Q2 2022 authID Inc Earnings Call
Yeah.
Greetings and welcome to off at <unk>, Inc. Second quarter 2022 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.
To ask a question. During this time you May press Star one one.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Grace to freeze senior Vice President marketing Communications and Investor Relations. Thank you Mr. Kris you may begin.
Thank you operator.
Good afternoon, everyone with me on today's call are Tom female.
Yeah trip Smith, our president and CTO anti spam, our CFO and Grandma, our general counsel.
By now you should have access to todays press release announcing our second quarter 'twenty 'twenty. Two you resolve if you have not received the release can be found on our website at www Dot O I D.
Under the Investor Relations section.
We are now on slide two.
Throughout this conference call, we've already presenting certain non-GAAP financial information.
This information is not calculated in accordance with GAAP and maybe calculated differently from other companies.
Similarly, titled non-GAAP information.
Reconciliations of our non-GAAP adjusted EBITDA information to their most directly comparable GAAP financial information.
In today's press release.
Before we begin our formal remarks, let me 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 Form 10-K, and subsequent filings, which are made available at www Dot S E T Dot Gov.
For those on the webcast. Please note that we have set up the presentation for you to advance the slides manually.
You can do this by hovering over the slides and tapping the double arrows up here on the right hand side of the slide.
Tom and Danny will provide cures for advancing the slides.
We will have a Q&A session following our presentation.
To participate in the Q&A you must be registered on the telephone.
I'd now like to introduce our CEO Tom T Mo.
Thank you Grace.
Welcome everyone to today's call I'd like to start on slide three and talk about the high technology standards, we've achieved and the multiple points of validation we've earned for our platform advancements during.
During the second quarter, we completed two major security certifications and Attestations that demonstrate to our customers that they can count on us to protect their security Bill.
Building on our previous achievements of meeting the stock to security standard we successfully upgraded to meet the ISO 27001 standards for information Security management programs. This means that our biometric authentication platform has met the rigorous security management industry standards that encompass key.
Aspects of confidentiality integrity and availability.
We also achieved a perfect score under the ISO standard for presentation attack detection or pad levels, one and two that measured the verified platforms liveliness capability and success and detecting harmful attacks.
Let me remind you that during this test verified successfully recognize and prevented more than 700 presentation attacks for a perfect performance. This demonstrates that we have the highest level of security to stop fraudsters from attempting to spoof biometrics.
Independent tests are important for us to earn and promote because they help us reach organizations with IGN compliance departments that have high vendor management and control standards. These certifications give these decision makers the confidence they need to choose <unk> to be their trusted partner in defending.
Against cyber attacks.
And in May we issued a patent that protects we were issued a patent that protects verified multifactor authentication methodology critical to fighting fraud. This patented methodology creates an unchallengeable audit trail for all parties. We were also pleased along with our customer Hamilton Rizza.
<unk> bank to receive the Fintech Futures banking award for best use of risk compliance and fraud protection.
These independent assessments concern confirmed the quality of our innovative technology by continuing to apply our key patents and Knowhow, we have the opportunity to forge a lead in this quickly evolving industry.
Looking ahead, we will continue to enhance the capabilities of our biometric authentication platform to meet the industry's changing needs our technology as validated by these independent assessments will help us gain traction and recognition for verify its best in class identity security management and authentication.
<unk>.
Before we talk about our newest team members I would like to take a moment to remember Ted Stern, who sadly passed away on July 29th Chad was a significant investor as well as a director of the company from 2017 to 2021 and he helped the company navigate through a series of critical changes Jed will be.
Fondly remembered for his great business insights and sense of humor, and we send our sincere condolences to the stern family.
Turning to our team.
During the quarter, we were honored to have Joe trailing the former Chief platform officer of clear join our board.
Joe brings in valuable industry expertise and technology product management to off.
I'm also pleased to introduce on this call our new CFO any fam and he is a great addition to our team and brings a stellar background in finance her experience includes sonicwall applied micro circuits, and a vargo, which is now broadcom.
He has deep experience with the SaaS business model and is dealt extensively with public company and SEC reporting as well as complex transactions. She has scaled teams and implemented best practices and finance that supported billions of dollars in revenue growth.
