Q3 2022 Authid Inc Earnings Call
This call and webcast.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask the question during the session you will need to press star one one on your telephone.
I'd now like to hand, the conference over to your speaker for today Gracie Freas you may begin.
Thank you operator, good afternoon, everyone with me on today's call are Tom T. Mo for CEO trip Smith, our President and C. T O any pham, our CFO and Graeme <unk>, our general counsel.
By now you should have access to todays press release announcing our third quarter 2022.
Results. If you have not received this release can be found on our website at www Dot Arthur I D Dot AI under the Investor Relations section.
Yeah.
Throughout this conference call, we will 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 adjusted EBITDA information to the most directly comparable GAAP financial information appear in today's press release.
As well as explanations of our bar and.
A R R kpis.
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 other filings, which are made available at www Dot FCC Dot Gov.
For those on the webcast. Please note that we will advance the slides on our end we will have a Q&A session. Following our presentation to.
To participate in that QA Q&A, you must be registered on the telephone telephone number is listed on our Investor Relations section of the website.
I'd now like to introduce our CEO Tom T Mo.
Thank you Grace turning to slide three legacy MFA doesn't cut it.
Yes, legacy multifactor authentication and passwords no longer create a safe digital world nearly every day, we read about a significant data breach at large organizations, including Twilio, Cisco Intuit and just yesterday American Airlines.
All of them have one thing in common they all use social engineering attacks that exploited human behavior and in particular vulnerable legacy MFA technology.
As quickly as chief technology, and information officers and the identity access management architects supplement passwords with Fishable, one time passwords or clunky push MFA hackers are finding new ways to exploit securities human element.
In the 2022 Verizon data breach investigation report the human element was identified the root cause of 82% of the 4000 data breaches study.
So after 60 years of passwords, we are in the midst of a fundamental evolution in the science of authentication with a renewed push to replace those hated and insecure credentials with cryptographic phyto to past keys or a phyto token bound to a device.
According to research and markets the market for password less authentication is projected to grow over the next 10 years at a CAGR of more than 16% to almost 54 billion by 2030 from approximately $13 billion today.
North America is expected to dominate the global password less authentication market currently accounting for at least 38% of the worldwide market.
In addition, with new research data showing that banking and health care are dominating the shift to password less authentication, we feel confident that we are targeting the right market segments.
Turning to slide four Q3 technology enhancements.
With Pat Keyes, replacing something you know with something you have it is an improvement.
But deploying password less authentication alone creates security and usability challenges, including limited portability and complex account recovery methods that often fall back to insecure identity authentication.
For instance, with the Cisco breach it appears that once the hackers gained control of a user's device they enrolled and redirected step up to new devices.
I saw dedication was now something to hackers add not the users.
The White House Zero Trust mandate also specifies that strong authentication include both device and identity authentication.
These shortcomings of past keys create a tremendous opportunity for off I D and allow us to differentiate our solutions.
In anticipation of the ramping password. This evolution, we made a strategic decision mid year to significantly upgrade and innovate our verified platform.
Our stellar product and engineering teams quickly developed and received certification of our platform by the Fido Alliance.
In October we launched verified three dot O and human factor authentication or H F Bay, which we believe is a pioneering solutions.
H F a buying strong unfeasible password less authentication with cloud biometric identity to authorize the human behind the device.
A four to five something to user has with something that user is which is their unique face. If the human element is a problem and 82% of breaches than solving for the human element with cloud biometric is the ideal solution.
Verified three dano and our differentiated human factor authentication.
Dress cyber risks that exploit human behavior with password less authentication bound with strong identity assurance.
<unk> adaptive authentication that balances high security with speed and ease of use driven by customer demand. These features are designed to improve workforce productivity and reduce friction for customers.
Include support for the open I D connect authentication protocol, allowing our customers to integrate our solutions in under 10 minutes.
Further verified three dato makes the move to zero trust easier because it offers our customers streamlined access to the ecosystem of identity access management privileged access management and endpoint detection and response providers.
