BKYI - Earnings call transcript Q2 2018 | BIO-key International, Inc.

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Operator

Good morning ladies and gentlemen. Thank you for standing by and welcome to BIO-key International’s Second Quarter 2018 Conference Call. All participants will be in listen-only mode. After the speakers’ remarks, you’ll be invited to participate in a question-and-answer session.

As a reminder ladies and gentlemen, this conference is being recorded today, Tuesday, August 14, 2018. to President conference of like Mahnken, to now Vice BIO-key’s Marketing. would turn over the Scott I

You may begin, sir.

Scott Mahnken

from results forward-looking remind DePasquale, this Thank uncertainties subject you. statements. statements. anticipate, are forward-looking to those on are project, assumptions similar projected Barbara management, believe, us the on words risks us Operating and available Chief Financial Officer; information for expect, to today’s as based you call identify and Act and the that generally Mike Rivera, made morning Ceci Litigation and Chief pursuant Such Good basis morning the today’s everyone forward-looking Officer. and I’d of provisions call. thank on BIO-key’s XXXX. materially and and statements to of CEO; intends, will Chairman management’s conference expressions The Welch, Private Harbor these joining Securities may to cause of Safe statements plan, are actual or may that that like webcast estimate, Reform differ may currently as contain certain With to beliefs, made well

to no call also the statements time, forward-looking to the to turn like reliance complete BIO-key speak to these company the after a or made. undertakes filings see performance may future any DePasquale. obligation affect events Factors description on of SEC. Mike? over At date Listeners and circumstances the factors with to which and on revision of undue the statements, only the risk this not For other in Mike Form of Report place company’s that these other reflect as Annual Risk XX-K International, these its disclose I’d The cautioned made. are to forward-looking date

Mike DePasquale

quarter XXXX, better today. you Scott headed. second we take want understand of highlights fiscal are to and the our I time us you we’re everyone thank joining potentially to from to thank as our outlook and for performance, well remainder where review some Yeah, for as and morning good where

stronger exposure While we consumer to generally season ago and revenue mentioned, we would closing have year as delivered for product based patterns, period, QX to the half holiday not principally sales have the end revenues second year. we results Further larger to are often timing customer again grows, retail QX the reasons in in those to the period. match heavily of towards around of the course of our expect the more exposure liked opportunities, which the the our did weighted to have

it year year full into this to means have more have over we’ve progress. challenging shareholders patterns, performance term we challenges effective the trends we long and limited for a and it makes more such While revenue visibility many our times. discussed to to understand our next assess revenue similar expect Making

security data, reporting for a a accessing employees log-in and trail enabling customer and importance This organizations hardware becoming practices telecommunications Fortunately the importance collects occurred the of a various and The of data data data. threats significant and breaches unit accessing as sensitive abundantly authentication database, securely escalating reevaluate call information, occur. involved media the a on consumer providing believe has with that access major provider. a platforms company a or that records. of large on measures audit to critical report is most breaches of BIO-key to One percentage what clear especially a profile taking América enterprise of their quarter customer helpful is to are for in it’s global for use project has this opportunity Móvil, against in the software individual may that expose of and internal is thorough contract includes need a second very for security use technology creating second Any telecom fingerprint recent an issue existing is coverage for center. method the case to is and where information. exciting case as High become target organizations. that the an of the deal We internal and potentially customer that identify, us, preventative as securing as leading at based Claro, been well breaches financial large our very in authenticate network hackers, customer focused

site. new satisfying. building when in and customer opportunities. our recognized closely their Director of brand increase to biometric customer for place, footprint had particular, international types Asia, at This proves in Expanding to we provide helpful offset offices own our wanted get authentication the allowed was in and fingerprint Windows help India with also infrastructure They In have that see that presence IBM. scanner opportunity demand, this authentication. we validation several Singapore and It’s fingerprint deployment. BIO-key’s and very building support to our scanners selected Kong. of deployment globally, in distribution sales to Hong interoperable finger it’s that subsidiary Another very ID where them already multi-factor but cost our was was tied Hungary, to deploy customer this growing our existing all in are across To hardware global we decade security great office organization. across their been a past and support for the working primary leverage to

North with our technology new we strategy. have partnerships expansion supporting Africa, leading international Additionally, and Europe providers across sales

biometric have North major achieved often a in enabled existing for key for objective Turning to we’ve to Placing that innovative line that America. retailers have brick-and-mortar Asia we retail one infrastructure. working hardware through build reach us; and our our solutions, reach is Bluetooth partners been across locks TouchLock awareness and has been determined and distribution and our best

