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BK

BIO KEY INTERNATIONAL INC (BKYI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2’25 revenue increased 49% year over year to $1.70M and 6% sequentially; gross margin moderated to 73% on higher hardware mix, and net loss improved to ($1.17M), or ($0.20) per share .
  • Segment strength: hardware rose sharply to $0.57M on expanded biometric deployments and sale of fully reserved inventory; license fees up 4%, services up 11% YoY .
  • Management launched the BIO-key CyberDefense Initiative to capitalize on elevated EU/NATO cyber spending; cited new defense and banking wins (Mozambique bank; $600K defense orders) as pipeline catalysts .
  • Expense discipline continued (SG&A -13.5% YoY), though Q2 included ~$0.3M timing-related sales/marketing spend; run-rate expected to normalize in H2 .
  • Estimates context: Q2 revenue was essentially in line with consensus ($1.70M*), while EPS missed (actual -$0.20 vs -$0.15*); limited coverage (one estimate) increases revision sensitivity going forward [GetEstimates Q2 2025]*.
    Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Revenue rose 49% YoY to $1.70M on contributions across all segments; hardware strength reflected expanded biometric deployments and inventory sales .
  • SG&A declined 13.5% YoY; overall operating expenses fell 8.5% YoY to $2.32M, supporting improved loss profile .
  • Strategic wins: initial IAM deployment with a National Bank in Mozambique and $600K follow-on orders from a leading defense ministry, reinforcing defense/financial vertical momentum .

What Went Wrong

  • Gross margin compressed to 73% (vs 77% in Q2’24), due to hardware mix shift; margins are lower on hardware than license/services .
  • EPS and net loss: Q2 EPS came in at ($0.20) and net loss at ($1.17M), reflecting continued investment and mix impacts; consensus EPS was tighter than realized (-$0.15*) [GetEstimates Q2 2025]*.
  • Hardware mix-driven variability and timing of large orders introduced quarter-to-quarter fluctuations; management reiterated no formal guidance, highlighting seasonality in EMEA (August) .
    Values retrieved from S&P Global.

Financial Results

Consolidated P&L vs Prior Periods and Estimates

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD)$1,141,286 $1,607,159 $1,696,907
Net Income ($USD)($1,666,950) ($736,545) ($1,167,396)
Diluted EPS ($USD)($1.00) ($0.16) ($0.20)
Gross Profit ($USD)$879,014 $1,327,661 $1,232,727
Gross Margin (%)77.0% 82.6% 72.6%
Total Operating Expenses ($USD)$2,533,100 $1,968,299 $2,316,577
Operating Income (Loss) ($USD)($1,654,086) ($640,638) ($1,083,850)

Segment Revenue Breakdown

Segment ($USD)Q2 2024Q1 2025Q2 2025
License Fees$774,225 $1,098,758 $806,087
Services$283,569 $272,598 $321,996
Hardware$83,492 $235,803 $568,824

Note: Q2’25 COGS reflects “Cost of hardware – reserve” of ($277,415) related to sale of fully reserved inventory, benefiting reported gross profit .

KPIs and Balance Sheet Highlights

KPIQ4 2024Q1 2025Q2 2025
Cash & Equivalents ($USD)$437,604 $3,133,752 $2,275,345
Accounts Receivable, net ($USD)$718,229 $803,277 $983,534
Deferred Revenue – Current ($USD)$773,267 $928,291 $873,394
Note Payable Balance ($USD)$1,525,977 $762,151 $447,153
Weighted Avg Shares (Basic/Diluted)3,032,240 4,702,421 5,821,133

Results vs Wall Street Consensus (S&P Global)

MetricConsensusActualOutcome
Revenue ($USD) Q2 2025$1,700,000*$1,696,907 In line
Primary EPS ($USD) Q2 2025($0.15)*($0.20) MISS

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025NoneNo formal guidance; management targets sequential growth with quarter-to-quarter variability Maintained: No formal guidance
Gross MarginFY 2025Target ~80% blended over time Q2’25 at 73% on hardware mix; margin outlook supported by focus on BIO-key solutions Lower in Q2; long-term target reiterated
SG&A / OpExH2 2025Q1 baseline with minor show costs Q2 had ~$0.3M event/marketing timing; run-rate expected to normalize Maintained discipline; temporary uptick
Product ReleaseQ4 2025N/APortalGuard IDaaS major upgrade targeted for Q4’25 New timeline

