BIO-key International (BKYI) 15 Nov 242024 Q3 Earnings call transcript

Good morning, everyone. Thank you for standing by, and welcome to BIO-key International's 2024 Third Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, Friday, November 15, 2024.

I'll now turn the call over to Bill Jones, Investor Relations.

You may proceed.

Wyatt. you, Thank

are its today and Mike CEO, Our Ceci BIO-key's Welch. and CFO, DePasquale; hosts Chairman

assumptions As a expected. subject reminder, to today's similar materially statements. on expect, cause conference provisions project call and Litigation to results as include and that differ or the statements, words anticipate, information and These management's XXXX. are and and actual risks to forward-looking Act estimate, typically realized Reform as plan identify investor those of available webcast forward-looking which based such statements certain are currently made beliefs to from uncertainties pursuant may Securities of Words using currently express questions of the and today Private harbor answers believe, safe

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

to will over I Now hand Mike? the Mike begin. to call

brief sequentially a questions. BIO-key year improvement I morning, from and Thanks, $X.X overview, remarks, call increasing compared last XX% the million call. turn reported will to quarter. solid revenue today's with for is which to call financial a prepared Bill. will last open to and QX investor my performance million, QX $X the a Good to thank you joining all then After for over we Ceci

million XX% is Importantly, to 'XX, improvement. in license which high-margin rose QX revenue significant a $X.X

the number identity, of mentioned, the quarter as and quarter of ministry foreign after and also order as in will a received portion large the a Virginia. be as services large from long-time one end, and QX or Again, secure leading I reflected balance and this Williamsburg, customer the foreign from subsequent province we British quarter, a which of Columbia closed a defense XXXX. banking in-person orders, results a close of financial for well a, to We the in

ID upgrading more the positively the fingerprint than account against matching process a ID or we known enroll cloud. This This the utilized processing of more the have biometrics BIO-key any of sophistication now technology has matching what fingerprint-only to part customer by to to few to greater customer number. identify ID transactions. technology of its the or securely and they to to IT far number their process, XX its KYC customer years the customers prior them bank stored biometric solution, matching million know-your-customer of solely the than been identities as number system one-to-many card, is past over solution which They and call record allows against are a requires our in using their BIO-key's biometric verify robust fingerprint banking account in resources

the ID. biometric Services the host to Web infrastructure of As on technical or a result, solution real-time customer the entirely support plans our one-to-many to AWS demands substantial Amazon

authentication as seconds. XX enhance the technology deploying staff and experience industry-leading customers solution times benefit approximately our by transactions customer fraudulent well transaction our full security, trimming enhanced productivity The of provide by utilizing biometric reduce to customer greater as

transaction, you of time XX If per a think of seconds it, millions is savings. transactions about lot over

received defense user The under to purchasing has pursuant users, AWS, additional have deployment for white to with we large-scale our the follow-on a and the develop scenarios, order of advanced the expands customer digital few of customers efficiency password-less biometric of The customers. We or our which secure were awards allowing large and to additional tech-savvy did from respected $XXX,XXX the solutions expect power Defense example deployment exciting ministries. other from over and benefits and world's or partner, very value a and the encompasses of solutions X-year and in ministry paper create case as deployment to solutions plan bring into significant personnel. to orders and services. benefits. our a to orders We expanded solutions tokenless a study most phoneless, on one authentication is September Ministry biometric our of business a and access this to in can recently, BIO-key new scope transformational believe steadily now our programs We customer its government existing this including work agreement enterprise the XX,XXX

using Likewise, streamline of and user strengthen as secure software, via for is security, in applications Federation roving user-friendly British our British X.X is advanced users is require existing of that is we to of XX,XXX biometric province in to Broadcom's a way, Columbia Columbia which adding deployment which with I SAML scenarios mentioned, where their the access SiteMinder the delivered excel. integrated WEB-key authentication infrastructure to forefront really biometric standards.

present, cost solutions of the have authorized what but biometric not solutions the and Our you card that or a verify that risks even reduced password user. necessarily token a only also is with

marketplace, test, PortalGuard the business recent Amazon of deploy Services PortalGuard active IDaaS platform enterprise. availability XXX,XXX development, AWS Web and find, customers on Amazon to to enables and on within software deploy world I AWS the their or the customers Over purchase terms of which buy the highlight want solutions In our around marketplace.