Buy, in online. such our expand For placing this and distributors of where Best we in are prominent product our been as available worked that have with reason successful base have to products our retailers store

the in few international past and selling put participation for coming holiday quarters in to place Our order been BIO-key national expanded position for an season. objective in to reach hardware products our meaningful has the

opportunity the in past seen leadership with our continues space Indexing innovation a BIO-key security BIO-key and for strength company the represents adoption a to demonstrate the biometrics patents. of significant our increasingly portfolio patent of searches. receipt in biometric solutions. that We patent you’ve enterprises quarters, secured as future recently believe the technology As Adaptive accelerates new few biometric the move for toward our of method

is use While value could aided biometrics prevent enables duplicate Cloud that authentication on secure is in already device focused in mobile for in one-to-many protections far device-only enterprise This Such more use fraud are authentication is our future. for technology and world. revenue not solution, the enrollments, identity solutions just and opportunities biometric the errors. with our rapid the for additional patent us principally in biometric associated the based in authentication issuance the new patent present devices, possible that may our and current of a patent

of review track a we a for to year much deliver $XX said, investors million years we to to we are based the presents would we agreements, XXXX hardware however year. continue larger been outlook, two this in of operational fluctuate QX, fiscal on metric over business. our we software which Barbara Rivera term to now relevant to the on to like feel As and on That the timing measure confident the to I’d heavily range half to as $X turn With longer believe million. more full results, performance revenue of that reiterate Barbara. focus guidance our will performance past XXXX weighted that in the that, second I continue as feel on have BIO-key’s quarterly highlights. call to like

Barbara Rivera

of in to has better Mike. meet aligning our around and you, sales increasing been Thank our operational morning! marketing major Good A efforts of objectives QX sales. focus area

Optimization will solutions. such, As is website to placement ensure redesigned SEO that our and being enhanced BIO-key an our around capability. obtain strategy that online website will ranking include will pertain in search key words Engine This our results high Sales

to next share to We launch the encourage you and expect site all and new your visit of feedback. week

The and position. like for inquiries class to Automating of marketing and us to ask customers located our better a and tools biometric BIO-key QX biometric new sales to sales tools QB sales This find prospecting throughout These the of help area Advisory, to is we technical with updates, a understand and opportunities. couple and with QBA, to within Advisory with provides in is services In will scale effort the shift current allow This a significant are. targeted us financial knowledgeable marketplace to And team our approach. are, potential demand strategic Ceci points automation support our where I’d of seamlessly qualified in for office executed with generation who customer allows India. our also their growing the suite global added pain native partnership us Ceci? also a provide of Mumbai those one-to-many a that IT performance them provider our have authentication the to in quick marketing with India what solutions lead respond support pipeline have authentication marketing to expansion, more to QB located world a allows with their We ability to capability. Calcutta. overview to a to our global technical financial introduce and partnership land. functions partnership strategic

Ceci Welch

Barbara. you, Thank

‘XX XX%, QX associated the This in software versus well and total due for services. in $XXX,XXX rights locks from QX providing offset engineering QX from with fingerprint decreased software maintenance licensees. hardware our Bluetooth-enabled gross $XXX,XXX $XXX,XXX lower year higher principally Biometric revenue to ‘XX ago as negative ‘XX, is amortization QX the to increase as license ‘XX, In in partially Our support includes was to QX of margin cost ‘XX $XXX,XXX sales by from and with an reader, services which period. non-cash

non-cash rights, the to occurred margin XX% in due ‘XX decreased the would to expenses prior gross related of positive QX year XX% quarter. Excluding have QX in compared higher been amortization and versus primarily ‘XX, costs due expenses operating outside decline costs. and ‘XX in to decreased up-listing. related temporary our NASDAQ expenses a R&D QX in factoring ‘XX, and in personnel also services a QX to XX% as decrease to license

after preferred or after dividend, preferred per net basic as net Our basic dividend ‘XX. in million $X.XX was share or share per million to compared $X.X $X.X loss QX of QX $X.XX loss a ‘XX

stock quarter and first XXXX. for compared as With the all slight stock six price months we six months million first During converted the December a cash the operations XXXX, from into accrued XX, common XXXX June cash start remaining dividends share. move to cash increase questions. outstanding convertible the at had question-and-answer B-X of $XXX,XXX as BIO-key of all XX, million Net unpaid company’s equivalents negative were announced conversion and with the can of per Series $X.X of Series session? shares A-Xand of to we a for $X.X generated preferred XXXX. $X.XX at and Operator, from summary, of $XXX,XXX please could in that was approximately you that

Operator

[Operator Instructions].

