Executive Summary

Q3 revenue of $1.55M declined YoY on tough comps from two large orders in Q3’24, while gross margin remained strong at 77%; net loss was $0.15 per share as OpEx fell 7.8% YoY .
Results missed limited S&P Global consensus: revenue $1.80M* est. vs $1.55M actual and EPS ($0.12)* est. vs ($0.15) actual; just one estimate covers BKYI, magnifying variance impact on “beats/misses”* (Values retrieved from S&P Global).
Management initiated FY25 revenue guidance of $6.5–$7.0M and highlighted a stronger Q4 pipeline, including a significant new Middle East defense deployment and EcoID III product launch .
Liquidity improved post-quarter via ~$3.1M gross warrant exercise; proceeds helped reduce notes payable, leaving $675K principal outstanding after prepayments and exchanges .

What Went Well and What Went Wrong

What Went Well
- Gross margin resilience at 77% despite mix and timing, aided by absence of third-party software costs and sale of fully reserved inventory .
- Strategic wins: “a significant biometric authentication deployment with a major new customer, a Middle East defense-sector security organization,” underpinned by the Cloud Distribution partnership in Saudi Arabia .
- Product innovation: launch of EcoID III (FBI FAP 20, liveness, encrypted comms); initial volume deliveries to defense/government customers and attractive price point positioning .
- Management quote: “We expect a strong close to 2025, with full year revenue in the range of $6.5–$7M, and solid growth from there in 2026” .
What Went Wrong
- YoY revenue decline driven by absence of two large Q3’24 orders (approx. $665K variance), highlighting timing lumpiness of larger contracts .
- License fee revenue declined YoY to ~$0.92M (from ~$1.44M) on prior-year large deals; hardware down 17% YoY due to shipment timing; operating loss widened vs Q3’24 .
- EPS and revenue both missed limited consensus; one defense order (~$134–$140K) slipped from Q3 into early Q4, underscoring visibility challenges* (Values retrieved from S&P Global).

Financial Results

Summary vs Prior Periods and Consensus

Metric	Q3 2024	Q2 2025	Q3 2025	Q3 2025 Consensus*
Revenue ($)	$2,144,804	$1,696,907	$1,549,706	$1,800,000*
Diluted EPS ($)	($0.39)	($0.20)	($0.15)	($0.12)*

Notes: BKYI’s press release text cites $1,548,706 revenue vs $1,549,706 in the financial table (difference $1,000) .
Asterisk indicates Values retrieved from S&P Global.

Margins and Profitability

Metric	Q3 2024	Q2 2025	Q3 2025
Gross Margin %	78%	73%	77%
Operating Expenses ($)	$2,260,099	$2,316,577	$2,083,908
Operating Loss ($)	($580,405)	($1,083,850)	($892,190)
Net Loss ($)	($738,959)	($1,167,396)	($964,849)

Segment Mix

Revenue by Segment ($)	Q3 2024	Q2 2025	Q3 2025
Services	$267,371	$321,996	$268,113
License Fees	$1,441,011	$806,087	$917,951
Hardware	$436,422	$568,824	$363,642
Total Revenue	$2,144,804	$1,696,907	$1,549,706

KPIs and Balance Sheet Highlights

KPI	Q3 2024	Q2 2025	Q3 2025
Cash & Cash Equivalents ($)	$437,604 (12/31/24)	$2,275,345 (6/30/25)	$2,039,853 (9/30/25)
Accounts Receivable ($)	$718,229 (12/31/24)	$1,138,303 (A/R + factor) (6/30/25)	$959,503 (9/30/25)
Inventory ($)	$378,307 (12/31/24)	$318,538 (6/30/25)	$394,176 (9/30/25)
Deferred Revenue – current ($)	$773,267 (12/31/24)	$873,394 (6/30/25)	$659,627 (9/30/25)
Notes Payable – total principal outstanding post Q3 ($)	n/a	n/a	$675,000 (post-October transactions)
Fully Reserved Inventory Remaining ($)	n/a	n/a	~$2.8M (management)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($)	FY 2025	None disclosed	$6.5–$7.0M	Initiated
Product Roadmap	2026 availability	n/a	PortalGuard v7 GA targeted late Q1/early Q2 2026	New timeline disclosed
Cost/Profitability	Ongoing	n/a	Continued cost reductions to lower breakeven and pursue positive cash flow/profitability	Reiterated focus

