BIO-key Cuts Net Loss 8% in Third Quarter as License Fees Grow 39%
Key Facts
On November 13, BIO-key reported results for the third quarter and nine months ended September 30, 2026, posting a net loss of $886,083, down 8% from $964,849 in the year-earlier period. The company said license fee revenue rose 39% to $1.3 million, marking a third consecutive quarter of double-digit percentage growth, driven mainly by momentum in the Middle East and Europe. By contrast, quarterly total revenue fell to $1,482,781 from $1,549,706 a year earlier. The company said growth in license fees largely offset lower hardware and services revenue, which varies more with project timing. The results show improvement in losses, margin and revenue mix despite lower total quarterly sales.
License fee revenue was $1,275,249, compared with $917,951 in the third quarter of 2025, and the company said the increase reflected deployments of solutions at new customers. The fees accounted for 86% of total revenue, up from 59% a year earlier. This shift means higher-margin fees made up a larger share of quarterly revenue as they continued to grow year over year. By contrast, hardware revenue fell to $12,404 from $363,642 in the year-earlier period. The company attributed the difference to current-quarter orders from new customers being primarily for software, while the previous quarter included a large hardware deployment. The differing timing of those projects highlights why hardware and services sales fluctuate even as the license revenue base expands.
Gross margin improved to 90% in the quarter, compared with 77% in the third quarter of 2025. BIO-key linked the improvement to the larger share of high-margin license fees in total revenue. The result is consistent with licenses rising to 86% of revenue, compared with 59% a year earlier. For the first nine months of 2026, revenue rose 14% to $5.5 million, while gross margin was 86%, compared with 77% in the same period of 2025. Net loss for the nine months also improved 42% to $1.7 million, from $2.9 million in the year-earlier period. The results for the extended period place the quarterly improvement within a broader trend of revenue growth, better margins and a smaller loss.
The company said its net loss in the quarter was $886,083, while the loss attributable to common stockholders was $5,388,087, including a deemed dividend related to the inducement of warrant exercises. The figures reflect two different measures: the accounting net loss declined from its level a year earlier, while the figure attributable to common stockholders was affected by the warrant-related item. The company therefore reported the stockholder loss separately from the quarterly net loss. The year-over-year comparison for net loss remains a decline of 8%, from $964,849 in the third quarter of 2025. On operating liquidity, working capital was $3.1 million as of September 30, 2026, up from $0.8 million on June 30 and $1.4 million on December 31, 2025.
On regional activity, BIO-key said it added three new government customers in the Middle East during October, bringing the number of new customers in the region over the previous seven months to eight. The company linked its expectation of a strong finish to 2026 and a strong start to 2027 to recent government wins in the region and expanding opportunities in the government and financial sectors. It added that expected annual license renewals support that outlook. The announcement did not include figures for these opportunities or renewals, but identified the sources underpinning the company's expectations. The company held its investor call on the results on November 13 at 10 a.m. U.S. Eastern time.