Q3 2021 Ipsidy Inc Earnings Call
Greetings and welcome to the HCP, Inc. D D H I T E I third quarter 'twenty, one 2021 earnings conference call.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Grace the freezer SVP marketing communications and Investor Relations.
Mr. Freas, you may begin.
Thank you operator.
Afternoon, everyone.
I want to advise you that this slide today or you can advance them yourself. So we will direct you as to which side we're referencing.
With me on today's call are Tom Chemo, our CEO trip Smith, our president and C. T M.
Stuart Miller, our Chief Financial Officer.
By now you should have access to our third quarter 2021 press release.
If not it can be found on our website www dot loss I E Dot AI under the Investor Relations section.
Throughout this conference call, we will also be presenting certain non-GAAP financial information.
The information is not calculated in accordance with GAAP and may be calculated differently from other companies similarly, titled non-GAAP information.
Quantitative reconciliations of our non-GAAP financial information to their most directly comparable GAAP financial information appear in today's press release.
You can now advance to the second floor.
Before we begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements.
Such forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.
These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
Some of these risks are mentioned in today's press release, others are discussed in our 2020 Form 10-K, which is available at www Dot S E T Docker.
I'd now like to introduce our CEO Tom T Mo.
Thank you Grace I'm on slide three.
I'm excited to speak to our investors today. This is our first update since our uplift to NASDAQ on August 24th and.
Not only will we talk about our results from the quarter. We will also share the exciting developments that came out of our market and product launches at money 2020 on October 24th in Las Vegas.
There, we unveiled RFID verified a self service solution that allows you to use a selfie cloud biometrics to replace those much hated one time pass codes and passwords.
Slide four I'm not now.
There are five is our disruptive wedge.
Our marketing and sales efforts are laser focused on the messaging of replacing one time passwords and knowledge based authentication with cloud biometric authentication with one selfie verify delivers increased accuracy.
Beyond the legacy authentication solutions since it tight who you are your face to an account not just the device or cold not an answer to a question that can be sold on the dark web.
Verified offer secure self service account recovery and reduces enterprise password reset costs with a simple turn of the risks and a selfie verified authenticate a user with no friction no struggle to filing the pin code or remember the place where you met your best friend quite simply.
Verified delight customers.
Moving to slide six.
When I assumed the role of CEO in June My first task was to review the assets resources and strategic direction of the company, especially where there are gaps and room for improvement and then come up with a plan to rectify them.
We knew that the company had best in class technology, but what else did it need to succeed.
First and foremost the company needed capital and a bigger platform from which to attract investors as well as to give comfort to prospective customers in particular, where major financial institutions.
We therefore pushed ahead with a public offering and uplifting to NASDAQ, which we were delighted to complete in a very quick two months, culminating on August 24th.
A NASDAQ listed company establishes us I D in the premier rank of identity providers in our industry. It provides validation to both investors and customers that we operate under the highest standards of corporate governance and with full transparency.
<unk> allows even the smallest investors to participate in an early growth company with large market opportunity.
Ringing the NASDAQ closing Bell was truly a gratifying experience and certainly a culmination of a lot of hard work I want to thank again, our team of professional advisors and you our loyal investors, who helped us achieve this important milestone.
Moving to slide seven.
Our next urgent task was to build out the management and operational team.
An important part of realizing our vision and preparing our company to replace one time passwords and knowledge based authentication revolves around team building and culture to that end. Our leadership team has been busy mapping out key positions recruiting quality candidates and hiring the most qualified experts in their respective fields.
Over the past two months, we have added more than a dozen employees into key roles, including product management sales, where we now have eight people comprising inside sales and sales director roles customer success marketing and engineering.
We are also on boarded several key vendors on the technical and engineering side, which is an efficient and productive way to allow us to scale faster as we move into growth phases.
On the culture side, we've made significant strides in adding diversity, both gender and ethnic to our management team and to our workforce and the team members added I'm proud to share that 45% of the individuals are people of color and or women.
