Intellicheck, Inc.

Greetings and welcome to IntelliCheck Third Quarter 2020 Earnings Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gar Jackson, Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon and thank you for joining us today for the IntelliCheck Third Quarter 2020 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 will, 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 management team, identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 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 safe harbor statement and risk factors listed from time to time in the company's filings with the Securities and Exchange Commission. Statements on today's call are as of today, November 4th, 2020. 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 Brian Lewis, IntelliCheck's Chief Executive Officer, and then Bill White, IntelliCheck's Chief Financial Officer, who will discuss the Q3 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 Brian.

Thank you, Gar, and welcome everyone to the Q3 2020 IntelliCheck earnings call. From the revenue numbers we just released, you can see that the opening of large regions of the country has had a positive impact on scan volumes and our sales, which came in at just under $2.7 million. SAS revenue was $2.4 million, up 47% over Q2, and up 57% versus Q3 of last year. We also posted net income of $32,000 for the quarter, versus a loss of 568,000 in Q3 of 2019. And EBITDA was a positive 169,000 in Q3 versus negative 457,000 in Q3 2019. Despite the pandemic, we've seen growth in expanded client usage of our technology solutions, new client onboarding, and successful go-live of some significant clients. Turning now to some of the specifics. Financial services company number two rolled out all the initiatives we discussed on our Q2 call, including finalizing going live with three new retailers and refocusing on credit card underwriting with a fourth sizable retailer that is already a client. During the quarter, we onboarded a 3,700 location duty supply retailer that was testing in pilot stores last quarter and is now fully live with our account opening and account lookup use cases. The second retailer is the Women's Intimate Apparel Company that went live with their remaining 350 locations, including several in new states, to authenticate licenses for both account opening and lookup. Next, we have the Gourmet Kitchen Equipment Retailer that also completed its testing in pilot stores during the third quarter. It is now rolling out account lookup across all stores. Lastly, the approximately 1,500-location housewares retailer that we have been working with for some time has brought out their co-branded card and has begun more actively pushing card acquisitions, so scan volumes should increase. Financial services company number four has expanded their challenge use cases and are now having customers authenticate themselves remotely if they believe there is the possibility of account takeover, which we will think will bring in a significant number of scans. The two Midwest banks we had previously discussed have successfully rolled out and are now live in their over 2,200 branches, and both are in discussions to expand use of our products into their online channels and their banking apps. We've also increased our penetration of the financial services sector with the signing of a Baltimore-based credit union. They are using our technology solutions for two use cases, new account acquisitions and account lookups for in-branch transactions. But it isn't just financial services companies in the win column. We have signed one of the largest humanitarian organizations in the United States. This nationally renowned and respected organization provides emergency assistance and disaster relief and is starting with a use case that authenticates military service people in the field applying for aid. And let's not forget that there is no hardware required. which is that much more critical when you're operating in the most difficult environments typical of natural disasters. This is done remotely using a mobile device, and we believe that there could be additional opportunities for this type of onsite disaster relief authentication. I'm also excited about the signing of a new pilot agreement with a California-based online personal finance company. This company provides a wide variety of financial services ranging from student loans to banking to mortgages. The pilot will begin this quarter and is using our no integration web tool. Initially, they will be authenticating users to stop account takeover when calling in to access their account with additional use cases and discussions for post-pilot and integration. I am very pleased with our growing prospects as I see acceleration in the amount of inbound leads we are getting, not only from our core financial services market, but from new markets as well. These opportunities feature use cases that encompass a variety of applications from standardized testing to companies focusing on real estate transactions. Think about it. Anytime you're asked to present your license for identity verification is an opportunity to take it a step further and authenticate. In my view, this underscores the fact that the market for authentication continues to grow in a climate of surging incidents of identity theft and fraud further fueled by the COVID-19 pandemic. During this quarter, we also made noteworthy progress in furthering our efforts to make essential investments in the companies of the future. We brought on a new Vice President of Sales, Mike Ehlers. Mike brings years of experience in both managing sales teams and understanding how to recruit great salespeople, given his successful career running recruiting and executive search teams at a number of different companies. From experience, I know that one of the things the best salespeople are always good at is networking, and Mike has placed key talent at a number of significant companies. Mike brings the experiences we need to make sure that as we grow the team, we