Amazon community's this still customer the starting to and and BIO-key's we've just inquiries. and days reach of the early we in support roll initiatives, the position We've source marketing out sellers initial product meeting been base with substantial to are expands AWS already prospects. Though partners to begun interest visibility on our and into opportunity.

mandating continued enhanced business access which regulatory partners authentication they're a customers and security fixture that and permanent systems requirements environments exactly multifactor solutions likely are BIO-key employees, an and underwriting such data, address. remote of work cybersecurity are stringent as solutions the problems trend that The standards, and increasing is for additional

quarter-to-quarter on mainly the larger companies, a As and performance most to our of basis, with contracts. impact customer small varies due public timing

a we revenues, potential. of with building high-margin base or Importantly, ARRs, annual expansion solid are growing recurring

We core will assets evaluate expertise, products to also opportunities for leverage strategic to create and continue our value to potential shareholders.

We our the $X exceeds with and in authentication of a multifactor strategic believe that value BIO-key their market use devices. of cloud from value secure to people of for technology, and and of has a mobile revenues that on daily basis on-premise cap. access solutions web our the all our applications base approximately customer a products of recurring significantly annual Today, current million variety millions

care very just BIO-key, identity authentication where encouraged is trust and use critical by retail, -- core go We and a phoneless offerings. the growing from beyond the floor secure, We the really passwordless. which At business differentiator shop zero for offer management of workstations. solutions, shared enterprise tokenless remain of our workers core which and is health we awareness importance methods, centers, roving environments call of access the implementing our of which

the profitability business revenue positive We over remain driving our focused flow of cash and to and quarters. the point on coming growth progressing

customer our globe dialogues while leverage and the channel larger-scale working around partners progress domestically. to also support efforts direct alliance sales via will our in-house We

an purchase warrants shares at price over Series gross also exercised stock of and warrants investor successful We shares BIO-key in inducement with our proceeds of agreement our a million with an holder QX balance $X.XX warrants. position existing at warrant cash additional received to to million improving from approximately The in Series sheet. of Turning $X.XX. amended common in were one purchase B BIO-key's and exercise A $X.X to

turn me financials to the let call take questions. to review before we that, With Ceci

Thank you, Mike.

you issued XX-Q last our our As filed know, and earnings we evening. release

year-over-year are as mind keeping filed XX-K. to the of the So our our review let in comparisons results restated that me some Form highlights, in XXXX

and The was BIO-key $X.X declines QX $X.X to in several revenues BIO-key's in 'XX. and their 'XX the long-term license revenue in software from Partially offsetting and driven QX service fees gains revenues. increased expanded XX% recurring million nonrecurring deployments. million million higher in as increase by QX customers hardware $X.X were 'XX

fees were million recurring for XXXX, first customer customization and year from agreement large than months prior offset compared the September $X.X ended license large more with X to months software loss hardware were period. For X revenues as one and the the the of of XXXX $X.X million gains

Europe more background, provide To QX as and not Swivel in justify had Secure in agreed it fairly to we be challenging agreement the required. services to and exit our did resources business low-margin

action agreement the headwind termination should substantially in near While some forward. margin blended this term, our moving benefit gross the of the provides revenue

cost to included profit of fees 'XX, revenue 'XX, in full significantly improved deployments million to for lower a that fee and was gross due Our BIO-key's party gross portion secure reserve overall software 'XX, a margin primarily in QX in lower comparisons third license $X taken in QX and hardware higher license support QX offerings.

