Q2’26
Filed Aug 14, 2026BIO-key’s Bottom Line Improves 51% on 13% Rise in Q2 Revenues Reflecting Strength with Government, Defense, and Financial Sector Customers Globally
Q2 revenue, gross profit, gross margin and net loss improved year over year, led by license fees and releases of previously reserved hardware inventory. A delayed large hardware order reduced quarterly hardware revenue, the company remained loss-making, and second-half targets are qualitative rather than quantified.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenuesGAAP | $1,919,991 | – | 13% |
| Gross profitGAAP | $1,674,040 | – | – |
| Gross marginGAAP | 87% | – | – |
| Total costs and other expensesGAAP | $245,951 | – | – |
| Selling, general and administrative expensesGAAP | $1,563,027 | – | – |
| Research, development and engineering expensesGAAP | $640,418 | – | – |
| Total operating expensesGAAP | $2,203,445 | – | 5% |
| Operating lossGAAP | $(529,405) | – | – |
| Total other income (expense), netGAAP | $(47,447) | – | – |
| Net lossGAAP | $(576,852) | – | 51% |
| Basic and diluted loss per common shareGAAP | $(0.56) | – | – |
| Weighted average common shares outstanding, basic and dilutedGAAP | 1,037,155 | – | – |
| Six-month total revenuesGAAP | $4,065,524 | – | 23% |
| Six-month gross profitGAAP | $3,443,273 | – | – |
| Six-month total operating expensesGAAP | $4,130,392 | – | – |
| Six-month operating lossGAAP | $(687,119) | – | – |
| Six-month net lossGAAP | $(781,889) | – | 59% |
| Six-month basic and diluted loss per common shareGAAP | $(0.75) | – | – |
| Six-month weighted average common shares outstanding, basic and dilutedGAAP | 1,036,938 | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| License feesSeveral new customer license agreements in Q2’26. | $1,229,345 | – | 53% |
| HardwareTiming of customer hardware deployments, including a large anticipated customer order that was delayed and is now expected to ship in the second half of 2026. | $459,641 | – | 19% decrease |
| ServicesLower non-recurring service revenues related to required product customization and lower recurring service revenues due primarily to the timing of service agreement renewals. | $231,005 | – | 28% decrease |
2H’26 outlook
- NoteBIO-key targets revenue growth and profitability for the 2H’26.
- NoteThe large hardware order is now expected by year-end.
- NoteThe company expects anticipated projects with government and banking and financial services customers.
- NoteThe company is working to develop strategic partnerships and identify potential acquisitions related to AI governance opportunities.
What drove it
- License fee revenue increased 53% to $1,229,345, reflecting several new customer license agreements in Q2’26.
- Gross margin improved to 87% from 73%, reflecting higher-margin license fee revenue and increased benefit from sales of hardware inventory that had previously been fully reserved.
- Operating expenses decreased 5% to $2,203,445, principally due to lower selling, general and administrative expenses associated with ongoing cost containment measures.
- The company cited signed contracts, new channel partners and a growing base of project discussions in Europe, Middle East and Africa.
- Recent customer activity included Saudi Arabia, Portugal, Jordan and Alabama’s AOD Federal Credit Union.
Concerns
- Approximately $0.8M in fully-reserved hardware revenue with a 100% gross profit contribution anticipated in Q2’26 was delayed and is now anticipated in 2H’26.
- Hardware revenue decreased 19% to $459,641.
- Services revenue decreased 28% to $231,005.
- BIO-key reported a Q2’26 net loss of $(576,852).
- Cash and cash equivalents were $1,379,300 at June 30, 2026 before the subsequent warrant inducement transaction.
- Stockholders’ equity declined to $4,334,878 at June 30, 2026 from $5,106,805 at December 31, 2025.
What to watch
- Shipment of the delayed large hardware order, which the company expects by year-end.
- Conversion of government, banking and financial-services projects in the second half of 2026.
- Whether revenue growth and financial discipline result in second-half profitability.
- Execution of the EMEA pipeline, channel-partner activity and new customer deployments.
- Use of proceeds from the warrant inducement transaction and the potential effect of the issuance of unregistered warrants to purchase 1,236,668 shares of common stock.
Balance sheet and cash flow
- Cash and cash equivalents were $1,379,300 at June 30, 2026, compared to $2,694,663 at December 31, 2025.
- Accounts receivable, net, was $1,731,509 at June 30, 2026, compared to $1,220,822 at December 31, 2025.