We're happy to have any on today's call with us and you'll hear from her shortly.
I'm also pleased to announce that Jared Hufford joined our sales organization in June as our VP for cyber security sales Jared brings 24 years of experience in cyber security sales and business development.
Most recently Jared was VP and GM for the go to market strategy for our New Zero Trust access platform at Zircon Xie Qi edge business unit previously he was VP of sales for stellar cyber and the top performing executive leader at protect wise now Verizon.
Jared has been integral in helping us craft, our verified workforce strategy and our go to market approach with major cyber security players.
Now turning to slide four.
This quarter, the American board of radiology selected <unk> to deploy its facial biometric authentication solution. After extensive testing with the ease of itself each confirm identity through either a webcam or mobile device verified provides the ABR with strong identity authentication to maintain.
The integrity of remote medical professional certification exams.
Now instead of using a disruptive verification process candidates will perform and identity verification ahead of the exam and then simply snap yourself to confirm identity at exam time.
Our customer success and development teams work very closely with the ABR to carry out a proof of concept trial, which we passed with flying colors.
<unk> got all the a b or C. I O said in his complements of off D. I am certainly going to focus on security and ease of use when I present to the other medical boards about at I D.
I will also mention that art ideas, a great partner our whole team has been extremely impressed with how helpful and knowledgeable RFID has been.
The ABR win is a great demonstration in the health care industry of our value add healthcare is fraught with attacks on compromised credentials that trigger both ransomware and sensitive data breaches.
And as with everything health care. These breaches are very expensive to fix IBM reported the data breaches and the health care sector had the highest average cost amounting to over $7 million per breach health care as a key target market for <unk>.
Where the demand for secure seamless authentication for both workforce and patient use cases is strong.
In the past quarter, we signed contracts in the fin serve and Fintech segments.
Adding several new customers to integrate verified into their fintech digital banking platform providers are channel partners also added several financial service providers, along with a global online media company to use RFID to verify customer identity and account ownership.
In the quarter, we launched a new tack with our verified workforce product set.
This was in response to seeing longer sales cycles in the verified consumer side as well as increasing corporate investments in cyber security password list and zero Trust authentication solutions, yes. The same verified platform that protects users' bank accounts is the same technology that delivers strong cyber security.
Tools for critical infrastructure industries.
Verified prevent hackers from logging into corporate production systems with stolen credentials by passing week authentication methods.
Phyllary rating sensitive data or impersonating employees trying to reset credentials.
It's a testament to our agile sales and marketing teams that we are swiftly develop programs targeting enterprises, where our verified biometric chain of trust eliminates passwords and protects critical systems. We quickly created new web content deployed new digital advertising and targeted expanded.
<unk> prospect lists with new outbound workforce messaging and campaigns. We are also building our market presence at key cyber security conferences, including <unk> and RSA in June Black hat this week and exhibiting at the Gartner identity access management conference in August .
Turning to slide five.
Looking at the Big picture, while we've made a good deal of progress in the last six months, our sales have not met our internal goals.
I'm very pleased with positive signs in our pipeline our sales team is working on converting several workforce opportunities and cyber security partnerships into book deals. Let me highlight a few key deals the team is working through.
First opportunity is with a U S based business, providing customer onboarding and risk assessment, we are proposing that they integrate verified to mitigate identity fraud and automate secure onboarding for their enterprise financial service companies and their customers.
The second opportunity is with a technology company that we'll look to embed verified into a workforce solution offered by one of the three major wireless carriers in the United States.
Another opportunity is to integrate our verified platform with one of the largest cyber security software companies in the United States in order to deploy our verified workforce solutions as part of their zero Trust authentication and access services to their portfolio of customers.
As we stated in our last quarterly call today, We will report on our key performance indicators are booked annual recurring revenue annual recurring revenue and deferred revenue. While these kpis are not yet where we wanted them to be we have assessed our pipeline and have set sales goals that support our exists.
Guidance of targeting positive cash flow by the time, we enter 2024.
Now, let me turn the call over to Andy who will give us an update on our financial results and Kpis Annie.
