BIO-key International (BKYI) 12 Aug 222022 Q2 Earnings call transcript

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to BIO-key International Second Quarter Conference Call.

During management’s prepared remarks, all participants will be in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded today, Friday, August 12, 2022. I would now like to turn the call over to Bill Jones, BIO-key’s Investor Relations. sir. proceed, Please

and materially you webcast, BIO-key’s Thank identify from that on certain as our believe, forward-looking of Private the Presenting differ Safe forward-looking today’s are BIO-key projected. forward-looking call. Rocha, cause Words will which Welch. Thank everyone plan, information anticipate, statements, Reform to may Litigation made management’s answers remind and Securities for and actual Such to as those estimate, CEO, using risks are that EMEA; the of assumptions Harbor Director Chairman is call or that’s well such to CFO, results Mike today provisions based uncertainties statements. Ceci and are who XXXX. Act statements I similar and currently of and you. conference and beliefs, to Managing expect joining BIO-key’s and available DePasquale; subject Alex include words typically express as questions pursuant

reflect on like to Mike. to would obligation future speak The the I events to today. forward-looking date. For risk circumstances Exchange a with to only turn future not please the Form and other with BIO-key, no that, risk are performance statements Listeners statements, or which company reliance company’s of call description revise affect revisions see and that XX-K may Mike? to factors undertakes as today’s of in report filed forward-looking place or the the Securities And annual on to of cautioned undue Commission. factors disclose complete over these after

this Biddings, vacation. from IR you on call, who’s thank firm Bill, Catalyst on Harbor you, and reading is Kim for our is our normally the Global; Bill Thank morning. Safe

Alex Then will for today. So again, we’ll to highlights and investor questions. I provide Middle the East. for efforts the and will our thanks, the turn Good then you my Ceci quarter, call call thank over call to in morning Europe Rocha review the and this joining remarks After morning, our for Bill. financial open

full from to operating into more March, results The quarter Alex proceeding Swivel according and will and base, expect was acquisition, the international it first to closed potential. performance and in as second growth discuss Secure quarter in well but its plan. to important significantly our our integration detail, our business BIO-key our contribution the operations, which an of we it customer is our our make expands team, XXXX

second doubled license the by Swivel XXXX installed the for in base our revenue nearly software of in revenue, reflecting from customers, growth quarter Secure. driven Our XX% including increase a of benefit

our CAP or We efforts we management XX% and business, continue program. Channel sales and to inside growing domestically new sourced of partners. going forward more or both sales CAP Alliance advance to be our expect Leveraging through access Partner the core identity through model, program

One Intelisys, master of very with success our agent with particular Intelisys where we have a broad reach. key partners had is relationship certain We’ve agents. a referral

This the QX, programs on the enable for and with with their affiliation we a with continue team a half and Technologies, will of XEye resellers developed Joint in of collaboration packages complete to identity spoke on local key So in marketing BIO-key agents to We introduce in of their in panel IAM Boston the our opportunities. working finding a sales joint with our continue relationship. were to to and to customers marketing as to events and as their second this markets. value-added solidify marketing on meet financial the network, developing in that expands more to mobile, Intelisys In solutions successful particularly events the those security we’re focused QX. services solution at launched within partnered programs government within channel partner and distributor network and XEye value-added MSPs scope relationships, quarter, channel universe. build we well second

announced can Just the managed to outcomes solutions enterprise for services provider our with that global a of access that a grade like its identity program last customers provide Accelerate also month, Program, selected authentication Darksteel identity-as-a-service with solutions run security in Co-selling Technologies, we build the PortalGuard services platform Orlando, or more Darksteel Partner and had desktops, security customers. customer leverage of to business enterprise result AWS solutions. security, expanding delivers has QX, customers, and that and or Network, in access who community the now commitment software provide Also to on for critical integrate companies Amazon joined small- class solutions the applications opportunities, Web better and data. medium-sized reach AWS BIO-key cybersecurity our BIO-key co-sell partners Services to for BIO-key. to a mutual AWS also with given not but provides in BIO-key only partners AWS. from ISV MSSP,

recognize and within institutions, I increasing We education big complete differentiator and to authentication workforce PortalGuard multifactor applications data, capability. capabilities, our customer flexibility to of municipal including access provides. as hybrid options agencies, threats county reset IAM continue mentioned, and strategies. higher sign-on enterprise addresses and to value a government of support that password Biometric and critical resonates a BIO-key Biometrics, support grade and that industry anywhere. workforce, require the includes solution Customers set just unique as our leading high solution IAM that security and increase is for multi-factor feature PortalGuard’s flagship enterprises. that information Its businesses authentication, PortalGuard from and easy XX including, penetration deploy methods, self-service which Identity-Bound Identity-Bound Single different a users

