BIO-key(US:BKYI)2024-04-02 20:51Financial Data and Key Metrics Changes - BIO-key's revenue increased by approximately 29% to $9.1 million in 2023 from $7 million in 2022, driven by increases in all license fees, hardware sales, and service revenue [102][106] - The adjusted operating loss was trimmed by nearly two-thirds to $3.6 million, significantly advancing the company towards profitability [102] - The gross profit decreased to $3.3 million in 2023 from $4.6 million in 2022, impacted by a $2.8 million noncash inventory reserve [36][37] Business Line Data and Key Metrics Changes - Annual recurring revenues represented more than 70% of BIO-key's total revenue in 2023, with a blended gross margin of approximately 65% [8][10] - Hardware revenue grew significantly in Q4 2023, benefiting from sales to a foreign defense agency, contributing to a 26% increase in revenue over Q4 2022 [94] - Service revenues benefited from custom services for new installations and conversions to the PortalGuard IDaaS cloud platform [94] Market Data and Key Metrics Changes - North America revenue has remained flat over the past few years, while there has been growth in the Middle East, Europe, and Africa [73] - The company expects to see growth across all key regions in 2024, particularly in North America [73] Company Strategy and Development Direction - The company is focused on a bifurcated go-to-market strategy, utilizing direct sales for larger strategic opportunities and channel partners for small to medium enterprise business [45] - BIO-key plans to introduce Passkey:YOU, a biometric authentication solution, to capitalize on the growing trend of passwordless security [114] - The company aims to achieve cash flow breakeven and profitability in 2024 [46][105] Management's Comments on Operating Environment and Future Outlook - Management highlighted the increasing importance of Identity and Access Management as enterprises navigate security and efficiency challenges [113] - The ongoing migration to cloud solutions and hybrid work environments presents growth opportunities for BIO-key [113] - Management expressed optimism about the company's potential for continued growth and bottom line improvements in 2024 and beyond [105] Other Important Information - The company received $1.5 million in cash related to an expanded license agreement with a long-term financial services customer [12] - Cost-saving initiatives have been implemented, including downsizing the corporate headquarters in New Jersey, which is expected to save between $125,000 to $170,000 annually [64][116] Q&A Session Summary Question: What is the status of the inventory reserve? - Management confirmed that the inventory reserve was fully reserved and that selling this inventory would positively impact the bottom line [21][23] Question: Is there ongoing R&D for the Passkey solution? - Management indicated that the Passkey solution has been in development for a while and is nearing formal launch [25] Question: What are the expectations for recurring revenues in 2024? - Management stated that approximately 70% of 2023 revenue was recurring and expects this percentage to hold or grow in 2024 [63] Question: Why has North America revenue been flat? - Management noted that while transaction counts are higher in North America, the deals are smaller, and they are focused on larger strategic opportunities in the pipeline [79] Question: What are the expected savings from closing the New Jersey office? - Management estimated annual savings of $125,000 to $170,000 from downsizing the office [64]