BKYI Q3 2026 earnings call transcript, November 13, 2026

Good morning, Mike.

What we're seeing is, again, as I mentioned in my prepared remarks, we're seeing very, very strong license revenue. And there's hardware as well in this. Sometimes it happens before, sometimes it happens after the sale in our EMEA group in the regulated space.

As a follow up to that, Mike, you're clearly having some great success in the Middle East. It's really ramping up. I think you've mentioned eight new material customers out there. I imagine this plays a role in shaping 2027. Does this, do you feel like you're entering? You're going to be entering 2027 and even 4226 on the licensing front. Out of these new customer wins, I guess, if you could quantify or just directionally, how does this set you up for, I guess, entering 27? Well, it kind of sets us up, number one, to be profitable. Number two, to be consistently profitable. And number three, to potentially be cash flow positive and remain cash flow positive. Again, when you're doing high end six figure and seven figure deals, the cash flow is wonderful. And when it's all software. The margins are incredible. Even again, we're going to see some larger hardware orders come along with this because typically these larger entities, when they deploy our technology, they're deploying biometrics. And so they need not only to enroll all of their employees or customers, but they need that. We have the facility to be able to identify them. And so our finger scanners get pulled along. So, I mean, I just think we're in an incredible position. We've never been in this position before where we're sitting on enough cash and receivables to really fund our business for a couple of years. pipeline of, you know, seven-figure opportunities that, you know, we obviously will be working in the next six months. So, it's just an entirely different, you know, opportunity for us today. And it's because of the dynamic.

That we're seeing in the world, right? You know, we've always had a very strong business, as you know, in the defense sector, international defense sector. We have a very large customer to support over 60,000 of our devices and enroll hundreds of thousands of their, you know, their folks. And so, this is now. Traveling of the other, right, sensitive government and financial services institutions on an international basis. And I don't want to discount also our domestic business. You know, that casino win. Which, again, was a Q4. That's a Q4 opportunity that was not recognized in Q3. So it'll be recognized this quarter. It's really kind of a resurgence and a reinvigoration of our domestic business with partners. We are really going full bore, similar in nature to the way we operate in. To me, a partner, partner, partner-centric. And I think that's going to have a huge impact on our domestic business as well. Great. And I'm glad you mentioned the casino win again. I want to just kind of follow up with that and just your thoughts on, I guess, the overall casino gaming hospitalities. space for BioKey bigger picture. And then also just touching on, obviously, the agentic AI update that you mentioned. How does the agentic AI space and opportunity in this new casino space, just how does this compare relative to, I guess, the upside you're seeing in defense, your other core verticals that are large?

Yeah, so just a couple of questions there. So let's go and answer the gaming one first. It's interesting because in gaming, they're struggling with a very typical security issue or problem that most enterprises are. Where you can't use a phone or a token, you have a very serious security issue and problem because you need multi-factor authentication in order to meet your compliance hurdles.

your finger and automatically authenticate and not have to have a phone or a token or a card, which can be shared and used by anyone. We have the perfect solution. This was our first entry. We did this deal from start to finish. This was a web key. It was a web lead that came in to us, right? So it was an inbound lead from inception to close was less than 60 days because they have a serious issue. Also, this customer, and this is a six-figure deal. Six-figure deal, a three-year contract. But this customer is also taking us to an event in the first quarter where we'll have the opportunity to share what we're doing for them with other potential prospects. So, you know, gaming is a big. In this country, not just the big names like MGM and the ones that you know in Vegas, there are an incredible number of tribal, local casinos and resorts in almost every state in the country. So it's a really, really nice opportunity. So that's the gaming question. You know, how does that relate against the EMEA scenario? Well, clearly the deals in defense and banking are, you know, some of them are seven figure. Many of them are seven figure deals. So they're bigger deals, right? Those are much bigger deals than even enterprise opportunities. You know, again, there's a balance. Do I think on the domestic side we can get to that point? I do. I think it's going to take us some time, but I think we can. As it relates to agentic AI, look, it's intuitive. You're hearing it all over. Agents are wonderful. They're incredible in terms of the.

The efficiency and productivity that they can provide to enterprise and government agencies. The problem is if they operate on their own without any human intervention, there's always a danger and a risk that they go rogue or you can't meet your compliance requirements and or you put your customers at. And so in the in the real world of agentic AI, you want a human to acknowledge and to validate and authenticate that agent to do very specific tasks on behalf of you or dating that with a biometric ensuring that. the individual who authorizes that who says, yes, this agent could go out and do X, Y, Z, knowing who they are, and when they validated and authenticated that process is critical and important. So we see that as a really, really big opportunity because AI is dominating, you know, the space. In enterprise and government, and securing AI agents is a real issue, and human innovation is not an option. It's required. And I suspect with the new legislative changes past election here last week, we're going to see a lot more pressure.