We believe that a culture built on diversity not only creates a more desirable workplace, but also it's one that's strongly supports our commitment to ethical AI, enabling us to provide products that are agnostic to ethnicity and are more effective in the marketplace to better serve society more broadly.
Moving to slide eight.
The point of our investment in the money 2020 event and this launch of our verified product is simple when businesses and consumers think of replacing one time pass code and password, we want them to think of Offsite D.
I believe we accomplished our mission with thousands of guests at money 2020, laughing hysterically and singing along with our Princeton personate or to the replacement of the songs <unk>.
Even with our own rendition of password pain.
Even the Prince impersonator himself admitted.
He feels the pain of passwords and onetime pin codes by prominently featuring our name our messaging our people and our product and prominent view throughout the conference venue and across Las Vegas, we generate substantial brand recognition attendees throughout the show said over and over yeah.
I've heard it yet.
Slide nine.
During the money 2020 conference our team we conducted a survey this survey allowed us to gain insight about current and emerging trends and identity authentication and increased perception of RFID as a thought leader in the identity space.
Key findings of the survey include 88% of the respondents site familiarity with biometric authentication.
80% excited concerns about the enterprise risks associated with onetime passwords and knowledge base that dedication.
75% are also concerned about customer dissatisfaction with OTB and KBA and them abandoning a transaction.
Lastly, and most importantly, 84% of the respondents plan to increase investments in identity authentication over the next 12 months.
This survey tells us that fintech companies banks and credit unions are deeply concerned not only about the risks associated with onetime passwords and knowledge based authentication, but also the customer abandoning transactions midstream due to the friction and hassle they come with these legacy authentication processes.
It also tells us that our messaging on replacing vulnerable onetime pin codes and knowledge questions with cloud based biometric identity authentication is resonating.
Finally, the survey data with responses for mid and high level executives across Fintech and banking support our belief that there is a large market opportunity for off I D moving to slide 10.
We advertise in the party planning for password paying yielded results over the three days were at money 2020, we met with hundreds of Fintech and banking executives.
As well as Fintech providers every day, our booth was overflowing with attendees <unk>.
Speaking with our expanded sales team watching demos and experiencing the seamless nature.
Of our biometric web solution.
Needless to say, we're all interested in gaining a greater understanding of how they could quickly and easily deploy our cloud biometric selfie to replace one time pass codes.
At money 2020, it became clear that we were the only provider of portable biometric authentication in the cloud rather than something thats chained to the device such as a pin code sent over SMS to a device they may not have in their possession.
Syndicator App that you have to open on your mobile phone or in line brought web browser based product means we're device agnostic the user can authenticate their identity and access to an account easily on desktop laptop mobile tablets and phones. It means they do not have to download a separate mobile apps.
Indicator app in ratable profile or typing pin code instead, they are sent E authentic Kate easily by turning the phone towards their face.
The Sochi and the download the CEO of Microsoft soft famously said, it's not the device that's mobile.
The person that's mobile by comparing our lives healthy to our cloud biometric authentic opic RFID is verified and bodies and delivers upon that vision.
Other services that authenticate a device or a pin code do not offer provides frictionless biometric authentication through a web based interface, regardless of whether the user is on a windows laptop, a Mac and iOS device, an Android tablet or a chromebook.
The device does not matter, it's Europe space that Authenticates you.
Moving to slide 11.
And our op IV development and customer success teams are also hard at work in the third quarter launching with several significant clients and partners here, we highlight too.
Hamilton Reserve Bank in the third quarter, we brought verified live with Hamilton Reserve Bank, a global bank, serving a large and rapidly expanding work what worldwide clientele supporting customer activities in more than 150 countries and offering customers deposits in 10 different currency.
This service was deployed as part of our partnership with Temenos, a global banking platform provider.
As HR be launches, new digital banking service with the Temenos Infinity banking platform with goals of enrolling 1 million customers over the next 12 to 18 months. After I did that AI is delivering high levels of identity assurance to HIV as expanding international clientele are.
Biometric identity products are helping HR be reduce operational cost of passwords mitigate security risks arising from stolen passwords fishing and account takeovers and ultimately deliver seamless customer experience that's fully satisfies HR beef insistence for the best International standards.
