Financial Data and Key Metrics Changes - Revenue grew 26% in Q2 2025 to $36 million, exceeding guidance of $32.5 million to $34.5 million [8][10] - Adjusted EBITDA was approximately a $400,000 profit, compared to guidance of a loss between $2.1 million and $600,000 [10][12] - Operating cash flow in the quarter was $7 million, with free cash flow at $4.6 million, representing a 12.9% free cash flow margin [11][12] Business Line Data and Key Metrics Changes - Security Solutions accounted for approximately 90% of total company revenue, driving the outperformance [8][19] - Year-over-year revenue growth was primarily driven by an 82% increase in Security Solutions, partially offset by a contraction in secure networks [12][14] - Adjusted EBITDA improved by $3.3 million on a $7.5 million increase in revenue, indicating a 44% incremental adjusted EBITDA margin [12][14] Market Data and Key Metrics Changes - The TSA PreCheck program expanded to 415 enrollment centers across 40 states, a 43% increase since the last earnings call [15] - The company is targeting 500 enrollment locations by the end of 2025 [15] - The pipeline includes over 200 unique opportunities with an estimated contract value exceeding $4 billion, indicating strong future revenue potential [39] Company Strategy and Development Direction - The company is focused on scaling large programs within its Security Solutions segment, which is expected to drive significant revenue growth [21] - A commitment to expense discipline is enhancing operating leverage, contributing to substantial year-over-year growth in revenue, adjusted EBITDA, and cash flow [21] - The company plans to use free cash flow primarily for share repurchases while remaining open to opportunistic acquisitions [50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business outlook, forecasting significant year-over-year improvements in revenue, profit, and cash flow for the full year 2025 [11][12] - The company anticipates a sequential increase in revenue and adjusted EBITDA in the second half of the year [10][21] - Management highlighted the robust and recession-resistant markets they operate in, with well-funded customers [54] Other Important Information - The company resumed share repurchases, deploying $4 million to buy back approximately 1.5 million shares at a weighted average price of $2.69 per share [11] - The Xacta software solution received FedRAMP high authorization, reinforcing the company's position in the security solutions market [16] Q&A Session Summary Question: TSA PreCheck enrollments and market share - Management confirmed that enrollments are increasing alongside the ramp in locations, despite overall market renewals being down due to the five-year anniversary of COVID [26][30] Question: Drivers for sequential gross margin increase - Management indicated that gross margin fluctuations are due to a mix of revenue streams, with expectations for cash gross margin to be around 40% to 41% in the third quarter [31][32] Question: Confidential IT security work with the federal government - Management noted that while specifics cannot be disclosed, this work is a meaningful additional revenue stream, and there is a strong pipeline of opportunities expected to close in the second half of the year [38][39] Question: Impact of DHS changes on TSA PreCheck - Management does not anticipate negative effects on enrollment from recent DHS changes, as the speed through security remains a critical component of the TSA PreCheck program [46] Question: Capital allocation strategy and M&A - Management stated that the priority is to use free cash flow for share buybacks, while remaining open to opportunistic acquisitions, with a disciplined approach [50]

Financial Data and Key Metrics Changes - In Q1 2025, the company's revenue increased by 10% to $1.6 million compared to Q4 2024, but decreased year-over-year due to a $1.2 million revenue from a financial services customer in Q1 2024 [5][17] - Gross profit remained strong at 83%, with a reduction in SG&A expenses by 23% year-over-year [7][18] - The net loss for Q1 2025 increased to approximately $737,000 or $0.16 per share, compared to a loss of $573,000 or $0.32 per share in the prior year [18][19] Business Line Data and Key Metrics Changes - Service revenues in Q1 2025 increased to approximately $73,000 from $213,000 in Q1 2024, while recurring support service revenue rose by 37% to $265,000 [17] - Hardware revenue saw a significant increase to $236,000 in Q1 2025 from $18,000 in Q1 2024, driven by increased purchases of fingerprint biometric scanners [18] Market Data and Key Metrics Changes - The company is experiencing solid traction in key verticals such as defense and financial services, with notable projects like the integration of BIO key's PortalGuard IAM platform by the National Bank of Egypt [9][10] - The Wyoming Department of Education deployed PortalGuard iDAS to support up to 20,000 end users, contributing to the company's growth in the education sector [11] Company Strategy and Development Direction - The company is focusing on expanding its BIO key branded solutions in the EMEA region, transitioning away from lower-margin Swivel Secure services [12][16] - There is a strategic emphasis on passwordless, phoneless, and tokenless authentication solutions, which are expected to drive growth and improve margins [14][32] Management's Comments on Operating Environment and Future Outlook - Management noted that there is increasing recognition among enterprises and governments of the limitations of legacy authentication methods, leading to a growing demand for more secure IAM solutions [13][32] - The company aims for sequential growth throughout 2025, despite potential seasonality challenges in Q3 due to the August holiday in Europe [41][42] Other Important Information - The cash position improved significantly to over $3 million, reflecting proceeds from warrant exercises [7][19] - The company reduced its note payable by more than half, enhancing its balance sheet and supporting growth opportunities [8] Q&A Session Summary Question: Clarification on the large customer and future revenue expectations - The large customer is now the company's single largest customer, with an expected renewal of approximately $3 million over a two-year period starting in Q1 2026 [22][24] Question: Contribution of other customers to Q1 revenue - Revenue in Q1 2025 was a mix from various sources, including service and maintenance revenue, new customer revenue, and upgrades to the installed base [27][28] Question: Outlook for the second quarter and seasonality - Management expects to grow sequentially, with Q2 showing potential for continued growth despite typical seasonality challenges in Q3 [41][42] Question: Insights on operating expenses and margin outlook - The company aims to maintain gross margins in the 80% range and is focused on controlling operating expenses [47][48] Question: Update on defense contracts and international opportunities - The company is engaged with government defense ministries, with potential for sizable recurring revenue opportunities [64][66]