BIO-Key International's Earnings Call Contradictions: ARR Run Rate, 2026 Banking Renewal, and Foreign Bank Contract Value Shifts

Date of Call: Mar 31, 2026

Financials Results

• Revenue: $6.1M, decreased 12% YOY
• EPS: $0.69 loss per share, compared to $2.09 loss per share in 2024
• Gross Margin: 77.5%, compared to 81.4% in 2024

Guidance:

• Q1 2026 revenue expected to be approximately $2.2 million, representing a 37% increase over Q1 2025 and a larger sequential improvement over Q4 2025.
• Expect a substantial improvement in Q1 2026 bottom line performance exceeding each of fiscal 2025 quarters.
• Goal to reach breakeven and profitability in 2026, with expected cash flow positivity.

Business Commentary:

Revenue Outlook and Growth Strategy:

• BIO-key International anticipates Q1 2026 revenue of approximately $2.2 million, representing a 37% increase over Q1 2025 and a larger sequential improvement over Q4 2025.
• The growth is driven by increased urgency and focus from customers in the military, defense, financial services, and regulated industries to enhance security measures.

EMEA Transition and Impact on Revenue:

• The company's 2025 revenue was affected by a strategic transition in the EMEA region, impacting software license revenue by roughly $800,000 compared to 2024.
• This transition to selling only BIO-key branded solutions is expected to benefit gross margins and growth prospects in 2026.

Product Development and Market Position:

• BIO-key is set to release significant updates for its PortalGuard identity platform, version 7.0, enhancing monetization and deployment capabilities.
• The development aligns with market trends favoring passwordless authentication and positions BIO-key to capitalize on growing demand in regulated industries.

Cost Management and Profitability Goals:

• In 2025, BIO-key reduced total SG&A expenses by 11% and overall operating expenses by 7%.
• Continued cost management and operational efficiency initiatives are aimed at progressing toward the company's goal of breakeven and profitability in 2026.

Cash Position and Financial Health:

• BIO-key ended 2025 with $2.7 million in cash, increasing its book value to $7.6 million.
• The strong cash position provides a solid base to support growth plans, contributing to the company's optimism for 2026.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed optimism: 'We are now seeing much more urgency and focus from our customers and prospects', 'We are poised to deliver long-term shareholder value', 'Given the growing adoption...we expect 2026 to be a very exciting and productive year', 'We are entering the most exciting chapter in our company’s history'.

Q&A:

• Question from Jack Vander Aarde (Maxim Group): Can you speak further about the 2025 revenue softness due to a significant contract renewal with a foreign retail bank? Is this an active customer? Are they due for an expansion or renewal in 2026?
  Response: The foreign bank renewed for one year at over $1 million, a 30% increase. The 2025 underperformance was also impacted by a longer-than-expected EMEA transition to selling only BIO-key branded solutions, which is now expected to benefit future growth.

• Question from Jack Vander Aarde (Maxim Group): Is the $1.04 million one-year license renewal with a foreign bank the same customer from 2024?
  Response: Yes, that is the same customer.

• Question from Jack Vander Aarde (Maxim Group): Regarding the Q1 2026 revenue target of $2.2 million, is this any slippage from Q4? What is the expected mix?
  Response: The majority will likely be license revenue, with some strong hardware revenue, expecting high gross margins (80%+).

• Question from Jack Vander Aarde (Maxim Group): Where are the largest potential deal opportunities?
  Response: Significant opportunities are seen globally in defense, intelligence, financial services, healthcare, and through partners like TD SYNNEX in government and state/local/federal sectors.

• Question from Dan Camus (Private Investor): Were Q1 expenses about the same as Q4?
  Response: Management cannot comment on exact Q1 expenses but expects them to be similar to other quarters, with potential variability from events like a planned website relaunch.

• Question from Dan Camus (Private Investor): What is the R&D outlook for 2026?
  Response: R&D expenses are expected to be relatively stable, not grow significantly, with a focus on using AI tools to increase efficiency and reduce costs.

• Question from Dan Camus (Private Investor): Is there anything revolutionary about PortalGuard version 7.0?
  Response: Yes, it is a significant update with major platform monetization, multi-tenant management for partners, and improved deployment capabilities.

• Question from Dan Camus (Private Investor): Is the 30% increase in the foreign bank renewal just more licenses?
  Response: The increase is exciting due to potential advanced technology deployments and growth in user population, with opportunities to expand the contract significantly.

• Question from Dan Camus (Private Investor): Is break-even expected in Q2, or just reduced cash burn in Q1?
  Response: The goal is to reach break-even and cash flow positivity in early 2026, with revenue in the $2-3M range and expenses around $2M.

