authID Inc.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss AuthID's first quarter 2025 financial results. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, General Counsel, Graham Arad. Graham, please go ahead.

Thanks, operator. Greetings and good afternoon. This is

Graham Arad, General Counsel at AuthID. Welcome to the AuthID first quarter 2025 earnings conference call. As a reminder, this conference is being recorded. Joining me on today's call are our CEO, Ron DeGuro, our CFO, Ed Solito, and our founder and CTO, Tom Zocchi. By now, you should have access to today's press release announcing our first quarter 2025 results. If you have not received this, the release can be found on our website at .authid.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 reconciliation of our non-GAAP adjusted EBITDA information to the most directly comparable GAAP financial information appears 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 guaranteed for future performance and therefore you should not place undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's press release, others are discussed in our Form 10-K and other filings which are made available at .sec.gov. I'd now like to introduce our CEO, Ron DeGura.

Thank you, Graham, and thank you all for joining us today. I'm very excited about AuthID's growth prospects in future. We have solidified a foundation to become a leader in the evolving and fast-growing biometric authentication market while making progress on our ambitious 2025 goals. Obviously, we are in a very dynamic macroeconomic environment and believe that market uncertainty could accelerate our industry. Historically, in a recession, fraudulent activity ramps up. For example, several UK-based enterprises all recently reported crippling cyberattacks. As call centers' exposure to these attacks have not been addressed, chief security officers in the industry are looking for solutions to prevent this from happening to them. Existing fraud prevention providers are also looking to include biometrics in their core offering in response to growing exposure and risk. We've been on an education spree to help customers understand how to adopt and implement biometrics, but nothing is more compelling than cyberattacks and security breaches that result in significant losses and business disruption. Last quarter, I talked about how we spent the previous 18 months building towards an inflection point, with the expectation to close multiple Fortune 500 and multinational customers. While delayed timing of large deal cycles impacted our Q1 bookings, this was not due to lack of interest or demand, and our pipeline is extremely strong. In fact, we have prioritized large enterprise deals and large partnership deals. We have made very exciting progress on both fronts and continue to receive very positive feedback, which reinforces our confidence in generating accelerated growth in the back half of 2025. Let me now cover our exciting key highlights from the first quarter of the year. As I said in our last earnings call, our goal is to sign Fortune 500 customers this year. To that end, I'm very excited to provide the update that, after demonstrating tremendous value in a successful proof of concept, we have entered into contract negotiations with a large global Fortune 500 prospect to deliver our identity verification and biometric solution. In addition, we signed a paid live production trial agreement with a global Fortune 100 retailer to test our product in a controlled rollout and ultimately convert a long-term contract before end of year. Next, we are in the final stages with a global Fortune 100 biometric hardware provider to embed AuthID into a solution offering reusable, interoperable identity credentials for employee workforces. During the first quarter, we initiated joint product development as well as training their partner sales organization as we take concrete steps to go to market with an AuthID-powered solution later this year. We have also been confirmed as a selected vendor by one of the largest identity fraud platforms and are also in the final stages of contract negotiation. Aided by our recent capital infusion, we are also developing new and exciting opportunities, many of which we believe we can execute in the year. For example, we are integrating with a blockchain-based data privacy and security platform to validate identity of data owners through privacy preserving biometrics. This will bring AuthID technology into smart cities in South America and India just to start. In a big shift, we are now accelerating our efforts into the public sector by providing a reusable identity platform for removing the barriers between siloed systems for government workforces. By issuing interoperable digital credentials compliant with the ADA standard to provide secure, accountable, and trusted access to sensitive systems. Additionally, with our major Indian AI applications development customer, we are working on new opportunities in the Indian banking sector, protecting high-value transactions and account access with AuthID's Privacy Key technology, as well as government applications in the US and India, requiring biometric authentication for internal workforces and citizens access to government services and movement through secure control points. The reason AuthID has been able to advance these large, important deals is because of two big strategic bets that we made over the past 18 months to position AuthID as a leader in biometric authentication in four key categories, speed, accuracy, privacy, and interoperability. The first big bet we made was on Privacy Key, which allows us to offer full biometric authentication using enterprise-grade encryption technology without the need to store any biometric information with a 1 to 1 billion false match rate, the highest accuracy in the market today. We have now built this into our core product, making us among the first to offer biometric authentication without the need to store any biometrics. To be clear, we do this by leveraging well-established public-private key technology, a de facto standard for all enterprise encryption and crypto. The privacy and compliance that AuthID's Privacy Key provides is important to all our customers and prospects, but is most important to the largest enterprise and platform providers, who have an absolute requirement for privacy-preserving biometrics in their solutions and an unmatched revocability of biometrics. This is where we are winning in the market, attracting interest and beating out our competition. The second big bet we made is on integrating our biometric authentication platform with an interoperable solution for reusable identities, enabling organizations to leverage trusted credentials bound to an individual's facial biometrics across multiple agencies and entities without changing their existing infrastructure. We have developed this solution on the ADA standard, which is founded by the same organization that created the widely adopted FIDO standard. The bet we made on building AuthID into this technology has led to an opportunity to work with a major global Fortune 500 biometric hardware provider, where we are making significant progress in finalizing a joint product development and sales partnership which would cover multiple countries. Our efforts in product innovation are being recognized by the greater market. In the first quarter, AuthID earned the honor of the Best ID Management Platform in 2025, FinTech Breakthrough Award. This is a testament to the dedication of our team in delivering innovative solutions and making a digital ecosystem safer, more secure, and more user-friendly for both businesses and consumers. These strategic bets were difficult choices to make early on since we knew they would take time and resources. However, we believe that the game-changing capabilities we were developing would meet the current and future needs of the market. With the customer feedback we have heard and tangible progress we have made in Q1, I believe we have finally come to the inflection point we've been working towards for almost two years. We are also excited to note that we completed two capital raises in April and May, which approved our balance sheet, broadened our investor base, and provided us with additional expertise and support to scale our business and invest in new opportunities. Between the two raises, we secured nearly $9 million after expenses from existing and new shareholders, while also creating an advisory board comprised of two new expert advisors, Eric Swider and Donald Niddy. Both leaders have deep experience in different industry and government sectors where AuthID's biometric identity solutions can address critical needs. They have already provided meaningful contributions to our pipeline development efforts. In conclusion, we continue to focus on major enterprise and partner prospects in order to achieve our booking targets, which will be dominated by the FAT100 and FASTER100 segments as we move through the second quarter. I am confident that we will sign new customers and continue to drive significant growth towards our $18 million booking target for 2025. And now I will turn it over to Ed Salido, our CFO, to cover our financial.