Thank you Tom and thank you for your earlier introduction I'm very excited to have dropped off.
I came to offline because it presents a compelling opportunity to grow our business in an exciting and fast growing industry with a very talented team.
I look forward.
Our growth goals.
Thank you.
Doug.
Strong risk and capital management, all of which will contribute to adding value for our customers and shareholders.
Now turning to slide number six.
The following highlights comprised of results from continuing operations and reflects all previous announcement that we are exiting the company noncore businesses.
I'll take that in Colombia.
Just on now classified in our financial statements as discontinued operations or assets held for sale.
Accordingly, all of my remarks will compare results from continuing operations for the quarter and six months ended June 32022, with the quarter and six months ended June 32021, unless specified otherwise.
For both the three and six months period verify software license revenue increased year over year.
<unk> revenue for the quarter increased over the prior year by 178% to $51000.
For the six months in 2020 to verify revenue increase over the last year by 163% to 87000.
Total revenue for the quarter was $1 million compared to $41 million compared with $2 1 million for the prior year.
Six months in 2022 total revenue was <unk> 2 million compared with $3 million.
Do you mostly to the discontinuation of our legacy products.
Operating expenses for the second quarter of 2022 totaled $6 million compared with $3 4 million for the prior year.
Principally due to higher non cash expenses of $3 2 million.
Operating expenses for the six months period totaled $11 $2 million compared with $5 6 million for the prior year.
Principally due to higher non cash expenses of $5 $4 million.
The non cash expenses comprised of mostly $2 6 million of stock based compensation for the three months period, and $4 5 million of stock based compensation for the six months here at.
Our second quarter of 2022 expenses rose from last year as we accelerated our investment in stock technology sales and marketing, which started in the second half of 2021.
Net loss for the quarter was $6 4 million compared with $3 million.
And for the six month net loss totaled $11 5 million compared with $5 4 million.
Net loss per share for the quarter was 26% compared with 15 cents for the six month period net loss per share of total $4 48, compared with 27 cents.
Adjusted EBITDA loss for the quarter was $3 million compared with $1 3 million.
For the six months in 2022, adjusted EBITDA loss was $5 9 million compared with $2 5 million.
Now, let me present, all Kpis, we committed to provide you today with the following kpis.
Booked annual recurring revenue ABA.
Annual recurring revenue.
Both of which are non-GAAP measures.
Deferred revenue.
Both annual recurring revenue about CMO of annual recurring revenue represented by the minimum or estimated amounts payable under contracted orders for our verified products.
The cumulative amount of bar through June 32022.
$161000.
Annual recurring revenue or <unk>.
And CMO of recurring revenue as determined in accordance with GAAP and divide pump sales.
Verify products during the last month of the quarter multiplied by 12.
As of June 32022 is approximately $154000.
The full revenue our GAAP metric HFC postscript billings from customer for all of their products, which will only be recognized as revenue.
Yes.
As of June 30, 2022 is approximately $46000.
As Tom indicated earlier, our sales team is working on close those deals in our pipeline and we expect all verified subscription revenue will expand significantly in the second half of 2022.
Now turning to our balance sheet.
As of June 30, 2022 we had approximately $10 million in cash.
There are no borrowings on the new revolving credit facility.
Looking ahead, we anticipate our cash burn rate to approximate $1 1 million per month, and then improving as we add revenue from our core operation.
So we integrate our previous guidance, we estimate having sufficient financing to fund operations through 2023 and believe our strong sales pipeline gives us confidence we can achieve our target of positive cash flow by the time, we enter 2024.
Now, let me turn the call over to the operator, so we can take any questions.
Thank you.
As a reminder to ask a question you would need to press star one on your telephone.
Please standby, while we compile the Q&A roster.
Tom <unk>.
While we're waiting for the queue of questions to be compiled perhaps I can ask you. A question asked you to clarify a bit more what it means for our workforce product.
In the marketplace that we're targeting now.
Paul Westphal, Subsys and how that compares to other products in the market.
Absolutely Graham Thanks.
Clearly as we highlighted earlier.
When the consumer side of our business, where our business users are authentication technology to authenticate a user of that consumer.
