Company: AWRE
Filing Date: 2025-03-13
Form Type: 10-K
Source: 0000950170-25-038714
Chunk: 86

Company: AWARE INC /MA/
Filing Date: 2025-03-13
Form: 10-K
Item: Item 7
Chunk 86
---
 receive software support and software updates, if and when they become available, during the term of the contract.

Software maintenance revenue increased 12% from $7.7 million in 2023 to $8.6 million in 2024.  As a percentage of total revenue, software maintenance revenue increased from 42% in 2023 to 49% in 2024.  The dollar increase in software maintenance revenue was primarily due to software maintenance related to perpetual license sales during the second half of 2023 as well as for the year ended December 31, 2024.

A majority of our customers purchase software maintenance contracts when they initially purchase software licenses.  Since our software is used in active biometrics systems, many of our customers continue to renew their maintenance contracts in subsequent years while systems remain operational. 

Services and Other Revenue

Services revenue consists of fees we charge to perform software development, integration, installation, and customization services. Similar to software license revenue, services revenue depends on our ability to win biometrics systems projects either directly with end user customers or in conjunction with channel partners.  Other revenue consists of hardware fees that are included with some of our software licenses.  Services and other revenue fluctuate when we commence new projects and/or when we complete projects that were started in previous periods.

Services and other revenue was $1.0 million for the years ended December 2024 and 2023.  As a percentage of total revenue, services and other revenue was 6% in each of 2024 and 2023.

Cost of Services and Other Revenue 

Cost of services and other revenue consists primarily of engineering costs to perform customer services projects.  Such costs primarily include: i) engineering salaries, stock-based compensation, fringe benefits, and facilities; ii) engineering consultants and contractors; iii) software license fees; and iv) hardware costs.

Cost of services and other revenue decreased 11% from $1.3 million in 2023 to $1.1 million in 2024.  When compared to services and other revenue, cost of services and other revenue as a percentage decreased from 122% in 2023 to 110% in 2024, which resulted in reduced gross margin loss from 22% in 2023 to 10% gross margin loss in 2024.  The change in cost of services gross margin loss was primarily due to the profitability mix of customer projects.

Gross margins on services and other revenue are a function of: i) the nature of