$XX,XXX 'XX costs offset in an QX net and engineering 'XX Also $XXX,XXX company's research reduction loss operating expense BIO-key's product in per in $X.X 'XX marketing expenses, QX per $X.XX loss trimmed support a lower financing show costs, headquarters increase of personnel partially development. Reflecting We costs, improved 'XX. $X.X higher development or and gross revenue sales million versus share in was to professional and or to to expenses million by QX equity. the our in in $X.XX primarily level by QX profit share due related operating personnel from to related services, offsetting expenses, SG&A to increase

share or net which $X.X For $XX.XX period, share $X.X reserves. per the versus to months reduced million the million million per our a we hardware first net X loss of loss $X.X $X.XX comparable of XXXX, or included XXXX a in

focus revenue our breakeven to We flow path profitability. costs continue on controlling to support to cash and and increasing

I had cash $XXX,XXX of the September due including from inventory, cash accounts XXXX, $X $X.X expect other and assets terms reserves assets. these position X as and and approximately receivable Mike prepaid equivalents, XX, future BIO-key our million and to you million, QX expansions, factor, of updating of customer and cash current and expenses $X.X other on balance of million In forward sheet, net we of of current large and mentioned our to of items call. results benefit quarters QX our $XXX,XXX look in of

ask This concludes operator and I'll to remarks, prepare the prepared our Q&A. for

[Operator Instructions]

question with Maxim Vander first Group. from the And comes Jack Aarde

at believe the it revenue of the typically slipped in the quarter. seasonally guess, soft appreciate has up great third I it do Mike, quarter third quarter, to that update. see to the or third stronger that I least was I third I probably guess a pick Okay. the with quarter, strength order the quarter. Europe. which large is some in into

there's slipped And quarter. do I you quarter think where in $XXX,XXX large there. think that the weaker a thoughts last just this is your that it give But order quarter? this on announced me may was I have upside typically

softer is again, business Yes. any other say, July Thank QX the international than you, slow Jack. Typically, you're because year, absolutely correct. Europe in as very, mostly, in very Things and quarters of August. business, Yes, right? you in the the the X are of

QX softer a have than expected did some because We slip. of

So customers. described existing that's prepared very But some strong part it. also we saw remarks in business, my as some I for of

seeing positive the we're customer a I accounts. bring value expansion the the call table. in larger of our will quality of to what so testament really to our the of the And And we really, the it, in stickiness trend and some and adoption, solutions a that's

for So this was us. productive quarter good and really very a a

leading XX. Excellent. Well, of press September September order. One with well, as a It released was defense question it was XX. regard that. is -- announced $XXX,XXX to was you specific kind it order, That a another ministry, on a follow-on great see international to follow-up

that there, in the top off third have the did if you head? quarter? of curious just order your that recognized So get whole Or

Yes.

Okay.

quarter. the So in that was recognized

from this subsequently longtime customer order Okay. much quarter a financial for That the And then end. $XXX,XXX. larger came services after

that will all -- in recognized fourth the that So quarter? get

Yes.

of That fourth are mentioned, all, that. of annual will the recognized their QX. an that customer, not as they with accurate the subscription the quarter doubled in it balance quarter. in was will the I They you're As deployment. third be be and $XXX,XXX-or-so about of A the size in fourth portion and first in was quarter,

I renews So believe, their in annual subscription February.

their that be newer now and subscription updated part year. So of next will starting

So in round about quarter the QX. $XXX,XXX numbers in this and $XXX,XXX-whatever

further kind a of there's renewal Okay. And that that customer after this February? related the then -- implying is that? to Fantastic. is that part you of are in Or orders

That now there annual will size expansion. million opportunities one be recurring contracts. of additional $X.X No, significant. their will the so contract revenue be larger subscription in But be and range, will our

-- hop then then Great. or of queue. appreciate revenue so I'll color questions That's Okay. you great $X.XX back to the a hear. and outlook XXXX just million. couple I there. on expect to the meet questions the And But in of exceed revenue -- XXXX

$X.X looks of like a implies at was. -- at which revenue minimum where least is XQ at this least basically, I you expect above it So million

revenue good that's license to third Do to mostly the quarter? expect you the see. similar revenue to So fourth quarter be

do. Yes. Yes, And QX, expect solid to we yes. have we a good

a like And in maybe $X.X she all if wants Okay. almost question looks for as Great. the million. Ceci operating expenses here. to well it The quarter, -- third in in chime

nice of a kind from X So quarters. prior reduction the

this So it been with a seasonal uptick is can't OpEx is good at a good a looks here. recall, run like pretty going you looking is some the costs -- forward? in quite rate quarter this have fourth at cutting there I effective Or the baseline -- all? Is

we've some done We've some, It's financing. a run rate. fairly as good said,

right it's little So now. heavy a

of term million cut less, just number long I looking expenses. a to types But the good are we obviously. is or some would those say of So $X.X

