BIO-key International (BKYI) 18 Jun 242024 Q1 Earnings call transcript

Good morning, everyone. Thank you for standing by, and welcome to BIO-key International's First Quarter 2024 Conference Call. [Operator Instructions]

As a reminder, this conference is being recorded today, Tuesday, June 18, 2024. I would now like to turn the call over to Bill Jones, Investor Relations. proceed. Please

and for Betsy, this you thank you, joining all call. Thank

VP and today well DePasquale; Senior new CLO, product are on hosts some CEO, will as Strategy provide who BIO-key's Sullivan, launch. as Our BIO-key's Welch; Chairman Mike insights and Ceci and Jim of CFO,

differ and call realized webcast, forward-looking subject are typically statements well reminder, those forward-looking uncertainties can these answers actual as from risks cause that a statements. to Words and express plan, As anticipate, and to expected. today's results which estimate, to conference identify believe, words as project such investor include currently certain questions, similar or as expect,

pursuant Private Such Act on as beliefs statements today assumptions Securities of made harbor XXXX. and management's based provisions of the Litigation to safe currently Reform the and are available of using information

these filed of of in risks description as report the complete XX-K cautioned Listeners occur reflect reliance or place revisions which today's of to as not or please are undertakes may forward-looking performance the see statements. to company, only, a such BIO-key and forward-looking to risk factors to with the on speak date no that disclose statements, affect annual events obligation future SEC. other on after undue today. revise For circumstances Form company's that

me let begin. to the pass to Now Mike call

afterwards, you the for solution, more financial us to provide joining authentication we'll and all thank brief will today. remarks, and BIO-key's morning, questions. our around call of details provide a good formal Jim Ceci open our your my and will Bill, launch performance, Thanks, then overview Passkey:YOU After of

XXXX we this by X, statements XX-Q financial with Friday. First, of our public continued firm, up from revenue million. But $X.X Ceci BIO-key the in filings. recently now XXXX from level, our on June a completed our review we XX-K accounting high our to past XX% recently with and Again, audit our QX filed filed of regulatory to compliant independent the progress is date our and we was XXXX all will numbers. up and

QX, long-term to we benefited In a biometric customer a flow had from who financial by biometric cash the their of identification services solutions. operating client use system of continues positive we expansion expand our as generated

In to fact, we currently revenue significant they ID from for a featured us BIO-key's more over looking which They years. client have been a upgrade of potentially to year. past are may license say to generated their have complex good simple more customer later the have this solution, certainly and about a

has expanded an orders that As in our BIO-key provided add-on use And had the our of possibility there foreign late will defense customer XXXX. certainly force And several more. be to of expenses also our XX% in 'XX. into QX, that and, other by operating In XX% reduced organization. within we reduced our solution year-over-year approximately loss $XXX,XXX QX than therefore, more areas to

right work have more but we the do, performance. We we heading with direction in our are believe QX to

a over believe to We position move drive customer good revenue cost. in have focus continue could efforts to XXXX as further impact forward meaningful opportunities us quarters. reduce a positive to growing through We network progress base global distribution look has move our larger our this well with we a on profitability as on and results, next as that and the to several

well. of developed through XXX majority today over years that providers integrators, as managed MSPs partnerships with resellers, including value-add are we've through or service sales the The our partners, system

a channel sales are European and overall partner. to partners sales our the our majority are company through brought of of through now or All originate us

that I've addressable allows pursue us which in sales of mentioned frees the larger deals, our a team reach Leveraging market examples to also broader revenue partners to direct of pipeline. currently and and up are a networks their couple customer our

Another management bases identity to with partnering large industry and can upgrade in some of include their the of IAM by like XXXX bound BIO-key's the is MFA larger with access focus installed who identity have strategically ForgeRock, biometric point providers customer who solutions began we SailPoint, that in offering. Ping and unique

migrating The and stronger, requirements, market superior user solutions secure and help require There authentication, third-party IAM more many or of while reasons. mainstream Enterprises and continues insurance all authentication BIO-key and grow regulatory for are customers overall options. experience to to better workforces around cyber our remotely hybrid regulations the and systems. cybersecurity are insurance cloud, meet than alternative their these providing requirements increasing are value contractors to working access

the rules are The reporting of zero-trust for and require opportunities and approach ransomware cybersecurity environments IAM, as ownership regulations report cost advanced SEC's flexible, passwordless on adoption and meet itself of approaches more provide lower multifactor of enterprise want need management essential BIO-key plenty cyber authentication, who and user broad total to well current risk for to of or insurance, authentication more covered payments. climate that Multifactor companies new authentication as through disruptions promptly differentiate and enterprises a experience-centric biometrics. cyber to CISA and

We XXXX. to expect cybersecurity cybersecurity companies requirements, solutions. throughout with solution more priority discussions a in challenges Again, these sales flexibility, management very top represents lower as current of environment and and meet boardroom BIO-key all XXXX allow backdrop as of our incidents keep high-profile so for well the a and favorable breaches, and cost, emerging these constant item to

