authID Inc.

Good evening, everyone. My name is Graham Murad. I'm General Counsel at AuthID. Welcome to the AuthID 2023 Annual Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. You can submit written questions at any time using the Q&A button at the bottom of your screen. If you would like to ask a live question at the appropriate time, please indicate that using the Q&A function or tap raise your hand and you will be invited to speak. As a reminder, this conference is being recorded. With me on today's call are our CEO, Ron DeGuro, our CFO, Ed Salito, and our CTO, Tom Ahsoki. By now, you should have access to today's press release announcing our fiscal year 2023 results. If you have not received this, the release can be found on our website at www.orthid.ai under the investor relations section. Throughout this conference call, we will be presenting certain non-GAAP financial information. This information is not calculated in accordance with GAAP and may be calculated differently from other companies similarly titled non-GAAP information. Quantitative reconciliations of our non-GAAP adjusted EBITDA information to the most directly comparable GAAP financial information appear in today's press release. Before we begin our formal remarks, let me remind everyone that part of our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's press release. Others are discussed in our Form 10-K and other filings, which are available at sec.gov. For those on the webcast, please note that we will advance the slides. I'd now like to introduce our CFO, Ed Salito.

Thanks, Graham. 2023 was a pivotal rebuilding period for AuthID, where we leveraged the best that AuthID had, secured new identity domain talent, instilled new sales discipline, and drove strong momentum in our book sales. I'm therefore pleased to report our 2023 GAAP and non-GAAP financial results and metrics. On slide 3, the following highlights compare results from continuing operations for the 12-month period ended December 31, 2023, with the 12-month period ended December 31, 2022, unless otherwise specified. Total revenue for the year 2023 was $0.2 million, compared with the total revenue of $0.5 million for the 12 months ended December 31, 2022. The 2022 revenue included $0.3 million in revenue from a legacy authentication product that was discontinued in April 2022. Verified license revenue was unchanged at $0.2 million for both 2023 and 2022. 2023 operating expenses declined by 52% to $10.9 million, compared with $22.8 million for 2022. The reduced expenditure reflects the company's cost-saving measures taken in the first half of 2023, resulting in lower headcount costs and lower third-party vendor costs. In line with the improvement in operating expenses, loss from continuing operations improved by 17% to $19.6 million in 2023, of which non-cash and one-time severance charges were $10.9 million. This compared with a net loss of $23.7 million in 2022, of which $12.3 million was non-cash charges. The 2023 non-cash charges were primarily comprised of the one-time conversion expense of $7.5 million related to the exchange of convertible notes per shares of our common stock that the company executed in May 2023. Accordingly, net loss per share improved to $3.19 for 2023 compared with $7.72 for 2022. Turning to our non-GAAP results on slide 4. Adjusted EBITDA loss improved by 24% to $8.7 million for 2023, compared with $11.4 million a year ago, primarily due to the cost savings from our 2023 restructuring plan. Turning to our BAR, or Booked Annual Recurring Revenue. We define BAR as the amount of annual recurring revenue we believe will be earned under our customer contracts, looking out 18 months from the date of signing of each contract. Net bar reflects the deduction of bar from contracts previously included in reported bar, which were subject to attrition during the period. We're excited by the momentum the team is building with new sales bookings. Both gross and net bar from contracts signed in 2023 were $2.9 million, approximately 12 times the $0.23 million signed in 2022. The company also monitors annual recurring revenue, or ARR, which is defined as the amount of recurring revenue derived from sales of our verified products during the last three months of the relevant period as determined in accordance with GAAP, multiplied by four. The amount of ARR as of December 31, 2023 was $0.2 million compared to $0.18 million of ARR as of December 31, 2022. Moving to slide five. As we first reported on our third quarter earnings results call, we also monitor and manage our remaining performance obligation, or RPO, as noted in our financial statements for the period, in accordance with GAAP. RPO provides a sense of the minimum expected revenue to be recognized from our signed contracts based on customers' contractual commitments. As of December 31, 2023, our total RPO increased by 116% to $4.03 million from the third quarter of 2023, where our total RPO was $1.87 million. The year-end RPO includes deferred revenue of $0.13 million, as noted on our balance sheet. Deferred revenue represents advanced payments received, which are not yet recognizable as revenue. The RPO also includes $3.9 million in additional non-cancellable revenue under contracts that were signed in 2033, but which has not yet been recognized. We expect to recognize the year-end RPO of $4.03 million over the entire life of the contracts, which are typically signed with a three-year term. Further, based on contractual commitments and expected usage patterns, we expect to recognize approximately one-third of this RPO as revenue over the next 12 months. While the RPO is based on contractual terms agreed by our customers, the expected time to recognize revenue is based on our best estimates, given the current known facts and circumstances. Of course, while RPO is based only on minimum contractual commitments, we have reason to believe that each of these customers will exceed their minimum commitments. Turning to slide six. As part of our efforts to advance our short and long-term growth, we actively review our progress through our revenue growth stages. Looking from left to right on the slide, we see our progression to sustainable revenue growth beginning with bookings as measured by bar. From there, we actively monitor and manage our customers' financial commitments through our RPO metric. As we onboard new customers and drive usage on our platform, those commitments are then converted into recognized revenue. Finally, as our customer relationships mature, our focus will move to deepening these relationships with continued growth, renewals, and the upsell of new value-added services. As shown at the bottom of the page, our team had a pivotal year of growth in 2023, where we saw significant progress in the first two stages, with almost $3 million in bookings and over $4 million in remaining performance obligation. In January 2024, with the funding provided to us in November 23 by our investors, we brought on additional sales and sales engineering talent to help us continue our sales momentum by expanding our pipeline, advancing new opportunities, and booking new sales. In 2024, we also added resources to our customer success team who are diligently managing and progressing our customer implementations to shorten time to revenue and advance our revenue growth. This team is laser-focused on deploying and refining proven customer implementation methodology to help customers meet projected go-live dates, establish full-service rollouts across contracted use cases, and meet and ultimately exceed their minimum contracted commitments. Finally, customer success works closely with our sales leaders to renew customer contracts, cross-sell existing solutions across additional enterprise use cases, and upsell new solutions. Based on our ability to turn contracts into live customers, we are confident that we will make progress toward increasing our ARR and overall revenue during 2024. In summary, I'm extremely excited to be part of AuthID's growth story, to advance our market position, and to help lead us to the next stages of our growth. With that, I'd like to turn the call over to our CEO, Rhonda Girl.