In AML T Y C and CFT compliance.
In the words of Crocker's caused the CEO of H R. B Hamilton Reserve banks, New digital banking platform makes it possible to achieve our mission of Onboarding 1 million new customer within the next 12 months, providing our valued customers with a seamless authentication experience west.
Paramount to our growth at <unk> Dot AI cloud based biometric authentication has helped us eliminate passwords and secure our customers' valued transactions, including Swift wire transfers and beneficiary changes.
Next CEO Nextgen another key partner launch in the third quarter was CEO Nextgen, a credit Union service organization supporting more than 40 credit unions across the U S. In the third quarter CEO Nextgen rolled out our identity services to their credit union portfolio to transform the way they.
Nice their members both digitally and in person with similar consistent experiences.
RFID is committed to helping financial services companies.
Combat identity fraud by knowing with biometric certainty, who is transacting on their platform and again, let's turn to what our client Kent Zimmer the CEO, our CEO nextgen as to say about RFID by.
By adding at Ids biometric identity services to our platform. We can help our members reduce risk deliver enhanced identity trust and offer the seamless convenience a password list login for credit Union members.
In addition in the last few weeks, we have added three customers in the financial services industry and one of the leading international nonprofit organizations.
<unk> value proposition and with our new disruptive web verified is incredibly simple to understand and I believe this will enable us to continue to increase deal flow as we execute on our mission.
I'm moving to slide 12 now.
In order to achieve our strategic and financial objectives, we need to build on these early successes and increase the pace at which we achieve sales we are using a proven playbook to generate leads turned them into qualified prospects and convert them to book deals our marketing and sales teams have been working.
Hard to focus our message and lead our efforts with what we consider to be the disruptive wedge, replacing onetime passwords and knowledge based authentication with cloud biometric authentication for password recovery. We believe this will be a successful strategy for winning this market how will we know.
There are number of key performance indicators or kpis that I will be closely monitoring over the coming months in order to see if our efforts are working.
And to give management greater visibility towards future results as we gather more data we will start sharing these with analysts and investors probably starting in the middle of 2020 to better inform the market and enable us to provide credible guidance. That's not something we are able to do today, but I will share with you. Some example.
To be clear these metrics focus on our new identity products verified proof and authentic side and any other innovative products. We may launch in the identity space rather than on our legacy business you should be aware that most of these are non-GAAP metrics.
That do not replace our GAAP financial statements, but we believe will enhance your understanding of our business.
As you can see we plan to capture several key performance indicators first identity booked annual recurring revenue or as we referred to it bar. This highlights the value of recent contract signings based on the minimum amount that each customer has committed to upon signing.
Next is identity deferred revenue this balance sheet item represents cash received that we cannot yet recognized as revenue under GAAP, but we expect to fully recognized in future periods.
Finally identity annual recurring revenue or <unk>. This is an average or the monthly revenue earned in the previous three months and annualize by multiplying by 12. This is perhaps the most significant of the three as it shows the current revenue run rate.
It is also our Kpis, we will use to measure internal sales performance and incentivize our sales and management teams.
As you can see the focus is on generating revenue and gaining visibility as to what revenue. We can expect based on hard facts, namely new contracts cash billings at the appropriate time, we will start to report these and other kpis as part of our quarterly calls and we believe that if we are able to show.
Growth in these metrics they will translate into progress on our goal of top line revenue growth.
With that I would like to turn the call over to Tripp Smith, our president and CEO, who will start with slide 13.
Thank you Tom.
We put a major emphasis on our launch of the verified biometric authentication product money 2020, leading up to this launch our engineering team invested efforts to develop new integrations demos and onboarding close for identified product.
As a result of our progress we were able to achieve our goal of offering new customers and self service Onboarding process that includes developer quick start documentation API documentation and a simple self service sign up process that enables our customers to easily convert from a web form to a 14 day trial of verified.
We made our verified products, so easy to implement that a customer can onboard themselves.
<unk> integrates indication workflows with the simple copy paste are just a few lines of code.
