Q1 2024 Intellicheck Inc Earnings Call

Operator: Greetings. Welcome to the Intellicheck First Quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Guy Jackson. You may begin.

Greetings and welcome to the intelligent first quarter 2024 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This.

The conference is being recorded.

I'll now turn the conference over to your host Alright, Jackson you may begin.

Okay.

Guy L. Smith: Thank you, Operator. Good afternoon, and thank you for joining us today for the IntelliCheck First Quarter 2024 Earnings Call. Before we get started, I will take a few minutes to read the forward-looking statement. Certain statements in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. When used in this conference call, words such as "believe, expect, anticipate, encourage, and similar expressions as they relate to the company or its management, as well as assumptions made by and information currently available to the company's management, identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Jackson: Thank you operator, good afternoon, and thank you for joining us today for the Intel a check first quarter 'twenty 'twenty four earnings call before we get started I will take a few minutes to read the forward looking statement certain statements on this conference call constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 as amended when you.

Guy L. Smith: These forward-looking statements are based on management's current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and the company undertakes no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements, whether resulting from such changes, new information, subsequent events, or otherwise. Additional information concerning forward-looking statements is contained under the headings of the Safe Harbor Statement and Risk Factors, listed from time to time in the company's filings with the Securities and Exchange Commission.

Jackson: This conference call words, such as well believe expect anticipate encourage and similar expressions as they relate to the company Orange Madison as well as assumptions made by and information currently available to the company's management identify forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Jackson: These forward looking statements are based on management's current expectations and beliefs about future events and as with any projection or forecast they are inherently susceptible to uncertainty and changes in circumstances.

Jackson: Company undertakes no obligation to and expressly disclaims any obligation to update or alter its forward looking statements, whether resulting from such changes new information subsequent events or otherwise additional information concerning forward looking statements is contained under the headings.

Jackson: Safe Harbor statement and risk factors listed from time to time in the company's filings with the Securities and Exchange Commission.

Guy L. Smith: Statements made on today's call are as of today, May 13th, 2024. Management will use the financial term adjusted EBITDA on today's call. Please refer to the company's press release issued this afternoon for further definition, reconciliation, and context for the use of this term. We will begin today's call with Bryan Lewis, Intellicheck's Chief Executive Officer, and then Jeff Ishmael, Intellicheck's Chief Operating Officer and Chief Financial Officer, who will discuss the first quarter financial results. Following their prepared remarks, we will take questions from our analysts and institutional investors. Today's call will be limited to one hour, and I will now turn the call over to Bryan.

Jackson: Statements made on today's call are outside today May 13, 2024 management will use the financial term adjusted EBITDA in today's call. Please refer to the company's press release issued this afternoon for further definition reconciliation and context for the use of this term will begin today's call with Brian Lewis Intel checks Chief Executive Officer and then.

Bryan Lewis: Geoff fish now Intel checks, Chief operating officer, and Chief Financial Officer, who will discuss the first quarter financial results. Following their prepared remarks, they will take questions from our analysts and institutional investors today's call will be limited to one hour and I will now turn the call over to Brian.

Bryan Lewis: Thanks, Gar, and thank you all for joining us today for the Intellicheck Q1 2024 earnings call. One of the areas Jeff and I have been emphasizing in previous calls and meetings is improved EBITDA, and we delivered on that objective with adjusted EBITDA positive results last year. We also continue to deliver on our trailing 12-month growth progression in SAS revenues each month that saw improvement in both our Q1 adjusted EBITDA results and our net income and earnings per share results versus the prior year. Given our growth expectations and our margin structure, we anticipate that we will end 2024 both net income and adjusted EBITDA positive.

Bryan Lewis: Thanks, Scott and thank you all for joining us today for the Entellus had Q1 2024 earnings call.

One of the areas, Kevin I've been emphasizing in previous calls and meetings is improved EBITDA and we delivered on that objective with adjusted EBITDA positive results last year.

Bryan Lewis: We also continued to deliver on our trailing 12 month growth progression in SaaS revenues each month and saw improvement in both our Q1 adjusted EBITDA results in our net income and earnings per share results versus the prior year, given our growth expectations and our margin structure, we anticipate that we will end 2020.

Bryan Lewis: For net income and adjusted EBITDA positive.

Bryan Lewis: Before I get into some of the wins and recap some highlights from the first quarter, I'm going to begin with the evolving market for ID authentication. The landscape of the market for identity verification is evolving against the backdrop of a growing sense of urgency that is being fueled by across-the-board incidents of identity theft and fraud. This has led to a significant new focus on security and the user experience as businesses in every market vertical are feeling the effect of identity theft and fraud.

Bryan Lewis: Before I get into some of the wins and recap some highlights from the first quarter I'm going to begin with the evolving market for IV authentication.

Bryan Lewis: The landscape of the market for I get any barrier vacation is evolving against the backdrop of a growing sense of urgency is being fueled by across the board incidents of identity theft and fraud.

This has led to a significant new focus on security and the consumers users' experiences businesses in every market vertical are feeling the effect of Baghdad, any theft and fraud.

Bryan Lewis: Consumers are sending a clear message to businesses of every size in every market vertical. They want better protection, but they do not want to be burdened with time-consuming, arduous processes to get that protection, and they will take their business elsewhere if they do not get what they want in a user-friendly process.

Bryan Lewis: Consumers are sending a clear message to businesses of every size in every market vertical they want better protection. They do not want to be burdened with time consuming arduous process is to get that protection and they will take their business elsewhere. If they do not get what they want in a user friendly process.

Bryan Lewis: This heightened concern across market sectors is being driven by the dramatic growth of incidents of identity fraud. The data is compelling. According to Javelin Research, identity theft increased 13% in 2023 with losses of $23 billion impacting 15 million people. Account takeover increased 15% to $13 billion, and losses to businesses where this happens are long-term.

Bryan Lewis: This heightened concern across market sectors is being driven by the dramatic growth of incidents of identity fraud. The data is compelling.

Bryan Lewis: Turning to javelin research identity theft increased 13% in 2020 three with losses of 23 billion impacting 15 million people.

Bryan Lewis: Account takeover increased 15% to $13 billion in.

Bryan Lewis: And losses to businesses, where this happens our long term, 26% of people avoid merchants, where their identity has been stolen and 20% closed their accounts.

Bryan Lewis: 26% of people avoid merchants where their identity has been stolen, and 20% close their account. We see this in every sector of the market. Why is it so prevalent and increasing?

Bryan Lewis: We see this in every sector of the market.

Bryan Lewis: Why is it so proudly and increasing because it's so easy to steal someone's identity data breaches have led to more than 353 million people in the U S. Seeing there personally identifiable information compromised the recent United Healthcare breaches wallet, an estimated one third of all Americans.

Bryan Lewis: Because it's so easy to steal someone's identity. Data breaches have led to more than 353 million people in the U.S. seeing their personally identifiable information compromised. The recent UnitedHealthcare breach affected an estimated one-third of all Americans. The recent AT&T breach exposed 73 million people. This data does not cost much to buy on the dark web. The price tag is about $20.

Bryan Lewis: The recent AT&T breach exposed 73 million people.

Bryan Lewis: This data does not cost much to buy on the dark web the price tag is about $20.

Bryan Lewis: Fake IDs so good that even law enforcement officers say are virtually impossible to visually detect cost only $40 in bulk. So for about $60, someone can become you and can easily steal your identity. Again, we see it in every sector; loans, bank accounts, housing, and social media. Looking at two of the market sectors where we are active should give you a good idea of why our products are so valuable. A significant number of real estate professionals in the U.S. reported they were faced with seller impersonation fraud challenges, and a number of these fraudulent efforts skyrocketed in 2023. Seller impersonation fraud involves bad actors using publicly available records and information to pose as the legitimate owner of a property in an attempt to illegally sell it.

Bryan Lewis: HIV is so good that even law enforcement officers they are virtually impossible to visually detect cost only $40 in bulk.

Bryan Lewis: For about $60 someone can become you can easily steal your identity.

Again, we see it in every sector loans banking accounts housing and social media.

Bryan Lewis: Looking at two of the market sectors, where we are active should give you a good picture of why our products are so valuable.

Bryan Lewis: A significant number of real estate professionals in the U S reported they were faced with seller impersonation broad challenges and a number of these fraudulent efforts skyrocketed in 2023.

Bryan Lewis: Seller impersonation fraud, and balls back that bad actors using publicly available records and information to pose as the legitimate owner of a property in an attempt to illegally sell it.

Bryan Lewis: Our clients in this space tell us incidents of this nature have emerged as the foremost cause for alarm in the industry. In the automobile industry, concern over identity fraud is well-founded due to surging incidents that have had a direct bearing on dealership revenues and profits. An ELIN study based on interviews with more than 700 dealerships found 79% of automotive dealerships had an identity fraud-related loss last year. Sixty percent of those participating in the study reported they had costly losses of at least three vehicles due to identity fraud.

Bryan Lewis: Our clients in this space tell us incidents of this nature have emerged as the foremost cause for alarm C. In the industry.