strengthen city overall a effectively Texas to its PortalGuard posture in and respond to that cyber evolving selected threats. QX in security include customers New

with cyber relationship districts, multi-factor secured attacks municipalities by authentication, among not we Nigeria mobile and Africa, PLC Specta Sterling agents Mejeticks critical access of forged our against management, infrastructure a in also year, Bank’s accelerate strong IT through with but may PocketXX other customer to in relationship increased the provide money its Counties in are be and Separately, departments half of halls, partnership eTranzact requirements. with new profit, are the awaiting school to solutions have a second you voter aware, the the last for ransomware require insurance was In will that equipping As vulnerable. our with for in the have city along commencement called to consulting government Intelisys. year. terms police only of company deployment choosing that our and Texas entities a most we Dallas expected is project compliance This new local PortalGuard disrupt X,XXX registration of devices. of firm

as secured in for National the Identity a Nigeria in in In and demand play channel Kim staff and or Commission API’s that access row. of we key to recently application role and transactional We the our has for or verification national product interfaces success of recognition. authentication from named I’m hardware, anticipate all Kim, integral Management woman also deployment with These a mentioned continent. front in rise leadership software Africa. MobileAuth numbers. IT industry BIO-key our Year partner programming Congratulations relationships and than received a summary, monetize our across relationships and identity today’s our One of NIMC BIO-key year’s right the to service offerings, to Awards. in individual center industry we information global employees base taken for very systems app bullish opportunity. There’s the prospects biometrics, those we we want is an strong this new as to to their CTO Identity-Bound CRNs, are remain believed, Africa. security mobile integrates in and organizations with technology I It launch enhancements or World now incredible of couple in the were network our And supports to Switching and this as LaCous, to with easier security including Gold our Globee channel a security strategy. authentication a solutions an year longer to our the our but solutions. protect meet Mira requirements. awards, solution. on PortalGuard demand for and and our MobileAuth second Mira has certainly with and PalmPositive of as expanding own for mobile modalities, enhancements currently for empowering proud number Android in say continued remains MobileAuth base MobileAuth ID, in Face our strong offering. allowing But facial with ID, only is recognition FacePositive and customers And palm and Touch address PortalGuard mobile and secure also for both powerful scanning integrate complete cybersecurity list token solution a that reseller with multi-factor growing to software who increasing push supports even acknowledge. more well there build further release. devices the solution, Award Apple important of authentication. our and of power authentication that much built product the their innovation such the with of development, to for Biometrics of customers team, an that received to partnerships multi-factor awards Biddings the development, updates for was press product to recognition other data very QX MobileAuth make QX and BIO-key the and solution more committed a BIO-key entire of

to by use strong, compelling business security expanding deploy, and IAM and organization’s see Protection with to with cost our easy but friendly solutions continue that begins We opportunities user securing driven scalable, borders digital to an solutions. effective. are grow globally,

expanding PortalGuard meets this Our customer solutions. strong cutting proposition of a providing need, authentication with edge an value platform array

our successfully be we reach continue expand years. that the past our set base, M&A or solution have also on as to will sales value and marketing both opportunities and X our could enhancing We customer done build over internally a

momentum with are of opportunities and Europe, advancing in our the progress the Africa. we Swivel in building further integration seeing business, including Secure Given

recurring million, We XXXX expect million are of XX% we software to reiterating of our to revenue $XX from which revenue. $XX full come guidance license year

is capital channel Our our position, expanding talented partner global global well XXX% our guidance This teams, footprint. supported approximately and more, solid represents sales. or marketing XXXX by outlook as as development over product and sales, management of growth

focused of East that, hardware the revenue to Rocha obviously operating We’re on discuss conference operations guidance of XXXX range European this mix Alex? I’ll balance cash building subject within Middle With for business. to company the turn QX breakeven revenues. our on flow Alex call or to our momentum positive the and software and now to our is positioned and

have very the Mike. you, made exciting and maintain momentum. solid Thank we into so I’m progress integrating in far by organization sales BIO-key

September, expertise his announce is Middle and with [Nadine this Mohamed] Europe. XX recognized Africa. in join new projects. focusing will [Joseph America. EMEA responsibility products We in and many [Eric the our that and covering selling [ph] years sales more already identity with engineer [ph] strategy, than sales team of knowledge on in sales of Francis] and APAC; a years member and [ph] with In proud is use and to our support will experience Spain experience we full the in of only are identity. solutions operational Nottingham] East Latin team high To both