As we move into the fourth quarter key additions to the team, including our SVP of product, Jeremy and Nathan will focus on continuing to enhance user experience and pre configured partner integrations.
Thank you and now I'd like to turn the call over to Sue solar our CFO. So he can provide an overview of our financial.
Results for the third quarter of 2021, and we will move to slide 14.
Thank you trip.
The results as we reported in our earnings release, and recently filed Form 10-Q reflects changes in our operations and our business.
<unk> occurred and will occur as a result of our management changers rebranding and building a sales focus.
Focused sales and marketing efforts.
Couldn't understand at this early stage in a product launch on sales and marketing activities, we will not be giving any guidance as to future results. At this time, although I will touch on certain financial trends that we expect to see in the coming months.
All of my remarks will be comparing the third quarter September 32021, with the third quarter ended September 32020, unless.
Otherwise.
Quarters net loss increased by $3 3 million from a year ago, adjusted EBITDA loss rose by one 5 million during the quarter.
We began to make investments in key new hires marketing and technology.
Adjusted EBITDA is adjusted earnings before interest taxes, depreciation and amortization and other noncash or nonrecurring items as defined by <unk>.
And then as a proxy for cash flow.
Refer to our earnings release and 10-Q for vaccines.
Conciliation of adjusted EBITDA.
Comparable GAAP information.
Quarterly revenue was flat as our new marketing initiatives only began in the third quarter and the focused product offering was introduced.
End of October at money 2020.
We expect these new marketing initiatives and product launches to be successful.
Which case, we anticipate revenue will expand in the fourth quarter and into 2022.
Tom has previously mentioned the metrics, we will use to measure our progress.
Operating expenses increased by $4 million compared to 2020, principally due to higher noncash stock compensation expenses salary costs and professional fees due to increased professional fees principally due to the shift in our strategic focus.
We can expect increases in the fourth quarter, we can expect expenses in the fourth quarter and beyond to continue to trend up.
<unk> continues to invest in sales marketing and technology resources for the future.
The fourth quarter will also include costs associated with money 2020.
We've said for marketing and sales objectives slope on the show and we've been we have been tracking these metrics closely.
We believe.
That money 2020 were successful and a worthwhile investment and will grow and will convert the pipeline sales and revenue as we close these opportunities.
Further certain costs incurred in Q3 work required to relaunch the business and therefore will not reoccur in future quarters of course, we will be cautious with all cash and capital as we expand the business.
Other nonoperating items improved during the quarter inter.
Interest expense was dramatically reduced due to a majority of the company's convertible debt being converted into equity in June 2021. In addition, the company's second PPP loan was forgiving in Q3 in accordance with federal law, and which the accounting rules.
Cause you to be recorded as a gain on the extinguishment of debt.
Following the successful public offering the company had $9 2 million of cash at September 32021.
Outstanding indebtedness.
Crude interest was point 7 million with the majority due in February 2022.
We expect the majority of the <unk> 7 million to be converted to equity as the conversion price of $6 per share relative to today's market price of approximately 17.
That concludes my presentation.
We would like to open the call to questions. Thank you.
Thank you ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one on your touch stone telephone.
Again that is star one.
If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
We ask that you limit yourself to one question and one follow up.
Please stand by while we compile the Q&A roster.
Again, if you would like to ask a question that is star one.
Yeah.
And I'm seeing no questions at this time I would now like to turn the call back to Tim T. Mo for any further remarks.
Alright, I want to thank all our investors for taking the time.
To hear us today and.
And we look forward to reporting to you in the future.
The one closing remark I'd like to say relates to our final slide in the deck slide 16.
And that is there really are three large markets that we are pursuing.
The first is to eliminate one time passwords and knowledge base authentication.
Once we allow companies to eliminate one time passwords and KBA, we can really turn to eliminating all passwords, the entire user name and password ecosystem.
Finally that will enable us to be the company that helps businesses recognize their customer.
Yeah.
So thank you very much from all of us it off.
Thank you for the opportunity to serve you our investors our customers our partners.
<unk>.
We can conclude the call operator.