Kinstlinger first The comes Please Partners. question Global ahead. Brian with from go Alliance

Brian Kinstlinger

guys. morning good Hi,

Mike DePasquale

Brian. Good morning

Brian Kinstlinger

wanted of initial to how start TouchLocks, some of about bicycle talk both well how first about locks. talk as and the distribution build I partners, distribution how Can gone all and So, gone? of out with that’s the as Locks, adoption the has of then the you brick-and-mortar your

Mike DePasquale

to we was partner selling weeks Buy. two to very Best well; weeks the are think a also through were brick-and-mortar, the at promoted only OEM reaching there maybe of did as I so Aluratek other, highlighted out press But weeks availability Sure, are strong. a of the a few we our points those we have sell an was and They or e-tail out product/deal now Locks through day release that – products. into Sunday, ago expand ago, very, Best Buy distribution or ago but not two we

the products, products, to So and they the promote stores. online their promote continuing we again are are continuing both to in

their they country we other things in stores. the is more in are Buy are XXX away brick-and-mortar day up stores – placed than they We a and XXX set initially way were from no around the at Best

in it’s one pretty ship for in store go either that locks there a particular by they store, that get close will if in can to and particular it you store and it So you. walk not the and that’s or you

Of the store pick you and in buy country. it any up course online it around can

believe we’re we’re Brookstone. – we in expecting it that. expand or So Also not to

stores business course for of haven’t two that I We still think were they – but don’t made and – They’re yet, formally absolutely e-tail weeks going airports moving that they their course announced their bankruptcy, to mall-stores. their also of announcement as planning but filing keep ago that’s well.

So to expand. continuing we’re

many, as well. brick-and-mortar We e-tail are other scenarios retail type many working on large and

to for products, seasons. over for awareness so e-tail objective Our in few get the that demand the that next pulled is network and to create distribution they’ll goal months through and – holiday the

General consumer this finger here the We in awareness solution. say who and are that an scanners, and all entirely for looking hardware. formulation that the going don’t today, to also solution and at if TouchLock, that mentioned, to that a Motors have But products, other it because see of our highlight for of consumer website sell a large of because software enterprise they again with come are kinds launching greater you’re we on also so products of locks separating where you an plans want the as website consumers don’t the want are in lock, actually relate enterprise. we’re stages type very level website are to Barbara context be are Conversely example the leading creating homepage looking for new you’re I when we looking to back will locks, that or demand. although they lock for see standalone we point, let’s know, they consumer, or to for marketing you in creating are a the anything will CIO enterprise example enterprise come an a a Also say a you

also we benefit our think So will have separating on reach. that we’re out and positive visibility a and that

Brian Kinstlinger

– for about of and but numbers kind manufacturing. us any many or early, to big how shipped ramp-up how locks ready have those as get your terms how can maybe been the Best holiday you it’s I in have talk can season of and mean with you you share been – sold numbers many Can production or get in Buy for

Mike DePasquale

larger get we are specific so months eight it feedback – product. really retailors, share share yet, last to can’t I really I can’t not from gone share six because e-tailers just to though, I the through could refining any numbers the we’re believe Well, this or starting numbers. any now the our and we’ve

pretty stable and some are China we You volume market, got some changes, – really, we in put some and out now that manufacturing. know made the good through fed now group it enhancements, we we significant we capable back in engineering, really we really are in feedback, our importantly we’re much of to very more

So holiday of and we can product build of thousands tens now between the season.

there. So we’re set to ramp significantly, if that demand is

So we we we’re especially market as that’s going more expecting to that grow products. really as or begin again continue aggressively to these

before one end say, I we’ll sit year. say can’t exactly product I the much you So know today here how will sell the thing and of

price as way so and as is retail is from anywhere that $XXX. the all ship able at the objective know The to Our to goal can satisfy we be order you much demand, to as up products know possible. $XX, range you

done has Asia in launched we very, which very lock bicycle Our well they.

bicycles add-on. selling their an the lock Asahi Japan, in bikes and fact with as In is

