WALL, NJ--(Marketwired - Nov 16, 2015) - BIO-key International, Inc. (OTCQB: BKYI), a leading fingerprint biometric identification software and technology provider, today reported results for its third quarter ended September 30, 2015. The Company will host a conference call today at 10:00 a.m. EST (details below) to review its results and it recent agreements that expand its technology base, product capabilities, global reach and provide a strong financial footing to fund future growth.
Recent Highlights:
•Reported Q3 and 9 month revenues of $670,000 and $3,591,000, respectively, nearly in-line with the lower end of the revenue guidance range.
•Raised $7.5M in net new capital via private placement of convertible preferred securities convertible into common stock at $0.30 per share.
•Secured commercial license to a portfolio of mobile and online payment software technologies from strategic partner and investor China Goldjoy Group Limited (CGG) (Hong Kong: 1282).
•Shipped mobile biometric security solution for a new global payment customer.
•Launched Asian sales, business development, and sourcing presence, opening offices in Hong Kong and the People's Republic of China (PRC).
•Partnered with Microsoft for its "Ignite your business with Windows 10 and Office 2016" series of events in 12 cities.
Michael DePasquale, Chairman and CEO of BIO-key, commented, "While the bulk of our recent efforts have been focused on negotiating and completing transformational technology licensing and funding transactions that have closed in recent weeks, BIO-key achieved Q3 revenue performance that was just shy of the low end of our Q3 revenue guidance. Importantly, we believe we have fundamentally reshaped BIO-key and its future growth potential through a significant cash infusion combined with a technology license agreement with an existing partner and provider of biometric and mobile payment technologies.
"These strategic agreements are already delivering tangible benefits to our company in terms of both sales opportunities and completed sales. During Q4, we have booked orders and completed an initial product shipment to a global payment company for a new mobile security application. At the same time, BIO-key is now able to pursue sales and marketing initiatives, such as our multi-city marketing partnership with Microsoft and the opening of BIO-key sales and sourcing offices in Hong Kong and in the PRC, which substantially expand the scope of our business reach.
"While we continue to expect variability in our quarterly operating results due to the size and shipment timing of orders in our pipeline, we are now even more bullish on BIO-key's near- and long- term prospects, and remain comfortable in achieving full year 2015 results within our guidance range."
Q3 Results
Total revenue for Q3'15 decreased to $669,846 compared to a strong 2014 performance of $1,283,847 based on the shipment of a few large non-recurring license orders in Q3'14. Q3'15 license and other fee revenue decreased to $419,655 compared to $787,720 in Q3'14 and service revenues decreased to $250,191 in Q3'15 from $496,127 in Q3'14. The non-recurring custom services decreased due to a customer project that was completed at year-end 2014.
Q3'15 gross margin was 44% as compared to 81% in Q3'14, principally due to the decrease in higher margin license sales and higher volume hardware sales. Q3'15 operating expenses rose 5% to $1,382,566 from $1,314,513 in Q3'14, reflecting increases in both SG&A and R&D expenses related to the expanding scope of the business, costs related to the strategic transactions, and R&D efforts focused on product refresh updates and new product offerings, along with a reclassification of roughly $100,000 of Q3'14 service related R&D expenses to Cost of Goods Sold.
BIO-key reported Q3'15 net loss of ($1,079,584), or ($0.02) per basic share, compared to a net loss of ($51,526), or ($0.00) per basic share, in Q3'14. BIO-key had a weighted average number of basic shares outstanding of 66,038,941 and 58,026,262 in Q3'15 and Q3'14, respectively. Share and per-share figures have been adjusted to reflect a February, 2015 2-for-1 reverse split.
Liquidity and Capital Resources
Net cash used for operations during Q3'15 was ($973,836) compared to ($1,696,817) in Q3'14. As of September 30, 2015, BIO-key reported current assets and working capital of $2,425,956 and ($604,256), respectively. Reflecting the impact of the convertible preferred placements and strategic license agreement, as of 11/12/2015 current assets and working capital were approximately $12,800,000 and $11,400,000, respectively.
2015 Financial Guidance
The Company's Fourth Quarter 2015 Opportunity Pipeline, representing the aggregate total of all deal opportunities that could book as revenue during the quarter, is comprised of 43 deals valued at approximately $8 million. The Company's opportunity pipeline for the next twelve months (the aggregate total of all deal opportunities that could book as revenue over the next twelve months ending September 30, 2016) consists of 127 opportunities valued at $30 million, as compared to $25.0 million at December 31, 2014 and $25.0 million at June 30, 2015. Given the variability in the timing and size of potential contracts within the Company's sales opportunity pipeline, BIO-key's quarterly financial performance will likely vary significantly from quarter to quarter.
BIO-key has tightened its full year 2015 revenue guidance range to $5 million to $6 million, compared to revenue of $4.0 million in 2014. BIO-key expects Q4 revenue to range between $1.4 million and $2.2 million, versus $1.5 million in Q4 '14.
Gross margin is expected between 75% and 80% for the Fiscal Fourth Quarter and full year 2015 period. Reflecting additional dividend expense, BIO-key has revised its cash breakeven level to annual revenues of roughly $6.9 million
