Intellicheck, Inc.

Greetings and welcome to the IntelliCheck fourth quarter and year-end 2023 earnings call. At this time, all participants are in a listen-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 zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gar Jackson with Investor Relations. Thank you, Mr. Jackson. You may begin.

Thank you, operator. Good afternoon, and thank you for joining us today for the IntelliCheck fourth quarter and full year 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 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 update or alter its 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 of the Securities and Exchange Commission. Statements made on today's call are as of today, March 21st, 2024. Management will use a 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'll begin today's call with Brian Lewis, IntelliCheck's CEO, and then Jeff Ishmael, IntelliCheck's COO and CFO, who will discuss the Q4 and full year 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.

Thanks, Dar, and thank you all for joining us today for the IntelliCheck Q4 2023 and fiscal year 2023 earnings call. One of the things Jeff and I have been emphasizing throughout previous calls and meetings is that we were going to end the year with adjusted EBITDA break-even or better. I'm excited to point out that we delivered on that goal. For Q4, we achieved net income of positive $757,000, adjusted EBITDA of a positive $1.17 million, and the adjusted EBITDA for the full 2023 year of a positive $377,000. our gross profit margins continue to remain strong, running at 92% for the year. Given our growth expectations, we expect this trend will continue into 2024 and anticipate that we will also end 2024 adjusted even though positive. Before I get into some of the wins for the fourth quarter and recap some highlights from 2023, I'm first going to share with you some of the substantive changes we have made to the organization. Driven by the changes we made in the engineering team, We reduced year-over-year IT costs by approximately 10%. At the same time, we have realized some significant upgrades to our software. We are now cloud agnostic, which throughout 2024 will further reduce our cloud expenses as we move clients off of Azure. This improvement is an important milestone. Not only does it provide more security to data in transit, but it will essentially eliminate downtime as we are now active-active on parallel platforms. This is a noteworthy distinction because active-active means we have redundancy and can switch over immediately if the cloud provider has an issue. This advancement has also led to a complete rewrite of our API. This too is another distinctive step forward because it makes them much simpler to integrate. Anyone can go to our website and program against our testbed and get simulated results. We're already seeing the positive impact. For example, we had a prospect integrate in one day and call us the next day and tell us they were ready for the production keys. We loved how excited they were at the ease of integration. We had to tell them we were happy to give them the keys, but in their excitement, they had missed a key step. We needed the contract signed, which they promptly did. Our technology improvements don't stop there thanks to our revitalized IT organization. We also released a new and much simpler way for our digital clients to capture documents and facial biometrics if needed. Previously, our clients built their own proprietary remote capture screens. While we still allow clients to do so if they choose, we now offer a tool that can be white labeled and can be integrated into the client's existing system with two simple web hooks. This has been extremely well received and we currently have seven either existing clients switching over to this tool or new clients integrating it. We've seen with existing clients that they experience an increase of 20% in completed transactions with the new tool. This is important to highlight because we believe that this new tool will substantially decrease time to revenue for new digital clients. Data science and machine learning began in earnest in Q4. The data lake is complete, and our data team has already come up with new methods to make our ability to spot fakes even more accurate. Throughout the course of 2024, they will continue to enhance our products, while in conjunction with our clients, we will continue to build and create new ones. Across all of our use cases, the number of people in North America that our process through IntelliCheck is impressive, continues to grow, and we believe provides value to our clients. We also have notable changes in marketing. I'm happy to say that in Q4, we hired Christine Elson as our new VP of marketing. She has a fantastic track record of helping to ignite sales at several high growth cybersecurity and technology companies. I am pleased to report that she is already making an impact. As previously discussed, we hired a branding and design company to help with our branding to make our message clear. Through interviews with our clients and the collaborative work with the branding and design team, we think we succeeded. Our clients reinforced two important distinctions that we are certainly calling out. No hardware and the ease of use and simplicity of the process for their clients. We truly are the hardware-free, go-anywhere identity validation platform that we believe provides the best identity experience for their customers that their customers never knew they had. We said we would be upping the IntelliCheck profile in 2024, and we have moved forward. Christine has IntelliCheck lined up with speaking engagements at some of the most important industry conferences and trade shows. We had a strong presence at FinTech Meetup a few weeks ago. FinTech Meetup is a high-profile event that brings together more than 4,000 leaders from FinTech, banking, payments, and lending to