Fingerprint hardware firm Bio-Key has reported that total revenue declined to $431,463 in the third quarter compared to $669,846 in Q3'15.The firm noted that this was principally due to the absence of a one-time $266,000 sale of hardware sensors to a reader manufacturer recorded in Q3'15, as well as a decline in service revenues.Service revenues, principally comprised of recurring maintenance and support, decreased 25% to $187,025 compared to $250,191 in Q3'15, due to a decrease in maintenance revenue as there were no special software requirements for current or new customers.However, Q3'16 gross margin increased to 60% from 44% in Q3'15, due to a favorable change in revenue mix. Q3'16 operating expenses rose 5% to $1,454,493 compared to $1,382,566 in Q3'15, principally due to increased R&D expense for new personnel, temporary outside services, and non-cash compensation.The company's chairman and CEO, Michael DePasquale, said: “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.”He added that the company was seeing the initial impact of a growing customer preference for a software as a service model, which spreads revenue over a longer time period, providing greater long-term visibility, versus the “episodic” perpetual license model in the past.The CEO noted that the company's close marketing partnership with Microsoft was having benefits.”Building on our marketing partnership with Microsoft to provide aftermarket hardware that enables the innate biometric capabilities of Windows 10, our products are now widely available within Microsoft's retail and online stores. Windows 10 is currently installed on over 350 million devices worldwide, and is slated to grow to over a billion devices in the coming year.””We have also substantially expanded our distribution partnerships with leading technology providers to support growth in both enterprise and consumer markets. Our fingerprint readers are now available globally via a growing array of online and bricks and mortar IT distribution companies, and we are working to further expand our retail footprint.”He said, that reflecting BIO-key's growing sales channels, the company expects material increases in device sales in Q4 and into 2017.
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