BIO KEY INTERNATIONAL INC Q1 FY2025 earnings call

• Mike DePasquale noted Q1 '25 revenue rose 10% vs Q4 '24, with transition to high-margin BIO-key branded products in EMEA. Revenue from a financial services customer was impacted by an upgrade to advanced biometric solution, but expected to more than double in next two-year period. - Gross profit 83% due to SaaS model. SG&A expense reduced 23% year-over-year. Cash position increased to over $3 million, note payable reduced. - Solid traction in defense and financial services verticals. National Bank of Egypt integrating PortalGuard IAM platform. Wyoming Department of Education deployed PortalGuard IDaaS. Strategic partnership with California's EdTech Joint Powers Authority for PortalGuard in K-12 schools. - Transition away from Swivel Secure services strengthened business long-term with superior capabilities and enhanced margins.

BIO-key's Q1 '25 revenue rose 10% to $1.6 million versus Q4 '24. Year-over-year, revenue was impacted by $1.2 million from a prior-year financial services contract. Service revenues in Q1 '25 increased to approximately $273,000 from $213,000 in Q1 '24, with recurring support service revenue up 37% to $265,000. Hardware revenue increased to $236,000 in Q1 '25 from $18,000 in Q1 '24. Gross margin remained healthy at 83% in Q1. Recurring support service revenue contributed significantly, and hardware sales grew due to increased fingerprint biometric scanner purchases.

• Expect revenue from the financial services customer to more than double to approx $3 million for next two-year license period starting in Q1 '26. - Goal is to sequentially grow business and get to profitability. Anticipate growth in Q2 and beyond despite potential seasonality challenges in Q3 due to European August slowdown.

• Forward-looking statements subject to risks and uncertainties that may cause actual results to differ. - Market dynamics affecting stock price and potential challenges in closing large defense and government contracts due to secrecy and agency restrictions.

Q: Jack Vander Aarde asked about the large financial services customer's revenue, its contribution to other revenues, and the status of Wyoming Department of Education and National Bank of Egypt contributions.

A: Michael DePasquale responded that the large customer's revenue was $690,000 in Q1 '25, with other revenue from mix of service, new customer, and upsell. Wyoming and Egypt were Q1 events with potential for future opportunities.

Q: Dan Khamis asked about SG&A drop, deferred revenue, cash burn, defense contracts, and Boumarang.

A: Cecilia Welch discussed SG&A reduction due to headcount change and cost control. Deferred revenue from longer contracts. Cash burn related to payables. Michael DePasquale clarified defense contracts are with government defense ministries, not contractors, and discussed challenges in disclosing defense deals.