A few of the identity ecosystems providers. We are now working with include Okta Austral beyond Trust sensor Gora and Vmware.
As we complete the launch of these services, we will provide more information in the coming weeks.
Turning to slide five.
Rather than simply talk about HSA I want to share a video of verified H F. A inaction using a recent cloud connect integration with okta.
Entity access management Frieder.
Watch how it enrolled verified users seamlessly logs in with our Phyto two certified password less authentication on any mobile device or desktop device.
Once the user is inside the corporate network verified seamlessly elevates authentication with a quick selfie to authorized user access to sensitive applications.
Let's see H F. A an action on the left hand side of your screen operator can you play the video.
[music].
Turning to slide six there.
That's the beauty of HSA in less than one minute in the same interface with no searching a recalling a password no fumbling for a secondary authentication application or looking for a fishable onetime pasco.
The verified users simply entered their user name and use their past key and device biometrics in this case touch I'd.
To log in to the company's network.
The authorized user access to the company's gated asset their intranet verified seamlessly elevated authentication in the user's browser.
<unk> accepted the activity request and then captured a quick healthy.
Now on that Selfie was something you might have missed a key UX change that we made with verified three dato that users no longer need to smile during itself, resulting an instantaneous image captures.
That are secured with our eye beta pad level, two liveliness detection, that's it that's human factor authentication.
Human factor authentication secures both logging access with a fight O two passkey and seamlessly gates use of enterprise assets by verifying the human behind the device.
Delivering enhanced enterprise security human factor authentication also offers the ease of use and portability, both workforce and consumers and all of us are demanding.
Turning to slide seven.
Verified three dato is now a market compelling product and our sales efforts and marketing campaigns continue to focus on two offerings workforce and consumer.
Verified H F. A close close the security gaps for both enterprise workforce and consumer applications by combining password less authentication with biometric certainty to shut down access privileges and lateral movement for unauthorized users cheaper.
Chief information security officers need solutions that replace legacy MFA solutions and stop hackers from logging into corporate production systems were stolen credentials.
We believe that these needs will outweigh the hesitancy with buying decisions in the current uncertain certain macroeconomic environment.
We have also taken a very targeted and thoughtful approach to the markets, where we can there.
Impact sales.
These three markets financial services health care and cyber security have been identified by industry researchers as ready for password list and are the segments. We believe can most benefit from verified human factor authentication.
With highly valued assets and data. These segments are frequently targeted by social engineering and account compromise attacks that can cause significant damage to reputation positioning and market Trust.
Turning to slide eight where we are on our journey.
In early 2022, we started working with early prospects to foster product adoption, our efforts to harden our platform security and comply with ISO 27 001 standards.
I bet, a pad specification and Phyto two protocol have strengthened our competitive positioning.
A further note the successful transformation of our platform has not gone unnoticed by industry experts in October Juniper research awarded author D. The gold winner for best biometric views in payments.
<unk> future Digital awards recognize the most impactful financial products and services that are driving innovation across banking retail fintech payments.
The increased cyber security attacks exploiting human behavior have also helped significantly to advance the understanding of wide products like verified should be adopted we them.
We are moving along our journey with customer wins and implementations within financial services and health care admittedly not as quickly as we would all like to see during the quarter, we signed several new financial services customers, including various regional U S credit unions and as we announced in September compliant are U S based.
AI, driven business Onboarding and risk scoring company.
We continue to work on developing and closing opportunities generated by our marketing activities.
Our customer success team is actively supporting our new clients with a streamlined implementation plan. They are also diligently working to up sell our new password less authentication services to existing customers.
Now, let me turn the call over to Andy who will give you an update on our financial results and Kpis Danny.
Thank you Tom turning to slide number nine the falling highlights comprised of results from continuing operation and we feel like our previous announcement that we are exiting the company non core businesses in South Africa and Colombia.