U.S. version to going the upon MSRP open are product which depending that here that a product can open can month of an this which launch Bluetooth fingerprint has the has a up We MSRP that $XXX. with of and model, or combination in

sizeable are So they good, margins well. on a revenue as carry a products the good possibility those quite and

scanners finger products make and can north better. saying little keep our XX% a are and of volume that the we the on hardware know bit margins You consumer that

or are how not the end be to be of product precise going moved the much through a able we to in So exactly year. we’re position to sell on

in support kind demand. that just getting are our we to think line self of I

Brian Kinstlinger

kind uncertain but on or those large last could so factor of There based the like driving your be will we think very is just two guidance, timing reaching should about one orders, year? the be then numbers. it annual And that to and

Mike DePasquale

That India it’s in The fundamentally Aadhaar, across biometric a citizen every always of don’t India case, acceptance widely and incredible, opportunity will enterprise the community. biometrics expanded because that want system, culturally fingerprint, companies really is that nothing accepted found in support we’ve footprint. Iris, that the biometrics, context many call the we which being from has now in project and but I one they be and broad small know very widely of business sold you but they and enquiries weren’t also significant say certainly have Barbara accepted. to so in the And we that about we to that won range large because short, really is spoke enrolled had also a very to our we’ve whether it’s it’s competed business. single want in a able I India, some, country really we’ve and and in

very as year to numbers business the now even the América world wanted in them Also of I end that weren’t and telecommunications though that’s international where last an have think So not look variability know medium and backlog a the is right examples more to company on at having companies, that couple I come of a our feet we very closure office pipeline fact our the our opportunities only of And you us. number outside of a our only but into there and you large really the that now tell between sized for going in of we be our are ground, with in opportunities pleased our some and be, is and fall don’t with like there and ramp way Móvil pipeline having year, starting to pipeline, sizeable of China. of big think largest fourth opportunities network is small by to the will revenue many building to with QX, was well. very, out the I but couple not the our we

closed in large a we fourth know telecommunications of last quarter year. very You the contract

So business we’ve we’ve with NTT business closed also Vodafone, with Japan. in done India in

in solutions space the our centers solution. perfect fit very and nicely really in shared perfect, workstations, with space a we So call have have and we nice that footprint that

going well build to continue expand. as that’s to So and

a come couple with business to out. going of it’s but So contracts, large filling our also is

Brian Kinstlinger

Great. my for answering Thanks questions.

Mike DePasquale

welcome. You’re

Operator

with comes ahead. Group. Please next go Josh Goltry The from question Maxim

Josh Goltry

like just now? to case how sales. are continue to cost about question the you? I guys, that’s that’s because it amortization quarters, this of within Hi a Is going that seems preceding the in expense occur have

Mike DePasquale

Yeah, let Ceci on back me that. me address up that and then can

a amortization years arrangement approximately little we that a place expenses is with two put associated than So license ago. in more that two ago, years

We complete are take almost actually a built authentication. solution platform advantage of that and multi-factor in are now in the We’ve marketing that Asia that technology. WEB-key process, into our set for will

And again but quarterly in so down and right broader on accelerated market. away solution to now basis year, sell across, the and ways change on into as begin we broadly amortization are could go again across we go begin that we that a a market the that to as more or will this amortization technology But sell that writing down many basis. that

Josh Goltry

as have to don’t on you when guidance, you’re expect but going know, you revenue do certain saying to recognize when know little you have you be visibility maintain from customers. Right. on you such from to receiving you’re why your because And insight revenue customers, you’ll know that

So a just lack why to want visibility have understand of I there. you such

Mike DePasquale

the conversation I just had two consumer our what with know again, and or we to minute and consumer visibility. sales before, potential AGP from you I’ve just lock want know level know We visibility be you our don’t two that – Kinstlinger Well, a product ago could it said of into was about business, things. you I separate a have Brian

season great and Really, volume new this manufacturing, now in our I is have quantity business market. that just first counts. we’re holiday visibility frankly We’re don’t into into where so the

that’s that’s talked we So clear, what about.

the as has many fourth when fall do based based written did again, fall in On always we’ve do press business of third quarters on quarter, and described they second Do the quarter the been enterprise some the lumpy it’s in always release quarter-to-quarter, as as we’ve site, fall in fall. for contracts they a they they in year. differential last these our and quarter, been our a on

they I know the it’s know it’s that been visibility, described, So also they contracts. lack are, these closed more way, likely context of that our get way And cycles continue generally base not the and be with they timeframe of tenuous have are we and the you until will can you in to larger things speaking, enough. as associated big

we geographies, may as for as more various operations, I in of international have to business, think year. but our visibility base not various customers selling not get we’re expanding broader in industries, the we’ll we’re another a only that in happen irons more As into our but fire,