We use also of its authentication to expect market XXXX. in passkey the penetration expand

does tokens. not use pass the a variety solution useful authentication very for As a in such, I'll the moment, Jim is this exciting to to in This or of cases. greater we And Sullivan just business use unique list hardware launched Passkey:YOU, require phones opportunity call detail. discuss of that a password solution

our to unique of the positive Access factors for and very I've I've outlook some market Identity BIO-key and and Management many a on for discussed reasons providers, solutions. touched specific

available facial among the identity, and are fingerprint BIO-key that palm industry in in XX the We the industry, and and option does which factors is are authentication different the customers, our competition. offer biometric we leader from currently an separate most and that ID, such as really flexible which

have a license provides we base Today, high-margin ARR. XXX solid recurring, revenues, fee that over customers and or

opportunities our addressable continue large team, leveraging to direct to sales larger pursue our through revenue a market. while We channel partners reach

to We pursue to cost to continue will flow. reduction path accelerate our initiatives positive and cash continued profitability

into we opportunities our purchased cash. inventories, African are convert hardware including Also for down exploring XXXX, which about in $X In some million was QX, approximately million initiatives. slow-moving wrote we $X.X inventory to of

current monetize of to expect and in quarters. some We that continuing the inventory

believe and top positioned to continue improvement through well line meaningful as performance these progress of we year. BIO-key reasons, all this is bottom For we

Passkey:YOU our discuss Now let the call me to solution. Jim over turn to new

phishing a Thank include seen you phone like FIDO press users authentication targeting solution, from a workstations. $XX that which either nearly biometrics. only goal eliminating on you scenarios something who to you, involve identity workplace Passkey:YOU platforms the is X as passwords, things mainstream priority for where approaches, have may per sell you apps offering tokens implementing of each. YubiKeys, enterprise, hardware of have Mike. phone share week, like and like opposed authentication of user phone-based FIDO limited are which like or would know, of passwords announced cost call or we every Preventing are MFA, or authentication release BIO-key's now of $XX based but last apps, underserved by is passkeys multifactor authentication, Both something options which the roving launch Everyone X or something and to we implementations what tokens formal

options hospitality, fit shared typically workplace authentication Operational you among well handheld scenarios, as reaming users don't are floor, for devices. kiosks challenges call arise or care a well retail, something health suited variety and centers, where use they of manufacturing terminals, or or aren't have point-of-sale because workstations, shop such many

personal of These hardware that's FIDO an and apparent workplaces often distraction only workforces, option authenticating identity or roving strongly reasons safety enterprise buy those leave prohibit large phones tokens. to single for them the a team for use

each lose is user be recommending that lockout X FIDO provisioned But one they token so Alliance per tokens if with token, or each. risks their FIDO user X user the

of to of to a maintaining in outfitting at we're working, tokens who those order that spending provide millions able years if to -- workers workers. X,XXX to would be couple XX,XXX looking a manufacturer mean $XX so has XX,XXX with Now tokens, they're pair of of X,XXX to every these $XX buying and dollars tokens

Manufacturers of are is tokens themselves per a a loss loss XX% user typical projecting rate. that

multifactor really the swamps becomes of adding those a economics spend roving this workforces. for that consumable So

personal on carry and BIO-key's BIO-key changes instead hosted And any a their our does nothing to just passkey of touch touch servers, passwordless of tokenless that that at workstation authentication in to Now software that token. can with biometric a a unlock user passkey a a phone finger workstations and and in having the provide is carry means based in or that with renowned of all each to experience users by of enterprise. hosted a a work phoneless, the finger a any Passkey:YOU marrying of so those just authentication Passkey:YOU

device and So Passkey:YOU platforms. it that is have every used you where And most workflows supports drop-in hardware authentication therefore, leveraging the are a might application have, replacement, door instead existing they in already previously functional touch in tapping FIDOX: identity WebAuthn access cases, user also of their a allow the shared to the finger, at the that workstation. or and a experience tokens support on many already pads

strong user at radically out cost This multifactor point changes buying hardware the a for workforce. authentication of itself putting hardware the hardware reduces to to the access economics from and rolling every

important existing we're as to that thought lower passkeys. is are that FIDO FIDO because user tokens usually workflows authentication cost fact of the Now experience the through we're all only superior accepting compliant hardware and of passing phone-based standard or the

make bring users. integrations have in our economics in us customers well of biometric the both hardware as asking to fact our do to deploy and buying putting place experience even product for necessarily maybe one in you're every more as be to of the that this cost simple is accessible like And love the terms not your going to having they without been that PortalGuard. So of

to So experience. or this us there identity enter Okta biometric Ping, allows our able those and IDPs, to are solutions adopt then like are providers present where already existing

to into hardware product Ide passkeys, has it makes built all enterprise so IAM a essentially their ability this workflow. hundreds to authentication even of we users deliver it's an solution ], with to passkey. to tokens millen turn [ the thousands effortless authentication order add who they're already the passwordless we to enterprises strong struggling at looking for this think currently existing valuable instead. an that are tool or potentially And within that will be our a essentially And in where our that experience for And this partner, deliver