That we're securing and locking down agents so they don't go rogue. I appreciate all the color there. I know that was a loaded question. That's encouraging to hear, Mike. My last question, and then I'll hop in the queue, is just on the outlook and kind of relative to last year. Quarters outlook. I think you were targeting profitability in the back half of this year. Now, that's probably not quite on track now, but third quarter was close to breakeven operating income. I'm wondering if you could just share more of an update on your, I guess, more of a precise update on your outlook for 2017. Has anything changed? Are you expecting growth and profitability? Just any other color would be helpful. Thanks. Yeah, I'm really expecting significant growth. And I still think even in the fourth quarter here, we're going to see a very strong finish. And I'd like, obviously, we're targeting profitability. We're targeting to be cash flow positive. But certainly, as we go into the strongest quarter for our company, the first quarter, with the kind of pipeline we have and the opportunities that we're working right now, I'm highly encouraged we're going to see significant growth. And we're certainly...

to do anything from a financial perspective to support the company, we have enough resource right now to be able to do that. Okay, great. I appreciate the call, Mike. Thank you.

Thanks, Jack.

A couple of those deals are pretty large. So, you know, it's a balance, but it's definitely a reflection of the opportunities that we...the new business opportunities that we closed in Q3. Okay. With that kind of collectible, I mean, couldn't that result in a break-even cash flow by itself in the fourth quarter? Yeah, we hope. We hope it will. You know, it's timing of collections, right?

But, yeah, it certainly can. And what about this trend in AR? Do you consider that, I mean, it sounds like you consider it's either going to continue, or do you think it's peaked? Will it stay at this level? Just smaller on what you see in AR. I think it can continue if we close larger deals, right? I mean, it depends on how much business we close. And I think we're very encouraged by what we have in front of us for Q4.

And we collected more. And so the receivables were down, but our cash collections were up. But, you know, that's a dynamic that we'll see how that unfolds. Solid fourth quarter. I looked at some of your past results on the fourth quarter. They've been, I don't know, they averaged about one point. I think last year was 1.24 million. By solid, do you mean comparable to the results of the last quarters or these last fourth quarters?

Last year's fourth quarter revenue numbers. Cece, I don't know if you have that available because I don't have a mark to measure again.

Yeah, let me look real quick. Okay. So Dan, once Cece comes back with the number, I'll be able to articulate do I think it's going to be significantly over that or whatever. I don't want to just throw numbers out. But, yeah, we're... Yeah, last year was...

The agentic AI authentication market, could that be a killer app for you that actually opens up the U.S. market? Absolutely. In fact, it's funny. Internally, we're calling it a killer app. I don't like to introduce it in our, but we're calling it a killer app. First of all, including our passkey, it can attach anywhere. It doesn't matter what IDP, in other words, what maybe security infrastructure.

On top of that, without having to load tremendous amounts of software and infrastructure. So we do see that as a killer app. And we'll be deploying that to customers this quarter. So into 2027, we think this is going to be a really, really big partner-centric solution where these partners have existing customers. They can take this as an upsell and an add-on, which they love.

We think it's a killer app. Yeah, and you're talking about the U.S. market, right? U.S. and international. I don't think there's much of a differentiation in the context of where that can apply. You open up the U.S. market.

Yeah, and look, our U.S. business has been basically flat. We haven't seen as many...

with the partner network. When you bring someone like DLT on board, and they have a huge presence in public sector, they have a huge presence in enterprise, once that starts going, it's the gift that keeps giving. They continue to bring you to their customer base. And we've got to close the first handful, and we've got to hold their hand through it, and we do that. But at some point, when they get productive, it's going to be very powerful. And the products that we're using, it's going to be very powerful.

So that's what these partners want. They want something that's really simple, straightforward. They can demo it. They have a dashboard to be able to market the licenses and sell it, and then sell any hardware if that's required beyond that. Got it. Should we expect increasing R&D expenditures in this area then over the next 12 months? You know, I think we're solid here. I think Cece mentioned that our R&D expenses were pretty stable.

Some additional resource and support as sales climb, right, just to support our existing base. But we're pretty stable at this point. Great. You mentioned a multiple six-figure deal on the casino. Was that for a single resort or is it a whole chain? No, no. It's for a single entity. Yeah. It's for a single entity. Okay. So the opportunity there is pretty significant, right? If you think about, as I mentioned, do you think about it, do you think about it?