Bryan Lewis: In the automobile industry, considering over identity fraud, as well do you get surging incidents that have had a direct bearing on dealership revenues and profits in England study based on interviews with more than 700 dealerships found 79% of automotive dealerships.

Bryan Lewis: Got any fraud related loss last year.

60% of those participating in this study reported they had coffee losses of at least three vehicles to identity fraud.

Bryan Lewis: I can continue at length given the persuasive nature of identity theft and fraud and the ever-increasing reported incidents of credit card fraud, bank fraud, loan or lease fraud, employment fraud, and phone and other utility fraud that further defines the spyware problem. But these two examples highlight the increasing need for rapid, frictionless, and accurate identity verification. As you will see from our efforts on several fronts, we intend to continue to capitalize on the need for consumer-engaging solutions with our distinctive, affordable technology solutions that define and differentiate IntelliCheck from other would-be solution providers.

Bryan Lewis: I can continuous lengths given that or is it basically nature of identity theft and fraud and the ever increasing reported incidents of credit card fraud bank fraud loan or lease fraud employment fraud, and phone and other utility fraud that further declines despite lowering problem, but these two examples highlight the.

Bryan Lewis: The increasing need for rapid frictionless and accurate I get any verification.

Bryan Lewis: As you will see from our efforts on several fronts, we intend to continue to capitalize on the need for consumer engaging solutions with our distinctive affordable technology solutions that define and differentiate in telecheck from other would be solution providers.

Bryan Lewis: As we have discussed with you, an important part of our effort to build awareness of our technology solutions is our growing slate of marketing initiatives. Our new VP of Marketing, Christine Elson, is moving forward in collaboration with our SVP of Sales, Chris Meyer, to develop new tools to support our sales.

Bryan Lewis: As we've been discussing with you an important part of our effort to build awareness of our technology solutions is a growing slate of marketing initiatives.

Bryan Lewis: Our new VP of marketing Christine Ellison is moving forward in collaboration with our S. E. T. S sales, Chris Meyer to develop new tools support support our sales team.

Bryan Lewis: In February, a new sales presentation rolled out that clarifies our messaging and highlights the IntelliCheck difference. We have also relaunched our website to further refine the messaging of our consumer-focused approach to identity validation. Together, Chris and Christine are also working on a lead generation plan that emphasizes securing new accounts and expanding the relationship with existing clients. These initiatives will build on our foundation of sales support materials and initiatives as Chris continues his efforts to enhance the sales team with seasoned sales professionals.

Bryan Lewis: In February a new sales presentation rolled out that clarifies our messaging and highlights the intelligent difference. We have also re launched our website to further refine the messaging of our consumer focused approach to identity validation.

Bryan Lewis: Together Christine Christine are also working on a lead generation plan that emphasizes securing new accounts and expanding the relationship with existing clients.

Bryan Lewis: These initiatives will build on our foundation of sales support materials and initiatives as Chris continues his efforts to enhance the sales team with seasoned sales professionals.

Bryan Lewis: As we have said previously, we expect to continue to concentrate on recruiting new talent as we execute our plan for growth and market penetration across key verticals. Sales and marketing are also continuing to assess trade show opportunities that allow us to further invest our marketing funds to expand market awareness in our important market verticals. Next up is our participation at Finnovate Spring.

Bryan Lewis: As we have said previously we expect to continue to concentrate on recruiting new talent as we execute our plan for growth and market penetration across key verticals.

Bryan Lewis: Sales and marketing are also continuing to assess trade show opportunities that allow us to further invest our marketing funds to expand market awareness and our.

Bryan Lewis: Our important market verticals.

Bryan Lewis: This annual trade show focuses on FinTech innovators bringing together senior attendees that include representatives from more than 600 banks. Our participation also includes a speaking presentation for me on May 21st, as well as a 10-minute interview video, which will allow further reach into this meaningful market vertical demographic. Genevieve will promote the video on their blog page, social media channels, and stream it.

Bryan Lewis: Next up is our participation at innovate spring. This annual trade show focuses on Fintech innovators, bringing together senior attendee that include representatives from more than 600 banks. Our participation also includes a speaking presentation for me on May 21st as well as a 10 minute interview video which will allow for.

Bryan Lewis: We will also be using our social media channels to promote Intellicheck's prisms at the trade show and in the Finnovate video. As we continue to expand our marketing, investment, and trade show opportunities, we'll be keeping you updated on our progress. Another sales-focused effort is our public-private partnership program. As you saw in our recent announcement of our partnership with the city of Clemson, South Carolina, we are continuing to replicate our successes in partnering with municipalities to address the problems that negatively influence economic health, quality of life, and individual safety stemming from sophisticated fake IDs.

Further reach into this meaningful market vertical demographic.

Bryan Lewis: Beth will promote video in their block walk page social media channels and streaming.

Bryan Lewis: We will also be using our social media channels to promote intelligence prison at the trade show and if any of a video.

Bryan Lewis: As we continue to expand our marketing investment and trade show opportunities, we will be keeping you updated on our progress.

Bryan Lewis: And the other sales focused effort is a public private partnership program.

Bryan Lewis: As you saw in our recent announcement of our partnership with the city of constant in South Carolina, we are continuing to replicate our successes and partnering with municipalities to address the problems that negatively influenced the economic health quality of life and individual safety stemming from sophisticated baked I E.

Bryan Lewis: We issued a press release and held a press conference with the mayor, the chief of police, the state law enforcement division, Clemson University, members of the economic advisory committee, and city council members, as well as some of the participating business owners to launch the latest new pilot program aimed at tackling the problem of underage drinking. We are very pleased that every media outlet in the market attended the press conference on the launch of the 12-month pilot program that is initially being underwritten by the city of Clemson.

Bryan Lewis: We issued a press release and held a press conference with the Mayor Chief of Police State Law enforcement Division Clemson University and members of the Economic Advisory Committee and City Council member as well as some of the participating business owners to launch the latest new pilot program aimed at tackling the problem of under age.

Bryan Lewis: Drinking.

Bryan Lewis: We are very pleased that every media outlet in the market attended the press conference on the launch of the 12 month pilot program is initially being underwritten by the city of Clemson.

Bryan Lewis: Participating area businesses are now using the same IntelliCheck technology solution that is already being used by the City of Clemson Police Department and some area businesses that are early adopters of our technology solution. The pilot program will allow 15 area bars, convenience stores, liquor stores, and a local hotel to use Intellicheck's Identity Verification mobile technology solution. I want to point out that the police chief, Jorge Campos, appeared before the city council on more than one occasion and was a leading proponent of the program because of the police department's overwhelmingly positive experience with using our technology.

Bryan Lewis: Participating ARY businesses are now using the same entel a check technology solution is already being used by the city of Clemson Police Department and some area of businesses that are early adopters of our technology solutions. The pilot program will allow 15 area bars convenience stores liquor stores and <unk>.

Bryan Lewis: Local hotel to use Intel checks identity verification mobile technology solution.

Bryan Lewis: And I wanted to point out that the police cheap Jorge Campos appeared before the city Council and more than one occasion and was a leading proponent of the program because of the police departments overwhelmingly positive experience in using our technology.

Bryan Lewis: During the press conference, we also highlighted the often-overlooked problem that also endangers young people when they purchase fake IDs, which goes beyond giving young people access to alcohol. The personal information and photos young people provide to purchase these high-tech fake IDs set them up for identity theft and fraud. Far too often, these young people suffer financial devastation as fraudsters use that personally identifiable information to open credit accounts, take out loans, purchase automobiles, and real estate. The resulting defaults on payments victimize these unsuspecting kids, who find out the hard way that their credit has been compromised and destroyed.

Bryan Lewis: During the press conference. We also highly that'd be often overlooked problem that also are dangerous young people when they purchase fake I E.

Bryan Lewis: It goes beyond giving young people access to alcohol.

Bryan Lewis: Personal information and photos young people provide to purchase these high tech fake Ids set them up right that any theft and fraud.

Bryan Lewis: Far too often these young people separate financial devastation as fraudsters use that personally identifiable information to open credit accounts take out loans purchase automobiles and real estate.

Bryan Lewis: The resulting defaults on payments victimized needs unsuspecting kids you find out the hard way that their credit has been compromised and destroyed.

Bryan Lewis: So far, the numbers demonstrate the seriousness of this problem. Just over 1% of IDs scanned in Clemson by participating businesses have been expired, often an older sibling giving their old ID to their younger sibling. 13% have been outright faked. Think about that.

Bryan Lewis: So far the numbers demonstrate the seriousness of this problem.

Bryan Lewis: Just over 1% of items scanned and clients and by participating bad businesses had been expired.

Bryan Lewis: Often an older sibling, giving their old I D. Two they're younger sibling, 13% had been outright pigs.

Bryan Lewis: About 14% of the IDs checked were fake IDs that underage kids were using to purchase alcohol. And a final note on the press conference. Clemson Police Chief Kamtos pointed out what we know to be true.

Speaker Change: Think about that.