already process an And is its existing cryptographically into unlimited obtained solution platform, a of the users a be credential, because phish-proof password. phish-proof own entire no phishing credential authentication their number And is biometric could secured authentication so to user on which mode, that their Passkey:YOU allows by the powered this credential. attack be our essentially a by with like is fooling providing

entirely and users. it's this phishing So for secured yet easier the is against also

of user So that this we that so bring into easier popular solution going cost, is lower it is is experience be workstation shared think make these combination workflows. a -- very to going to to

things all with so compliant enrollment customers that to built privacy compliance in, integrated because have the built privacy capabilities we is platform being of workflows. for biometric part don't law like of and into is take as about our ensuring these care worry consent that BIO-key's

or user-controlled whether provide over to don't with is that products also Those understanding be worry they want built biometrics it. can so users are customers compliant our in control it have the private it. remove their so to used, capabilities being we've that We about revoke dashboards have how the

already. without into to the framework we've to we from experience integrate possible it integration adopt so This compliance customers either a want many to that benefit for have effort. having that or will Passkey:YOU And as people and again, make concern got using ensures BIO-key an any biometric as existing easy

financials. questions Q&A. that regarding you to Ceci now, for But I'd Welch, to the call can she answer be may so want to happy the turn over the Passkey:YOU in review any have I

Jim. you, Thank

As also for filed XX-Q the therefore, firm, press XXXX our results, statements restated Mike our recently referenced, and as we yesterday the compared accounting our XX-K completed audit independent I'll review our to to release QX 'XX. public financial was the QX the were registered both which 'XX XXXX QX and results. of XXXX issued by in

year the South XX.X% our declined with custom client in revenues a million, a BIO-key did of from order system longtime by Africa. A The for XX% 'XX large the hardware Swivel large period in to them in and due use offset services QX QX financial of in current up 'XX. order line revenues, increase were and benefited Secure that services customer a from $X.X to loss and in license service comparison expanded agreement drove decline by which identification biometric recurring fee sequentially in was recur. a large not revenue. Services QX 'XX customer the

Our profit than gross the services gross revenues, of command a higher and benefited profit license greater margin from fee and margin proportion equipment. which

from gross a to million to improved gross margin reserve $X.X 'XX, from in 'XX, our grew included hardware in with million which As our $X.X profit such, XX% expense. QX blended XX% QX

have versus been you the reserve in exclude 'XX. expense,in If would 'XX, it QX XX% XX% hardware QX

also higher period revenue revenue. fee benefiting the license year current included the margin from mix a that With

our $XXX,XXX QX $XX,XXX research or of versus reductions This less expenses. 'XX expense in in and operating XX% to development QX Turning included by $XXX,XXX We engineering 'XX. reduced expenses. SG&A and total and

in expense included calls. working reductions lease our audit higher occupancy related headquarters, is costs, lower downsize We for filings. and public lease to show were the professional now and by as Jersey and the to discussed most as sales regulatory prior reducing Expense fees personnel of slightly our were These initiatives corporate expense expenses cost-cutting and New related team headquarters able and reporting offset remotely. marketing

the $XXX,XXX gross QX an million $X.X by 'XX, operating million in operating profit, higher in $X.X to from of Given revenues loss of turned operating 'XX. QX loss and we loss

bottom $X.X QX million of or significantly in share 'XX. to ] line, $X.XX XX% terms its loss in by 'XX BIO-key or In or XX [ per trimmed net QX -- per $XXX,XXX share versus $X.XX

our on flow focusing support revenue initiatives continue path increasing breakeven XXXX cost-saving to and and cash to will We in profitability.

and BIO-key of items, the of sheet of and $XXX,XXX of March due balance including receivable and accounts the as of XX, cash of million, net current $XXX,XXX $XXX,XXX terms of cash million In $X.X assets XXXX, inventory, had reserves. $X approximately factor of to equivalents.

QX ]. related long-term technology slated in Africa that with for license cash the biometric customer extension $X.X to $X.X received projects BIO-key XXXX, to utilizes In services expanded [ mentioned As X-year customer agreement for we in financial in 'XX, a in down were an million that wrote million down authentication. inventories our of X

hardware our convert growth to working are We the operations. cash and to upon that support shipments portion to initiatives of inventory

concept new We and care several foreign force for a benefit proof also existing our have request existing larger projects customers filing and quarters. in of that's could customer, an with defense and customers results potentially with health that are upcoming or financial in stages proposal which a

remarks. our prepared concludes That

ask I'll begin operator Now the Q&A. to the

showing closing session At I'll the no Q&A Instructions] ask DePasquale are time, [Operator this for questions Mike we has and ended. remarks.

whose forward information Thank in contact team, with questions. IR out for reach updating our our follow-up any call calls. We our look press today. on you, release, everyone, joining Please future investor to you listed to is

you to interim time release. updates always, by for on as news and forward your press in our QX call. updating the look we'll today. And thank Again, We provide you

conference presentation. has now you today's attending The Thank for concluded.

You disconnect. may now