BIO KEY INTERNATIONAL INC Q4 FY2024 earnings call

Business Transition - Exited low-margin software and services with Swivel Secure, focusing on core BIO-key solutions like PortalGuard IAM and identity-bound biometrics. ### Financial Strengthening - Received approximately $3.8 million from warrant exercise, reduced debt to $730,000. ### 2024 Results - License fees up 20% to $5.2M, gross profit up 8% to $5.4M with adjusted gross margin 78%, revenue down 11% to $6.9M. ### Market Opportunities - Growing demand for passwordless, phoneless, tokenless solutions in defense, financial services, education; partnerships in EMEA, IoT, etc. ### 2025 Outlook - Solid start, focusing on cost reduction, sales through channels, and growth in subscription-based and partner-centric business.

In 2024, high-margin software license fee revenue increased 20% to $5.2 million. Service revenue declined to $1.1 million in 2024 from $2.2 million in 2023 due to exiting low-margin software and services. Hardware revenue had positive reserve adjustments of $213,000 in 2024, and in Q4 2024, hardware revenue declined 88% to $94,000. License fees contributed significantly with a 20% increase, while services and hardware segments saw changes in their revenue figures.

2025 Expectations - Confident in returning to growth and improved profitability. - Expect top and bottom-line improvement. - Anticipate growth in hardware as biometrics are integrated into contracts, and services to grow with professional services.

• Forward-looking statements subject to SEC risks and uncertainties. - Potential impact of transitioning away from low-margin services on revenue if not managed properly. - Uncertainties in emerging markets and IoT initiatives taking time to develop.

Q: Clarification on 10-K filing and restatements A: Ceci Welch said the 10-K is expected to be filed by Monday, and they are referring to the 2023 restatement with nothing new since the last report.

Q: Transition from Swivel Secure and impact on 2024 revenue A: Mike DePasquale explained the transition caused a revenue shortfall in 2024 but improved margins due to exiting low-margin contracts.

Q: Hardware and services segment growth A: Mike DePasquale expects growth in hardware as biometrics are integrated into contracts, and services to grow with professional services.

Q: European defense agency contract A: Mike DePasquale mentioned a substantial contract with a European defense agency, with phased implementation and work ongoing in the second quarter.

Q: R&D spending A: Mike DePasquale said they are investing in Passkey integrations and biometrics for mobile authentication to stay on the leading edge