Speaker Change: 14% of the Ikea check where fake Ids that they reach kids reuse using looking to purchase alcohol.

And a final note on the press conference call them simply as cheap Campos pointed out what we know to be true.

Bryan Lewis: It's not just a local problem; it's a statewide problem, and that problem is not just a South Carolina problem. This is why we are continuing our efforts to educate states as to the scope of the problem and the need to support the adoption of effective solutions. As you may remember, our first program of this nature was a pilot project with the city of Charleston, South Carolina. The pilot was supported by the City and Explore Charleston, the Charleston Area Convention and Visitor Bureau, allowing more than 30 downtown businesses to use IntelliCheck's ID verification program in an effort to eliminate underage drinking and make the central business district a safer place for students, residents, and visitors.

Speaker Change: Not just a local problem, it's a statewide problem and that problem is not just a south Carolina problem.

This is why we are continue our efforts to educate states as to the scope of the problem and the need to support the adoption of effective solutions.

Bryan Lewis: What started as a pilot program has proven to be so successful that the city has made this public-private partnership with Intellicheck and downtown businesses a permanent program. Given the success of both of these initiatives, we've been approached by foundations, lawyers, and lobbyists to see what can be done to expand this program across the state of South Carolina. We've also been receiving inquiries from other cities and other states with similar issues.

Speaker Change: As you May remember our first program in this nature was a pilot project with the city of Charleston, South Carolina. The pilot was supported by the city and explore Charleston, The Charleston area Convention and visitors Bureau allow.

Speaker Change: Allowing more than 30 downtown businesses to use intelligence saggy verification program in an effort to eliminate under aged drinking and make the central business district, a safer place for students residents and visitors.

Speaker Change: What started as a pilot program has proven to be so successful that the city has made this public private partnership with Intel or check in downtown businesses a permanent program.

Speaker Change: Given the success of both of these as dish. It is we've been approached by foundations lawyers and lobbyists to see what can be done to expand this program across the state of South Carolina.

Speaker Change: We've also been receiving inquiries from other cities and other states with similar issues.

Bryan Lewis: Another important development represents a new client, and with them, a new opportunity to reach educational institutions with an application for a technology that goes beyond preventing young people from using fake IDs to access age-restricted products like alcohol. We have just signed a university that will be using Intellicheck's technology to tackle financial aid fraud. As we discussed last call, we're beginning to move to a model that has customers commit to a set monthly minimum versus buying a bucket of transactions. And again, as we said, this will help us to be able to give you more concrete numbers, including ACV signs.

Speaker Change: Another important development development represents a new client and with them a new opportunity to reach educational institutions with an application for a technology that goes beyond preventing young people from using fake Ids to access age restricted products like alcohol.

Speaker Change: We have just signed a university that will be using impella checks technology to tackle financial aid fraud.

Speaker Change: As we discussed last call. We are beginning to move to a model that has customers commit to a set monthly minimum versus buying a bucket of transactions.

Speaker Change: And again as we said this will help us to be able to give you more concrete numbers, including E. C V side.

Bryan Lewis: This is one of the first new clients signed under this new pricing model. As we sign more clients under this model, our plan is to begin to provide those staff. In this use case, bad actors present themselves as would-be students in need of student loans to be able to obtain their education. Once the funds are awarded, these fraudsters disappear, and with them, precious financial resources. This is what we intend to stop. Recent data from California community colleges underscores the magnitude of the problem for federal Pell Grants alone.

Speaker Change: This is one of the first new clients signed under this new pricing model as we sign more clients under this model. Our plan is to begin to provide those stats.

Speaker Change: In this use case bad actors present themselves would be students in need of student loans to be able to attain their education.

Once the funds are awarded these fraudsters disappear and with them precious financial resources. This is what we intend to stop.

Speaker Change: Recent data from California community colleges underscores the magnitude of the problem Federal Pell grants alone.

Bryan Lewis: A California Community College Chancellor's Office study stated that an alarming 25% of applications were fraudulent. This problem, they reported, also extends to state and local aid. This is a developing market opportunity that we look forward to exploring to drive adoption of our technology. We have a pilot program that is starting this month with a technology-enabled consumer credit program that services underserved customers for its clients both in-store and online.

Speaker Change: In California Community College Chancellors Office study stated that an alarming 25% of applications were fraudulent.

This problem. They reported also is that extends to state and local aid.

Speaker Change: This is a developing market opportunity that we look forward to continuing to explore to drive adoption of our technology.

Speaker Change: We have a pilot program that is starting this month with a technology enabled consumer credit program that services underserved customers for its clients both in store and online.

Bryan Lewis: This flexible technology platform provides a loan decision to consumers within seconds across multiple market invertables, including automotive, healthcare, and credit card applications. Our ID verification solutions fit well into this decision-making platform. We're also looking to gain share in the lease-to-own space.

Speaker Change: Its flexible technology platform provides a long decision to consumers within seconds across multiple market verticals, including automotive health care and credit card applications.

Speaker Change: Our I E verification solutions, but well into this decisioning platform.

Speaker Change: We are also looking to gain share in the lease to own space in Q1, we signed a top three leased on provider who's starting a pilot this month.

Bryan Lewis: In Q1, we signed a top three lease-to-own provider who is starting a pilot this month. This omni-channel platform company is committed to elevating financial opportunities for customers through innovative, inclusive, and technology-driven financial solutions that address the evolving needs and aspirations of consumers. As we turn to our updates on other programs, I'm pleased to report that financial services company number two, one of our largest clients in the retail credit card space, is bringing live a retailer they just brought on board. The retailer is a prominent luxury department store chain with approximately 100 locations.

Speaker Change: Omnichannel platform companies committed to elevating financial opportunities for customers through innovative inclusive and technology, driven financial solutions that address the evolving needs and aspirations of consumers.

Speaker Change: As we turn to our updates on other programs I'm pleased to report that financial services company number two one of our largest clients in the retail credit card space is bringing live or retail or they just brought on board.

Speaker Change: The retail is a prominent luxury department store chain with approximately 100 locations. It is reassuring to see one of our top accounts continues to bring us new clients.

Bryan Lewis: It is reassuring to see one of our top accounts continue to bring us new clients. This is yet one more validation of the strength of this partnership and their understanding of the value we contribute. Financial services company number three, to whom we sold the hardware for their teller workstations a few years ago, remains on target for new branch use cases. We expect them to start generating incremental revenue within the next 100 days.

Speaker Change: Yet one more validation of the strength of this partnership and their understanding of the value we contribute.

Speaker Change: Financial services company number three to whom we sell the hardware for their teller workstations, a few years ago remains on target for new brass use cases, we expect they will start generating incremental revenue within the next 100 days. Additionally, there are 2200 location home Garden and farm.

Bryan Lewis: Additionally, their 2200 location, home, garden, and farm chain is still anticipated to go live by the end of the year. Another new use case is one that we believe could hold strong promise going forward. The focus of this use case is for unintended liquor sales in hotels. A growing number of hotels have expanded the availability of liquor sales to include key card-controlled entry into an area where alcoholic beverages are made available to hotel guests. Young people are using the room key card to gain access to alcoholic beverages in what hotels thought would be secure rooms.

Speaker Change: <unk> is still anticipated to go live by the end of the year.

Speaker Change: Another new use cases, one that we believe could holds strong promise going forward.

Speaker Change: Focus on this use cases for unintended liquor sales in hotels, a growing number of hotels have expanded the availability of liquor sales to include key card controlled entry into an area, where alcoholic beverages or made available to hotel guests.

Speaker Change: Young people are using their room key card to gain access to the alcoholic beverages and what hotels.

Speaker Change: What would be secure a room.

Bryan Lewis: In this third-party application, a hotel group received its production keys last week and will be starting a pilot program shortly. We're also seeing progress with the international social media company that we signed a few years ago. This client is now doing ID verification in multiple countries, and they are soon launching a project that will have all of their US email users reauthenticate themselves over the course of two to three months. Although email is not their primary business, we believe this one-time project serves to further our partnership and demonstrate the many ways Intellicheck can provide valuable solutions to their needs.

Speaker Change: In this third party application our hotel group received their production keys last week, and we'll be starting a pilot program shortly.

Speaker Change: We're also seeing progress with the international Social Media company that we signed a few years ago. This client is now reviewing I D verification in multiple countries and they are soon launching a project doesn't have all of their U S. Email users re authenticate themselves over the course of two to three months old.

Speaker Change: Although email is not their primary business. We believe this one time project serve to further our partnership and demonstrate the many ways and tell the check can provide valuable solutions to their needs.

Bryan Lewis: In yet another use case, we are eagerly anticipating next week's Go Live for the wire fraud company we spoke of on the last call. Wire fraud continues to be a significant concern amongst consumers with devastating consequences for those who become victims of this rapidly growing crime.

Speaker Change: And yet another use case, we are eagerly anticipating next weeks go live for the wire for our company. We spoke up on the last call wire fraud continues to be a significant concern amongst consumers with devastating consequences to those who've become victims of this rapidly growing crime.

