Intellicheck, Inc.

Greetings. Welcome to IntelliCheck second quarter 2022 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 Gar Jackson, Investor Relations. Thank you. You may begin.

Thank you, operator. Good afternoon, and thank you for joining us today for the IntelliCheck second quarter 2022 earnings call. Before we get started, I will take a few minutes to read the forward-looking statement. Certain statements in this conference call will 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 company's management, 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 to update or alter its forward-looking statements, whether resulting from such changes as 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 of the Securities and Exchange Commission. Statements made on today's call are as of today, August 11, 2022. 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. We'll begin today's call with Brian Lewis, IntelliCheck's Chief Executive Officer, and then Jeff Ishmael, IntelliCheck's Chief Financial Officer. We will discuss the Q2 2022 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 thank you to everyone for joining us on our second quarter 2022 earnings call. We showed solid SaaS growth both year over year and sequentially, and we believe that we have laid the groundwork on the sales front to generate momentum going forward. Before I review all of that with you, I will highlight a few of our financial results, and then Jeff will go into further detail later in the call. Our SaaS revenue grew 21% to $4 million versus last year and was up 17% sequentially over Q1 2022. Gross profit margins remain healthy at 91%. During the quarter, we made some noteworthy progress in furthering our efforts to make essential investments in the company's future, including major changes in our sales organization from the top down. For openers, we promoted Chris Meyer as our new Senior Vice President of Sales. This is an important step forward for us. Chris brings years of experience at IntelliCheck, as well as sales management experience. Chris has been responsible for signing some of our largest accounts across every vertical we sell into and thoroughly understands the process needed for prospecting and selling that closes large deals. Chris is excited to teach that knowledge to the team and lead them to success. We have also made major changes to our core sales team with the addition of four new salespeople and an account manager who will be responsible for maintaining the relationships with our key accounts. Each of these new salespeople has a proven track record of successfully developing new business at companies that sell identity proofing and cybersecurity products directly into our core market of financial services. They understand our business and our customers and our prospects. Between their knowledge of our industry and clients and Chris's understanding of what it takes to be successful at IntelliCheck, coupled with Chris's ability to teach that to both the new and existing team, We believe that we are now on our way to increase sales growth. With this growing team and guidance from Chris, we believe that we are well positioned for significant growth in 2023. This also underscores the commitment I made to you when I told you I was going to analyze our sales structure, evaluate individual performance, and grow the team with the right people who have the industry experience to not just knock on the right doors, but to get them open. I'm also very pleased with the progress we are already realizing with the addition of Jeff Ishmael as CFO, and I am excited by the additional analysis and rigor that he has brought to the finance team. Proper reporting is the key to effectively manage any business, and Jeff is driving that process with extensive analysis around all aspects of the business and bringing to the table perspectives we have not had in the past. This reporting and analysis will allow us better drive the business and provide better metrics to investors around our growth drivers. Given Jeff's extensive strategic and operational expertise, his significant experience managing multiple organizational functions, and his deep SaaS experience, I'm looking forward to the contributions that are yet to come. He has certainly become a valuable leader on the executive team. Turning now to our clients of pipeline. Looking at our financial services clients, we are seeing continued opportunities. Starting with financial services company number three, they completed the rollout to their bank branches during the quarter, which was a driver of their 13% revenue growth over Q1. I continue to believe we will see the branches generating more than 1 million transactions per year. Last quarter, I updated you on financial services company number four that has now completed the rollout of the bank mobile platform. You may recall that this use case, banking employees come to customers in the lobby and process all their banking needs using a tablet. There were several other new use cases in the quarter. They completed the full onboarding of a retailer selling kitchenwares and home furnishings that they took from a competing credit card provider. In addition, they began to bring in-house a sporting goods store. They provided white label credit cards to it. Previously, this client paid us directly on a per location model. As they bring the locations in-house, they move to the higher revenue per transaction model. All of these things led to a 38% sequential increase in revenue versus Q1. Last quarter, we also spoke about the off-price retailer that uses IntelliCheck to parse and pre-fill applications. They had renewed for a three-year deal moving to a transaction model with flat pricing in the first year. an 87% increase in year two, and a 33% increase in year three. During Q1, they completed the rollout of the new use case of no received returns. From early transactions, it would look like this would double transaction volume. In fact, volumes were up 300% in Q2 versus Q1. Overall, transaction volumes across our large retailers were up in Q2 versus Q1 a minimum of 13%, with most in the 30% range. We are also seeing strong results related to an earlier announcement regarding an agreement with a company that sells an omnichannel, multi-biometric platform to banks, marketplaces, and healthcare systems. They are reselling our ID validation tools as part of their onboarding process and had pre-purchased 500,000 transactions. They began running transactions in January, and volumes have steadily been increasing. They are now down to less than 10% remaining in their pre-purchase bucket, so they have purchased another bucket of 500,000 transactions. I had said we would be moving towards more resellers. This is an example of that working and is a continued part of our strategy going forward. We also have updates on some of the banks that are going through infosec review or proof of concept. The security audit at the top three bank we spoke about in the last call continues, and as I said, it seems the larger the bank, the longer the process. I have no doubt we'll pass the audit, as they are pretty much the same across all large banks. It's just the process they have to go through. The good news is while that is happening, the bank is continuing to work with us to identify additional areas in which our services could be used, with mobile banking being high on their priority list. I also wanted to share with you that one of our southern headquartered regional banks with about 2,400 locations' proof of concept is still in process to launch. The business unit thought they could start the pilot without InfoSec review, but that turned out not to be the case, so we're going through that right now. The other southern-based regional bank has completed their proof of concept and all success criteria passed the flying colors. They are now in the process of working with their provider of their existing check scanning hardware for the software licenses the devices need to read a barcode. This is a precursor to the full rollout. After a successful proof of concept, we signed a provider of financing solutions to over 15,000 retailers, as well as direct-to-consumer loans for healthcare needs. Their initial use case will be online financing for one of our major home improvement retailers. While it had been my sense that this financing firm alone could grow to be a very decently sized client, there's been an interesting new development. While the proven concept was underway, they were purchased by a multinational firm that is a leading global investment banking securities and investment management firm that provides a wide range of financial services. During that process, the loan provider spoke so highly of our services The investment firm purchaser wanted the MSA to be signed with them, not the loan provider. This is because the investment firm saw other internal use cases and did not want to negotiate in another MSA later. While this delayed signing the original loan provider, I believe it leads to other significant opportunities. In closing, the changes we have made are part of a continued larger focus on growth initiatives. I'm excited by where all these developments are taking us. We continue to expand our presence as an on-demand global platform that is providing our clients a more adaptable, advanced solution for both physical and digital identity validation use cases. We have enhanced our validation solutions with additional risk signals that give our clients all inclusive freedom of choice so critical in a global marketplace. We believe this will be equally effective in attracting new clients to a multifaceted platform built on technology that is driven by near-perfect certainty. I remain confident that we stand out because our solutions deliver the critical first step in authenticating a government-issued ID to defeat identity fraud. Additionally, we continue our strides in preventing underage access to age-controlled products and venues while remaining a leader in increasing law enforcement effectiveness and safety. Early in my tenure, I told you that I was excited by the prospects that I believe the future held. My feelings have not changed. I remain excited and energized by the opportunities I believe lie ahead, and I remain confident that there is a bright future for this innovative company. I will now turn the call over to Jack.