[ph] QX to train support X SLA as Regarding BIO-key XX/X the in and be leader sector. hours our with stock channel. our EMEA in University the will offered became available

an offer even PortalGuard that innovative the product, channel solution will exam knowing and online an receive approve We helps a our training certification.

in second international London, Dubai the clients will and are our Results quarter, Dubai. All And in including disclose. X operate and customers several we a are in several have the expand X sector that to new in and Tokyo, Spain, strategy Arabia, – international Africa. in and – we’re soon office we also organizations Middle and international new make of X reference with there Saudi X South to in Germany, in us in combined country the which East Madrid national market. going these Our second Frankfurt, the in cannot

and our subject a Our to reseller is levels partnership working channel with of program methods. we on the priority channel. Microsoft is engagement where build to our close And strategy. with part Okta is that strategy SailPoint these plotting another [ph], from SAP, are XXX% partner is technologic And

counting will and the guidance, authentication MSP PortalGuard CIM already first who PortalGuard customers our Our product. PortalGuard innovative products focus and which request with CIM garner Identity-Bound be feel to present on to to Biometrics of and by turn PortalGuard have the our value are unique working receive where market been international the MSP modified family products development ready is for been note, opportunities. market our that add in the market EU, are QX we banking projected other following their to and the will All will expecting online to are All Last our signs PortalGuard overachieved closely strategy. conference be demand concern are and us e-shopping then features have released The being on subjects needs. to the the have expertise we compliance. for improve Allow product relevance for with calls with we good more and company. high by right revenue XX%. Ceci. me the GDPR than of we now to

the briefly Monday. with be BIO-key’s Secure business morning of from filed Thank we financials in revenue that which released revenue XX-Q you, $XXX,XXX $X included acquired and the Alex. in The believe will period to on this million XXXX. review QX $X.X nearly doubled Swivel to related million I the QX QX XXXX. XXXX were

from increased new due new increased premises to QX in in XX% in PocketXX the in Service in to customers QX and software QX XXXX from XX% to with $XXX,XXX XX% $XX,XXX largely customer. $XXX,XXX XXXX from our Our in annually support. to XXXX XXXX, to cloud-based higher to particularly a customers from PortalGuard to to recurring one education sales revenue QX $XXX,XXX services upgrades increased Non-recurring solutions, due SaaS new from to from prem Hardware XX% XXXX XX add-on million $X.X customizations orders recurring on in migrating licenses QX representing on customer deployments. order increased maintenance QX versus customers due and cloud and product QX XXXX, from segment. and Asia, existing versus revenue

expenses due the increased and margin QX growth, from in $XXX,XXX new XXXX, addition to third $X.X XX% For to XXXX in margin fees in XXXX lower consolidation to QX from the in increased growth in the million as QX Gross and Secure $X.X the the Swivel due million sales software overall XX% Swivel Secure Secure Operating required to benefits. increased related the grew of margin, declined hardware XXXX year, profit offset QX XXXX hardware decline revenue party employees $X.X on Swivel million revenue. of partially gross first to to to in primarily a license lower by from profit related for half in [ph] revenues. as XX% QX licenses. reflecting due XXXX Gross expenses, QX well of in

We BIO-key enhancements million the research $X.X QX $X.X The versus to a increasing upgrades net of of loss development, company in also development operating loss QX million in costs or XXXX. QX engineering attributable recorded associated QX XXXX loss compared our due with share to $X.X and share $X.XX encourage operating million of the expenses significant a an application. a loss higher net costs in XXXX or $X.XX more than million and to $X.X as of gross profit. operating and the MobileAuth of reported XXXX per a

of equivalents, X and loss BIO-key or XXXX. excluding total is the months million, net share of net book million Net and share, receivables, a X BIO-key $X.X was million $X.XX value of first in of or $X in inventory. the quarter deferred with months for or $X.X versus million, first share. working of $XX.X million a per the assets, $X.X $X.XX cash For per including equity capital $X.X XXXX reported $X million, loss revenue million per and cash stockholders’ current $XX.X was million of $X.XX ended accounts

can for cash of as ago and inventory to year we call in questions. the months first opportunities we with to Africa. million million when back So our compared over the in the $X.X to And operating investor far, XXXX, $X.X turn used support operator in X of invested we the activities that, period

you. Thank

Please Maxim session. Jack Vander now Our Group. [Operator question begin Instructions] first from ahead. the comes question-and-answer with Aarde go We will

questions. finish Okay, I’ll I appreciate morning, start I Ceci, few with update. a questions. the Good guys. great. But of a will with couple

also I color. back Swivel what was that. didn’t touched and And comp the the in you I’ll thanks Just, come added the mean, Secure quarter? stock Michael, to revenue for

looks XQ Q-over-Q. I like on it the year-over-year, think, is question big result down, a was Just a license but it

