BIO-key International, Inc.

Good morning, everyone. Thank you for standing by, and welcome to BioKey International's first quarter 2024 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, Tuesday, June 18, 2024. I would now like to turn the call over to Bill Jones, Investor Relations Please proceed.

Thank you, Betsy, and thank you all for joining this call. Our hosts today are BioKeys Chairman and CEO Mike DiPasquale and CFO C.C. Welsh, as well as Jim Sullivan, Senior VP of Strategy and CLO, who will provide some insights on BioKeys' new product launch. As a reminder, today's conference call and webcast as well as answers to investor questions include forward-looking statements which are subject to certain risks and uncertainties that can cause actual realized results to differ from those currently expected. Words such as anticipate, believe, estimate, expect, plan, project or similar words typically express and identify these forward-looking statements. Such statements are made based on management's beliefs and assumptions as of today and 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 risks that may affect future performance of the company, please see Risk Factors in the company's annual report as filed on Form 10-K with the SEC. Listeners are cautioned not to place undue reliance on such forward-looking statements which speak as of today's date only. BioKey undertakes no obligation to revise or disclose revisions to forward-looking statements to reflect circumstances or events that occur after today. Now, let me pass the call to Mike to begin. Mike?

Thanks, Bill, and good morning, and thank you all for joining us today. After my remarks, Jim will provide more details around our formal launch of BioKey's PassKeyU authentication solution Then CeCe will provide a brief overview of our financial performance, and afterwards, we'll open the call to your questions. First, the audit of our 2023 financial statements was recently completed by our independent public accounting firm, and we filed our 10-K on June 5th. And we recently filed our Q1 10-Q this past Friday. BioKey is now up to date and compliant with all of our regulatory filings. Again, CC will review the numbers, but from a high level, we continued our progress in 2023 with revenue up 10% from 2022 to $7.8 million. In Q1, we had generated positive operating cash flow as we benefited from the expansion of a biometric client identification system by a long-term financial services customer who continues to expand their use of our biometric solutions. In fact, they're currently looking to potentially upgrade their license from a simple to a more complex client ID featured solution, which we may have more to say about later this year. They certainly have been a good customer of BioKeys and have generated significant revenue for us over the past years. as has our foreign defense force customer that had provided several add-on orders to BioKey in late 2023. And there certainly will be more, and the possibility of an expanded use of our solution into other areas within that organization. In Q1, we also reduced our expenses 17% year over year, and therefore reduced our operating loss by more than 70%. to approximately $500,000 in Q1 24. We have more work to do, but we believe we are heading in the right direction with our Q1 performance. We look to continue this progress as we move forward through 2024 with a focus on larger opportunities that could have a meaningful impact on our results, as well as further efforts to reduce cost. We believe our growing global distribution network and customer base has us in a good position to drive revenue and move to positive profitability over the next several quarters. The majority of our sales today are through partnerships that we've developed through the years with over 150 partners, including value-added resellers, system integrators, MSPs, or managed service providers as well. All of our European sales are through channel partners, and the majority of our overall company sales now originate or brought to us through a partner. Leveraging partners in their customer networks allows us to reach a broader addressable market and also frees up our direct sales team to pursue the larger revenue deals, of which I've mentioned a couple examples that are currently in our pipeline. Another point of focus in 2023 is that we began strategically partnering with with some of the larger identity and access management providers in the industry, like SailPoint, Ping, and ForgeRock, who have large customer bases with installed IAM solutions, who can upgrade their MFA to include BioKey's unique identity-bound biometric offering. The overall IAM market continues to grow for many reasons. Enterprises are migrating to the cloud, their workforces are working remotely or hybrid, and third-party contractors require access to systems. There are increasing cybersecurity regulations and cyber insurance requirements, and BioKey solutions help our customers meet all of these regulatory and insurance requirements around stronger, more secure authentication, while providing superior user experience and better value than alternative mainstream authentication options. The current climate of broad enterprise adoption of multi-factor authentication and advanced IAM approaches provide plenty of opportunities for BioKey to differentiate itself on a more flexible, lower total cost of ownership, and more user experience centric authentication approach through biometrics. Multi-factor authentication, zero trust, and passwordless environments are essential for enterprises who want or need cyber insurance, as well as to meet the SEC's new cybersecurity risk management and reporting rules and CISA regulations that require covered companies to promptly report cyber disruptions and ransomware payments. We expect all of these emerging requirements, as well as constant cybersecurity incidents and high-profile breaches, to keep cybersecurity a top priority item in boardroom and management discussions throughout 2024 and 2025. Again, BioKey solution allow companies to meet these challenges with more flexibility, lower cost, and so the current environment represents a very favorable backdrop for sales of our solutions. We also expect the use of Passkey authentication to expand its market penetration in 2024. As such, we just launched PassKeyU, a unique passwordless authentication solution that does not require the use of phones or hardware tokens. This solution is very useful for a variety of business use cases. And in a moment, I'll pass the call to Jim Sullivan to discuss this exciting opportunity in greater detail. I've discussed many of the reasons for a positive market outlook for identity and access management providers, and I've touched on some factors specific to BioKey and our very unique solutions. We are an industry leader in biometric identity such as fingerprint and palm and facial ID, which are among the 17 different authentication factors that we currently offer our customers, which is the most flexible and option available in the industry, and that really does separate Bayuki from the competition. Today, we have over 600 customers and a solid base that provides recurring, high-margin, license fee revenues, or ARR. We continue to pursue large revenue opportunities through our direct sales team while leveraging our channel partners to reach a larger addressable market. We will continue to pursue cost reduction initiatives to accelerate our path to profitability and continued positive cash flow. Also in Q2, we are exploring opportunities to convert some slow moving hardware inventory into cash. In 2023, we wrote down approximately 4 million of inventories, including about $3.1 million, which was purchased for our African initiatives. We expect to monetize some of that inventory in the current and continuing quarters. For all of these reasons, we believe BioKey is well positioned to continue meaningful top and bottom line performance improvement as we progress through this year. Now, let me turn the call over to Jim to discuss our new passkey use solution. Jim?