• Revenue: Decreased 11% to $6.9 million in 2024.
• License Fee Revenue: Increased 20% to $5.2 million in 2024.
• Service Revenue: Declined to $1.1 million from $2.2 million in 2023.
• Hardware Revenue: Declined to $632,000 from $1.2 million in 2023.
• Gross Profit: Increased to $5.6 million in 2024 from $1.4 million in 2023.
• Adjusted Gross Margin: 78% in 2024 compared to 64% in 2023.
• Operating Expenses: Reduced by $600,000 to $9.7 million in 2024.
• Net Loss: Improved to $4.3 million in 2024 from $8.5 million in 2023.
• Cash Burn: Reduced by 23% to $2.9 million in 2024 from $3.8 million in 2023.
• Debt Reduction: Reduced outstanding debt to approximately $730,000 from $1.5 million.
• Cash and Cash Equivalents: $438,000 as of December 31, 2024.

• Warning! GuruFocus has detected 4 Warning Signs with BKYI.

Release Date: March 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BIO-key International Inc (NASDAQ:BKYI) significantly strengthened its financial position by reducing outstanding debt from approximately $1.5 million to $730,000.
• The company increased high-margin software license fee revenue by 20% to $5.2 million in 2024.
• Gross profit rose 8% to $5.4 million, with an adjusted gross margin of 78% compared to 64% in 2023.
• BIO-key International Inc (NASDAQ:BKYI) reduced operating expenses by 6% and trimmed cash burn by 23% in 2024.
• The company secured a $910,000 contract with a foreign financial services client and expanded its deployment with a defense ministry, indicating strong customer interest and growth potential.

Negative Points

• Overall revenue declined by 11% to $6.9 million in 2024 due to the exit from a low-margin services agreement with Swivel Secure.
• Service revenue decreased to $1.1 million from $2.2 million in 2023, and hardware revenue also declined.
• The transition away from Swivel Secure resulted in revenue headwinds, impacting the company's short-term financial performance.
• Despite improvements, BIO-key International Inc (NASDAQ:BKYI) reported a net loss of $4.3 million in 2024, though this was an improvement from the previous year.
• The company faces challenges in the cybersecurity market, including the need to address growing cybersecurity vulnerabilities and the shortage of cybersecurity talent.

Q & A Highlights

Q: Can you clarify if the 10-K filing is expected by Monday and if there are any new restatements since the last report? A: Yes, the 10-K is expected to be filed by Monday. The restatements refer to the 2023 restatement, with no new restatements this year. - Cecilia Welch, CFO

Q: What caused the revenue expectations for 2024 to not meet the flat or growth expectations compared to 2023? A: The transition and exit from the Swivel Secure business resulted in a revenue shortfall of about $800,000 to $900,000 for 2024. Some opportunities took longer to convert to BIO-key, causing delays into the first quarter of 2025. However, this transition significantly improved gross margins. - Michael DePasquale, CEO

Q: Is the transition away from Swivel Secure contracts complete, and are there any headwinds entering 2025? A: The transition is completely done. We are now focusing on BIO-key products, which has resulted in significant contracts, including a recent one with a European defense agency. - Michael DePasquale, CEO

Q: How is the first quarter of 2025 looking compared to the fourth quarter of 2024? A: While the first quarter is not closed yet, we expect growth in 2025 with improved profitability and a more aggressive path to cash flow breakeven. - Michael DePasquale, CEO

Q: Are there expectations for growth in hardware and services revenue segments in 2025? A: Yes, we expect growth in both hardware and services. Biometrics are increasingly part of contracts, leading to hardware sales, and services revenue is expected to grow through professional services and support. - Michael DePasquale, CEO

Q: Can you provide details on the $910,000 contract secured in the fourth quarter? A: A significant portion of that contract will be recognized in Q1 2025. It was an upgrade for a financial services customer, contributing to recurring revenue. - Michael DePasquale, CEO

Q: Is there any update on the long-stalled BIO-key contracts in Nigeria? A: The World Bank is attempting to accelerate the enrollment of citizens in Nigeria, which could lead to sales of hardware and software. We are monitoring the situation closely. - Michael DePasquale, CEO

Q: What is the focus of the increased R&D spending? A: R&D is focused on integrations with larger partners, APIs, and mobile authentication, particularly in biometrics, to stay on the leading edge. - Michael DePasquale, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.