Just was more? bit understand why that to a

was We $XXX,XXX. in over had in quarter Africa from valued that the – a very first renewal License a large customer

that license it order that kind a big And – reason was one that That’s drove just the so revenue. single timing the that, – QX was scenario. was really of

So in significant. for overall but year-over-year really – significantly, business growing to and is grow will are the we’re I significant the as our adding us. also continue growth that base, we in still growth And also year. mentioned Part through now go that that is we excluding is of Secure as comments, prepared the my Swivel

the slower, comment the a and in As you in are big in this quarter Seasonality later. is Europe, very they on summer, obviously, third will probably have know, QX. significant, Alex but things

So, expect ARR as And revenue our right XX% I grow is its now. our mentioned, license to overall, business approximately meaning contracted we year-over-year. of significantly

a not license new moved customers, customers. with relationships subscription perpetual have now We older model only exclusively our are and to selling any fulfilling anymore existing against to

That a good color there. of fourth is strong point, This year, it’s half strength I a the to on your appreciate is And implies that maintained. in sense. now and quarter. Europe the Okay. hear regarding clearly the lot then think, makes of I the back guidance comments is

be of would much then, for whole, to revenue a as quarter quarter the the As the stronger all third segments? fourth revenue relative in expect you to

I to So we to it’s year, the I Well, than good we because think be just in quarter us. close strong we’d stronger described, certainly QX always right? scenario just that’s expect again, for QX the would that But a fourth the expect do also of be quarter because, expect the case, the – Europe QX.

end loaded, And in to back minimum let’s range So $X that have in $XX the we’ve million, we’d the if million year you to guidance million. that our hit revenue of do of look the $X half. saying of XX% Again, done at contracted. say, be first will approximately, –

be we’re numbers. think good pretty position overachieved achieve I in to a those able to or

on Okay, you one positive just great. have more, African me just how your X the looking guess, there. some pretty I contracts what And, maybe – ramping update an your on like your it just existing maybe – into and And developments with Thanks. Africa? And African maybe contracts? remind think, thoughts X then XXXX, are but activity you Can going was incorporates I guidance up? more minimal, these

of first all, think, I you’re correct.

around contracted, comments, XX% consider being services you side. as licensing have, my of on revenue our the We especially

guidance that intentionally, very in financial the right taken that that for it’s all the then particular, quarter. transactional beginning, for have because in an And the did in of XXXX. productive. will recurring We we’re significantly, building, little are creating revenue get or time right quite really – ramping I to Africa of the now. stream it’s hardware institutions our relationships will ultimately that because of ARR, in sell us some with procurement start happening fees backing we this this that That’s and

So, increase to ramp I hardware’s we’ve well said think, revenue see building. a this, we’re we’re the contracts in built you’re we some really a lot relationships the I episode significant have always [ph]. do think, after, to into business for as against not we’re second our going going the what that half, XXXX, have X newer In big that as XXXX. into see guidance we that But,

not that’s Nigeria, Africa. have across transactions for what but agency in hardware just a more a being really in important we is in that Africa, countries the a voting But, we large months. for in and a Also, you’re in our partner transactional in that to lot facilitate continue sell the country we to network well, particular, able And on you other business, us. as – after. has have going Africa. in registration weeks really build the hear So contract about program we’re to in secure to and a the model coming And partner

come as support to And BIO-key, particular hardware with software bit as well through of that so a there’s will associated it. contract that quite

to insurance, – the So years. we significant for next the East most transactions, Also, that’s Dubai, office there’s grow It’s Also of of now all securing that banking, healthcare, kinds probably and globe, the in have and we to on government serving going are office. continue that type the side just emerging few on grow. the remain really and out market. Middle grow access, Alex, an of and bullish the on other that market business, given

the of We to through next sale Africa proliferate across well. as countries of Alex the kicking many will be begin efforts the will in that the in initiatives PortalGuard and quarter off

Okay, the you there. helpful great. then then Ceci, color hand, comp have on you Lots stock please quarter? maybe remind And Swivel if it I me that. Secure was appreciate the And just of could of lastly, in revenue? what

Sure.

and X So X comp $XXX,XXX the was months, XX% was $XXX,XXX the and for services. probably software Swivel months. the the And for web $XX,XXX share-based the

right, Great. I lot. it Thanks that. All That’s appreciate a me. for guys.

