BIO-key International, Inc. — Q2 2026 Earnings Summary

Financial Performance

• Q2 2026 total revenues increased 13% year-over-year to $1,919,991, compared to $1,696,907 in Q2 2025.
• First half (1H) 2026 revenues grew 23% to $4,065,524, compared to $3,304,066 in 1H 2025.
• Q2 2026 net loss narrowed 51% to $(576,852) ($0.56 per share), compared to a net loss of $(1,167,396) ($2.01 per share) in Q2 2025.
• 1H 2026 net loss improved 59% to $(781,889) ($0.75 per share), compared to a net loss of $(1,903,941) ($3.61 per share) in 1H 2025.
• Q2 2026 gross margin improved to 87% from 73% in Q2 2025, driven by higher-margin license fee revenue and sales of previously fully-reserved hardware inventory.
• Q2 2026 gross profit increased to $1,674,040 from $1,232,727 in Q2 2025.
• Q2 2026 operating expenses decreased 5% to $2,203,445 from $2,316,577 in Q2 2025, primarily due to lower selling, general, and administrative expenses.
• License fee revenue in Q2 2026 rose 53% to $1,229,345, compared to $806,087 in Q2 2025.
• Hardware revenue in Q2 2026 decreased 19% to $459,641, compared to $568,824 in Q2 2025, due to the timing of deployments and a delayed large order.
• Service, maintenance, and other revenue in Q2 2026 fell 28% to $231,005, compared to $321,996 in Q2 2025.
• Cash and cash equivalents were $1,379,300 as of June 30, 2026, down from $2,694,663 at December 31, 2025.
• Stockholders' equity was $4,334,878 at June 30, 2026, compared to $5,106,805 at December 31, 2025.
• Accounts receivable increased to $1,731,509 at June 30, 2026, from $1,220,822 at December 31, 2025.
• Deferred revenue (current and long-term combined) totaled $688,896 at June 30, 2026, compared to $635,097 at December 31, 2025.
• Note payable balance was $699,769 at June 30, 2026, up from $604,102 at December 31, 2025.

Guidance and Future Outlook

• BIO-key targets revenue growth and profitability for the second half of 2026.
• Management anticipates a large hardware order, previously delayed, will ship by year-end 2026.
• The company expects to achieve profitability in the second half of 2026, supported by top-line growth and financial discipline.
• Outlook is supported by a solid pipeline of opportunities in government, banking, and financial services sectors.

Business Segments and Product Lines

• Saudi Arabia: Partnered with Maktabi Tech to advance identity security in the education sector and is working with local partners on government opportunities.
• Portugal: Selected by the Portuguese national security agency alongside Visualforma to strengthen identity and access management security; follows a nationwide public-sector rollout and a contract to secure digital identities in a major tourist city.
• Jordan: Selected by the Central Bank of Jordan for its national biometric authentication initiative to modernize financial sector authentication.
• United States: Alabama's AOD Federal Credit Union deployed BIO-key's phishing-resistant authentication and biometric security solution, serving over 37,500 members.
• AI Ecosystem: Management is exploring the role of biometric authentication in securing the AI ecosystem, specifically for non-repudiable authentication approvals for AI agent actions, and is seeking strategic partnerships and potential acquisitions in this area.

Market and Competitive Landscape

• Management cites growing incidence of international conflicts, political tension, and realigning security interests as drivers for customers in the EMEA region to strengthen access protection for mission-critical systems.
• Customers in the EMEA region are noted for moving more quickly to agreements and deploying solutions due to generally favorable regulatory frameworks.
• BIO-key is expanding its base of customer references, case studies, and deployments with globally respected military, defense, and police force customers.

Risks and Challenges

• A large anticipated hardware order was delayed in Q2 2026, impacting revenue timing, though it is now expected in the second half of the year.
• The company has a history of losses and limited revenue, with a focus on raising additional capital to satisfy working capital needs.
• Risks include potential security breaches, competition in the biometric technology and identity access management industries, and market acceptance of biometric products.
• Regulatory and compliance risks exist regarding SEC and Nasdaq periodic reporting requirements, including potential trading suspensions due to non-compliance with listing standards.
• Supply chain risks include potential tariffs and trade barriers affecting inventory imports from China, Hong Kong, and South Korea.
• Foreign currency exchange rate fluctuations and the duration of hostilities in Ukraine may impact European customers.

Management Commentary and Tone

• CEO Mike DePasquale acknowledged that the delayed hardware order caused Q2 results to fall short of expectations but highlighted solid top and bottom-line improvements.
• Management expressed a "very positive" outlook for the second half, citing momentum in the EMEA region and a growing base of new project discussions.
• The tone emphasized that the company's "decades of work" are now being recognized by a growing base of private and public sector customers.
• Management noted that the EMEA region is "bearing fruit" with signed contracts, new channel partners, and favorable regulatory environments.

Other Key Points

• Capital Raise: BIO-key raised approximately $2.5M via a warrant inducement transaction, selling 618,334 shares of common stock upon the exercise of outstanding warrants at $4.06 per share and issuing unregistered warrants for 1,236,668 shares at the same exercise price.
• Cash Position: Net proceeds from the warrant transaction increased the company's current cash position to over $4.5M.
• Debt Reduction: Over the past two weeks, BIO-key reduced the outstanding balance on its 2025 note by $350,000 (51%) to $325,000 in exchange for the issuance of 81,100 shares of common stock.
• Stock Split: In Q2 2026, BIO-key completed a 1-for-10 reverse stock split to regain compliance with Nasdaq listing rules, effective April 30, 2026.
• Investor Call: An investor call was scheduled for August 14, 2026, at 10:00 a.m. ET.