- Inventory was $375,740 at June 30, 2026, compared to $370,879 at December 31, 2025.
- Total current assets were $3,806,635 at June 30, 2026, compared to $4,537,687 at December 31, 2025.
- Total assets were $7,483,076 at June 30, 2026, compared to $8,303,315 at December 31, 2025.
- Note payable was $699,769 at June 30, 2026, compared to $604,102 at December 31, 2025.
- Total current liabilities were $3,013,184 at June 30, 2026, compared to $3,096,160 at December 31, 2025.
- Total liabilities were $3,148,198 at June 30, 2026, compared to $3,196,510 at December 31, 2025.
- Total stockholders’ equity was $4,334,878 at June 30, 2026, compared to $5,106,805 at December 31, 2025.
- Over the past two weeks, BIO-key reduced the outstanding balance due on its 2025 note by $350k, or 51%, to $325k, in exchange for the issuance of 81,100 shares of common stock.
- This week, the Company raised $2.5M through a warrant inducement transaction involving the sale of 618,334 shares of common stock upon the exercise of outstanding warrants at $4.06 per share and the issuance of unregistered warrants to purchase 1,236,668 shares of common stock at an exercise price of $4.06 per share.
- Reflecting net proceeds from this financing, BIO-key’s current cash position has increased to over $4.5M.
Analysis
BIO-key delivered year-over-year improvement in its second quarter. Total revenues increased 13% to $1,919,991, while gross profit increased to $1,674,040. The reported 87% gross margin, compared with 73% in Q2’25, reflected higher license-fee revenue and an increased benefit from sales of hardware inventory that had previously been fully reserved. License fees increased 53% to $1,229,345 following several new customer license agreements.
The revenue mix was uneven. Hardware revenue decreased 19% to $459,641 because of customer deployment timing, including a large anticipated order that was delayed into the second half. Services revenue decreased 28% to $231,005, due to lower customization work and service-renewal timing. The delayed order was expected to contribute approximately $0.8M of fully-reserved hardware revenue with a 100% gross profit contribution in Q2’26, making its delivery timing central to the second-half outlook.
Cost containment supported the bottom line. Total operating expenses decreased 5% to $2,203,445, with lower selling, general and administrative expenses partly offset by reverse-split, audit and tax-related expenses. The operating loss improved to $(529,405), and net loss improved to $(576,852), or $(0.56) per share. First-half revenue increased 23% to $4,065,524 and the first-half net loss improved to $(781,889) from $(1,903,941).
Liquidity changed after quarter end. At June 30, cash and cash equivalents were $1,379,300 and total stockholders’ equity was $4,334,878. The company subsequently raised $2.5M through a warrant inducement transaction and stated that current cash had increased to over $4.5M. It also reduced the outstanding balance on its 2025 note by $350k, or 51%, to $325k in exchange for 81,100 shares of common stock.
Management targets revenue growth and profitability in 2H’26 but did not provide quantitative revenue, margin, expense or tax-rate guidance. Its outlook rests on the delayed hardware order, anticipated government and financial-sector projects, and expanding EMEA activity. Investors should focus on conversion of this pipeline, shipment timing for the delayed hardware order, and whether the improved revenue mix and operating discipline can support the targeted second-half profitability.
Management, verbatim
While the delay of a large hardware order caused our Q2 results to fall short of our expectations, we were able to deliver solid top and bottom-line improvements in both the quarter and first half, and our building business momentum supports a very positive second half outlook.
Mike DePasquale, CEO
Bottomline –– our focus on opportunities in our Europe, Middle East and Africa – our ‘EMEA’ region, is really starting to bear fruit, with signed contracts, new channel partners and a growing base of new project discussions that support our positive outlook.
Mike DePasquale, CEO
Top line growth, combined with ongoing financial discipline, should position us to achieve profitability in the second half.
Mike DePasquale, CEO
Not in the filing
stated, not guessed- Previous-quarter comparisons and quarter-over-quarter changes for reported operating metrics were not provided.
- Quantitative 2H’26 guidance for revenue, gross margin, operating expenses and tax rate was not provided.
- Operating cash flow and free cash flow were not provided.
- Non-GAAP financial measures, including non-GAAP operating income, net income and EPS, were not provided.
- Share repurchases and dividend information were not provided.
- A previous-quarter outlook was not provided, so actual performance versus prior guidance cannot be assessed.
- Numerical segment revenue guidance was not provided.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.