And this concludes today's conference call. Thank you for participating you may now disconnect.
Speakers, please standby for your post conference.
Thank you.
[music].
[music].
[music].
[music].
Greetings and welcome to the HD, Inc. D var, <unk> AI third quarter 'twenty, one 2021 earnings conference call.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Grace Jefferies.
S VP marketing communications and Investor Relations. Thank you Ms. <unk> you may begin.
Thank you operator, good afternoon, everyone.
I want to advise you that the slides today.
You can advance them yourself, so we will direct you to which slide we're referencing.
With me on today's call are Tom <unk>, our CEO trip Smith, our president and CTO.
Stuart Solar our Chief Financial Officer.
By now you should have access to our third quarter 2021 press release.
If not it can be found on our website www dot off E Dot AI under the Investor Relations section.
Throughout this conference call, we will also be presenting certain non-GAAP financial information.
This information is not calculated in accordance with GAAP and may be calculated differently from other companies similarly, titled non-GAAP information.
Quantitative reconciliations of our non-GAAP financial information to their most directly comparable GAAP financial information appear in today's press release.
You can now advance the second slot.
Before we.
We begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements.
Such forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.
These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
Some of these risks are mentioned in today's press release, others are discussed in our 2020 Form 10-K, which is available at www Dot S E C Dot Gov.
I'd now like to introduce our CEO Tom T Mo.
Thank you Grace I'm on slide three.
I'm excited to speak to our investors today. This is our first update since our uplift to NASDAQ on August 24th.
Not only will we talk about our results from the quarter. We will also show the exciting developments that came out of our market and product launches at money 2020 on October 24th in Las Vegas.
There, we unveiled RFID verified a self service solution that allows you to use a selfie cloud biometric to replace those much hated onetime pass codes and passwords.
Slide four I'm not now.
Verified is our disruptive wedge.
Our marketing and sales efforts are laser focused on the messaging of replacing onetime passwords and knowledge based authentication with cloud biometric authentication with one selfie verified delivers increased accuracy far beyond the legacy authentication solutions since it.
Hi, who you are your face to an account not just the device or code not an answer to a question that can be sold on the dark web.
Verified offer secure self service account recovery and reduces enterprise password reset costs with a simple turn of the risks and a selfie verified authenticate a user with no friction no struggled to filing the pin code or remember the place where you met your best friend quite simply.
Verified delight customers.
Moving to slide six.
When I assumed the role of CEO in June My first task was to review the assets resources and strategic direction of the company assess where there were gaps and room for improvement and then come up with a plan to rectify them.
We knew that the company had best in class technology, but what else did it need to succeed.
First and foremost the company needed capital and a bigger platform from which to attract investors as well as to give comfort to prospective customers in particular major financial institutions.
We therefore pushed ahead with a public offering and uplifting to NASDAQ, which we were delighted to complete in a very quick two months, culminating on August 24th.
Becoming a NASDAQ listed company establishes off I'd in the premier rank of identity providers in our industry. It provides validation to both investors and customers that we operate under the highest standards of corporate governance and with full transparency.
<unk> allows even the smallest investors to participate in an early growth company with large market opportunity.
Bringing that asset closing bell was truly a gratifying experience and certainly a culmination of a lot of hard work I want to thank again, our team of professional advisors and you our loyal investors, who helped us achieve this important milestone.
Moving to slide seven.
Yes.
Our next urgent task was to build out the management and operational team.
An important part of realizing our vision and preparing our company to replace one time passwords and knowledge based authentication revolves around team building and culture to that end. Our leadership team has been busy mapping out key positions recruiting quality candidates and hiring the most qualified experts in their respective fields.
Over the past two months, we have added more than a dozen employees into key roles, including product management sales, where we now have eight people comprising inside sales and sales director roles customer success marketing and engineering.
We are also on boarded several key vendors on the technical and engineering side, which is an efficient and productive way to allow us to scale faster as we move into growth phases.
On the culture side, we've made significant strides in adding diversity, both gender and ethnic to our management team and to our workforce of the team members added I'm proud to share that 45% of the individuals are people of color <unk> women.