Thank you, Ron, and thank you all for joining us today. Looking at our Q1 2025 gap results, total revenue for the quarter was approximately $0.3 million compared with $0.16 million a year ago. Operating expenses for Q1 were $4.7 million compared with $3.3 million a year ago and $4.9 million last quarter. The -over-year increase is primarily due to increased headcount investment and sales and R&D throughout 2024 to support the development of our pipeline and deliver on our product roadmap. Net loss for the quarter was $4.3 million, of which non-cash charges were $0.5 million. This compares to a net loss of $3.1 million for the same period last year, which included $0.8 million in non-cash and one-time severance charges, and a net loss of $4.6 million in the previous quarter. Net loss per share for the quarter was $0.40 compared with $0.32 a year ago and $0.49 last quarter. Turning to RPO on the next slide. Remaining performance obligation, or RPO, represents the minimum revenue expected to be recognized from our signed contract based on our customers' contractual commitments. As of March 31, 2025, our total RPO was $13.85 million, a decrease of $0.41 million over the prior quarter. Our RPO for the quarter compares favorably with the RPO at the same period last year, which was $4.03 million. We expect to recognize the full RPO of $13.85 million over the entire life of the contract, which are typically signed with a three-year term. On to our non-GAAP results on the next slide. Adjusted EBITDA loss was $3.9 million for Q1, compared with a $2.4 million loss for the same period last year and $4.1 million last quarter. The increase in EBITDA loss is primarily due to increased headcount investment in sales and R&D throughout 2024 related to the development of our sales pipeline and product roadmap. We also monitor and report on annual recurring revenue, or ARR, which is defined as the amount of recurring revenue earned during the last three months of the relevant period as determined in accordance with GAAP multiplied by 4. The amount of ARR as of Q1 is $1.2 million, compared with $0.6 million of ARR as of Q1 2024 and $0.8 million as of last quarter. Turning to BAR, or Booked Annual Recurring Revenue, which is the projected amount of annual recurring revenue we believe will be earned under contracted orders looking at 18 months from the date of signing of each customer contract. The gross amount of BAR signed in the first quarter of 2025 was $0.01 million, down from $0.10 million of gross BAR a year ago. Our Q1 BAR was lower than expected due to delays in the sales process for certain deals expected to sign in Q1, the delays driven in part by uncertainty in the economic outlook. These deals are continuing to progress and are expected to contribute to our 2025 full year bookings target of $18 million. As previously explained during our quarterly earnings calls, BAR comprises two components, which we refer to as CAR and UAC. The $0.01 million of gross BAR in Q1 2025 is fully comprised of UAC, or usage above commitment, as the new business signed in the quarter contains purely usage-based terms. Going forward, we do expect our 2025 bookings to revert to the average of approximately 50% of our gross BAR being comprised of contractually committed annual recurring revenue, or CAR. Turning to our revenue growth stages on the next slide. I'll finish off by summarizing the progress we're seeing through our revenue growth stages. The first milestone we use to monitor our growth is bookings, as measured by BAR. In Q1 2025, we realize the total gross BAR of $0.01 million. As I mentioned earlier, we expect the temporary dip we experienced in Q1 to compress our bookings over the next three quarters, as we are both adding pipeline and progressing large enterprise and platform partnership deals. We reiterate our goal to achieve $18 million in bookings by the end of 2025. The next milestone is our remaining performance obligation, or RPO. As I detailed earlier, as of Q1, we have secured approximately $13.85 million in RPO, a number that we expect to increase in line with our bookings throughout the remainder of the year. Our third milestone is revenue, recognized in accordance with GATT. Our Q1 revenue of $0.3 million grew approximately $0.14 million over the same period in 2024. We also expect this to grow substantially later in the year, as our 2024 bookings continue to go live. And as we've called out in prior earnings calls, we are increasing our focus on customer retention and expansion in 2025, as our customer contracts mature. We're looking to build on the customer expansions we've highlighted in Q4 and continue to broaden relationships with our customer base by adding tangible value and helping our customers achieve their objectives with an off-ID solution. Overall, we look forward to executing on our strategy and delivering increased growth and shareholder value in 2025. With that, operator, we would now like to open up for questions.