We saw while that was going.
Going down we saw an increase in interest in our workforce product.
And this is very typical in the cyber security industry in downturns in the economy. There is actually more investment made in cyber security to protect corporate assets and.
And we have seen a significant uptick in interest in our products for that particular use case, it's why we have centered a lot of our marketing and sales around that and.
And we think that we are uniquely positioned because as most companies are moving towards password list, where they no longer will log into your corporate environment with a user name and password, but rather have a pass key or a token on your phone.
The way to step up that authentication to make sure you know who is behind the phone is with a biometric.
So in the world of passwords people used to pin code texted to a phone in the world of password list, where the device becomes the primary authentication.
The authentication to make sure. It is who is supposed to be behind that device.
Is a biometric like what we offer in verified and we think we have the best product in the market to solve this problem.
Thank you and just as a reminder to people who are listening perhaps on the webcast. So not able to ask the question directly.
Always open to.
Questions from investors, you can contact us at Investor that AI.
Once you've had a chance to review the various materials that we published today.
<unk>.
Also to speak with a member of management. If you have further questions. Please feel free to contact us at that time.
Another question comes in the workforce.
Marketplace.
Would you say are out.
<unk> competitive.
Sure.
We're trying to look out.
A number of companies we've been looking at as competitive in the marketplace.
Traditional providers of texting.
Solutions that would step up authentication through a pin code like a twilio.
And a number of other.
Solutions that are made independently by departments, where they choose to go to a standard SaaS solution.
One of the things that is.
Exciting about the workforce marketplace as opposed to the consumer marketplace is you tend to log into your work environment. Every day, you might log into your bank account once or twice a month.
As a result.
The value that we create and the price we're able to obtain is much higher in workforce than it is in consumer.
Also because from an implementation perspective, it typically takes much longer to implement on the consumer side. Because you are constantly concerned with gaining consent and making sure that the friction is not driving away the consumer.
When you're an employee of the company you typically sign documents that say you will use the security protocols that are required by the company. So consent is not something that is gained by an employee it is given when they accept employment with the company.
So this is one of the reasons that we see a significant opportunity and an opportunity to partner with the existing iam identity and access management companies in the marketplace. Because we are augmenting this and making it more secure.
So that they can verify not just the employees device, but the fact that the employee is actually behind the device.
Thank you.
Please standby for our next question.
Our next question comes from the line of David <unk> with Ren Rail Partners. Your line is open.
Hey, Tom.
Hello, David Hi, Jim a couple of questions you mentioned twilio.
So clearly the plan is still to be a replacement to a one time password and it seems also that Twilio is one employees gave away their credentials to do you see that as a big opportunity number one.
And then you mentioned a couple of new deals won in telecommunications.
One and I am more cyber security is not the same company and maybe we could elaborate on those and maybe some of the timing of those.
Absolutely.
First and foremost yes.
When.
The world moves away from passwords.
And moves too.
It's called most commonly now a pass key on the device to token a piece of software that's put on your phone or your laptop that identifies that that phone or laptop is present, and therefore logs you win.
And then.
When there is either something risky youre doing maybe youre accessing a certain area of information inside the company or an area that the data is more.
Has a much greater loss if it is breached.
Then the user is challenge to make sure it's them and basically asked to turn the phone to their face and verify their identity with the biometric. So that is a very different ecosystem and this is where at I D.
Use the.
Overused metaphor of skate to where the puck is going.
We saw.
When we came to us I D.
The world was going to finally move away from passwords and when they did there was going to be a need to know who was behind the device not just the device was there.
And that is a much safer and more secure world than where you remember a password and you get texted a code.
And so many of the companies and speaking to the pipeline that we spoke to.
Whether it's in the healthcare market, where we see significant need because once again, there is tremendous amount of sensitivity and privacy to doctors.
Taking exams patients and their health care information. This is data that clearly you do not want breached.
If you look at the telecommunications opportunity that we're speaking to it serves small and medium businesses that need to secure their employees and make sure that the person that is using the device provided by that wireless telecommunications company.
Is the person it's supposed to be.
And finally talking about a large cyber security company that is separate from the telecommunications company.
