BIO-key(US:BKYI)2022-11-16 05:09Financial Data and Key Metrics Changes - BIO-key's Q3 2022 revenue rose 6% to $1.4 million compared to $1.3 million in Q3 2021, while year-to-date revenues increased 26% to $5.3 million from $4.2 million in the same period last year [44] - Annual recurring revenue for software licenses increased 5.5% to $918,000 from $870,000 in Q3 2021, reflecting growth from the addition of Swivel Secure and new PortalGuard customers [45] - The gross profit remained flat at $1 million in Q3 2022, with a gross margin decline to 71% from 77% in Q3 2021 due to higher costs for license fees related to Swivel Secure [47] Business Line Data and Key Metrics Changes - Service revenue improved 17% to $372,000 in Q3 2022, with 81% representing recurring maintenance and support, while nonrecurring services decreased 8% to $68,000 [46] - Hardware sales declined to $83,000 in Q3 2022 from $110,000 in Q3 2021 due to other MFA options offered with PortalGuard [46] Market Data and Key Metrics Changes - The company experienced delays in large IT projects in Africa and slippage of projects in the domestic business, primarily with county governments [9] - Despite these challenges, the company expects a strong close to the year as customers seek to utilize their IT budgets before year-end [16] Company Strategy and Development Direction - BIO-key focuses on innovation, particularly in expanding passwordless and mobile Identity and Access Management (IAM) options, with the launch of the updated MobileAuth app and enhancements to PortalGuard [10] - The company is building a growing base of recurring software-as-a-service revenue and expanding its sales team and channel partnerships to enhance market reach [15][20] Management's Comments on Operating Environment and Future Outlook - Management expects to achieve breakeven early in 2023, citing the third quarter as seasonally slow due to summer holidays in Europe [56] - Despite geopolitical and economic challenges, management believes that multifactor authentication solutions will remain in high demand, positioning BIO-key for growth [61] Other Important Information - BIO-key ended Q3 2022 with current assets of $9.9 million, including $2.8 million in cash and cash equivalents, and total stockholders' equity of $11.2 million [51] - The company has a significant inventory of approximately $4 million related to African projects, which is expected to generate cash once deployed [54] Q&A Session Summary Question: What is the current breakeven point and is there enough cash to last through 2023? - Management indicated that breakeven has increased due to higher expenses from acquisitions and marketing initiatives, but they expect to reach breakeven early in 2023 and have sufficient cash to support operations through 2023 [55][58] Question: Can you provide an update on the voter registration system in Africa? - The election in Eswatini is scheduled for August, requiring a lead time of six to nine months for hardware deployment, with deployment expected to begin in early 2023 [64] Question: What is the status of the $500,000 bond in Hong Kong? - The bond is on the balance sheet and is being rolled over, with a reserve set aside due to potential risks associated with the funds being in China [80][83] Question: Will R&D and SG&A expenses remain at current levels? - Management expects R&D expenses to decline as projects are completed, while SG&A may stabilize as the company continues to invest in growth initiatives [88][89] Question: What are the plans for raising capital if needed? - Management stated they would consider debt instruments rather than equity capital at current market rates, emphasizing the importance of their inventory and ongoing projects to generate cash [91][92]