Intellicheck, Inc.

Good afternoon and welcome to the IntelliCheck Q2 2023 Earnings Call. At this time, all participants are in lesson-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paul Jackson, Investor Relations. Thank you. Please go ahead, sir.

Thank you, operator. Good afternoon, and thank you for joining us today for the IntelliCheck second quarter 2023 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 an 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 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 10, 2023. Management will use the financial term adjusted even 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'll begin today's call with Brian Lewis, IntelliCheck's Chief Executive Officer, and then Jeff Ishmael, IntelliCheck's Chief Operating Officer and Chief Financial Officer, who will discuss the Q2 2023 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 Q2 2023 earnings call. Before I speak about our results, some highlights, and some of the things we're doing to raise awareness of intelligence, I'd like to give a brief overview of who we are in case you are new to our story. IntelliCheck has taken its place as an industry leader, and we continue to distinguish ourselves as an exceptional identity validation company because our technology solutions are exceedingly accurate and extremely fast. Many of you on this call are familiar with us, but for our newcomers and those of you who use an update, we are evolving, we are growing, and we continue to be focused on refining at every level to expand our penetration in key market verticals. I believe that this growing reputation for excellence has led to our use by some of the largest banks and credit card issuers in the United States and Canada at their teller workstations, call centers, online, and in their stores to validate their customers' identities. We are currently in approximately 30,000 retail locations and over 4,800 bank and lender branches, not counting the pilots, and adoption continues to grow. I feel equally confident that our demonstrated superior speed and accuracy is key to the fact that 28 state-level law enforcement agencies use IntelliCheck to validate IDs. And keep in mind that while law enforcement are the only people that can directly connect with every DMV in North America to validate an ID, they choose IntelliCheck. Again, speed, accuracy, and ease of use are the distinguishing factors. Not to stop there, we're also much more than just ID validation for bars, restaurants, retailers, banks, and law enforcement. For example, one of our verticals is our cannabis vending machine clients. To buy cannabis products, the customer scans a QR code on the vending machine screen with their mobile phone. That prompts our system. The ID is validated to prove it is real and you are of age. Then a selfie is taken for facial recognition to show that you are the owner of the ID that you're holding. And the person is then geolocated to prove that they are standing at the machine. Pretty sophisticated. We are used by our clients because we simplify and speed the process, allowing them to onboard more clients faster without making them feel like a criminal. And almost as a byproduct, we virtually eliminate fraud. And although I know there are many of you who may know our story very well, But given the number of locations we're in, I'm willing to bet that the majority of the people on this call have been run through our validation services and didn't know it was us. Whether opening a credit card, doing an in-bank or online banking transaction, making a change to an existing account, buying a car, or making a retail or age-restricted purchase, we are increasingly an integral part of the process. trusted by our customers, protect their business, reputation, and you. So with all this in mind, now on to some of the financial highlights that Jeff will further detail later. I'll start by saying that our trailing 12-month SaaS revenue continues to increase and has every month for the last 42 months. Our momentum continued in Q2 of 2023, with SaaS revenue up 19% to $4.7 million, from 3.9 million in Q2 of 2022. Gross margin improved to 92.5%, and we were EBITDA positive for the quarter. All of this positions us to continue to invest in the growth of the business. Looking at some sales updates of note for the quarter, financial services company number three ran through their scan allocations and renewed for another 2.5 million transactions. Turning to the pilots of the two regional banks with 1,400 and 2,700 locations that will use IntelliCheck in their bank branches, call centers, and digital use cases, here's an update. The 1,400 location bank intends to roll out next month when they finish the software update on the remaining scanners in about a third of their branches. The 2,700 location bank is live in their contact call center for high-risk Italian openings with their much more expanded digital and online use case planning to go live later in Q3. The good news is that we are already in discussions on expanding to other departments within each bank, which is exciting and demonstrates their endorsement of our products. Last quarter, I spoke about a channel partner who has