BIO-key(US:BKYI)2019-08-15 17:08Financial Data and Key Metrics Changes - Q2 2019 revenue declined slightly to approximately $728,000, a decrease of 2.7% compared to $748,000 in Q2 2018, primarily due to lower software license fees and service revenues [20] - Software license revenue decreased by 61% to $60,000 in Q2 2019 from $154,000 in Q2 2018, attributed to the transition to a SaaS model [20] - Hardware sales increased by 26% to $436,000 from $345,000 in Q2 2018, driven by a large fingerprint reader order and new customer deployments [21] - Q2 2019 net loss improved to $1.4 million or minus $0.10 per basic share compared to $1.7 million or minus $0.15 per basic share in Q2 2018 [22] Business Line Data and Key Metrics Changes - Service revenues decreased by 7% to $232,000 in Q2 2019 compared to $249,000 in Q2 2018, mainly due to a decline in nonrecurring service revenues for custom projects [20] - The transition to a SaaS model is expected to create more steady and predictable recurring revenue streams, although it reduces upfront revenue opportunities [11][20] Market Data and Key Metrics Changes - The financial services sector is identified as having the greatest sales prospects, driven by compliance and security requirements [15] - There is increasing interest in biometric authentication technologies, particularly from organizations in sensitive environments such as banks and financial services [8] Company Strategy and Development Direction - The company is transitioning to a SaaS model, recognizing most software agreements on a recurring yearly subscription basis, which is expected to enhance revenue predictability [7][11] - BIO-key is exploring small tuck-in acquisitions to expand its technology and product portfolio [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook for 2019 and future years, despite challenges such as delays in software license payments from a Chinese customer due to trade tensions [8][12] - The company revised its 2019 revenue guidance to a range of $6 million to $12 million, depending on the receipt of software license payments [12][13] Other Important Information - The company completed a convertible note financing in July, raising $2.55 million in gross proceeds to support financial needs while awaiting software license payments [12][23] - Gross margin in Q2 2019 was 7%, compared to negative 38% in Q2 2018, primarily due to a higher level of non-cash software license amortization expense in the prior year [21] Q&A Session Summary Question: What would have been the year-over-year trend for recurring service revenue if renewals were not pending? - Management indicated that it would have trended up, as they continued to receive more orders and renewals [25] Question: Can you provide some color on why these renewals are pending? - The pending renewals are attributed to the timing of billing and collecting cash [26] Question: What are the targets for your salesforce in terms of net new ARR per quarter or per rep? - There are no specific targets; the company is working on quarter-based plans for sales reps [30] Question: Can you provide a breakdown of revenue distribution between hardware and software? - Management suggested a potential split of 50:50 to 60:40 between hardware and software, depending on the mix of new and existing accounts [36][37]