Certainly, and as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue,

simply press star 1-1 again. And our first question for today comes from the line

of Ricky Solomon from Independent. Your question, please.

Yeah, hey, Ron. Can you talk a little about when you're going to start seeing leverage from – you highlighted a couple of partnerships. When do you think that will actually start resulting in some bookings?

Yeah, great question. Thank you, Ricky. We're already kind of benefiting from those partnerships. The bookings will come. So, we've invested a lot into the channel, and we believe that from a payout perspective, we have to invest in the channel and the channel partners as we help to enable them to bring off-ID to their customers. So, it's an ecosystem for which we are investing in. So, we have to obviously sign the partnerships or win the partnerships first by proving off-ID is the best biometric authentication platform. Then, once we do that, we onboard and teach the partner how to go to talk to their customers, both in integrating their technology with theirs, and then we have to rely on them to then communicate to their customers. And we do that several ways. Sometimes we work with the customer directly, and sometimes we actually work as if we are the partner. Or third, we do joint deals together. So, our goal is to sign partnerships with major platforms who have basically a large set of customers in their ecosystem. Our existing partnerships already have brought us into the Indian banking sector, have brought us into five large employment agencies, brought us into a large financial exchange, as well as more banks. And then we have some upcoming partnerships, which will include one of the largest fraud platforms in the market, which plans to onboard over 100 banks, 50 of which will be within the first year. Another key partnership is with the Fortune 500 biometric hardware provider that I talked about earlier that will work with off-ID to go to market large enterprises, specifically in public sector as well, not only in the US, but globally. And then another upcoming key partnership will be bringing off-ID into the smart city projects in South America and India. So, from a partnerships perspective, it's very important to off-ID. We are very excited to make these announcements, hopefully very soon. Okay.

So, if you look at like, so the expenses, our expenses, you know, compared to the revenue, they're quite high. Why have we had to have, you know, these expenses so far ahead of the revenue? I know there's been delays, but can you kind of walk us through, you know, your thinking on that?

Ed, why don't you take that first and then I'll add to that.

Sure. Thanks for the question. I'll start by saying that our current expense rate is driven by investments that we've been making in mostly in headcount, furthering our sales and R&D capabilities that are both really important investments to drive the growth that we're working towards, signing, onboarding, and supporting not only our existing clients, but really the large clients in the pipeline as well that Ron's been talking about and providing solutions for those customers. While we're onboarding our existing customers that we've signed and also working towards signing and onboarding the new customers that are in our pipeline, we are expecting the growth in revenue to, you know, throughout this year to continue to start to outpace the growth in our expenses, and we'll see that gap start to close. We're always looking to deploy our capital strategically to ensure that we're doing the right thing to support and drive our growth and execute on our strategy. So, Ron, if there's anything you'd like to add, I'll turn it back to you.