We believe that a culture built on diversity not only creates a more desirable workplace, but also it's one that's strongly supports our commitment to ethical AI, enabling us to provide products that are agnostic to ethnicity and are more effective in the marketplace to better serve society more broadly.
Moving to slide eight.
The point of our investment in the money 2020 event and this launch of our verified product is simple when businesses and consumers think of replacing onetime pass code and password, we want them to think of off Heidi.
I believe we accomplished our mission with thousands of guests at money 2020, laughing hysterically and singing along with our Princeton personate or to the replacement of the song Purple rain with our own rendition of password pain.
Even the Prince impersonator himself admitted that he feels the pain of passwords and onetime pin codes by prominently featuring our name our messaging our people and our product and prominent view throughout the conference venue and across Las Vegas, we generated substantial brand recognition attests.
<unk> throughout the show said over and over.
I've heard of yet.
Slide nine.
During the money 2020 conference our team we conducted a survey this survey allowed us to gain insight about current and emerging trends and identity authentication and increased perception of off as a thought leader in the identity space.
The key findings of this survey include 88% of the respondents site familiarity with biometric authentication.
80% excited concerns about the enterprise risks associated with onetime passwords and knowledge based authentication.
75% are also concerned about customer dissatisfaction with OTB and TBA and them abandoning a transaction.
Lastly, and most importantly, 84% of the respondents plan to increase investments in identity authentication over the next 12 months.
This survey tells us that fintech companies banks and credit unions are deeply concerned not only about the risks associated with onetime password that knowledge based authentication, but also the customer abandoning transactions midstream due to the friction and hassle that come with these legacy authentication processes.
It also tells us that our messaging on replacing vulnerable onetime pin codes and knowledge questions with cloud based biometric identity authentication is resonating.
Finally, the survey data with responses for mid and high level executives across Fintech and banking support our belief that there is a large market opportunity for off.
Moving to slide 10.
We advertise in the party plans and password paying yielded results over the three days were at money 2020, we met with hundreds of Fintech and banking executives.
As well as Fintech providers.
Today, our booth was overflowing with attendees.
Meeting with our expanded sales team watching demos and experiencing the seamless nature.
Of our biometric web solution.
Needless to say, we're all interested in gaining a greater understanding of how they could quickly and easily deploy our cloud biometric selfie to replace one time pass code.
At money 2020, it became clear that we were the only provider of portable biometric authentication in the cloud rather than something thats chained to the device such as a pin code sent over SMS to a device they may not have in their possession.
Syndicator App that you have to open on your mobile phone or in line brought web browser based product means we're device agnostic.
As you can authenticate their identity and access to an account easily on desktop laptop mobile tablets and phones. It means they do not have to download a separate mobile authenticator app in rollover profile or typing pin code instead they are fendt.
Syndicate easily by turning the phone towards their face.
<unk> the CEO of Microsoft soft famously said, it's not the device that's mobile.
Person, that's mobile by comparing our lives healthy to our cloud biometric authentic opic, rfid's verified and bodies and delivers upon that vision.
Other services that authenticated device or a pin code do not offer provides frictionless biometric authentication through a web based interface, regardless of whether the user is on a windows laptop, a Mac and iOS device, an Android tablet or a chromebook that device does not matter, it's Europe space.
That authenticates you <unk>.
Moving to slide 11.
And our App development and customer success teams. We're also hard at work in the third quarter launching with several significant clients and partners here, we highlight too.
Hamilton Reserve Bank in the third quarter, we brought verified live with Hamilton Reserve Bank, a global bank, serving a large and rapidly expanding work worldwide clientele supporting customer activities in more than 150 countries and offering customers deposits in 10 different currencies.
This service was deployed as part of our partnership with Temenos, a global banking platform provider.
As HR be launches, new digital banking service with the Temenos Infinity banking platform with goals of enrolling 1 million customers over the next 12 to 18 months off I'd Dot AI is delivering high levels of identity assurance to <unk> expanding international clientele our buyer.
