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BK

BIO KEY INTERNATIONAL INC (BKYI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $1.46M and diluted EPS was ($0.53), reflecting a significant miss vs Wall Street consensus revenue of $2.29M and EPS of ($0.35); margin profile improved on higher license mix despite lower total revenue . Revenue Consensus Mean $2.29M*, Primary EPS Consensus Mean ($0.35)*; Actual revenue $1.46M, EPS ($0.53) .
  • License revenue grew 77% YoY to $1.02M while services fell 28% to $0.34M and hardware declined 88% to $0.09M, consistent with the strategic exit from Swivel Secure and pivot to higher-margin BIO-key solutions .
  • Gross profit reached $1.20M vs a loss in Q4’23, as mix shifted to BIO-key’s own software and benefited from sale of previously reserved hardware; OpEx was flat YoY at $2.63M, and net loss improved to ($1.57M) from ($2.37M) YoY .
  • Strategic catalysts: completed initial deployment for a new European defense agency in four days (expansion expected), Ed Tech JPA partnership (access to 195 K‑12 districts), and large financial services biometric upgrade with ~$600K recognized Q1’25 and ~$250K in Q4’24 .

What Went Well and What Went Wrong

  • What Went Well

    • License revenue strength: “Our efforts enabled us to increase high‑margin software license fee revenue by 20%… In Q4’24 license fee revenue increased 77% to $1.0M” .
    • Margin improvement: Adjusted gross margin rose as mix shifted to BIO‑key solutions; Q4’24 gross profit was $1.20M vs Q4’23 loss driven by prior‑year hardware reserves and sale of reserved inventory .
    • Strategic wins and execution: “We secured a $910K contract with a long‑time financial services client… expected to trim ~30 seconds from each customer interaction” and completed a rapid defense deployment (four days) with planned expansion .

  • What Went Wrong

    • Top‑line shortfall vs expectations: Management previously expected FY’24 revenue ≥ FY’23; Q4’24 and FY’24 were impacted by the Swivel Secure exit and timing slips into Q1’25, driving the miss vs consensus .
    • Services and hardware declines: Q4’24 services down 28% and hardware down 88% YoY due to transition away from SSL and absence of a large expansion order seen in Q4’23 .
    • Continued losses and limited cash: Q4’24 net loss ($1.57M) and year‑end cash $0.44M (though strengthened in Q1’25 via warrant exercises); variability from large-order timing remains a headwind .

Financial Results

Metric (USD)Q4 2023Q3 2024Q4 2024
Revenue ($)$1,825,101 $2,144,804 $1,462,278
Gross Profit ($)($95,496) $1,679,694 $1,199,917
Gross Margin (%)(5.2%) 78.3% 82.1%
Total Operating Expenses ($)$2,628,338 $2,260,099 $2,627,227
Operating Loss ($)($2,723,834) ($580,405) ($1,427,310)
Net Loss ($)($2,372,813) ($738,959) ($1,567,189)
Diluted EPS ($)($3.99) ($0.39) ($0.53)

Vs Estimates (Q4 2024)

MetricConsensus EstimateActual
Revenue ($)$2,290,000*$1,462,278
Primary EPS ($)($0.35)*($0.53)

Values retrieved from S&P Global.*

Segment Breakdown (Revenue)

Segment (USD)Q4 2023Q3 2024Q4 2024
License Fees$577,669 $1,441,011 $1,023,701
Services$478,005 $267,371 $344,444
Hardware$769,427 $436,422 $94,133
Total Revenue$1,825,101 $2,144,804 $1,462,278

Selected KPIs

KPIQ4 2024Note
Contracted ARR (% of revenue)~66% (management view) Subscription/partner-centric model
Cash and Equivalents ($)$437,604 Year-end balance
Current Assets ($)$1,886,958 Year-end
Deferred Revenue – Current ($)$773,267 Year-end

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/CommentaryChange
RevenueFY 2025None“We do expect to absolutely emphatically grow our business in 2025” New qualitative outlook
Gross Margin/ProfitabilityFY 2025None“Gross margins and the march towards profitability should be very aggressive this year” New qualitative outlook
OpExNear term (Q1–Q2 2025)None“Pretty flat for a few quarters” Maintained/flat
Large Order TimingOngoingNoneQuarter-to-quarter variability due to timing of large orders Risk emphasized