incorporated IntelliCheck into their platform and is working with an auto manufacturer with 2,700 rotations. The manufacturer saw the early success of the pilot and decided that the launch had to be a big bang, but they had not adequately developed training materials or trained their trainers. That is being done now, and they plan to launch in September. You may have seen the press release about the success of the pilot program we had with the City of Charleston, South Carolina bar and restaurant owners, which now has become a permanent program. During the pilot, we detected 3,400 fake or invalid IDs. And I can tell you the bar owners and security staff love the system. My daughter lives in Charleston and had her ID checked at a venue. She asked the man what they were using, and he said IntelliChat. And she said, my dad's the CEO. And it turned out he was the CEO of the security company hired by the venue. He gave her his card and asked her to have me call him. I did, and he couldn't stop raving about IntelliCheck. We are now looking to replicate this program in other college towns or places with rowdy entertainment districts. Last quarter, I spoke about the diversification of our client base. So to provide further color in that regard, I thought a list of some of the types of clients we sold into in the quarter will help illustrate this progressive growth. We onboarded 17 bars and restaurants. We onboarded an event security company, an online marketplace for premium event seating, two more cannabis vending machine companies, a credit union, and a small online bank, an internet child safety company, nine more title companies, and additional auto dealers. What I continue to see is there are a lot of business to be had in the $5,000 to $50,000 annual revenue market, but our challenge has been We still do not enjoy the brand recognition befitting a company with multi-market vertical success, especially with the pedigree of our clients. As you know, we've engaged in a growing number of efforts to address this challenge. We still aren't satisfied with where these efforts are standing, so we have brought on board an agency to re-rant and further develop our messaging. As part of this process, they're speaking with clients across all sectors. We asked the head of fraud at one of our largest banks, that he would be willing to speak with the agency. He basically told us he would love to because so many of our competitors only do about 20% of what they say they can do, while IntelliCheck does 100%. He said that anything he could do to help us improve our message and awareness and grow our business would be great for an industry that is trying to stop fraud. When a client of this stature makes such an endorsement and offers further support based on the value of our technology solutions, it speaks volumes. We expect this branding work to be done in Q4 and be ready to launch early next year. We believe that raising awareness about IntelliChat will help drive interest and leads in markets where we know accuracy is important because the stakes are so high. As part of our evolution and refinement, we've made some personnel changes as well. We've promoted Jeff to Chief Operating Officer in addition to a CFO role. Jeff has a very strong growth-focused SAS operational background, and his assuming this role allows me to spend more time on important initiatives in areas like sales, marketing, and branding. In his new position, Jeff will look to ensure our internal systems are all fully operational, and properly integrated with each other. In addition, given his channel partner experience at Cylance, which really accelerated their growth, he is tasked with building out the systems and programs needed to support this, and I will let him speak more in detail about that shortly. We have also brought in a new VP of Engineering, Jonathan Robbins. We brought him on board for two reasons. First is to upgrade our technology stack, which will reduce our dependence on Microsoft products and Azure. We believe this will reduce our overall IT costs in 2024. The other reason is his data analytics experience. In his most recent role, he worked for the Chicago Cubs to develop a database and AI for them to track players, even young players, and build models that would help them predict future success and therefore who they should draft or trade for. That is important because we've been speaking about data and the power of the data in a community setting. Each of our clients use their own data, nothing more, but we see it all. Our clients are very enthusiastic about pooling the data and then using AI and machine learning to glean insights to be used in modeling. Some said that would provide significant value along with ID validation. Jonathan is in the process now of building out the data lake. that can make that happen. I am very enthusiastic about the exciting developments happening here at IntelliCheck. We look forward to sharing more on our expanding efforts to perfect and deliver our messaging on point, and about products such as the new effort being developed to tap into our data to help our clients stop even more fraud, and therefore generate more revenue. With that, I'll turn it over to Jeff.