Okay. That's very helpful.

that and the the just enough needs your -- formal point sets subscription you it reasonable kind has or you're for for you guidance some I'm like in happen we forward you base have revenue thoughts curious do up when of up get to ramping to to at you point? feel to kind at point you your XXXX. introduce installed ramping with level target, imagine guys close getting Are that the breakeven been -- of So fairly base to as of and where installed here might at up. visibility a license we here, move what Mike, confidence? I visibility have

we as be to will able think XXXX, think get into I that. we I do

especially we getting And of we're into migrating opportunities. We're larger PortalGuard You business PortalGuard close that think migrated, visibility more can see and -- our have to getting really base. more the that subscription. subscription. is base We've I some there. We're

also profitability. company to breakeven our goal very -- we're Ceci to want I and right obviously, look, think direction I and and objective, now. moving aggressively that in get this to We're

we Jack. able I hope get into that be we'll that as So to do XXXX,

Instructions] [Operator [ who Private comes Cummings Our Investor. Dan next is ] question from a

from wondering of expect Good recurring you revenues -- for you any quarter. the do the forward? estimate ministry I'm have kind defense about going

element it's not is one They the in customers. ministry support a agreement, revenue. still and it, defense I'll The subscription We perpetual our are, but of larger call do for have subscription XX,XXX long continuing runway defense way expand. the But maintenance. to just users a lot so ministry now. is and to long, There's to ahead We're go a up or of there.

sometimes coming is million $X it business the to right, to to a continue to that and past, So they've that in going so, year, be the a typically significant, $X somewhere seen million less. where in be right, years, over ranges spent sometimes between $X.X we've will X X more, little million bit the or

Is I that see. maintenance What's the that? on like XX%?

for it's Well, support.

it's support... for So

dollar-wise? mean I

the software. dependent user of value the of So contract on generally It's right? can't say. I the XX% it's typical is count,

any deal? is Is also... Columbia that recurring there British Or revenue on the

No, subscription. that's a

revenue the Is on estimate that? there on any recurring

subscription, that is The It's to question Yes. a yes. answer yes. Yes.

recurring But much how revenue expect? you No. do

I don't I off the even know that head. the my that the I how -- know top I of don't of -- frankly, order, I of Well, that quite my size off head. don't know. Dan, have don't top don't

related was Does some margins and that sold -- inventory improvement old the that mentioned the mean gross that it you to was pretty high, were mean that reserved? reserve. hardware hardware I the You the of

the orders this more We to beyond. significant and have, for to that continue and quarter we expect hardware, we sell and see

not focused -- higher-margin also, software was a that focused the margins, European agreement question very, operation, -- to on But in and also of been that renew in And answer on context we've maintenance licensed sales. our decided especially large had agreement. So we we're razor very are yes. we the that negligible is to we

to in us XX%, So to are much XX% margins. positive focus that it's the an softwares the it's products on a are more or impact which with overall the gross -- BIO-key gross have higher giving is going our range. our very resources importantly, especially more, blended opportunity on margins, in And

So that's you're another the increase reason margin. an gross in seeing why

So a a our profitability. going on and much overall, to to to much, better going shorter create breakeven have this is it's to pathway impact and getting financials,

you think expect that of you see. margins gross I I Are to news. Well, that's good kind saying these continue?

the been continue. absolutely Yes. of And We've we've the and in that we -- in They've expect been been exclusive look, to especially last the X.X the margins gross holding over range. year have that in or write-down, on our been hardware, XXs. years that range,

in much Okay. third how Can quarter? hardware sold give to of kind you number you some

Ceci, I think you can...

by the last reduced quarter. just inventory We about $XXX,XXX

least that quarter. come in lot a bigger we at this expect or contracts expect the double based We on to

already very appears I quarter, Well, to think waiting a I sold quarter. have, this spoken large is openly. this that and it significant I've for -- that, We've again, going we we've some been this to and project, and happen a on order

we're this So positive for pretty is us. thinking

we've know, inventory. As written down entire the you

all to And so and it's all goes bottom line. cash it the

So impact it's positive very on financials. the a

This it? absolutely. in Africa, Yes, is is Yes.

mean the in Africa? is project You

Yes.

