BIO-key International (NASDAQ:BKYI) executives said the company exited 2025 with improving momentum and is targeting a stronger start to 2026, while acknowledging that reported revenue in 2025 fell short of expectations due largely to contract timing and an EMEA sales transition.
Early 2026 outlook: Q1 revenue expected to rise
Chairman and CEO Michael DePasquale told investors the company anticipates first-quarter 2026 revenue of approximately $2.2 million, which he said would represent a 37% increase over Q1 2025 and a “larger sequential improvement” over Q4 2025. DePasquale also said management expects “a substantial improvement” in Q1 2026 bottom-line performance versus each quarter of fiscal 2025.
2025 performance: Revenue declined, but hardware and services grew
CFO Cecilia Welch said total 2025 revenue decreased 12% to $6.1 million from $6.9 million in 2024. The decline came despite gains in other parts of the business: hardware revenue more than doubled to $1.3 million, which Welch attributed largely to “increased purchases of our biometric solutions,” and service revenue increased 6% to $1.2 million due to a growing customer base and new deployments.
Welch said in Q4 2025, license fee revenue decreased 26%, hardware revenue increased 85%, and service revenue decreased 10%, citing the same factors discussed by management and the timing of deployment.
Key drivers of the year-over-year comparison
DePasquale pointed to two major items affecting the year-over-year comparison, totaling roughly $2 million. The first was a $1.5 million two-year license renewal with a foreign national bank, where “the bulk” of revenue was recorded in 2024, leading to roughly an $800,000 decrease in recognized revenue related to that customer in 2025 compared with 2024. He emphasized the relationship is “continu[ing] to grow nicely” despite the timing impact.
During Q&A, DePasquale confirmed that the foreign bank referenced in the press release—an expanded one-year license renewal of over $1 million for 2026—was the same customer. He said the renewal represented an approximately 30% increase in revenue over the prior contract and reflected growth in the user population. He also said the customer is assessing “more advanced technologies,” including “one-to-many,” which he said could expand the contract size over time, though he did not provide additional specifics.
The second factor was the completion in 2025 of a strategic transition in the EMEA region to selling only BIO-key branded solutions. DePasquale said the transition took longer than expected and contributed to 2025 underperformance, but he expects it to support improved gross margin and growth prospects as the company rebuilds its EMEA pipeline with BIO-key-only offerings.
Asked for more color on EMEA, DePasquale said the region tends to involve larger deals—often “in the high hundreds of thousands of dollars” and sometimes seven-figure opportunities—sold through channel partners and typically to larger customers. He said the benefits are “incredible when they close,” and management is “very bullish and very encouraged about 2026.”
Margins, expenses, and profitability objectives
Welch reported 2025 gross margin of 77.5%, down from 81.4% in 2024, which she attributed primarily to revenue mix. She noted gross margins on license fees improved to 91% in 2025 from 88% in 2024, reflecting the impact of selling branded products rather than third-party products in EMEA.
On costs, DePasquale said the company reduced total SG&A by almost $800,000, or 11%, and cut total operating expenses by 7% in 2025. Welch said SG&A fell 11% due to cost management efforts including a reorganization of sales personnel, reduced marketing show expenses, and lower audit fees, partially offset by higher professional fees tied to financing activities. She said R&D engineering costs increased 4% in 2025 to support new product development.
Despite lower operating expenses, Welch said the company’s net loss increased to $4.6 million, or $0.69 per share, from $4.3 million, or $2.09 per share, in 2024. For Q4 2025, net loss increased to $1.7 million, or $0.19 per share, compared with $1.4 million, or $0.46 per share, in Q4 2024. Welch noted that weighted average shares outstanding reflected warrant exercises and other financial activities.
DePasquale reiterated the company’s aim of reaching breakeven and profitability, stating management’s objective is to be “break even or profitable and to be cash flow positive.” In response to a shareholder question, he said the timing of achieving that goal cannot be specified, adding that management’s goal is to reach it in “the early part of 2026.”
Product roadmap, go-to-market approach, and financial position
DePasquale highlighted product and market initiatives aimed at regulated industries such as defense, banking, and healthcare. He said BIO-key introduced the FBI FAP 20 certified EcoID III fingerprint scanner in Q4, describing it as the company’s most advanced reader and noting it pairs encrypted device-to-host communication with liveness detection for “faster, more secure authentication.”
He also said the company is finishing work on a major update to its PortalGuard identity platform, version 7.0, which he said includes “major platform monetization,” increased configurability and flexibility, and “improved lower-cost deployment capabilities.” He said the release is undergoing third-party security testing and is expected during the second quarter.
In Q&A, DePasquale described version 7.0 as significant, especially for partners seeking more control to deploy and manage subscription licenses, including multi-tenant management and enhanced dashboard capabilities.
On go-to-market strategy, DePasquale said BIO-key’s business is predominantly subscription-based and that the company uses a partner-centric model—about 50% of new U.S. business and nearly 100% of international business is sold through channel partners. He cited relationships with Amazon and TD SYNNEX, and said TD SYNNEX is expected to act as a “force multiplier” in public sector markets.
Welch said BIO-key ended 2025 with current assets of $4.6 million, including cash of $2.7 million, compared with $1.9 million in current assets and $438,000 of cash at the end of 2024. Accounts receivable increased 73% to $1.2 million at December 31, 2025, from $718,000 at the end of 2024. She also reported book value of $7.6 million at year-end 2025, up from $3.8 million at the close of 2024. Welch said the company planned to file its Form 10-K “within the next week.”
DePasquale also addressed Nasdaq listing compliance. He said the company filed a proxy as a “belt and suspenders” measure and that management would not “risk the potential to lose our Nasdaq listing.” He said the company had until early May for the stock to trade above $1 for 10 consecutive days to avoid a reverse split, adding that if the threshold is met, the company “certainly would not do the reverse split,” but that it would proceed if needed.
About BIO-key International (NASDAQ:BKYI)
BIO-key International, Inc is a developer and provider of fingerprint biometric identity and access management solutions, serving enterprise and government customers. The company’s core offerings include a range of fingerprint readers and authentication software designed to verify user identity across physical and digital environments. By leveraging proprietary template-on-card and template-on-device technologies, BIO-key seeks to enhance security and streamline user access without reliance on traditional passwords.
In addition to hardware sensors, BIO-key delivers software platforms that integrate with existing IT infrastructures such as Microsoft Active Directory and major workforce management systems.