• Question from Dan Camus (Private Investor): Is there evidence U.S. businesses are purchasing from BIO-key for passwordless adoption?
  Response: Yes, new business is being won, and the partnership with TD SYNNEX is a strong proof point for expansion.

• Question from Dan Camus (Private Investor): Is there an underlying deal with TD SYNNEX?
  Response: Yes, there is a series of deals in progress with them, more of which will be announced.

• Question from Dan Camus (Private Investor): What is the ARR in Q1?
  Response: ARR remains in the $6M-$7M range.

• Question from Dan Camus (Private Investor): Any changes in the Boomerang asset?
  Response: No change in value; Boomerang has filed an S-1 and made some product acquisitions.

• Question from Dan Camus (Private Investor): Could the stock trade above $1 in the next 10 days to avoid a reverse split?
  Response: Management hopes so, but if not, the board will consider a reverse split to protect the Nasdaq listing, with the shareholder meeting in late April.

Contradiction Point 1

Annual Recurring Revenue (ARR) Run Rate

ARR estimate appears inconsistent between quarters.

Jack Vander Aarde (Maxim Group) - Jack Vander Aarde (Maxim Group)

2025Q4: ARR remains in the $6-$7 million range. - Mike DePasquale(CEO)

What is the current Annual Recurring Revenue (ARR) run rate? - Dan Khamis (Private Investor)

2025Q3: ARR is estimated at $6–7 million. - Michael DePasquale(CEO)

Contradiction Point 2

Status of the Large Q1 2026 Banking Customer Renewal

Contradiction on whether the key renewal is still on track for early 2026.

What are your expectations for Maxim Group's Q3 earnings? - Jack Vander Aarde (Maxim Group)

2025Q4: The 2025 softness was largely due to a $1.5 million two-year license from 2024 that was fully recognized in that year... The foreign bank customer is active and expanded its contract in 2026. - Mike DePasquale(CEO)

Can you provide clarity on the 2025 revenue impact from the significant contract renewal with the foreign retail bank and confirm if the customer is active with potential expansion or renewal in 2026? - Jack Vander Aarde (Maxim Group LLC)

2025Q3: The large banking customer renewal is still on track for early 2026. - Michael DePasquale(CEO)

Contradiction Point 3

Expense Run Rate and Financial Trajectory

Contradiction on whether expense stability is expected to continue or reverse.

What role does Dan Camus (Private Investor) play in the company? - Dan Camus (Private Investor)

2025Q4: R&D expenses are expected to be relatively stable... The company is actively assessing AI tools to improve efficiency, reduce costs... - Mike DePasquale(CFO)

What are your R&D expense expectations for 2026? - Dan Thomas (Private Investor)

2025Q2: The Q2 increase was a temporary 'blip' due to specific events. The company expects to maintain the expense run rate established at the start of the year for Q3 and Q4. - Mike DePasquale(CFO)

Contradiction Point 4

Contract Revenue Recognition Timing

Contradiction on when revenue from recently closed contracts will be recognized.

Jack Vander Aarde (Maxim Group) - Jack Vander Aarde (Maxim Group)

2025Q4: The 2025 softness was largely due to a $1.5 million two-year license from 2024 that was fully recognized in that year, making 2025 comparison difficult. - Mike DePasquale(CFO)

Can you provide clarity on the 2025 revenue impact from the significant foreign retail bank contract renewal, and whether the customer is active with plans for expansion or renewal in 2026? - Dan Thomas (Private Investor)

2025Q2: Contracts closed in Q2 and late Q1 will generate revenue in Q3... The contracts are real and will generate revenue through the end of this year and into next year... - Mike DePasquale(CFO)

Contradiction Point 5

Large Foreign Bank Customer's Contract Status & Value

Contradiction on whether the customer's contract is active and its value trajectory.

What are your expectations for the company's revenue growth in the next quarter? - Jack Vander Aarde (Maxim Group)

2025Q4: The customer renewed for one year at over $1 million, representing a ~30% increase in value. The 2025 softness was largely due to a $1.5 million two-year license from 2024 that was fully recognized in that year... - Mike DePasquale(CEO)

Can you provide clarity on the 2025 revenue impact from the significant contract renewal with the foreign retail bank and whether this customer is active with plans for expansion or renewal in 2026? - Jack Vander Aarde (Maxim Group)

2025Q1: Confirmed this is now BIO-key's single largest customer... This results in a $3M renewal opportunity in Q1 2026 for a two-year contract... - Michael DePasquale(CEO)