BIO-key expects positive net income this year as deferred biometric software sales roll in
BIO-key finished 2018 with reported full-year earnings of $4 million, but also a software license deployment the company says is its most significant to date, which will push approximately $3.9 million in revenue into 2019 as the company adjusts its accounting practices to record revenues as payments are received.
The large software deal, reached in Q4 2018, contributed $1.1 million of an expected $5 million total during the quarter. The shift in accounting led to declines in revenue for both Q4, from $3.1 million a year earlier to $1.7 million, and the full year, down 36 percent from $6.3 million in 2017 to $4 million. BIO-key CEO Michael DePasquale is optimistic, however, saying the deferral of revenue booking will allow for more consistent and predictable quarterly performance, and initiating 2019 full-year revenue guidance of $11 million to $14 million. Within this range, the company expects to achieve positive cash flow and net income this fiscal year.
“Importantly, 2018 marked a significant year of progress for BIO-key both in terms of new business productivity and developing predictable and recurring revenue opportunities for our core biometric software technology for 2019 and beyond,” DePasquale comments. “Case in point, our recurring service revenue contributed to 88% of total service revenues in 2018 compared to 41% of total service revenues in 2017. This was a result of a large three-year maintenance contract, and several new orders from smaller customers. In addition, we received multiple contract awards for our ID Director for Windows from highly visible customers in law enforcement, financial services and manufacturing around the world. These customers were looking to either secure the online activity of remote users and shared workstations or incorporate workflow efficiencies, such as replacing cumbersome passwords with ‘frictionless’ biometric authentication, while also adding enhanced tracking and reporting capabilities to their security infrastructure.”
Highlights during 2018 include more than $10 million in orders from two technology and financial services companies based in Hong Kong, one of which appears to be the $5 million order with the deferred revenue. That contract also includes two annual extensions that could be worth an additional $7 million in revenue. At the time of the Hong Kong contracts announcement, BIO-key narrowed its revenue guidance for 2018 to $8 million to $9 million, and having reported $4 million plus a $3.9 million deferral, the results seem to have just missed expectations.
“Our strategy remains to position BIO-key as a preferred provider of secure biometric authentication solutions across a growing base of use cases,” concludes DePasquale. “We made solid progress in this regard over the past few years, and we are confident in our growth prospects for 2019 and beyond. This view is supported by clear and growing global need for enhanced authentication solutions and the clear value, security and user efficiency our solutions provide across various devices and enterprise and mobile networks.”
Other highlights for the company during 2018 include being selected by two Florida county election boards to ensure the accurate identification of staff members and volunteers in upcoming elections, and the launch of its biometric locks to major U.S. retailers.
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