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1’25, Q2’25)	Current Period (Q3’25)	Trend
CyberDefense Initiative	Introduced in Q2’25 with rationale tied to EU/NATO cyber resilience and pipeline building .	“Off to a strong start” with significant Middle East defense deployment; Cloud Distribution partnership highlighted .	Strengthening execution
Product Roadmap (PortalGuard v7)	Q2: targeted release in Q4’25 .	Updated GA timeline to late Q1/early Q2 2026; major platform modernization .	Schedule extended, scope larger
Hardware: EcoID III	Not in Q1/Q2; Q3 pre-launch communications in October .	EcoID III launched with FAP 20, liveness, encryption; initial volume shipment to defense/government .	New growth lever
Channel/Partners	Q1: Arrow ECS Iberia; Ed Tech JPA . Q2: Cloud Distribution (Saudi), Runlevel (Mozambique), Arrow ECS Iberia .	IT2Trust in Nordics; ongoing partner-led EMEA momentum .	Expanding, quality-focused
EMEA focus and Swivel transition	Q1: Transition away from Swivel; margin-positive shift .	Continued EMEA focus; seasonality noted; sales refocused solely on BIO-key solutions .	Refined focus; seasonal
Banking (large customers)	Q1: NBE deployment for 30k employees via Raya .	Large banking customer: >29M users; renewal expected early 2026; ARR strength and low churn discussed .	Renewal pipeline building
Cost discipline	Q1/Q2: SG&A reductions; OpEx down .	OpEx down 7.8% YoY; SG&A down 13% YoY; continued breakeven focus .	Improving efficiency

Management Commentary

CEO on tough comps and pipeline: “Q3’24 benefitted from two large orders… approximately $665,000 higher in Q3 last year… We expect to close out the year on a strong note as we make progress advancing our channel sales efforts particularly in Europe and the Middle East” .
On defense win and differentiation: “We secured a significant biometric authentication deployment with a major new customer, a Middle East defense-sector security organization… uniquely able to support… without mobile devices or hardware tokens” .
On product roadmap: “PortalGuard… Version 7… represents our most significant update ever… timeline for general availability is late Q1 or early Q2 in 2026” .
CFO on margins and OpEx: “Q3 2025 gross margin remained strong at 77%… operating expenses decreased 8% to $2.1 million” .
On liquidity: “Raised approximately $3 million net… through a warrant exercise… puts us in a stronger position to pursue growth” ; post-quarter transactions left $675,000 principal outstanding .

Q&A Highlights

National Bank of Egypt expansion: Management expects ongoing expansion and potential CIAM extension, with employee expansion possible this year and CIAM review in 2026 .
ARR and churn: ARR “probably in the $6–$7 million range” with churn in single digits (management view) .
EcoID III pricing/positioning: List ~$49.99 vs higher-priced PIV Pro; added liveness and encryption; initial order ~7,500–10,000 units to a defense customer .
Defense opportunity scale: New Middle East defense contract has “even bigger” potential than prior ministry engagement; long-tail, sticky deployments .
Profitability path: Management reiterated confidence in achieving break-even via pipeline, renewals, partner leverage, and margin discipline .

Estimates Context

Q3 2025 results vs S&P Global consensus: Revenue $1.55M vs $1.80M* (miss); EPS ($0.15) vs ($0.12)* (miss). Coverage is extremely limited, with just one estimate for both revenue and EPS*, implying higher variance sensitivity (Values retrieved from S&P Global).
Target Price Consensus Mean: $2.00*; no consensus recommendation text available* (Values retrieved from S&P Global).

Key Takeaways for Investors

Mix/timing, not demand: YoY revenue decline was primarily the absence of two large Q3’24 orders (~$665K), while gross margin remained robust at 77% .
Momentum in defense vertical: Significant Middle East defense deployment and partnerships (Cloud Distribution; IT2Trust) broaden footprint and pipeline .
Product catalyst: EcoID III broadens differentiated, phone/token-less security stack; initial defense shipments and attractive pricing position support adoption .
FY25 guidance introduced: $6.5–$7.0M revenue; Q4 expected to be strong; however, quarterly lumpiness likely persists given order timing .
Cost discipline improving loss trajectory: OpEx down 7.8% YoY; SG&A down 13% YoY; operating loss improved sequentially vs Q2 .
Liquidity enhanced post-quarter: ~$3.1M gross warrant proceeds supported debt reduction to $675K principal; enhances runway to growth objectives .
Watch Q4 execution and 2026 renewal: Near-term trading likely tied to defense deliveries, EcoID III traction, and progress toward early-2026 banking renewal .

Additional Q3 Press Releases (Context)

Warrant inducement agreement for ~$3.1M gross proceeds; additional new warrants issued to investor .
EcoID III product launch with FBI FAP 20, PIV, NIBSS certifications and liveness detection .
EMEA event presence at GITEX Global and 19ENISE, highlighting product capabilities and regional engagement .

Appendix: Cross-Quarter Benchmarks

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($)	$1,607,159	$1,696,907	$1,549,706
Gross Margin %	82.6%	73%	77%
Diluted EPS ($)	($0.16)	($0.20)	($0.15)

Asterisked items in estimates sections: Values retrieved from S&P Global.

BIO KEY INTERNATIONAL INC (BKYI)·Q3 2025 Earnings Summary