Bryan Lewis: This client will be using our technology to authenticate users in a wire transfer. We are also seeing growth trajectory for our regional banks as they continue to grow, with a 1,200-location bank customer looking to negotiate a longer-term contract that we anticipate will close in the third quarter. In addition, one of our larger regional bank customers has launched the second of several use cases that now allows customers to start an application from their web browser; previously, it had to be started from a mobile device. The web browser use case has significantly higher volumes than the mobile use case.

Speaker Change: This client will be using our technology to authenticate users and a wire transfer.

Speaker Change: We are also seeing growth trajectory for our regional banks as they continue to grow with a 1200 location bank customer looking to negotiate a longer term contract that we anticipate will close in the third quarter.

Speaker Change: In addition, the larger of a regional bank customers has launched the stack into several use cases that now allows customers to start an application from their web browser.

Speaker Change: Previously it had to be started from a mobile device.

Speaker Change: Web browser use case had significantly higher volumes than the mobile use case.

Jeffrey Ishmael: Later this month, we will look to be up and running with the first ID and credentials verification app that is designed specifically for transport and logistics drivers. This is yet another exciting new application and fits into our vision of confirming that a person you are dealing with is in fact who they say they are. Things are also going well with our real estate platform client. The software provider we spoke about earlier is beginning their rollout later this week, and they intend to have us fully integrated into their new infrastructure later this month.

Speaker Change: Later this month, we'll be look we will look to be up and running with the first I D and credentials verification App that is designed specifically for transport and logistics drivers is yet another exciting new application and fits into our vision of confirming the person you are dealing with it.

Speaker Change: He is in fact, who they say they are.

Speaker Change: Things are also going well with our real estate platform clients. The software provider. We spoke about earlier is beginning to roll out later this week and they intend to have it fully integrated into their new infrastructure later this month.

Jeffrey Ishmael: As I spoke about earlier, the real estate industry has significant issues with fraud, and we want to be there to help prevent it in this very important vertical. In closing on this partial pipeline update, the top three banks we have spoken of in the past continue to indicate they will be up and running with their digital use cases in the fourth quarter of this year. As you've seen, we remain alert to how long these things tend to take when working with a very large institution, and we will continue to keep you posted.

Speaker Change: As I spoke about earlier, the real estate and she had significant issues with fraud, and we want to be there to help prevent it in with this very important vertical.

Speaker Change: In closing on this partial pipeline update the top three bank, we have spoken of in the past continues to indicate that it will be up and running with their <unk>.

Speaker Change: Digital use cases in the fourth quarter of this year.

Speaker Change: As you have seen we remain alert how long these things tend to take when working with a very large institution and we've continued to keep you posted.

Jeffrey Ishmael: We believe this would be a significant revenue generator for 2025 and beyond, and upon full implementation, it will be a top five customer. I will now turn the call over to Jeff for further discussion about our Q1 results.

Speaker Change: We believe this would be a significant revenue generator for 2025 and beyond.

Speaker Change: The implementation will be a top five customer.

Speaker Change: I will now turn the call over to Jeff for further discussion about our Q1 results.

Jeffrey Ishmael: Thank you, Bryan. I'm pleased with the continued progress we've been making throughout the organization as we continue our efforts to recalibrate our spend and redistribute investment into the areas that we believe will fuel our growth and profitability. Our first quarter revenues were 10% higher versus the prior year, and we continue to report a higher average price per scan versus the prior year. And we continue to improve both our adjusted EBITDA results for the first quarter and our net income and earnings per share versus the prior year.

Jeff: Thank you Brian I'm pleased with the continued progress we've been making throughout the organization as we continue our efforts to recalibrate, our spend and redistribute investment into the areas that we believe will fuel our growth and profitability.

Jeff: Our first quarter revenues were 10% higher versus the prior year. We continue to report a higher average price per scan versus the prior year and we continue to improve both our adjusted EBITDA results for the first quarter and our net income and earnings per share versus the prior year.

Jeffrey Ishmael: As Bryan mentioned earlier, we're pleased to see the continued trailing 12-month growth progression in SAS revenues each month, which we have achieved since we introduced this metric in January of 2020. Continuing to cast a critical eye on the metrics of our SAS revenue, it's encouraging to see an 18% increase in our average price per scan versus the prior year as we have largely completed right-sizing the pricing of our legacy accounts, enforced internal discipline on CPI increases, and signed new customers at higher rates than we have traditionally executed.

Jeff: As Brian mentioned earlier, we're pleased to see the continued trailing 12 month growth progression in SaaS revenues each month, which we have achieved since we introduced this metric in January of 2020.

Jeff: You mean to cast a critical eye to the metrics of our SaaS revenue.

Jeff: Or do you need to see an 18% increase in our average price per scan versus the prior year as we have largely completed rightsize the pricing in person legacy accounts enforced sooner internal disciplines on CPI increases and signed new customers at higher rates than we have traditionally executed.

Jeffrey Ishmael: We continue to be encouraged by the improvement in this metric as it continues to speak to the testament of value realized by our new and existing customers. We are also continuing to maintain our focus on our operating expenses to ensure that we achieve the expected return on our investments in this area. Within the Q1 period, we continue to realize the benefits of our 2023 restructuring efforts and the subsequent improvement in our year-over-year adjusted EBITDA results.

Jeff: We continue to be encouraged by the improvement in this metric as it continues to speak to the testament of value realized their new and existing customers.

We're also continuing to maintain our focus on our operating expenses to ensure that we achieve the expected return on our investments in this area.

Within the Q1 period, we continued to realize the benefits of our 2023 restructuring efforts and the subsequent improvement in our year over year adjusted EBITDA results.

Jeffrey Ishmael: Turning now to our first quarter results, revenue for the first quarter of 2024 increased 10% to $4,680,000 compared to $4,254,000 in the same period of 2022. Our SAS revenue for the first quarter of 2024 grew 9% to $4,608,000 from $4,228,000 during the same period of 2023 and represented 98% of our first quarter revenue.

Jeff: Turning now to our first quarter results.

Jeff: Revenue for the first quarter of 'twenty 'twenty, four increased 10% to $4 million 680000, compared to 4.254 million in the same period of 2022.

Jeff: Our SaaS revenue for the first quarter of 'twenty 'twenty four grew 9% to $4 million 608000 from $4 million 228000. During the same period of 2023, and representing 98% of our first quarter revenue.

Jeffrey Ishmael: Gross profit as a percentage of revenues was in line with our expectations at 90.7% for the first quarter of 2024 compared to 92.2% for the same period of 2023. The nominal decreases are within our previously discussed range of 90 to 91% and are reflective of our continued re-architecture efforts as we incur planned overlap in our cloud expense fees. Our product team has demonstrated that we can maintain recurring margins of over 90% as the re-architecture progresses.

Jeff: Gross profit as a percentage of revenues was in line with our expectations at 97% for the first quarter of 'twenty 'twenty four compared to 92.2% for the same period of 2023.

Jeff: The nominal decreases within our previously discussed range of 90% to 91% and is reflective of our continued re architecture efforts as we incur planned overlap and our cloud expense fees. Our product team has demonstrated that we can maintain reoccurring margins of over 90% as the re architecture progresses that being said we will.

Jeffrey Ishmael: That being said, we'll continue to scrutinize our cost structure with the goal of maintaining or improving upon that level. Operating expenses, which consist of selling, general and administrative, marketing, and research and development expenses, decreased 531,000, or 10%, to $4,770,000 for the first quarter of 2024, compared to $5,301,000 for the same period of 2023, included within operating expenses for the first quarter of 2024 and 2023 with $334,682,000, respectively, of non-cash equity compensation expense.

Jeff: Continue to scrutinize, our cost structure with the goal to maintain or improve upon that level.

Operating expenses, which consist of selling general and administrative marketing and research and development expenses decreased 531000, or 10% to $4 million 770000 for the first quarter of 2024 compared to 5.301 million for the same period of 2023.

Jeff: Within operating expenses for the first quarter 'twenty 'twenty, four and 2023 with 334680 2000, respectively of noncash equity compensation expense.

Jeffrey Ishmael: Within the first quarter, we recognized $609,000 in software capitalization tied to our re-architecture efforts. While this was higher than our prior guidance, we still showed tremendous progress leveraging our operating expenses against revenue. Driven by the product team supporting multiple implementation projects, as well as tight expense controls, we leaned heavier on external consultants to accelerate our re-architecture efforts.

Jeff: Within the first quarter, we recognized 609000 in software capitalization tied to a re architecture efforts well this was higher than our prior guidance, we still showed tremendous progress leveraging our operating expenses against revenues.

Jeff: And by the product teams supporting multiple implementation projects as well as tight expense controls, we leaned heavier on external consultants to accelerate our re architecture efforts on.

Jeffrey Ishmael: On a constant basis, adding back our capitalized software expenses, our operating expenses as a percentage of revenues decreased a full 810 basis points against the same period of 2023, resulting in $379,000 in leverage improvement. As discussed on our last call, we expect our total non-cash expenses will continue to decrease and comprise approximately 10 percent of our operating expenses, with stock-based compensation comprising 90 percent of that figure. This compares to our prior historical trend of 13 to 15 percent. Turning to Net Income and Adjusted Evidence.