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Defense/Cyber spendingExpanded deployments; multi-year potential; $910K financial upgrade; 80k personnel covered Launch of CyberDefense Initiative; $600K defense orders; new defense agency phase completed; EMEA focus Strengthening; pipeline building
EMEA strategyTransition away from Swivel Secure; focus on BIO-key branded; improving traction Refocused solely on BIO-key suite in EMEA; stronger control/margins Positive momentum
Education/SLED & phone-freeCalifornia Ed Tech JPA partnership; Wyoming DoE IDaaS; 100+ institutions; 4M end users Continued North America presence in higher ed/healthcare/public sector; recruiting sales leadership Stable to improving
Hardware inventorySale of reserved inventory in FY’24/Q4; benefited GP Continued liquidation; goal to move bulk by year-end Ongoing, supports cash/margins
SeasonalityEMEA August slowdown; sequential growth aim Europe summer malaise noted; defense less impacted; pipeline encouraging Seasonal but mitigated
Tariffs/supply chainTariffs not affecting readers; some inventory/parts in China No new tariff issues disclosed Neutral

Management Commentary

  • “BIO-key had a solid Q2 performance with revenue rising 49% versus last year and 6% on a sequential basis… trimming SG&A expenses by 13.5%… reduced our note payable to $447,000” — CEO, prepared remarks .
  • “We are forming the BIO-key CyberDefense Initiative… supported by significant ramp in European defense spending commitments… expect meaningful contract activity in the first half of next year.” — CEO .
  • “Gross margin moderated to 73% vs. 77% in Q2’24, reflecting an increase in hardware sales… total operating expenses decreased 8.5%… major PortalGuard upgrade targeted in Q4’25.” — Press release .

Q&A Highlights

  • Expense run-rate: Q2 included ~$300K timing (events, leadership changes); management expects expense run-rate similar to early-year levels in Q3–Q4 .
  • Defense pipeline and revenue timing: Several contracts closed late Q2 and in Q3; revenue to be reflected in Q3 and Q4; secrecy limits disclosures, but contracts are multiyear .
  • Hardware inventory: Ongoing sales each quarter; goal to move bulk by year-end; hardware sales typically accompany software deployments .
  • Seasonality and outlook: No formal guidance; Europe slow in August, but defense/intelligence projects are mission-critical and less impacted .
  • Liquidity: Management affirmed sufficient cash and equivalents to get through year-end .

Estimates Context

  • Q2’25 actual revenue was essentially in line with consensus ($1.70M* vs $1.697M), while EPS missed (-$0.15* vs -$0.20). Limited coverage (one estimate) suggests higher sensitivity to new disclosures and results [GetEstimates Q2 2025]* .
  • Forward consensus indicates gradual revenue growth with improving EPS through year-end: Q3’25 revenue $1.80M*, EPS ($0.12); Q4’25 revenue $2.20M, EPS ($0.07)* [GetEstimates Q3/Q4 2025]*.
    Values retrieved from S&P Global.

Forward Consensus Snapshot

MetricQ3 2025Q4 2025
Revenue Consensus Mean ($USD)$1,800,000*$2,200,000*
Primary EPS Consensus Mean ($USD)($0.12)*($0.07)*
# of Estimates (Revenue / EPS)1 / 1*1 / 1*

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q2’25 showed broad-based revenue growth with hardware-driven mix shift compressing margins; expense discipline continues with a transient $0.3M spend uptick tied to events/marketing .
  • Defense and EMEA opportunities are accelerating (new agency phase, $600K orders, Mozambique bank), with formal CyberDefense Initiative intended to deepen engagement with prime contractors .
  • Balance sheet improved: cash $2.28M; note payable brought down to ~$447K; AR build supports near-term collections; deferred revenue remains elevated, reflecting longer contract durations .
  • Results vs consensus: revenue in line; EPS miss. With only one estimate, expect analysts to reassess EPS assumptions given hardware mix and timing of defense revenue recognition [GetEstimates Q2 2025]* .
  • Watch near-term catalysts: defense awards recognized in Q3/Q4, progress on PortalGuard upgrade targeted for Q4’25, and continued inventory monetization aiding margins and cash .
  • Medium-term thesis: identity-bound biometrics aligned with passwordless/phoneless/tokenless trends across defense, finance, and education; EMEA refocus to BIO-key solutions should support structurally stronger margins .
  • Trading implications: stock may react to contract disclosures and sequential revenue prints; limited coverage amplifies sensitivity to reported bookings and margin mix shifts .

Values retrieved from S&P Global where marked with an asterisk (*).