Josh Goltry

about to contract I last I quarter. that costs item a a was and is? called had question And that understand sheet capitalized balance just what It’s introduced want

Mike DePasquale

that yeah, I’m turn one going over ahead to it no go – For Ceci. to

Ceci Welch

because a pronouncement standards the from contracts recognized From on they to of period that’s at us then where gotten, you the actually the and support follow-on certain accounting a that longer Great. by over you come related expensing that from. commissioned, to That’s things lot so over should be at companies, time, specifically are commission time. revenue of about talking then get related not a new longer that and usually number that that’s activities follow-on relationship, capitalized carries of board. the and getting get are just you contracts than and those period that point on when or expensed know amortized for those is gets that current they in that we’ve see What a it specifically time earned relationship contracts

Josh Goltry

of guidance $XX for next you’re million each, mean understand. going maintain to going quarters make this million I million Okay, two to the least at $X.X if year, I saying in you’re right. to you’re $X your Alright, so

in million you’re essentially million in and QX saying? So that’s what $X.X $X.X QX,

Mike DePasquale

on holding we’re Yeah, guidance. our

in the million-plus I yeah, think through in do, two the first business quarters. $X we’ll next half

Josh Goltry

it. appreciate thank guys, you. Okay I

Mike DePasquale

welcome. You’re

Operator

Investor. Please go Baker ahead. a Private The next from question comes Adam

Adam Baker

call. production, continue you you do question to Good cash up available is, the revenue? morning, My my the guys thanks to with have ramp taking as grow for

Mike DePasquale

and always and certainly now you and a for cash turnaround days our little us We know less than on scanners. buy are at to products It about that. parts XX short term is pieces our be to ship takes more ready to bit Right looking our basis. finger components, on build inventory, a consumer

So we’re always options business. at we looking looking that and that our support at can to ensure

So we in arrangements have factoring place.

put have a years down that drawn on that’s A we We we’ve a ago, years credit on place. of two ago basis, looking line weekly something actually certainly at in that not number on basis. always a our if daily utilized, but not we’re

Adam Baker

months. So that are sell million being enough manufacture $X said, do expected you the two have to to you in next the that

Mike DePasquale

That’s the question. so term, variable. I depends the the – orders, it It depends. really It we depends it can’t really really depends size of on that on answer timing, on

Adam Baker

Okay. it from me. That’s

Mike DePasquale

you. Thank

Operator

a Our go next question comes from Matthew Private ahead. Chambers Investor. Please

Matthew Chambers

did what to percentage Question, in going locks break the next – half, $X in much you the up what is here Mike. did part that bake for that? the of coming about in be million you or Hi how

Mike DePasquale

software and million some million data our into not that that is or our the $X.X as be about really extrapolate about believe services overall then what right, that greater grow came portion obviously was of and discussion as the I of could hardware. product right, and to Last can generated XX% locks, magnitude a the XX% we year given see XX% can forth, revenue. we – we $XX so our mix that were would we’ll $X some, that About bigger software maybe target and so our you in had revenue. around understanding give how could million, right, that year We forget product hardware of the sales change. and maintenance and sales be. we of historical That

the do how depending might know might depending our But significant. XX%, scanner during be to this quite locks component again, year the the might holiday also season. sales that right, upon remember be seen you it be yet we’ll the see higher, we and upon but finger So range – see XX% are locks, and that’s we in

Matthew Chambers

locks Great. scanners. compared the finger [Audio Gap] to

Mike DePasquale

which the uptake the depends you that season, know discussing. been really Again, holiday on is get during what we we’ve that

fingerprint us Our its that not that customers we’re significant of quantities and as stable, growing more business buying is scanner our well. and seeing more buy from software finger only are scanners

to deals, also the that QX, only international you, both but the included they we So in hardware announced for mentioned finger example, software and scanners. I deals not that

Matthew Chambers

Alright, thank you.

Mike DePasquale

You’re welcome.

Matthew Chambers

That’s it from me.

Mike DePasquale

You’re welcome.

Operator

Showing concludes further question-and-answer over like remarks. Instructions] for I any [Operator Mike no would our session. this the to questions, back conference closing turn DePasquale to

Mike DePasquale

will participating hope and again you thank you, you in call again conference for today’s all a the We fall. Thank call. in us Thank you join for quarter third everyone.

Operator

concluded. The attending today’s Thank conference is presentation. now for you

You may now disconnect.

BIO-key International (BKYI) 14 Aug 182018 Q2 Earnings call transcript