are adding the right people and we are knocking on the right doors. Mike's hire is part of a larger focus on growth initiatives. As we have stated, we raised capital in the third quarter not only to better position us to weather the storm should the country go into a major lockdown like we experienced in the spring, but also so we can more aggressively invest in growth drivers. A key initiative now that Mike is on board is to expand the sales team. This is key for several reasons. First, when we did a review of all of our clients, we determined that every single one could benefit from more of our products in expanded use cases or in additional divisions. In the past, we were focused on landing new clients who would typically sign up for one initial use case, which was great for proving out the concept and gaining market share. Our goal now, under Mike's direction, is to enroll existing clients for multiple use cases in addition to signing new clients. As a reminder, we do authentication for both on-premise and person not present credit card applications, card not present applications and transactions, non-received returns, and now with the COVID situation, growing needs associated with buy online, pick up in-store purchases. Add to this the growing need to authenticate people from afar when it has historically been done in person for everything from standardized testing to signing a new lease. The pandemic has accelerated the need for remote authentication, and I want to make sure we are staffed to capitalize on the need. Another initiative involves the steps we are taking to continue to refine our messaging, website, and marketing. One thing that has become abundantly clear is that we are often perceived as only a document authentication tool. We have plans in place to change this perception to one recognizing that we are a multiple solution authentication provider. A significant part of this lack of understanding, we believe, has been due to the very sector and product-focused product naming convention that we had used in the past. If I were in banking or credit card processing, would I think a product named Retail ID could solve my authentication problems and stop fraud? Not likely. To that end, since the release of version one of our newly designed website just a few months ago, we have continued to work on improvements, including how to better reflect the breadth of our relevant use cases. We are making progress as evidenced by Gartner Research, including IntelliCheck, in their market guide for identity proofing and affirmation for their, quote, multiple products and solutions. That being said, there is still not the needed level of awareness about our multiple product solutions, so there is still work to be done there. All of our solutions share one commonality. They are all driven by ID checks. In fact, some of our older product descriptions, it even says, powered by IDCheck. IDCheck is, in fact, an authentication engine allowing the client to pick the horsepower they need for the use case at hand. Is the person in front of you? Maybe all you need is a license authentication. If they're not, you should probably add facial recognition or any other tool we develop ourselves or provide through partnerships. I want to make sure that prospects and current customers understand that we are a multi-point system that can help them quickly and without friction make a better informed decision, especially in the person-not-present environment. We are in an excellent position to be as much a dominating force in this space as we are in the on-premise or person-present space because the first step is the most important. Can you be certain that the government-issued ID is authentic? It is our contention, and our clients tell us, no competitor can provide the certainty that we do. What remains clear to me is that we need to expand our efforts to make sure our messages penetrate and radiate in multiple market verticals, and we need to invest some money to have the resources to deliver that message. I look at these initiatives as upside. Investing in salespeople because you're worried about not being able to cover the range of opportunities is a great thing. and we have a strong branding message to start with. It is much better to be able to start from a position of authentication certainty than from authentication maybe, particularly when working with the financial services industry where there are significant financial consequences at stake. Before I turn it over to Bill to discuss the financials, let me say that we are cautiously optimistic and believe that any lockdowns will be more targeted and not as severe as we experienced earlier in the year. The good news is that everything that is in our control is on track. Inbound leads, product adoption with existing clients, signing new clients, NDAs being signed. I'm happy with all of that. What isn't in our control, like the COVID resurgence and potential lockdowns, is of concern to me, but we believe that we've taken the necessary steps to be well positioned for various scenarios. As a reminder, Our contracts are structured with monthly minimums. So even if things do shut down again, we will still generate revenue from our clients with a brick and mortar footprint. Additionally, we continue to grow our online offering and believe that we have significant opportunity to authenticate transactions where people buy online and pick up in store. In closing, two things we do know. Based on scan numbers, people want to get out there and shop and online shopping continues to grow. And based on the acceleration of inbound leads, the market for authentication remains strong, particularly when you have a technology solution that doesn't require the purchase of additional hardware. As always, we will continue to invest wisely in the business with a primary objective to drive top-line growth and capture additional market share. Like I said when I took this job almost three years ago, the market is coming our way. With that, I will turn it over to Bill.