Metric identity products are helping HIV reduce operational cost of passwords mitigate security risks arising from stolen passwords, fishing and account takeovers and ultimately deliver seamless customer experience.
Fully satisfies HR beef insistence for the best International standards in AML, <unk> and CFT compliance.
In the words of <unk> caused the CEO of H R. B Hamilton Reserve banks, New digital banking platform makes it possible to achieve our mission of Onboarding 1 million new customer within the next 12 months, providing our valued customers with a seamless authentication experience Westpac.
Amount to our growth off I'd Dot AI cloud based biometric authentication has helped us eliminate passwords and secure our customers' value transactions, including Swift wire transfers and beneficiary changes.
Next few Nextgen another key partner launch in the third quarter with Cu Nextgen, a credit Union service organization supporting more than 40 credit unions across the U S. In the third quarter CEO Nextgen rolled out our identity services to their credit union portfolio to transform the way they.
<unk> members, both digitally and in person with similar consistent experiences.
<unk> is committed to helping financial services companies.
Bat identity fraud by knowing with biometric certainty, who is transacting on their platform and again, let's turn to what our clients turn Zimmer the CEO of <unk> Nextgen as to say about off Heidi.
By adding up Ids biometric identity services to our platform. We can help our members reduce risk deliver enhanced identity trust and offer the seamless convenience a password list login for credit Union members.
In addition in the last few weeks, we have added three customers in the financial services industry and one of the leading international nonprofit organizations.
<unk> value proposition and with our new disruptive web verified is incredibly simple to understand and I believe this will enable us to continue to increase deal flow as we execute on our mission.
I am moving to slide 12 now.
In order to achieve our strategic and financial objectives, we need to build on these early successes and increase the pace at which we achieve sales we are using a proven playbook to generate leads turn them into qualified prospects and convert them to book deals our marketing and sales teams have been working.
Hard to focus our message and lead our efforts with what we consider to be the disruptive wedge, replacing onetime passwords and knowledge based authentication with cloud biometric authentication for password recovery. We believe this will be a successful strategy for winning this market how will we know.
There are number of key performance indicators or kpis that I will be closely monitoring over the coming months in order to see if our efforts are working.
And to give management greater visibility towards future results as we gather more data we will start sharing these with analysts and investors probably starting in the middle of 2022 to better inform the market and enable us to provide credible guidance. That's not something we are able to do today, but I will share with you some.
To be clear these metrics focus on our new identity products verified proof and authentic <unk> and any other innovative products. We may launch in the identity space rather than on our legacy business you should be aware that most of these are non-GAAP metrics.
That do not replace our GAAP financial statements, but we believe will enhance your understanding of our business as.
As you can see we plan to capture several key performance indicators first identity booked annual recurring revenue or as we referred to it bar. This highlights the value of recent contract signings based on the minimum amount that each customer has committed to upon signing.
Next is identity deferred revenue this balance sheet item represents cash received that we cannot yet recognized as revenue under GAAP, but we expect to fully recognized in future periods.
Finally identity annual recurring revenue or <unk>.
This is an average or the monthly revenue earned in the previous three months and annualize by multiplying by 12.
This is perhaps the most significant of the three as it shows the current revenue run rate. It is also our kpis, we will use to measure internal sales performance and incentivize our sales and management teams.
As you can see the focus is on generating revenue and gaining visibility as to what revenue. We can expect based on hard facts, namely new contracts cash billings at the appropriate time, we will start to report these and other kpis as part of our quarterly calls and we believe that if we are able to show.
Growth in these metrics they will translate into progress on our goal of top line revenue growth.
With that I would like to turn the call over to Tripp Smith, our president and CEO, who will start with slide 13.
Thank you Tom.
We put a major emphasis on our launch of the verified biometric authentication product good money 2020, leading up to this launch our engineering team invested efforts to develop new integrations demos and Onboarding flows for identified product.
As a result of our progress we were able to achieve our goal of offering new customers or self service onboarding process that includes developer quick start documentation.
Documentation and a simple self service sign up process that enables our customers to easily convert from a web form to a 14 day trial of verified.
