November 16, 2016 -
BIO-key International, Inc. issued the financial results of the third quarter of 2016, which saw the company’s total revenue drop to $431,463 compared to $669,846 in Q3 2015.
The company attributes the decrease in revenue to the absence of a one-time $266,000 sale of hardware sensors to a reader manufacturer recorded in Q3 2015, as well as a drop in service revenues.
Service revenues, comprised of recurring maintenance and support, saw a 25% decline to $187,025 compared to $250,191 in Q3 2015, which Bio-key attributes to a decrease in maintenance revenue as there were no special software requirements for customers.
Meanwhile, the company’s gross margin for the third quarter increased to 60% from 44% in Q3 2015, as a result of favorable change in revenue mix.
The company’s operating expenses increased 5% to $1,454,493 compared to $1,382,566 in Q3 2015, due to increased R&D expense for new personnel, temporary outside services, and non-cash compensation.
BIO-key experienced several highlights this quarter, launching its fingerprint readers in Microsoft retail stores and online on September 27th, which will provide products that enable use of Windows 10 biometric functionality.
The company also expanded additional hardware distribution partnerships with D&H Distributing, Dell.com, Ingram Micro, B&H Photo and Amazon.com.
On the software side, BIO-key is seeing growing interest in its software solutions offered under a subscription-based SaaS model, as opposed to the perpetual license and maintenance model used in the past.
BIO-key points out that this trend negatively impacts revenue in the short term, but will offer the potential for more predictable, recurring revenue streams going forward.
The company has several large enterprise/software opportunities in the works including one with a major U.S. retailer (currently in pilot), a top telecom provider, and a large Asian conglomerate, as well as several opportunities in the healthcare vertical, adding that it will make more specific announcements in the fourth quarter.
The past quarter also saw the appointment of former Experian executive Barbara Rivera to chief operating officer. She is working to more tightly integrate BIO-key’s operations, including sales, marketing and product R&D.
Finally, BIO-key has agreed to raise $1.8 million in new capital via a private placement of common stock, priced at $0.30 per share, with Kelvin Wong, a BIO-key director and lead investor in the company.
“We are confident in the value proposition and growth potential of our biometric solutions, however the pace of customer evaluation and sales engagement was slower than expected during Q3’16 and remains difficult to predict on a quarter-to-quarter basis,” said Michael DePasquale, chairman and CEO of BIO-key. “We saw several larger software deals and a few hardware opportunities that we thought would close in Q3, move into Q4 or next year. In 2016 we expected a fundamental change in the market dynamics and resulting product requirements.”
Previously reported, BIO-key International recently began selling its line of compact USB fingerprint reader accessories on Microsoft’s online store and at Microsoft retail stores nationwide.