Jeff: On a constant basis, adding back in our capitalized software expenses, our operating expenses as a percentage of revenues decreased to four 810 basis points against the same period of 'twenty twenty-three, resulting in 379000 and leverage improvement.

Jeff: As discussed on our last call. We expect our total noncash expenses will continue to decrease and comprised approximately 10% of our operating expenses stock based compensation comprising 90% of that figure. This compares to our prior historical trend of 13% to 15%.

Jeffrey Ishmael: The company's net income improved by $945,000 to a net loss of $442,000 for the first quarter of 2024, compared to a net loss of $1,387,000 for the same period in 2023. Net loss per diluted share for the first quarter of 2024 improved by $0.05 to a net loss of $0.02 per diluted share, compared to a net loss of $0.07 per diluted share for the same period in 2023. The weighted average diluted common shares were $19.4 million for the first quarter of 2024 compared to $19.2 million for the same period of 2023. Adjusted EBITDA for the first quarter of 2024 increased by 441,000, or 79%, resulting in a net loss of $117,000 compared to a net loss of $558,000 for the same period of 2023. Our balance sheet remains strong when we finish the first quarter with $9.2 million in cash and short-term investments.

Jeff: Turning to net income and adjusted EBITDA.

Jeff: The company's net income improved by 945000 to a net loss of 442000 for the first quarter of 2024 compared to a net loss of 1.387 million for the same period of 2023 net loss per diluted share for the first quarter of 'twenty 'twenty four improved by five cents to <unk>.

Jeff: Net loss of two cents per diluted share compared to a net loss of seven cents per diluted share for the same period of 2023.

Jeff: The weighted average diluted common shares were $19 4 million for the first quarter of 'twenty 'twenty four compared to $19 2 million for the same period of 2023.

Jeff: Adjusted EBITDA for the first quarter of 'twenty 'twenty four increased by 441000 or 79%, resulting in a net loss of 117000 compared to a net loss of 558000 for the same period of 2023.

Jeff: Our balance sheet remains strong and we finished the first quarter with $9 2 million in cash and short term investments.

Jeffrey Ishmael: We also continue to ensure we are properly managing our cash reserves, which generated $69,000 in interest income during the first quarter versus $3,000 in the same period of 2023. Turning now to the progress on our internal initiatives, 2024 represents a year of execution as we will continue to pivot off our 2023 restructuring effort and deploy our spend into meaningful marketing and brand initiatives that we believe will drive top-line revenue. As we have previously discussed, we are executing on a material shift in our expenses where we have taken previously allocated G&A spend and moved that into support for trade shows, regional conferences, and other brand initiatives.

Jeff: Also continue to ensure we are properly managing our cash reserves, which generated 69000 in interest income during the first quarter versus 3000 in the same period of 2023.

Jeff: Turning now to the progress on our internal initiatives 2024 represents a year of execution as we will continue to pivot off our 2023 restructuring effort.

Jeff: The players spending a meaningful marketing and brand initiatives, we believe will drive topline revenue.

Jeff: As previously discussed we are executing on a material shift in our expenses, where we've taken previously allocated G&A spend and move that into support for trade shows regional conferences and other brand initiatives with the hire of Christine Nelson as our VP of marketing in January. It took are only a handful of weeks to start implementing a 'twenty 'twenty four.

Jeffrey Ishmael: With the hire of Christine Nelson as our VP of Marketing in January, it took her only a handful of weeks to start implementing a 2024 blueprint for targeted trade shows. As Bryan discussed, through quick strike efforts across the team, we managed to attend two trade shows in the first quarter, and we have four more trade shows on the calendar for the second quarter. This is a key call-out, as the company, outside of targeted meetings, did not have a physical presence at any trade shows prior to COVID.

Jeff: Blueprint for targeted trade shows.

Jeff: Brian discussed through quick strike efforts across the team we manage to attend twos trade shows in the first quarter. We have four more trade shows in the calendar for the second quarter.

Jeff: This is a key callout is the company outside of targeted meetings did not have a physical presence at any trade shows since prior to Covid.

Jeffrey Ishmael: Planning efforts by the team in our sales department, attending a number of key events in the second half of the year as well as turning to our R&D experts. We are expecting our R&D expense to continue to decrease year over year during the second quarter as we continue the capitalization of our re-architecture effort. In 2024, we expect our R&D to comprise no more than 18-20% of our operating expenses moving forward, which compares to approximately 30% during the 2020-2022 period, which then subsequently was reduced to approximately 22% in 2023.

Jeff: Planning efforts by the team of our sales department attending a number of key events in the second half of the year as well.

Jeff: Turning to our R&D expenses were expecting our R&D expense to continue to decrease year over year during the second quarter as we continue the capitalization of our re architecture efforts for 'twenty 'twenty four we expect our R&D will comprise no more than 18% to 20% of our operating expenses moving forward, which.

Jeff: Theres to approximately 30% during the 'twenty 2020 'twenty two period, which then subsequently reduced to approximately 22% in 2023.

Jeffrey Ishmael: This change in spend composition is not resulting in a compromised product platform but one that is stronger through the re-architecture efforts of Jonathan and the product team, as well as the bolstering of our data science efforts, which we believe will result in a higher level of service and reporting for our customers. Overall, we expect to continue seeing significant leverage increases in our OPEX spend against our anticipated growth in 2024. While we are significantly increasing program spend on the sales and marketing side of the business to drive top-line revenues, we believe we are properly structured in our headcount and expect a 2024 year-end headcount that will be approximately equal to the headcount we finished with in 2022.

Jeff: This change in spend composition has not resulted in a compromise product platform, but one that is stronger through the re architecture efforts and Jonathan and the product team as well as the bolstering of our data science efforts, which we believe will result in a higher level of service and reporting for our customers.

Jeff: Overall, we expect to continue seeing significant leverage increases in our Opex spend again started anticipating growth in 2024.

Jeff: While we are significantly increasing program spends on the sales and marketing side of the business to drive topline revenues. We believe we are properly structured and our head count and expect the 'twenty 'twenty four year end head count that will be approximately equal to the head count we finished with in 2022.

Jeffrey Ishmael: We believe that we now have a significantly higher-caliber team that has the financial support and data analytics to drive the growth that we expect this brand should be able to achieve. As mentioned in the earlier remarks, we continue to improve our cost structure, which when adjusted for the previously mentioned software capitalization decreased by 810 basis points as a percentage of revenues versus the same period of 2023, while revenue increased 10%. This result is consistent with our focus on bringing down operating expenses as a percentage of revenues, which averaged 135% of our SAS revenues during the 2020 to 2022 period.

Jeff: We believe that we now have a significantly higher caliber team that has the financial support and data analytics to drive the growth that we expect the spring should be able to achieve.

Jeff: As mentioned in the early remarks, we continue to improve our cost structure, which when adjusted for the previously mentioned software capitalization decreased by 810 basis points as a percentage of revenues versus the same period of 2023, well revenue increased 10%. This result is consistent with our focus on bringing down our operating expenses.

Jeff: As a percentage of revenues, which averaged 135% of our SaaS revenue during the 'twenty 'twenty or 2022 period.

Jeffrey Ishmael: We remain committed to improving our adjusted EBITDA results for the year, a commitment that we exceeded last year and now puts us in a position to start moving our results into a more positive position for 2024. As discussed on our last call, improved adjusted EBITDA results for 2024 will be the combined disciplines of executing on our revenue plans, ensuring consistency in our gross margins, and holding all the team accountable to their 2024 operating budget.

Jeff: We remain committed to improving our adjusted EBITDA results for the year, our commitment, which we exceeded last year and now it puts us in a position to start moving our results into a more positive position for 2024.

Jeff: As discussed on our last call improved adjusted EBITDA results for 'twenty 'twenty four will be combined will be the combined disciplines and executing on our revenue plans.

Jeff: And consistency in our gross margins and holding all the team accountable to their 'twenty 'twenty four operating budgets.

Jeffrey Ishmael: During the prior quarter, we also discussed early efforts regarding the formalization of our Channel Partner Program, and I'm happy with the results that we are seeing. Since the beginning of the year, we have finalized agreements with eight partners and are close to signing a ninth. In parallel with bringing these new partners on board, we are walking our first deals through the portal registration process and working through deal registration acceptance. These new partners include identity access management platforms, hardware OEMs, as well as an expansion of our real estate and automotive partnerships, which Chris had originally started cultivating. David is aggressively working for partnerships with recognized hardware companies to increase our technology partner ecosystem. With a little tailwind, it's not unreasonable to think that our current partner count can double by fall.

Jeff: The prior quarter, we also discussed.

Jeff: Regarding the formalization of our channel partner program and I'm happy with the results that we're seeing.

Jeff: Since the beginning of the year, we have finalized agreements with eight partners and are close to signing a ninth in parallel with bringing these new partners on board. We're walking our first deals through the portal registration process and working through deal registration acceptance. These new partners include identity access management platforms hardware Oems as long as an.