We made our verified product so easy to implement that a customer can onboard themselves.
Lately integrator authentication workflows with the simple copy paste are just a few lines of code.
As we move into the fourth quarter key additions to the team, including our SVP of product Jeremy Nathan will focus on continuing to enhance user experience and pre configured partner integrations.
Thank you and now I'd like to turn the call over to solar our CFO. So he can provide an overview of our financial results for the third quarter of 2021, and we'll move to slide 14.
Thank you trip.
Actual results as we reported in our earnings release, and recently filed Form 10-Q.
The changes in our operations and in our business that have occurred and will occur as a result of our management changes rebranding and building our sales focus.
I'll focus sales and marketing efforts.
Can understand at this point.
Early stage and a product launch and sales and marketing activities, we will not be giving any guidance as to future results. At this time, although I will touch on certain financial trends that we expect to see in the coming months all of my remarks will be comparing the third quarter September 32000.
During 'twenty one with the third quarter ended September 32020, unless.
Otherwise.
Quarters net loss increased by $3 3 million from a year ago, adjusted EBITDA loss rose by one 5 million during the quarter.
We began to make investments in key new hires marketing and technology.
Adjusted EBITDA is adjusted earnings before interest taxes, depreciation and amortization and other noncash or nonrecurring items as defined by authority.
And then as a proxy for cash flow.
Refer to our earnings release and 10-Q for vaccines.
Reconciliation of adjusted EBITDA.
Comparable GAAP information.
Quarterly revenue was flat as our new marketing initiatives only began in the third quarter and the focused product offering was introduced.
End of October at money 2020.
We expect these new marketing initiatives and product launches to be successful.
Which case, we anticipate revenue will expand in the fourth quarter and into 2022.
Tom has previously mentioned the metrics, we will use to measure our progress.
Operating expenses increased by $4 million compared to 2020, principally due to higher noncash stock compensation expenses salary cost and professional fees increased professional fees principally due to the shift in our strategic focus.
We can expect increases in the fourth quarter, we can expect expenses in the fourth quarter and beyond to continue to trend up.
<unk> continues to invest in sales marketing and technology resources for the future.
The fourth quarter will also include costs associated with money 2020.
We said, both marketing and sales objectives blow from the show and we've been we have been tracking these metrics closely.
We believe.
That money 2020 were successful and a worthwhile investment and will grow.
And we will convert the pipeline sales and revenue as we close these opportunities.
Further certain costs incurred.
Three work required to relaunch the business and therefore will not recur in future quarters of course, we will be cautious with all cash and capital as we expand the business.
Other nonoperating items improved during the quarter inter.
Interest expense was dramatically reduced due to a majority of the company's convertible debt being converted into equity in June 2021. In addition, the company's second PPP loan was forgiven in Q3 in accordance with federal law, and which the accounting rules.
Acquired to be recorded as a gain on the extinguishment of debt.
Following the successful public offering the company had $9 2 million of cash at September 32021.
Outstanding indebtedness.
And accrued interest was <unk> 7 million.
The majority due in February 2022.
We expect the majority of the point 7 million to be converted to equity as the conversion price of $6 per share relative to today's market price of approximately 17.
That concludes my presentation, operator, we would like to open the call to questions. Thank you.
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Yeah.
And I'm seeing no questions at this time I would now like to turn the call back to Tim T. Mo for any further remarks.
Alright, I want to thank all our investors for taking the time.
To hear us today.
And we look forward to reporting to you in the future.
The one closing remark I'd like to say relates to our final slide in the deck slide 16.
And that is there really are three large markets that we are pursuing.
The first is to eliminate one time passwords and knowledge base authentication.
Once we allow companies to eliminate one time passwords and KBA, we can really turn to eliminating all passwords, the entire user name and password ecosystem.
Finally that will enable us to be the company that helps businesses recognize their customer.
Yeah.
So thank you very much from all of us it off.
Thank you for the opportunity to serve you our investors our customers our partners.
<unk>.
We can conclude the call operator.
And this concludes today's conference call. Thank you for participating you may now disconnect.