It's an international project.

Okay.

So licensing, you and was least already. million think, quarter, I the you I that yes, answered fourth at that mostly in think in question right? $X.X said

right? carries and higher as And hardware well, again, margin some of it be will which even the Yes. this -- a software, than

see. yes. Absolutely. Yes. I Yes,

I mean [indiscernible] higher margin, yes. a

Yes. the the are you it? from will are going down be in in And How much already of costs end onetime to Or quarter? and... fourth financings that financial have the they

not sure am I I understand that.

expense, that is and referencing? legal thing. interest, you're what that Ceci was SG&A think meaning what kind Is of I saying

with had the warrant. onetime capital that raised in loan a just fourth wondering you quarter? there a about you I'm taking talking be costs I'm the you then there's No, you'll the -- think I if did -- and

answer you know can if I question. Ceci, that don't

We things. are always on working

So continue, it I the at but it's expect rate not to been.

the they're I And I'm loans. just I'm the financing wondering what she usually warrants -- and don't just costs, onetime associated with for financings? the think the saying are, costs right, costs those

the to folks. it's between probably for legal quarters, close been first $XXX,XXX Well, auditors and X

-- any cost significant quarter to right? the there for fourth think that there Were did in So I deal? costs Okay. the you in costs October, any are -- warrants warrant the financing

that associated had of We costs course, to yes. some

Just feel if how for can? trying much, a to get you

mistaken. quarter, third in Also, way, inducement warrant was I by September? not the the think wasn't the I'm if that done Ceci,

was. it Yes,

Yes.

So quarter, that third the Dan. was

disclosed So in... it's already

mistake. okay. Oh, My

Sorry.

disclosed. It's there. It's already Yes. already

-- be the much So shouldn't then? there for then quarter too fourth

But I think Ceci what that's intimating. is

got I it.

it. -- service Got This Okay. you okay, market. the civil so exited

talking about right? You're European operations, the

Yes. When you say service, didn't... civil I

Didn't you say you're... That's thought what I civil service?

had was No, We no, really of have the resources a that But -- the support with over to were it the that margins agreements. any little more services us continue. to again to of no. that be place put Secure product. amount support contract, on support able I was it just didn't said required Swivel agreement in for Ltd, -- the with the control and again, -- a services agreement we make and sense

-- your or that not with personnel quite change did relationship I'm So that this were... Swivel, sure, is BIO-key

-- -- agreement place XX%. we of on had a in was the what No, We product out reseller a have markets in reseller no. with Swivel, I had mean, European sold where we we the that remember, in always agreement. margins

morph over goal, higher-margin margin. into products a always time. a right, the solution, obviously to ago our that much is X those negotiated own product. about It gross higher carry customers PortalGuard ultimately years which Our contract We was

margins again, that sense so was arrangement. it, it operate for the make of didn't of just just straightforward. agreement, any I'll And thin evolution that it pretty continue with is the business -- to to And anymore this call a, kind

All right.

When to sums? pretty are million. accounts $X.X able those know expect collect to that's at your receivable I So be do you large.

ship We've of collected to it. in We of the a majority September. things happened just lot

already. So been -- but most collected of it has

In the fourth quarter?

Correct.

DePasquale, At closing ended. the session further remarks. for questions, ask this no time, Mike Q&A I'll has showing

to taking at out if regarding a a our free update is this you us as and day Look we'll thank for very via and have press conference information contact reach December. Thank listed great to continue for IR and time call Gartner you, our whose release, always, in the Thank IAM to you to our team, much, weekend. Feel items. other you regular press any have everyone, questions releases. the any join you call today. in or And great

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

now may disconnect. You