Thank Jack. you. you, Thank

[ph] investor. [Operator go Please Instructions] comes Kenny] private next Your question from a [Dan ahead.

Hi, if guys. How any? the for hardware $XXX,XXX much sales in was Nigeria, of

About off so or $XXX,XXX my $XXX the – head. of top

year understand consultants to the Got I did what come from So you original revenue? that revenue? before hardware the it. that? Has quite moved the that and get is different happened make that paid – sale? don’t income no, that took because into get where that is that last that to a have to account Or original been And for work on you sale way $XXX,XXX? already off

new Ceci, defer sales customers. that to I no, or I’ll new so to that new revenue, partner that and Dan, new revenue is $XXX,XXX was but mentioned just

Right.

$XXX,XXX yeah, paid was been product, it So, for it but was domestically, already. for and African sold customer new it had

recognize fully revenue. So that

Okay. you must But revenue that ago or now. sale – happened $XXX,XXX took happening a don’t with sale I what in revenues? year be know what’s

sorry, receiving every up on it’s that. month. but side now, monthly on It’s I smaller – we cash the recognizing smaller mean, Yeah, so we are are ramping

So…

it. on paid you think, I

noticed that or for I what hardware was reserve, whether just was there that I wondering just Okay. $XXX,XXX something that? was

Will No. in That’s fully actually for it XX-Q. the be a in Kong. bond have that disclosed Hong we

Swivel? new in debt I noticed that was for $XXX,XXX

got pandemic, that have basically we it splitting the getting next and during government the over we thing paid It’s current the are it they received so. was same loan they Yes. long like loan, into and for term. a That’s XXXX

Mr. the a Rocha. Swivel PortalGuard this at percentage that What’s have question for of customers converted Maybe point?

to has converted only see we mean us That expected going X conversion yet the not in operate continue independent year. and next be We been that companies. to

Swivel what’s And headcount your see. at now any after I reorganization?

Right we Swivel now of is mean clearly in have we rest we – are strategy and what BIO-key half Secure are the and where XX putting are Europe, before, is the we that persons. That our focus.

I see. Thank you.

My pleasure.

margin like on fees reasonable your is the next the that quarters? Mike, license of for looks number about a XX% couple

is Yes. number. to converting mind year [Technical Swivel, in BIO-key. with mother Yes, again margin company, see base pay But that’s over sold a Secure. Alex’s right, next that much license still are fee why you’ll us to mother the the licenses PortalGuard company, on We that Difficulty] which Swivel the the a keep reasonable and higher. remember Swivel And is the business gross that Secure BIO-key

down, little her are of And comments. little will tremor So of margin. fee bit why margins the importantly, mentioned of Gross the the license you I in gross the go lower. bit board That’s CeCi a margin prepared But, that just mix margins the because hardware. a because think more that. across saw

second about it in months couple X XX% the questions more last SG&A the here, it. for Got like over grew XX% year and A or looks so. quarter maybe

that’ll be half in out? is that rate something will where and Or there So driving the think? you think growth the Was What for that increase you SG&A to expense the seems settle accelerating. second non-recurring? do be

core future. let address I’ll and But Ceci. question, Well, then Ceci about I’ll go the talk the ahead,

or Swivel. me, is Yes, integration excuse full so full that is quarter, – a a the month

to and development for also in that And research the of quite of directly SG&A attributed So a lot development extra Swivel. is has it in bit a the the MobileAuth.

and it R&D be in going more one to forward, the reduced. to maybe So it. in hiring we level year for the about stay, it’s sales any half I have where going And be is – SG&A of second except expect that’s to don’t

see. I

Okay.

actually I think okay, that’s it. That’s – thanks I – a it. have lot.

Thank Dan. you,

Instructions] questions. showing [Operator I’m more no

the I to will the question-and-answer So remarks. over closing call turn at this ended. time, has for session Mike back now

We just some I everyone forward in Thank call. call to person. September, our on H.C. will Wainwright be QX New you. want York we in you we In the November. today’s joining look hope to Global attending to at updating the where Investment for in see in you of meantime, thank Conference

we as updates press significant will a for weekend. happen provide time your within releases to always, continue again, thank the morning regular As news via develops Once this have great you business. and

conference now This concluded. today’s for you listening presentation. is Thank

now may disconnect. You