They see the same opportunities and are implementing identity and access management solutions and realize that in cases of either high risk or sensitivity. They want to make sure who is behind the device and we are best positioned to offer that because that has been our entire focus.
It is also why we have looked to.
Divest ourselves of businesses that are not tied to our ability to use a biometric to step up authentication.
These are good businesses that add value and will have great homes with other companies, but they have very little to do with where we see the future of the market and the massive opportunity we see in biometric authentication Dave.
David did I answer your questions.
Yes. Thank you.
Sure.
Last question I have one more if I may.
Any nice to meet you she mentioned a couple of things I heard.
<unk> revenue and bookings everything in the second half of this year, obviously it hasnt happened in the first half.
Where do you see you know well.
Well I'm looking at 167000, I think I saw was that the IRR in and maybe last quarter. So you got this quarter and one and a half more like to what magnitude is substantial.
What do you think we could look for a while.
Is it 20 ex <unk> I mean.
That's all from US all numbers what.
The one thing that we have very clearly stated David.
Is that we remain confident that given our sales pipeline.
By the start of 2024, we can be cash flow positive.
And we have stated that we burn today, roughly $1 $1 million in cash.
So thats roughly $13 2 million in cash burn on an annualized basis.
To state the obvious two half cash flow positive you would have to have receipts in excess of $13 $2 million in order to be flowing cash positive.
If that's the start of 2024 and we sit here in the middle of 2022.
I think.
We see a line and a path to reach that end goal that now is only 18 months away and.
And so yes, we would obviously have to significantly pick up a 154000.
Of.
To get to $13 2 million of IRR.
And I should clarify that because this business has deferred revenue and prepayments that the combination of deferred revenue in <unk>.
<unk> will meet or exceed 13, two not the IRR by itself does that makes sense.
100% so are there.
Particular large customer is this going to be one customer that if the numbers $13 million $15 million next year, how should we look at it.
100 customers, meaning workforce.
Customers, one large customer.
How do we kind of thing.
All of the above David I mean, here's Harris.
We're in a very early stage company our size company that typically you see in the venture markets.
We consider it.
We're honored to be in the public markets, but we know that we have to bring.
Investors that are may be used to much more mature companies along with us on this journey.
You typically start with very small customers that prove out your solution and then you gradually expand the size of your agreements with new customers and ultimately then when you've proven your customer you have at the stations you start winning awards, which we've been doing.
Then some of the larger software companies say wait a second this makes a lot of points for us to put inside our solution.
Because.
Everyone's focused on we've got to get rid of passwords.
And naturally no one is thinking to the next thing great I know the devices, there, but do I know, it's David learner behind that device and how do I make sure it's David and not just David cellphone.
And so there is a flow that the small deal help us to.
To prove out our product get all the certifications I mean, we had 700 presentation the tax detected a perfect score.
Everything they could throw at us to try and defeat our technology.
And we succeeded in that.
That happens because you have really good early customers that help you really that the solution, which then allows you to take it to those that.
Are going to embedded in their products, whether you're a wireless telecommunications company or a large cyber security software company or a.
Our risk engine that serves the healthcare industry.
And all of these.
<unk>.
No.
The opportunities get larger as you mature and we're on that journey.
And we remain confident.
That what we said when we raised money was that that we'll be able to cross at the start of 2024.
Thank you Tom. Thank you team that was also very nice to mention that Jetstar and.
Wonderful man and.
You guys and enjoy the rest of your night and congrats on a lot of really good stuff thats gotten done keep up the good work.
Thank you David.
Operator.
Doesn't seem like there's any more questions right now, but there's a fair reiterate that anyone who would like.
Further information of all of our questions they can contact us.
Either through the contract.
Page on our website or by email Investor relations at <unk>.
Hi.
Investor Relations at <unk>.
Hi.
Tom I think just remains for your closing remarks.
Alright, well I'd like to thank everyone.
For their interest and investment in our company and your questions and insight today.
In closing, we will continue to focus our sales efforts on protecting the workforce and securing corporate assets from hackers and cyber criminals and I really want to thank you for your time today.
Take care everyone.
Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Okay.
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