Jeff: Hansen of our real estate and automotive partnerships, which Chris had originally started cultivating.

Jeff: It is aggressively working for the partnerships with recognize hardware companies to increase our technology partner ecosystem.

Jeff: With a little tailwind, it's not unreasonable to think that our current partner count can double by fall.

Jeffrey Ishmael: Once the Channel Partner Foundation is built, David will fully focus his efforts on deal registration, pipeline growth, and achieving his bookings quota for 2024, which will drive future growth. In consideration of our 2024 outlook, we expect to see gross margins of approximately 90% to 91% while we continue to improve our architecture and data intelligence capabilities. We also expect to see continued leverage in our operating expenses as a result of the expense initiatives we implemented in 2020.

Jeff: Once the channel partner Foundation is built David will fully focus his efforts on deal registration pipeline growth and achieving as bookings quota for 'twenty 'twenty four that will drive future growth.

Jeff: In consideration to our 'twenty 'twenty four outlook, we expect to see gross margins of approximately 90% to 91%, while we continue to improve our architecture and data intelligence capabilities.

Jeff: Also expect to see continued leverage in our operating expenses as a result of the expense initiatives, we implemented in 2023.

Jeffrey Ishmael: As previously discussed, we expect the non-cash component of our spend to decrease by 400 to 500 basis points versus 2023, with 90% of that being total stock-based compensation. In closing, we remain committed to the continued improvement of our corporate performance, maintaining our strong balance sheet, and driving shareholder value. We look forward to sharing our Q2 results with you in August. I'll now turn the call back to Bryan for closing remarks.

Jeff: As previously discussed we expect the noncash component of our spending decreased by four to 500 basis points versus 2023, with 90% of that being total stock based compensation.

Jeff: In closing we remain committed to the continued improvement of our corporate performance, maintaining our strong balance sheet and driving shareholder value.

Jeff: Look forward to sharing our Q2 results with you in August I'll now turn the call back to Brian for closing remarks.

Bryan Lewis: As we approach the midway point of 2024, we believe there is opportunity for growth on multiple fronts, including existing customers, new customers, and with additional use cases. However, what we anticipate will prove to be one of our largest customers, but which was expected to go live in April, has pushed back on their timing. The delay is for good reason. They have made the decision to integrate IntelliCheck's technology into other internal systems as well before going live with us. We anticipate having additional color on this large opportunity over the next few months.

Bryan Lewis: As we approach the midway point of 'twenty 'twenty four we believe there is opportunity for growth on multiple fronts, including existing customers new customers and with additional use cases.

Bryan Lewis: What we anticipate will prove to be one of our largest customers.

Bryan Lewis: Specced It to go live in April has pushed back on their timing. The delay is for good reason, we have made the decision to integrate until it's X technology into other internal systems as well before going live with US we anticipate having additional color on this large opportunity over the next few months.

Operator: In closing, I would like to point out what continues to distinguish IntelliCheck from other would-be identity verification solution providers. We believe our easy-to-use, accurate, and consumer-focused identity platform provides quick and easy onboarding and immediate elimination of fraud better than any other. As new verticals and new use cases seem to sprout up each quarter, they may be new verticals, but the clients come to us for the same reason. They need to stop someone from using another person's stolen, personally identifiable information, whether that be for financial gain or to gain access to something they shouldn't. Our products are easy to integrate, easy to use, and stop all of the above. Operator, you can open up the call for questions. Thank you.

Bryan Lewis: In closing I would like to point out with continues to distinguish Intel a check from other would be identity verification solution providers, we believe our easy to use accurate and consumer focused again any platform provides quick and easy on boarding and then meet your elimination of fraud better than any other.

Bryan Lewis: As new verticals and new use cases seem to sprout up each quarter, they may be new verticals, but the clients come to us for the same reason.

Bryan Lewis: They need to stop someone from using another person's stolen personally identifiable information whether that be for financial gain or to gain access to something they shouldn't.

Bryan Lewis: <unk> are easy to integrate easy to use and stop all of the above.

Speaker Change: Operator, you can open up the call for questions.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad any confirmation tone will indicate your line is in the question.

Speaker Change: You May press Star two if you would like to remove your question from the queue for.

Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: And one moment, please, as we poll for questions. Our first question comes from the line of Daniel Hibshman with Crane Island Capital Group. Please proceed with your question.

Speaker Change: And one moment please poll for questions.

Speaker Change: Our first question comes from the line of Daniel Hickman with Craig Hallum Capital Group. Please proceed with your question.

Daniel Hibshman: Hey guys, thanks for taking my questions. This is Daniel on for Jeff and Rhee.

Daniel Hibshman: Hey, guys. Thanks for taking my questions. This is Daniel on for Catherine.

Bryan Lewis: Just on the retailer behavior during the quarter, in the last quarter, there's been significant discussion. Some of your larger retailers had volumes down, I think about 50% year over year for some of them. And for some of them, you were seeing some declines deepening into Q1. What did you see here in Q1 and what do you see so far leading into Q2?

Daniel Hibshman: The retailer behavior during the quarter in the last quarter. There has been significant discussion some of your larger retailers.

Daniel Hibshman: Volumes down I think about it.

Daniel Hibshman: Year over year, some of them and for some of them you were seeing him declined steepening into Q1, what did you see.

Daniel: Order here in Q1, and what have you so far leading into Q2.

Bryan Lewis: So I'd say they're coming back a little again. Just like last time, there are some retailers; it depends on, you know, I think who they are, what their strategy is, and how they're executing. You know, we've got some retailers who are up and then some who are down. I tend to look at the same group of large retailers each quarter. So, you know, I know that I'm looking at the same numbers.

Speaker Change: So I'd.

Speaker Change: I'd say, they're coming back a little again.

Speaker Change: Just like last time, there are some retailers depends on you know I think who they are what their strategy is and how they're executing.

Speaker Change: We've got some retailers who are and then some who worked out I tend to look at the same group of large retailers each quarter. So you know I know that I'm looking at the same numbers.

Bryan Lewis: And they're off about 10% in Q1, compared to Q1 of last year. But, again, that's because I think some of the retailers who, you know, you just, you can, you'll read about them, right? They're having their own internal issues, having management changes, moving things around, and are off more than some of the other retailers who I think are doing quite well and are up significantly. It just depends on the size of the retailer.

Speaker Change: And they were off about 10% in Q1.

Speaker Change: Compared to Q1 of last year, but again, that's because I think some of the retailers who you know.

Speaker Change: You just you can you'll read about them right there, they're having their own internal issues, having management changes moving things around or off more than some of the other retailers, who I think are doing quite well and are up significantly.

Just depends on the size of the retailer so overall about 10% off.

Bryan Lewis: So, overall, about 10% off. Again, one of the reasons that we are looking to move into other verticals. But I also said the other thing is I'm not so worried about retail because it will come back. It always does, and the other thing is it allows us, you know, as we start to think about where we want to go as a company and think about the amount of data that we see and, you know, the crucial parts that we have, where we are located.

Speaker Change: Again, one of the reasons that we are looking to move into other verticals.

Speaker Change: But I also said the other thing is I'm not so worried about retail because it will come back it always does.

Speaker Change: And the other thing is it allows US you know as we start to think about where we want to go as a company and think about the amount of data that we see in.

Speaker Change: The relying parts that we have where we're located.

Bryan Lewis: I think that we're probably in more locations with more data than anybody else who's really trying to get into the identity space in North America. So to me, having those retailers gives us access to the data that our customers find valuable and we think will provide lots of value as, hopefully, we can create the consortium that we've been talking about with our current customers to pool data and provide more information back to them.

Speaker Change: I think that we're probably in more locations with more data than anybody else who's really trying to get into the identity space in North America. So to me, having those retailers gives us access to the data that.

Speaker Change: Our customers find value and we think will provide lots of value.

Speaker Change: Hopefully we can create.

Speaker Change: Consortium that we've been talking about with our current customers to pull the pool data.

Speaker Change: More information back to those customers.

Bryan Lewis: And then just on the price per scan, that was quite strong this quarter. I think you said 18% up year-over-year this quarter. I think it was 16% last quarter, so an uptick there. You know, I think we've been talking for a long time now about nearing the completion of the migration from legacy pricing, and, you know, it seems we continue to see, even though that's been discussed for a long time. How do you expect pricing to ramp through the year?

Speaker Change: And then just on the price per scan that was that was quite strong. This quarter. I think you said, 18% up year over year. This quarter I think it was 16% last quarter an uptick there you know I think we've been talking for a long time now about nearing the completion of the migration from legacy pricing and it seems to be continuing to see.

Speaker Change: You know, even though that's been discussed for a long time.

Speaker Change: How do you expect pricing to.

Bryan Lewis: Do you think, you know, we can see similar levels of appreciation through the year? Should we be expecting a deceleration there? And just maybe a little bit of color on why the transition has gone on so long and if there are any more customers to move on. Mike.

Ramp through the year do you think you can see similar levels of appreciation through the year should we be expecting deceleration there and just maybe a little bit of color on why the transition has gone on so long in and if there's if there's any more customers to move on that.