Some are just gaming. Some are resort and gaming. This is a pretty big opportunity.

And are you seeing other interest or interest from other casinos based on this? We are. And as I mentioned, we're attending an event that's sponsored with our existing installed customer here. And they're going to be helping us referencing a new opportunity. So it's pretty powerful.

On some of these other deals in the Middle East and Portugal, do I have a feel for the actual size or potential?

Well, they're just wondering. Yeah, they range from 500,000 to millions. It's their larger deals, the Middle East banking and government deals specifically.

Is it too early? Yes. Yes. We're very happy with what we're seeing there. And again, when it happens in Spain, it happens in Portugal and happens in other countries. But our focus right now, because we have an office in Madrid and we have an office in Lisbon, has been really those two countries. But I'm not sure that the public really understands.

Security company. So they own, you know, Brinks-like companies that pick up cash. They provide security guards, armed and otherwise. And they have a cybersecurity division. They're a multi, multi, multi-billion dollar company. They happen to be headquartered in Spain. That cybersecurity division is a global entity. The majority of their business is in Europe and South America, so that's where the bulk of it is. But they operate here in the U.S. as well. And bringing our solutions into their portfolio is really powerful. That has tremendous opportunity and upside for us because they're big.

Just to clarify on the hardware sale, you said it's pushed. Does that mean it's basically…

It's small. We shipped 60 units a couple weeks ago. We're shipping 100 here, 100 there. So we're going to get to the ultimate volume. It's just taking more time. And we're charging more for the lower quantity units as well. So it's good for us. You mean to this customer that was going to buy the big amount or… Correct. They're a partner. So they have multiple contracts, right? So they don't…it's not one end-user customer. It's multiple customers of theirs.

I believe there's going to be additional write-downs on that. None at this point. Nothing that we're aware of. We have been following their public filings and now they have…one of the big reasons for the write-down last year was because they were…we're not getting revenue yet and they now have a contract where they're getting revenue. So some improvements there along with the next one. Yeah. It's in their public filing.

On the warrants, I noticed the shareholders approved the $4 warrants. I guess you're kind of indicating there's no real chance that you'll need to sell additional shares and create even additional warrants or reduce the price of those warrants at this point. Clarify that, I guess, one more time. No reason at all. But as you know, they have the ability to exercise those warrants if they so choose. And if the stock goes to $20 a share, they may do that. On the other hand, if it, you know, hangs in the $5, $6, $7 range, maybe they won't. But we have no intention of doing anything in the context. You know, another inducement or we don't really need the cash and we don't have the need to do that right now. So I don't see that. But if they do exercise, it brings cash into the company. They're priced at $4.02 or $0.10 CC? It's $4.06. $4.06. Yeah. So $4.06. So we'll see what happens.

I think it's about half the share count. And actually, it's down to maybe $270K. I'm wondering if this increase in the short interest, whether you consider it has anything to do with these days where we trade 10, 40, 80 times the flow. It's hard to say, Dan. You know, we don't really understand that dynamic. Look, I've been dealing with this now for two years, and I talk to a lot of people, advisors, so forth and so on. It's hard to say, right? We know it's bots. We know it's, you know, machine trading. It's algorithmic trading. Unfortunately, in fact, our IR guys were, you know, saying this this morning. The volatility is creating, you know, big ups.

Runs and we trade 100 or 200 million shares. It's just people, not people. It's institutions, entities, whatever, making money in and out, right? 200 and something thousand shares short is about 10 percent of the outstanding, right? We have 2,035,000 shares outstanding. So if there's 200 something thousand shares shorted, it's 10 percent, not out of the realm. Reality. You can borrow the shares in certain Schwab and, you know, Fidelity will loan shares, but there just aren't that many to loan. So I think we have to deal with that. But 200,000 shares on 2 million. 35,000 outstanding is not what I would consider material. Yeah, no, not when you're trading 100 million shares. Okay, last question. If we take the cash and the AR minus the payables and crude liabilities, that's about 3 million. The price of 220 right now times one. Well, your float or your stated share count, I think, in your current document is 1.35 million. That's about 3 million also. So it seems to me your company is currently trading essentially for cash. Considering your buying window opens in a couple of days for a month, should we expect to see insider buying in the near future? Yeah, I think you will. Okay, that's the answer I'd like to hear. Okay, I appreciate all the time and hopefully the coming quarters will be good. Thank you. Great.

Thanks, Dan.