BIO-key International, Inc.

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Bio-key International's first quarter 2022 conference call. During management's prepared remarks, all participants will be in a listen-only mode. Afterwards, listeners will be invited to participate in a question-and-answer session. As a reminder, this conference is being recorded today, Monday, May 16, 2022. I would now like to turn the call over to Kimberly Biddings, Bio-key's Vice President of Product. Please proceed.

Thank you, and thank you for joining our call this morning. With me today are BioKeys Chairman and CEO, Mike DePasquale, and our CFO, Cece Welch. I'll remind everyone that today's conference call and webcast contain forward-looking statements that are subject to certain risks and uncertainties that may cause actual results to differ materially from those projected on the basis of these statements. Words such as estimate, project, expect, anticipate, believe, think, plan, may, will, or similar words typically identify and express forward-looking statements. Such forward-looking statements are made based on management's beliefs and assumptions using information currently available pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For a complete description of these and other risk factors that may affect the future performance of Bio-key, please see risk factors in the company's annual report filed on Form 10-K with the Securities and Exchange Commission. Listeners are cautioned not to place undue reliance on forward-looking statements which speak only as of today's date. The company undertakes no obligation to revise or disclose revisions to such forward-looking statements to reflect future events or circumstances that occur after today. With that, I will turn the call over to Mike DePasquale.

Mike? Thanks, Kim. Good morning, and thank you for joining our call today. After my remarks this morning, I will turn the call back to Kim to review some of our marketing and sales initiatives. CeCe will provide financial highlights for the quarter, and then we'll open the call for your questions. Bio-key's license revenue rose 205% over Q1 2021 and 267% from Q4. Our performance reflected continued growth in our installed base of customers, as well as an initial contribution from Swivel Secure, which we acquired in March 2022. Our gross profit margin rose to 82.6% in the quarter, up from 59.4% in Q1 2021, reflecting the year-over-year increase in our annual recurring revenue, or ARR, from software licenses, which is a core focus and value driver for BioKey. Beginning in Q2, our consolidated results will reflect the full quarterly benefit from the addition of Swivel Secure, which generated 3.1 million of revenue in calendar 2021. We are still working on the acquisition accounting entries for the balance sheet, so you will see a notice from us later today that we will file our 10-K a little bit later this week. The acquisition, I'm sorry, 10-Q later this week. The acquisition will make an important contribution to our 2022 performance as it significantly expands our international team, our operations, our customer base, and our growth potential. We are still in the early stages of integration process and will provide updates on this effort in future periods. We continue to advance our core identity and access management business both through inside sales efforts as well as with our growing channel alliance program, CAP as we call it, now accounts for approximately 50% of new sales. Our Portal Guard solution continues to gain momentum within county and municipal government agencies, higher education institutions, and businesses and enterprises as well. Portal Guard resonates as a high-value, easy-to-deploy solution that addresses the hybrid requirements of distributed network and cloud access caused by growing work and study from anywhere demands. Customers are increasingly recognizing PortalGuard's flexibility and differentiated authentication capabilities, including support for 16 different multi-factor authentication methods. Importantly, we're seeing growing appreciation and adoption of our solutions because of BioKey's industry-leading, identity-bound biometric capabilities. Recent customer wins include local governments in Missouri, New Mexico, New York, South Dakota, and Texas that selected Portal Guard for secure and compliant access to their mission-critical systems. Although each situation is unique, generally speaking, counties and other local government entities are choosing Portal Guard to provide strong multi-factor authentication, access management, and compliance for their cybersecurity insurance needs. As interest in identity-bound biometrics grows, we are increasingly able to also provide our hardware solutions, such as our fingerprint readers, to enable the enhanced security and convenience of identity-bound biometrics. In higher education, we added Illinois North Central College in the first quarter, building on our Identity as a Service, or IDAS, footprint which now serves 2.5 million users, including students, faculty, and staff across 12 states. Our most recent channel alliance program progress was the addition of a leading-edge value-added distributor, 3i Technologies, as a new partner. This partnership will expose an even larger base of customer prospects to bio-key solutions with particular emphasis on their complementary strengths in financial services and with local governments seeking enhanced IAM security solutions. We're currently developing joint marketing programs in collaboration with 3i Technologies and plan to go live on these initiatives in the next several weeks. We're also building on our relationship with Intellisys with whom we have a master agent referral relationships and their distributed network. PortalGuard is the first and only IAM platform that has been offered within their extensive network, and already we are seeing solid conversion of prospects in their network into PortalGuard users. We have a number of joint events and marketing programs underway and planned for 2022. During Q1 2022, we began hardware deployments for our Nigeria National Identity Management Commission's National ID Enrollment Program in partnership with Sterling Bank's Nigeria's SPECTA online lending program. The deployments are with BioKey's Pocket 10 device, which provides mobile biometric enrollment to support increased adoption and use of the national identity number in mobile banking and payments across the country. We expect to ramp shipments of our products as well as transactional software in the coming months. At BioKey, we continue to invest in innovation and product development, including new products, enhancements, and updates. One example is the recent launch of important enhancements and updates to our mobile auth solution. MobileAuth is currently the only multi-factor authentication mobile app that integrates the power of identity-bound biometrics with other authentication modalities, allowing customers to build a more complete MFA strategy. These methods include palm scanning with our palm positive solution and facial recognition with our face positive solution. Empowering mobile devices with biometric authentication methods integrated with our Portal Guard solution. MobileAuth also supports device-based biometric authentication methods, including Apple Face ID and Touch ID and Android biometrics, as well as support for push token authentication. These enhancements make mobile auth more powerful and even easier for customers to deploy to meet their increasing authentication and security requirements. I also want to touch on the great work the BioKey team has done to build visibility and credibility for our company and solutions. Our team continue to build on our base of IT industry awards and recognition, including four recent 2022 Cybersecurity Excellence Awards, a Security Today Magazine 2022 Govies or Government Security Award, and our own Kim Biddings was named for the second year in a row to Computer Resellers News Woman of the Channel Power 100 list. These industry accolades are very important in building our reputation with prospective partners and customers on a global basis. Looking forward, we see an expanding worldwide opportunity to grow our software license revenue base, driven by compelling security, scalability, ease of use, and deployment, and the strong customer value proposition of our PortalGuard IAM platform, along with an expanding array of security solutions. We continue to look for value-enhancing M&A opportunities, as we have with PortalGuard and Swivel Secure Europe, in order to expand our solution set, customer base, and sales and marketing reach, always with an eye to creating greater value for our shareholders. There is a clear and growing global need for enterprises of all kinds to protect their data and systems with stronger cybersecurity solutions. BioKey has built a strong base of products, services, and partnerships to address this substantial opportunity. Given the building momentum in our business, complemented with the addition of Swivel Secure Europe and further progress advancing our opportunities in Africa, we are reiterating our full-year 2022 revenue guidance of $10 to $13 million, approximately 70% of which relates to contracted recurring software license revenue. Our revenue guidance represents growth of approximately 100% or more over 2021, primarily from growth in software license and complemented by hardware and services revenue that are generally tied to specific projects. Our growth outlook is supported by our strong capital position, our talented global management group and product development teams, and our expanded global sales, marketing, and Channel Partner Footprint. We believe BioKey is positioned to reach break-even profitability and free cash flow at the lower end of the range, subject to our mix of software and hardware revenues. As we execute on our growth strategy, we believe the market will come to recognize and hopefully reward our progress. We are focused on building on our positive momentum for the balance of this year. With that, I'll turn the call back to Kim.