Thank you, Ed. I'm also excited to be here, and I'm extremely proud of our 2023 accomplishments. I came to AuthID because of the strength and the value of its technology and the opportunity to build a high-performance sales machine with the necessary go-to-market skills required to achieve long-term growth. And in 2023, we laid a strong foundation for continued growth and market leadership. Let's look at our progress. 2023 was a pivotal turning point for AuthID, where we made a reboot across all facets of the business. In just a little over six months, we completely rewrote the AuthID story, secured new talent with deep identity domain knowledge, enhanced our patented identity platform, and proved strong product market fit and demand for our biometric verification and authentication solutions. Looking at the timeline, in late March and April, we saw the reconstitution of our board of directors and my appointment as CEO and director. Then in May, our investors provided an infusion of capital and a debt-to-equity conversion that together helped improve our balance sheet, regain NASDAQ listing compliance. Our investors continued their support through an additional $9 million of fundraise of capital in November, for which I extend my deep appreciation for our investors who put their faith in our ability to leverage what they have already built and gave us the opportunity to succeed. With funding in place, my next priority was to implement a sales discipline using a proven formula that I have successfully implemented as a former Chief Revenue Officer. These efforts were rewarded quickly with record contract bookings of $239,000 in Q2, outperforming in one quarter all that the company had booked in all of 2022. Our contract with ABM Industries represented a first-ever win with AuthID with a well-established Fortune 500 New York Stock Exchange-listed company. Critical to winning this deal was AuthID's ability to provide an easy-to-use, secure biometric authentication experience on shared computing devices that eliminated password risks and struggles for over 100,000 service workers. Moving to Q3, we added more talent to the team. Joining us in August as CFO, Ed Salido has been integral to our success by providing strong discipline to our sales pipeline management and revenue optimization efforts. Our new sales executives who joined in July quickly built out Off-ID University and put customer wins on the Q3 scoreboard valued at a million in new bar with new use cases across fintech, telehealth, and workforce. Our Q3 booking contracts represented a successive 300% increase over our Q2 bar and more than 25 times the bar earned in Q3 of 2022. Truly phenomenal performance for a team who had only just started. In the fourth quarter, we continued to accelerate our momentum with bookings of new customers that included an international digital wallet and an entertainment social commerce platform. These wins notched a phenomenal bar view of 1.7 million, a 64% increase over our third quarter bookings. While our sales leaders were busy winning deals, our highly skilled product and engineering teams maintained our commitment to delivering market leading technology and addressing customer needs through eight major releases and six minor versions of our identity lifecycle platform. They met critical customer security requirements with the Q4 renewal of our ISO 27001 certification. We were also recognized by outside professionals for innovation and value our services deliver when the CISO 50 award was presented to ABM for excellence in passwordless authentication. Supported by the commitment of our investors and the value of our patented technology, our team secured a cumulative bar of almost 3 million in sales bookings, representing 1200% growth over 2022, and the highest total gross bar that AuthID had previously reported for any annual period. Moving to slide nine. In only the last six months of 2023, we changed the trajectory of AuthID with several key noteworthy results. First, AuthID had record net new bookings growth. Our team quickly built a robust sales pipeline for both short-term and long-term expansion and put record-breaking deals on the board. By the end of Q4, this team realized our 12-month sales bar goal of 3 million, originally targeted for June 2024, in just six months. Said differently, we surpassed our milestone in half of the projected amount of time. Second, we are actively growing customer size with record deal volume. In 2023, our team secured a number of record-sized deals, including six new customers valued at over $100,000 in bar. We also booked two customers valued at over $500,000 in bar. AuthID's very first customers ever of this size. In 2022, the tally for both of these metrics was zero. Third, we increased the record number of customer contractual commitments. As Ed mentioned before, we are actively measuring our Revenue Performance Obligation, or RPO, representing the minimum fees that our customers have agreed to pay over the life of each contract. As of December 31, 2023, our total RPO grew to over $4 million, far surpassing AuthID's 2022 performance by an amazing 4,800%. To ensure we onboard these new customers efficiently and speedily, our recently augmented customer success team is managing customer implementations. Once these new customers go live, we will start to see the benefits of our sales achievements reflected in top-line revenue. Based on our ability to turn contracts into live customers, I am very confident that we will start to see significant progress in revenue growth shortly here in 2024. I would now like to turn the call over to Tom Zoki, our Chief Technology Officer, who will talk about the market trends that will drive our growth in 2024 and beyond.