning

Portions of this release contain forward-looking statements regarding future
events and are subject to risks and uncertainties, such as estimates or
projections of future revenue and earnings, and the growth of the DSL service
assurance and biometrics markets. Aware wishes to caution you that there are
factors that could cause actual results to differ materially from the results
indicated by such statements.

General factors include, but are not limited to: our quarterly results are
unpredictable and may fluctuate significantly; our business is subject to
rapid technological change; we face intense competition from a wide range of
competitors; our intellectual property is subject to limited protection; our
business may be affected by our use of open source software; our business may
be affected by government regulations; adverse economic conditions; and our
ability to obtain or enforce patents could be affected by new laws,
regulations or rules. DSL service assurance factors include, but are not
limited to: our DSL service assurance product line depends upon a limited
number of customers; our DSL service assurance software products face intense
competition; and our DSL service assurance software products could have
quality problems. Biometric factors include, but are not limited to: market
acceptance of our biometric technologies and products; changes in contracting
practices of government or law enforcement agencies; the failure of the
biometrics market to experience continued growth; announcements or
introductions of new technologies or products by our competitors; failures or
problems in our biometric software products; delays in the adoption of new
industry biometric standards; growth of proprietary biometric systems which do
not conform to industry standards; our ability to sell services contracts in a
manner that is consistent with our business model; our ability to deliver
services contract milestones; and our dependence on third party contractors
and consultants to deliver certain services contract milestones.

We refer you to the documents Aware files from time to time with the
Securities and Exchange Commission, specifically the section titled Risk
Factors in our annual report on Form 10-K for the fiscal year ended December
31, 2011 and other reports and filings made with the Securities and Exchange
Commission.

Aware is a trademark or registered trademark of Aware, Inc.
Any other trademarks appearing herein are the property of their respective
owners.



AWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)


                                          Three Months Ended  Year Ended
                                          December 31,        December 31,
                                          2012       2011     2012     2011
Revenue:
 Software licenses                     $3,230     $2,675   $11,301  $10,347
 Software maintenance                  925        767      3,396    2,717
 Services                              933        1,135    3,033    4,311
 Royalties                             571        605      2,170    2,146
 Total revenue                           5,659      5,182    19,900   19,521
Costs and expenses:
 Cost of services                      547        556      1,686    1,777
 Research and development              1,319      1,233    5,749    5,295
 Selling and marketing                 1,168      1,231    4,312    4,132
 General and administrative            945        936      3,860    5,005
 Total costs and expenses                3,979      3,956    15,607   16,209
Operating income before patent related    1,680      1,226    4,293    3,312
income
Gain on sale of patent assets             -          -        86,394   -
Income from patent arrangement            1,121      -        1,121    -
Operating income after patent related     2,801      1,226    91,808   3,312
income
Other income                        -          -        85       -
Interest income                           91         35       227      83
Income from continuing operations before  2,892      1,261    92,120   3,395
income taxes
Provision for (benefit from) income       (3,062)    -        20,186   2
taxes
Income from continuing operations         5,954      1,261    71,934   3,393
Income (loss) from discontinued           12         (302)    373      (826)
operations, net of income taxes
Net income                                $5,966     $959     $72,307  $2,567
Basic net income per share:
 Basic net income per share from        $0.27      $0.06    $3.30    $0.16
continuing operations
 Basic net income (loss) per share      0.00       (0.01)   0.02     (0.04)
from discontinued operations... 
Basic net income per share                $0.27      $0.05    $3.32    $0.12
Diluted net income per share:
 Diluted net income per share from      $0.26      $0.06    $3.26    $0.16
continuing operations
 Diluted net income (loss) per share    0.00       (0.01)   0.02     (0.04)
from discontinued operations 
Diluted net income per share              $0.26      $0.05    $3.28    $0.12
Weighted-average shares – basic           22,422     20,612   21,814   20,534
Weighted-average shares - diluted         22,539     20,775   22,071   20,735





AWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)


                                                 December 30,  December 31,

                                                 2012          2011


ASSETS
 Cash and investments                        $73,084       $47,304
 Accounts receivable, net                    4,578         3,546
 Inventories, net                            -             547
 Property and equipment, net                 5,904         6,232
 Deferred tax assets                         1,760         -
 Other assets, net                           528           222
 Total assets                                $85,854       $57,851




LIABILITIES AND STOCKHOLDERS' EQUITY
 Total current liabilities                   $3,639        $2,814
 Long-term deferred revenue                  319           462
 Total stockholders' equity                  81,896        54,575
 Total liabilities and stockholders' equity  $85,854       $57,851



SOURCE Aware, Inc.

Website: http://www.aware.com
Contact: Rick Moberg, Aware, Inc., +1-781-276-4000, IR@aware.com
 
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