The cost close business was sold on August 29, 2022, and the exit from the non core business in Colombia is in process.
This business, there's a classified in our.
Financial statements as discontinued operations and assets held for sale.
Accordingly, all of my remarks will compare our results from continuing operations for the quarter and nine months ended September 32022, with the quarter and nine months ended September 32021.
Unless otherwise specified.
But both the three and nine months period verify software license revenue increased year over year.
<unk> revenue for the quarter increased over the prior year by 144 per cent to point there were $3 million.
For the nine months in 2020 to verify revenue increase over last year by 158% to $1 million.
Total revenue for the quarter comprised of verify software license revenue was quite zero.
Zero 3 million compared with <unk> 2 million for the prior year.
Which 0.1 million was from licenses to verify software.
For the nine months in 2022 total revenue was <unk> 3 million of which $41 million was from licensees to verify software.
This compared with total revenue for the same period in 2021 up <unk> 5 million of which 0.5 billion was from licensees to verify software the reduction in total revenue was due to the discontinuation of our legacy products.
Operating expenses for the quarter totaled $5 $7 million compared with $5 6 million for the prior year.
Operating expenses for the nine month period totaled $16 $9 million compared with $11 2 million for the prior year as we accelerated our investment in staff technology sales and marketing starting in the third quarter of 'twenty or 'twenty one.
Net loss for the quarter was $6 3 million compared with $5 2 million for the prior period.
For the nine months net loss totaled $18 2 million.
Including noncash charges of $8 3 million compared with $10 7 million, which include noncash charges of $5 3 million for the prior year.
Net loss per share for the quarter was 25% compared with 22 cents for the nine months period net loss per share totaled 73.
Paired with 50 cents.
Adjusted EBITDA loss for the quarter was $3 3 million compared with $2 6 million.
For the nine months period.
In 2022, adjusted EBITDA loss was $9 1 million compared with $5 million.
Now, let me present, our kpis.
Booked annual recurring revenue or bar is CML annual recurring revenue represented by the minimums or estimated amounts payable under contracted orders for all verified products.
The cumulative amount of a bar through September 32022 is unfortunately, <unk> 2 million.
Up about 25% over the second quarter.
Annual recurring revenue or <unk> is the amount of recurring revenue.
In accordance with GAAP.
<unk> from sales of all verifying products during the last month of the quarter multiply it by 12.
I R. R. As of September 32022 is approximately <unk> 1 million down about 14% from the second quarter.
Okay.
Deferred revenue our GAAP metric is the cash collected all billings from customer for all verified products, which will be recognized as revenue in future periods.
Deferred revenue recognized as of September 32022, as opposed to <unk> dollars 1 million a proportionately hundred percent from the second quarter.
With deals in our pipeline, we expect our verify subscription revenue will continue to expand.
Turning to our balance sheet at September 30 of 2022 cash and available credit facilities totaled $17 1 million.
Looking ahead.
Our cash burn rate will reduce to approximate $9 million per month. We then expect to improve our cash flow as we add revenue from verified treat auto sales.
Our previous guidance of having sufficient financing to fund operations through 2020, this way remain unchanged.
Our revised target is to achieve positive cash flow on a current basis by late 2024.
Let me now turn the call back to Tom for additional remarks.
Thank you Annie.
Before we move into Q&A I wanted to say a few words.
Certainly we are disappointed that our sales goals have not been achieved on the timeline we anticipated.
But our goals have not been lowered.
We have seen macroeconomic conditions extend decision, making and delayed sales cycles, but we know the opportunities remain.
We've taken steps on several fronts to achieve our goals.
Now that we've invested in a highly competitive and compelling platform. There are several areas, where we will reduce costs.
This year, we performed a number of coffee activities, including expanding our platform capabilities hardening security and performance securing compliance with ISO 27001.
Oh, two an eye beta standards as well as running brand awareness marketing campaigns, a number of these areas will not be as costly in 2023.
