Release Date: November 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BIO-key International Inc (NASDAQ:BKYI) reported an 18% increase in revenues for Q3 2024, driven by higher software license fees and hardware revenue.
• The company secured a significant $500,000 follow-on order from a leading international defense ministry, indicating strong customer retention and expansion.
• BIO-key's biometric solutions are being adopted by large-scale enterprises and government customers, enhancing security and reducing transaction times.
• The company is expanding its presence on the AWS marketplace, increasing visibility and potential customer base.
• BIO-key is focused on driving revenue growth and progressing towards profitability and positive cash flow in the coming quarters.

Negative Points

• BIO-key experienced declines in recurring and nonrecurring service revenues, impacting overall revenue growth.
• The company exited a low-margin civil Secure Services agreement in Europe, which may present short-term revenue headwinds.
• Operating expenses were reduced, but there were increases in professional services costs related to financing activities.
• BIO-key's performance varies on a quarter-to-quarter basis due to the timing and impact of larger customer contracts, indicating potential revenue volatility.
• The company is still in the early stages of rolling out marketing initiatives on the AWS marketplace, which may delay potential revenue benefits.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with BKYI.

Q: Can you explain the factors contributing to the stronger-than-expected third quarter revenue, especially considering it's typically a weaker quarter? A: Yes, typically Q3 is softer due to international business, particularly in Europe. However, we experienced a softer Q2 due to some slips, but saw strong business from existing customers in Q3. This reflects a positive trend in the adoption and expansion of our solutions among larger customer accounts, showcasing the value and stickiness of our offerings. (Unidentified_1)

Q: Regarding the $500,000 order from a leading international defense ministry announced in September, was the entire order recognized in the third quarter? A: Yes, the entire order was recognized in the third quarter. (Unidentified_1)

Q: For the large order from a financial services customer, will it be recognized in the fourth quarter? A: Yes, a portion of about $250,000 will be recognized in Q4, and the balance will be in Q1. They are an annual subscription customer, and their subscription renews in February. (Unidentified_1)

Q: Do you expect the fourth quarter revenue to be mostly license revenue similar to the third quarter? A: Yes, we expect the fourth quarter to have a good solid revenue, mostly from license revenue. (Unidentified_1)

Q: Can you provide an estimate for the recurring revenues expected from the defense ministry going forward? A: The defense ministry is not primarily subscription-based; they are one of our larger perpetual customers. We do have a subscription element for support and maintenance, generally around 20% of the typical contract value. The business is expected to remain significant over the next 2 to 3 years. (Unidentified_1)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.