No formal quantitative ranges were issued for revenue, margins, OpEx, tax, or segments .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2’24 and Q3’24)Current Period (Q4’24)Trend
EMEA transition away from Swivel SecureQ2: Noted delays and headwinds; pivot to BIO-key solutions Transition “totally complete, totally done” Improving/complete
License-led growth, margin profileQ3: License +52% YoY; margin 78% Q4: License +77% YoY; margin ~82% Accelerating mix shift
Defense sector tractionQ3: $500K follow-on orders; AWS Marketplace added New European defense agency deployment in 4 days; expansion planned Expanding deployments
Financial services biometric upgradeQ3: $910K order announced ~$250K recognized Q4, ~$600K in Q1’25 Ongoing, multi-period revenue
Education/SLED momentumOngoing presence; AWS Marketplace, Williamsburg VA Ed Tech JPA approval; Wyoming DOE IDaaS deployment Broadening access
Cost disciplineQ2: OpEx down vs prior year OpEx flat YoY in Q4; outlook “flat for a few quarters” Sustained discipline
Regulatory/cyber driversQ2: Emphasis on MFA/passkey requirements SEC cyber rules raised awareness; passwordless/phoneless positioning Supportive backdrop
Nigeria national ID programNot discussedMonitoring World Bank efforts; potential hardware sales as facility enables Watchful, optionality

Management Commentary

  • “We substantially strengthened the margins, profitability and strategic potential of our business in 2024… increase high‑margin software license fee revenue by 20%… adjusted gross margin of 78% vs 64% in 2023” .
  • “In Q4’24 we secured a $910K contract… upgrading to BIO‑key’s ‘fingerprint‑only’ one‑to‑many identification system… expected to trim ~30 seconds from each customer interaction” .
  • “We currently provide authentication and digital security services for over 80,000 ministry personnel and believe that deployment could double or triple in coming years” .
  • “We are off to a strong start in 2025 and believe we are well positioned to deliver improved top‑ and bottom‑line performance… financial performance has the potential to fluctuate significantly quarter‑to‑quarter” .
  • CFO: “Q4 license fee revenue increased 77%… lower margin services decreased 28%… hardware declined 88%… Q4 revenue of $1.5M vs $1.8M in Q4’23” .

Q&A Highlights

  • Restatements/10‑K timing: Q4 call indicated 10‑K expected “by Monday”; restatement referenced is 2023, nothing new .
  • FY’24 shortfall vs prior expectation: Revenue impact tied to exit from Swivel Secure; some deals slipped to Q1’25; mix shift boosted margins .
  • Transition status: “Totally complete, totally done” for Swivel Secure exit; international defense contract momentum .
  • Revenue timing for $910K order: ~$250K recognized Q4 and ~$600K in Q1’25; two‑year subscription renewal representing $1.5M recurring revenue .
  • Hardware/services outlook: Expect growth in both lines as biometrics increasingly included; services growth to be professional services vs prior support contract .
  • OpEx outlook: “Pretty flat for a few quarters” .
  • Nigeria program: Monitoring re‑acceleration; potential hardware sales contingent on infrastructure and payment facility .

Estimates Context

  • Q4 2024 results vs consensus: Revenue $1.46M vs $2.29M* (−36%), EPS ($0.53) vs ($0.35)* (miss of $0.18); driven by Swivel Secure exit and order timing . Values retrieved from S&P Global.*
  • Implications: Consensus models likely need to reflect lower near‑term services/hardware and quarter‑to‑quarter variability, offset by stronger gross margins from license mix and growing ARR base .

Key Takeaways for Investors

  • Mix shift to BIO‑key software is structurally improving margins; despite revenue pressure, Q4 gross margin ~82% and gross profit turnaround vs prior‑year reserve impact .
  • The quarter was a clear miss vs consensus on revenue and EPS; stock narrative will center on execution of EMEA pivot and visibility into large order timing—expect volatility to persist near term .
  • Strategic wins in defense and financial services are important multi‑year catalysts; rapid deployment and planned expansion support pipeline credibility .
  • Education channel access (Ed Tech JPA) creates a scalable route to recurring IDaaS revenue aligned with phone‑free school policies—watch for traction over 2025–2026 .
  • Operating discipline continues; OpEx flat and management reiterates aggressive path to profitability and breakeven driven by license ARR and partner channels .
  • Near‑term trading: misses vs estimates and variability may weigh; any incremental disclosures on defense expansions or large financial services deployments could be positive catalysts .
  • Medium‑term thesis: Higher‑margin license base, ARR (~2/3 of revenue), and sector endorsements (defense, banking, SLED) support improving unit economics and eventual operating leverage as order timing normalizes .