Bryan Lewis: Well, I think the mistake that people are thinking is that there is a change in price at renewal and price increases there, right? You can look at it two ways.

Speaker Change: Well I think the mistake that people are thinking is that.

Speaker Change: The change in price is purely.

Speaker Change: A change in price at renewal and price increases there.

Speaker Change: You can look at it two ways dues at renewal, we raise your price.

Bryan Lewis: There's at renewal; we raise your price. There's also new clients coming on board at higher prices than before. So that is something that will make those part of the increase, right? 18% up. Part of that is we are bringing in all new clients at higher rates than the historical average. So, you know, I think we've got, we're learning more, we're getting into different markets where the stakes are much higher, and people are willing to pay more for the product. So while I can't guarantee that it'll continue running at 18%, I do believe that we will continue to see prices higher than the historical average.

Speaker Change: There's also new clients coming onboard at higher prices than previous so that is something that will.

Speaker Change: Make those.

Speaker Change: Part of the increase rates, 18% huh.

Speaker Change: Part of that is we are bringing on new clients at higher rates than the historical average. So you know I think we've got.

Speaker Change: We're learning more we're getting into different markets, where the stakes are much higher and people are willing to pay more for the product.

Speaker Change: So while I can't guarantee it'll continue running at 18% I do believe that we will continue to see prices.

Speaker Change: Higher than the historical average.

Bryan Lewis: Thanks for that. That's helpful. And then just last for me, just real quick on the modeling, on the R&D up, you know, a decent chunk this quarter, and then 600k of cloud migration or 600k of software capitalization. I take it that's all in relation to the cloud migration, and we should model that kicking back down, or is that investment in other areas?

Speaker Change: Thanks for that that's helpful. And then just last for me just real quick on the modeling on the R&D up a decent chunk this quarter and then 600 K a cloud migration I.

Speaker Change: Sometimes we can't software capitalization I take it that's all in relation to the cloud migration and we should model that kicking back down or is that that's been another area.

Jeffrey Ishmael: No, that's all tied to the re-architecture of the platform, which part of that does involve going cloud agnostic, but there's a much broader re-architecture play in place. I think what you can probably model going into Q2 is somewhere in the mid-range between what we saw in Q4 and then Q1. So you're probably going to be in the range of about 500. We saw a lot of customer interaction with the product team during the Q1 period, so that drove the cost up a little higher as we leaned on outside contractors. But we should be close to substantially done by the end of Q2, but we'll have more info on the Q2 call. That's it, thanks.

Speaker Change: No. That's a game that's all tied to the to the re architecture of the platform, which part of that does involve going cloud agnostic, but there's a much broader re architecture play in place I think what you can probably model going into Q2 is mid range between what we saw in Q.

Speaker Change: 410 in Q1, so you're probably going to be in the range of about 500, we saw a lot of customer interaction with the product team drove in the Q1 period, so that drove the costs up little items related one offs.

Speaker Change: But we should be close to substantially done by the end of Q2, but we'll have more more info on the Q2 call.

Daniel Hibshman: That's it. Thanks so much for taking my question.

That's it thanks, so much for taking my questions.

Speaker Change: Yeah.

Scott Christian Buck: Thank you. Our next question comes from the line of Scott Buck with H.C. Wainwright. Please proceed with your question.

Speaker Change: Thank you Arne.

Speaker Change: Our next question comes from the line of Scott Buck with H C. Wainwright. Please proceed with your question.

Scott Christian Buck: All right, good afternoon, guys. Thanks for taking my questions. I'm curious about the channel partner agreements, what do you guys anticipate being the ramp there in terms of educating those partners and then getting them up to speed on the product? I mean, should we expect kind of a six-month maturity schedule, or how do you think about it?

Scott Christian Buck: Hey, good afternoon, guys. Thanks for taking my questions.

Scott Christian Buck: I'm curious on the channel partner agreements, what do you guys anticipate being the the ramp there in terms of educating those partners and then getting them up to speed on the product.

Scott Christian Buck: When should we expect kind of a you know a.

Scott Christian Buck: Six months.

Scott Christian Buck: <unk> schedule or how do you think about it.

Bryan Lewis: Yeah, I think it takes a while to get them up and running. You know, if you think about it, it's like training new salespeople, but it also depends on the vertical. You know, so I'd say somebody who is a hardware provider who understands that we'd be a great add-on is going to be much longer than, say, somebody who is in, say, the automotive space who understands, they know that you need to figure out who people are.

Speaker Change: Yeah, I think it takes a while to get them up and running you know if you think about it it's like training new salespeople, but it also depends on the vertical.

Speaker Change: So I'd say somebody who is a hardware provider who understands that we'd be a great add on that's going to be much longer than say somebody who.

Speaker Change: Is in say in the automotive space, who understand they know that you need to figure out who the people are they already have things that you know part of what you need to do is get a photocopy of a drivers license. So it's a simpler change for them to.

Bryan Lewis: They already have things that, you know, part of what you need to do is get a photocopy of a driver's license. So it's a simpler change for them to understand how to do it and what to do it, and, of course, the owner of the dealership not wanting to lose money. I think that's a simpler ramp. So I would say, honestly, it depends on the vertical, but we had always anticipated that starting this channel program would be something that would be, you know, a late 2024, but really a 2025 revenue initiative.

Speaker Change: To understand how to do it and want to do it and of course, the owner of the dealership not wanting to lose money.

Speaker Change: I think that's a simpler ramp so I would say honestly it depends on the vertical but we'd always anticipated that starting this channel program would be something that would be you know a late 'twenty 'twenty four but really 2025 revenue initiative.

Scott Christian Buck: Great. I appreciate that, Bryan. And then I wanted to ask you about the private-public partnership. Is pricing the same there versus your legacy commercial customers, or are you giving the public a bit of a break?

Speaker Change: Great I appreciate that Brian and then I wanted to ask you about the private public partnerships the pricing the same there versus your kind of legacy commercial customers or are you, giving the public a bit of a break.

Bryan Lewis: So, you know, I say age-restricted in general is at a different price point than, you know, other things where losses are huge. But we do work with the municipalities and things, you know, the cities, because it's basically a bulk order, if you will. So to make that work, we will work with the town to get the pricing right for what they want to do. Part of what we look at is that we think we're doing a public good. I'd say that the cities agree, and we think that's a just and right thing to do. So the price is a little bit lower than if we were just selling things one-off.

You know I'd say age restricted.

Speaker Change: In general is at a different price point than other.

Speaker Change: Other things where losses are huge.

But we do work.

Speaker Change: With the municipalities and things you know the cities.

Speaker Change: Because it's basically a bulk order if you will so to make that work we will work with the town.

Speaker Change: To get the pricing right for what they want to do so.

Speaker Change: Part of what we look at is we think we're doing a public good I'd say that the cities agree.

Speaker Change: And we think that's adjust and right thing to do so the pricing is a little bit lower than if we were just selling things one off.

Scott Christian Buck: Great. And the sales cycle on those, I mean, similar to what you see in the other industries you're working with, or, you know, slower, given that there's a government component?

Speaker Change: Great and in the sales cycle on those I mean, similar to what you see in the other industries, you're working with or.

Speaker Change: Slower given that there's a government components of it.

Bryan Lewis: You know, I'd say that once you get the right people on board, it happens very quickly. You get a few businesses. You get one of the local legislators involved. And generally, the police department is all over it. They see the benefit. Once you get that going, it usually goes pretty quick. Yeah.

Speaker Change: I'd say that once you get the right people on board it happens very quickly.

Speaker Change: You get a few of the businesses.

Speaker Change: You get a one of the.

Local legislators involved and generally the police department is all over it and.

Speaker Change: They see the benefit once you get that going.

Speaker Change: He goes pretty quick.

Scott Christian Buck: Yeah, that makes sense. I appreciate the time, guys. Thank you. Thank you.

Speaker Change: Yeah, no that makes sense I appreciate the time guys. Thank you. Thank.

Speaker Change: Thank you.

Rudy Grayson Kessinger: Thank you. Our next question comes from the line of Rudy Kessinger with DA Davidson. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Rudy passenger with D. A Davidson. Please proceed with your question.

Rudy Grayson Kessinger: Thanks for taking my questions, guys. I believe last quarter you said you were planning on giving annual guidance this quarter. And you gave – I mean, Jeff, you had a ton of modeling points, except for revenue. And so I know you also said last quarter that you expected SAS revenue growth to accelerate throughout the year. I guess just what kind of color can you give us for Q2 or the full year on revenue?

Hey, Thanks for taking my questions guys I believe last quarter. You said you were planning on giving annual.

Rudy Passenger: Annual guidance this quarter and you gave I mean, Jeff.

Kind of modeling points, except for on revenue and so I know you also said last quarter, you expected SaaS revenue growth to accelerate.

Rudy Passenger: Throughout the year I guess, just what what kind of color can you give us for Q2 or the full year on revenue.