We firmly believe that verified three dot O is the right product for the right time and that with its launch we will start to make headway in achieving our sales targets across the right vertical markets for human factor authentication financial services health care and cyber security.
Our work remains focused on converting opportunities generated through our pipeline and made more accessible through our expanded cloud connect ecosystem.
Now with verified three dot O. We are well positioned to take our share of the vast total addressable market for password less authentication secured with identity assurance.
And with that I will turn it over to the operator and open the call to Q&A Graham.
Yeah.
So if you can just explain how people come.
Great questions. If they wish. Thank you as a reminder to ask a question you would need to press star one one on your telephone.
That's star one wanted to ask a question.
Please standby, while we compile the Q&A roster.
Thank you well also waiting for questions Suraj. Some perhaps you could take a few minutes just to explain the.
With respect to verify a three point O.
What makes it what gives a competitive advantages in this market. Obviously there are many many competitors out there, claiming all kinds of different benefits of that product what really makes us different.
What makes verified three dot O very different than the many many password less authentication providers that you see at all the trade shows today is that most password list companies in the final standard itself calls for you to buying an identity to a specific device.
Basically a pass key or think of it as a software token is put on your phone and when that phone is present at logs you in you don't need the password anymore.
That's great except for when you're.
Accessing a particularly sensitive area or you don't have that device or you want to access that information from a different device. The fact that we also bind a biometric that is stored in the cloud not on the individual device gives you a second layer of authentication eight multi fab.
Authentication that we have now branded ourselves as human factor authentication because that second factor that multi factor is now human it's your biometric it to you.
And that allows us. Unlike every other password password list provider to bind that identity and allow you to recover your past key on a new device.
Allow you to have your authentication stepped up to make sure. It's really you before you access a very sensitive area of your company's intranet or you make it very sensitive transaction as a consumer.
This greatly differentiates us in the past with verified to Dot O and since we launched.
Author D at money 2020 in 2021.
We were focused on the step up we talked a lot about twilio and the one time password and how we were going to replace it but.
But in the past with this world people view both factors together.
Factor that is tied to your phone and the factor that steps you up.
And that is the difference that we shifted with verified three dot O to also offer a password list fundamental that we can add all of the biometric.
Step up capability that we originally developed we've made a platform that is now turnkey and allows our customers to come to one provider to replace their passwords and replace their pin codes in one step.
Thanks Graham.
Thank you.
I have one more question.
You mentioned the expansion of the cloud connect ecosystem and some of the new partner relationships that we've developed an integrated suite over the last several months can you expand a little more on the significance.
Those relationships and how they are going to help out with with a future sale.
Absolutely one of the key ones is being able to integrate seamlessly with okta and all of their.
Partners.
You will recall in the past, we talked an awful lot about a rest API and low going from low code No code. What that means is you used to replace a call that is today done typically to twilio.
Arrest the API call you would have to have programmers in your I T staff go in program that integration tested integrated trial it before they could roll it out now for anyone that works with a Y D. C. You can integrate our solution in minutes because it's already.
Good.
And this is a huge step for us one of the keys are verified three dot O is the partner ecosystem and an example was at the Gartner identity and access management conference. We developed a relationship with sensor girl two Ceos and we said, let's integrate this.
And they expected that it was going to take US, we'll get a team a product people and engineers and we'll do it over zoom over the next few weeks.
The two engineers got together in our booth and did it in seven minutes.
That's the power of OID see that's the power of our verified offering and it really opens up a broad market to us that's very very simple for our customers to implement.
Thank you.
I'm showing no further questions at this time.
Now I'd like to turn the call back over to Tom for closing remarks.
Thanks for the questions and you know I appreciate everyone's time today, I think I speak on behalf of the entire management team here that we believe that we have the right product.
For this market.
The macroeconomics has made some headwinds.
But this is a change that will happen in technology. It will move to password list and it will need a step up to a biometric and we're the only company that offers those integrated together with a great platform of partners. Thanks for taking the time to spend with us today.
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