I think you covered it. As we're starting to close these big customers, and I described it earlier, especially in the partnerships, it does require us to make sure that we're training all those folks as well as with the large enterprise we're working with. Typically, instead of working with five people on smaller companies, you're working with a group of 27 people in these large committees, and so it requires us to make sure we invest in our team and to be able to support them properly.

OK, thank you. Thanks for the question.

Thank you. And our next question comes from the line of Gary Brode from Deep Knowledge Investing. Your question, please.

Hi, Ron. The press release in that you mentioned you're nearing the finish line with multiple Fortune 500 customers or that you're already in negotiations. Sounds like you're really close to the bunch of them. And you also on this call reiterated the $18 million bar target or bookings target. How many of those big Fortune 500 clients do you need to sign this year to make that $18 million goal?

Probably. I mean, you know, first of all, Gary, thank you for the question. I am extremely excited that we're nearing the finish line on these these fat 100 opportunities as we've been really working hard to make sure that we can fit within their enterprise and as well as make sure that we can fit and win not only with the with the with the partner, but also win with the large enterprises. So that's really been a big, big emphasis for us. What I really love about the fat 100 deals is their big deal sizes. So these deal sizes are at least a million and above. And some of them are in the two to three million range. So for us, probably with all the other what I would say other opportunities, maybe we only need like four or five. We have one opportunity or two, actually two opportunities. But we have two opportunities that can make the entire number for the year if it comes down. So I'm very, very optimistic now that we have built the right foundation to close the large fat 100 or large enterprise deals that we've been working towards. That's been a big delay for us in making sure that we can service those accounts. But right now, all the POCs have been very successful. All the customer feedback has been very successful. And the result is moving the contracts. So we anticipate those those to go in the contracts. We expect to help the customer go at full volume as fast as possible. And with that, we hope to maximize the large deal sizes. But they're roughly all above a million dollars and a lot more. But we probably maybe four to five is what I'm hoping would be enough to knock out the year.

Got it. That four to five number makes sense and is consistent with other things you've said in the past. I just want to know, did you just say you have one potential deal big enough to cover the whole 18 million or it would be a couple that would do that?

We do have one potential deal that can cover the whole thing.

Got it. OK, good to know. Thanks, Ron. I'm looking forward to it. I love partnerships,

right? So the reason why partnerships are awesome is that Dave already established all the customers that we could have ever wanted. And they already have the infrastructure. They already have a platform. And all we want to do is make sure that if they make a choice for biometric authentication, it comes to off ID. And I think these these bets that we've been making have really put us in this position. That's why we're very excited about

it. Got it. Sounds good. Thanks a lot. And please feel free to move on to the next question. I appreciate it.

Thank you. Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press star one one on your telephone.

While we're waiting for any additional questions,

you've talked about the pipeline and the issues in the market relating to fraud. Can you talk about what you see as the demand pull for biometrics right now?

Well, as I was talking earlier, you know, well, I'll just give you kind of a sense of how we're looking at pipeline. One is we are seeing a rise in demand, obviously, because we're building pipeline at a faster rate. So in Q1, we generated 13 million a new pipeline. Q2, we're only in the midway mark and we're already at 8.5, approaching 9. So we are trying to build pipeline on a quarterly basis to the tune of 13 million, 15 million, 18 million per quarter. Can't be doing that if there isn't a demand. So we're very, very excited about that. And it's all rooted in biometrics. So when we brought to market the verified with privacy key and using the public key and private key pair for basically essentially executing biometrics without storing biometrics, that absolutely has taken everybody's attention by storm. And one, because the standard basis of using public key and private key is something that's well known in the industry today. If you say, hey, use biometrics, a standard engineer would be like, I don't know anything about biometrics, but they know everything about public key and private key. And I think that adoption or actually I know that that adoption has allowed technical companies, the technology teams to say, hey, listen, if they're using that type of approach, then that's easy for me to understand, easy for me to implement and easy for us to create governance and controls and policies because they've been doing that for years. And so I think that that has allowed us to build a lot of excitement around our technology with our new banking partner. And thank you to Madison Global for making an introduction to Dominarie. Like with their new advisors that had helped us and they're introducing us to all the people in their network, in their space, that is absolutely what they're all fired up about, which is the public key, private key ability to that technical pattern for biometrics. And we're

seeing

a great demand there.

Okay, thank you. Thank you,

Ron. I think that's all the time we have for questions anymore, so perhaps I can hand it over to you to wrap it up.

Certainly. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.