Rudy Grayson Kessinger: Should we still be thinking that SAS revenue growth accelerates on a year-over-year basis in Q2 versus Q1? I know, Bryan, you talked about a large customer delaying an April launch. But what color can you give us on the revenue side?

Rudy Passenger: Should we still be thinking SaaS revenue growth accelerates on a year over year basis in Q2 versus Q1, I know, Brian you talked about.

Rudy Passenger: Large customer delaying from an April launch, but what what color can you give us on the revenue side.

Bryan Lewis: Look, we still expect SAS revenue to accelerate throughout the year. You know, they said if that customer had started, I think it would have been easier to give more color, which we expect to do next time around. Absolutely no reason to think that that customer is not going to go live. But that would be, you know, they would be a substantial customer. So... Again, nothing really changed in our mindset of SAS revenue accelerating throughout the year. It's just the timing of it a little bit delayed, but we're still very confident that we'll be net income and EBITDA positive.

Rudy Passenger: But we still expect SaaS revenue to accelerate throughout the year you know as I said is that that customer had started I think it would have been easier to give more color, which we expect to do next time around absolutely no reason.

Rudy Passenger: To think that that customer is not going to go live.

Rudy Passenger: But that would be.

Rudy Passenger: It would be a substantial customer so.

Rudy Passenger: Again, nothing really changed in our mindset of SaaS revenue accelerating throughout the year.

Rudy Passenger: It's just the timing of it little bit delay, but still we're very confident that we will be net income and EBITDA positive at year end.

Rudy Grayson Kessinger: Okay, and on the customer who's delayed, you said, you know, what you anticipate will prove to be one of your largest customers. What vertical is that?

Speaker Change: Okay, and then on the customer Who's delayed you said.

Speaker Change: You know what you anticipate will prove to be one of your largest customers.

Speaker Change: What what vertical was that is that I know you brought up the new top three customer last quarter, but you said they weren't going to go live until Q4. This year. So it doesn't sound like that but.

Bryan Lewis: I know you called up a new top three customer last quarter, but you said they weren't going to go live till Q4 this year, so it doesn't sound like it's them, but is that a large bank? Is it a customer in another vertical? Yeah, it's a non-financial vertical that needs to be able to, you know, It's very important that they authenticate people and know who they are. There's also a very, very strong NDA in place so we can't really talk about who they are and what they are. OK. Fair enough.

Speaker Change: Is that a large bank as it is it customer another vertical who could yeah, yeah sure yeah, the nonfinancial vertical.

Speaker Change: That needs to be able to.

Speaker Change: Very important that they authenticate people and know who they are.

Speaker Change: There is also very very strong NDA in place that we cant really talk about who they are what they are.

Okay.

Rudy Grayson Kessinger: And I guess if you just look at Q1, you gave the guidance range of 4.3 to 4.4 million pretty late in the quarter. Just what drove the couple hundred thousand of upside in revenue? Was it better than expected scan volumes with some of those retailers who were struggling? It sounds like the year-over-year comparison proved there, or was it new projects that went live at the end of the quarter?

Speaker Change: Fair enough and I guess, if you just look at Q1, you know you gave the guidance range of 4.3 to $4 4 million pretty late in the quarter just what drove the couple of hundred thousand of upside on revenue was it was it better than expected scan volumes with some of those retailers who are struggling it sounds like.

Speaker Change: Year over year compare proof there or was that new projects that came.

Speaker Change: That went live at the end of the quarter.

Jeffrey Ishmael: Yeah, Rudy, at the time we tabled our Q1 guidance, we were anticipating some headwinds on some credit memos, and they simply didn't materialize and impact the quarter as I anticipated. That expected impact is also not just being pushed into the next quarter. It just didn't materialize. So, you know, hence coming in higher than our prior guidance. Yeah, okay.

Speaker Change: Yeah Rudy it at the time, we tabled our Q1 guidance, we are anticipating some some headwind on on some credit memos and they simply didn't materialize and in past quarters I anticipated.

Speaker Change: That expected impact is also not just being pushed into the next quarter or you just didnt materialize, so hence coming in higher than our prior guidance.

Rudy Grayson Kessinger: Okay, got it, great, that's it for me, thank you guys.

Speaker Change: Yeah Okay.

Rudy Passenger: Got it Chris that's it for me. Thank you guys.

Rudy Passenger: Yes.

Michael John Grondahl: Thank you. Our next question comes from the line of Mike Grondahl with Northland Securities. Please proceed with your question.

Thank you our next.

Rudy Passenger: Next question comes from the line of Mike Grondahl with Northland Securities. Please proceed with your question.

Michael John Grondahl: Yeah, guys, this is Luke on for Mike. Just want to touch on some new wins and some new use cases. It seems like every quarter there seems to be another one popping up. I just wanted to kind of see where the sort of main focus is by vertical, if there's one or two or three where you guys are really looking to pour some gas on.

Rudy Passenger: Yeah, Hey, guys. This is Luke on for Mike.

Luke: Just wanted to touch on you guys mentioned, a bunch of new win some new use cases, it seems like every quarter there seems to be another one popping up just wanted to kind of see.

Luke: Where the sort of main focus is by vertical if there's one or two or three where where you guys are really.

Luke: Looking to pour some gas on.

Bryan Lewis: You know, I guess what we focus on is where there is real pain. And, you know, that generally ties into either monetary or reputational loss. So those are the verticals we look at.

Luke: Yeah.

Luke: Guess, what we focus on is where is there real pain.

Luke: And you know that generally.

Luke: Ties into either monetary or Reputational loss. So those are the verticals. We look at so that's everything from anything that has to do with banking.

Bryan Lewis: So that's everything from anything that has to do with banking, credit, and social media. Those types of things are where people really care. The others are things where people come to us, and if that's the case, and it's easy, and it works, obviously, we're going to take the sale. I think that we win where people want to make sure that you are who you say you are. You know, I certainly have seen plenty of them, and Michael M.

Luke: Credit.

Luke: Social media those types of things are where people really care.

Luke: The others are things that where people come to us and if that's the case and it's easy and it works obviously, we're gonna take the sale, but you.

Luke: I think that we win where people want to make sure that you are who you say you are.

Luke: Certainly you've seen plenty of nuts.

Luke: Hum.

Luke: Potential customers, who I don't think really wanted to know because it costs them revenue.

Luke: We are targeting two sectors were not using a very accurate tool will cause you to have massive again financial a reputation a loss.

Bryan Lewis: ........... So that's really our focus.

Luke: That's really our focus.

Michael John Grondahl: Okay, got it. And then our new sales hires that are coming in, are these guys vertical specific, like when they get hired, are they tied to a specific vertical? Or are they kind of covering a couple different ones? Or how is their focus? It kind of depends.

Speaker Change: Okay got it and then.

Speaker Change: Our new sales hires that are coming in are these guys.

Speaker Change: Vertical specific like when they get hired as bearish or tied to a specific vertical or are they kind of covering a couple of different or or how how is their focus.

Bryan Lewis: Yeah, it kind of depends. We're definitely hiring people who know the identity space. And, you know, that means they've been working for our competitors or something. So oftentimes, they come in knowing a sector. So that makes sense to put them on that. We hired two new salespeople. We fired one.

Speaker Change: It kind of depends.

Speaker Change: We're definitely hiring people, who know the identity space you know.

Speaker Change: So that means they've been working for our competitors or something so oftentimes they come in knowing a sector. So that makes sense to put them on that.

Bryan Lewis: The two people that we hired, again, come from the space. So, obviously, they want to be able to jump into the areas that they know well and know how to sell into. But, again, given that it seems like every time we turn around, we're finding another one of those sectors that's, again, financial loss or reputational loss, it's really important. They see what we do, know how we are different than where they used to work, and they're eager to go hit wherever they can.

Speaker Change: We hired two new salespeople, we exited one.

Speaker Change: The two people that we hired again come from this space. So you know obviously, they want to be able to jump on the areas that they they know well and know how to sell into but again given that it seems like every time, we turn around we're finding another one of those sectors, that's again financial loss of reputation.

Speaker Change: Los it's really important day.

Speaker Change: They see what we do know how we are different than where they used to work and they're eager to go hit wherever they can.

Michael John Grondahl: Okay, I got it. Thanks for taking the questions, guys, and congrats on the quarter.

Speaker Change: Okay got it thanks for taking the questions guys and congrats on the quarter.

Speaker Change: Thank you.

Bryan Lewis: Thank you, and we have reached the end of the question and answer session. I'll now turn the call back over to Bryan Lewis for a closing remark.

Speaker Change: Thank you and we have reached the end of the question and answer session I'll now turn the call back over to Brian Who's for closing remarks.

Bryan Lewis: I just want to thank you all for attending the call. We are still super confident about what we do, happy with the trajectory that we are on, and I very much look forward to speaking to you all again in August. So, thank you all, and have a great night.

Bryan Lewis: So I just want to thank you all for attending the call. We are still Super confident about what we do happy with the trajectory that we're on and I very much look forward to speaking to you all again in August. So thank you all and have a great night.

Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Speaker Change: And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: [music].