discuss, shape, and create the future of FinTech. The agenda there is designed to focus on the biggest issues, challenges, and opportunities facing the industry. Our SVP of sales, Chris Meyer, delivered a well-attended tech talk on next-gen fraud prevention and how it increases conversion rates by 20%. He and Enterprise Account Executive Joshua Baker held a number of one-on-one meetings during the event. Previously in February, Chris attended the Stadia Managers Trade Show. This event brings together personnel from teams, colleges, and universities, facility managers and public sports authorities, and suppliers to the industry. It was yet another important opportunity to build brand awareness and connect with influencers. These are just the first of many trade shows that we'll be attending this year. Coming up, we'll be attending Datos Insights, which focuses on financial crime and cybersecurity, and provides a forum for senior-level executives to focus on fraud, AML, cybersecurity, and risk. So turning now to Q4, we saw new client wins in addition to an expansion of use cases with our longstanding financial services company clients that are also bringing on additional retailers. One of the things we as a management team foresaw was that retail was potentially running into challenges, so focusing on diversifying our portfolio of verticals served became a focus. Given the fact that major retailers are shutting down locations, we were correct in our assumptions, as Q4 transactions at our largest retailers were off 15%. You will see that by our wins with new banking clients and new banking use cases, in addition to clients in new verticals not tied to traditional retail, that we are confident that this pivot is working. We believe that over time, these new channels should more than offset the retail reductions we are currently seeing, and we believe that we made the right decision. That being said, we continue to expand our retail penetration and anticipate more than 3,000 new retail doors by the end of the year. During the fourth quarter, financial services company number two brought online a 565 location wholesale beauty supply company. In addition, they launched a branded credit card utilizing IntelliCheck as a first step in the digital application. They have also begun integrations with two additional retailers they expect to bring live by year end. One is a clothing store with over 1,000 locations for new account openings and account lookups. and the other is a 170-location hotel and gaming company for new card account openings. Financial services company number three is expanding in-branch use cases with the addition of wire transfers and new account openings in addition to the current use cases of transactions over a certain count, no debit card present, and account lookup. They anticipate volume for the new use cases to be about 100,000 transactions a month. They are also working on the integration to bring live a retailer with over 2,200 locations throughout 49 states that provides home improvement, lawn and garden products, and farming equipment and supplies. They expect to go live in Q3 of this year. The two regional bank pilots were completed in Q4 and were fully implemented and revenue generating in February. A bit behind schedule, but they are now up and running. If you recall, the first bank with 1,300 locations had an in-branch proof of concept. This went so well that they are now doing the work to incorporate IntelliCheck into their digital use cases. They expect rollout in late Q2 for early Q3. The other regional bank with over 2,000 locations started the other way around with a single digital use case, opening new accounts. Because of how IntelliCheck simplifies account opening, They had hoped for a 2% increase in new account openings after we were implemented. But because of how IntelliCheck simplifies account opening, they realized an impressive 20% increase. They are now expanding to other digital use cases and are working to incorporate IntelliCheck into their bank branches. You may remember we had been working to secure an agreement with the top three banks. I am very pleased to report They completed their security audits in Q4, and we now have a signed contract with them. Like all very large organizations, bringing on a new initiative takes time, and our sense is that just like the audits, we're an extensive time-consuming effort, so will be the implementation. Right now, they are targeting Q4 of this year to go live with their digital and mobile banking app. We will continue to provide updates on the integration progress on future calls. We are excited by the wind. We believe that when a bank of this size goes with IntelliCheck, it is a tremendous validation of what we do and provides a great foundation for 2025 and beyond. We are very excited by another step forward. Our products are now being utilized outside of North America. Our client is a renowned global media and tech company reaching nearly 1 billion people worldwide. is now using IntelliCheck in the UK to validate people. We believe that we will see more multinational clients that need to validate people in North America turn to IntelliCheck for their international needs. We are also continuing to expand in the automotive space both directly and with resellers. The reseller that is working with one of the largest auto manufacturers reached a deal with them to fully roll out to all 2,600 locations with expected minimum annual volumes of approximately 750,000 transactions. We anticipate that full rollout should occur in Q2. Between Q4 of 23 and Q1 of this year, we have either signed or are in the process of signing an additional four resellers in the automotive space. Title insurance is another market vertical where we continue to see expansion, again, either through direct sales to inbound needs or through resellers. Between Q4 and Q1 of this year, we signed four of the largest title companies. We have also signed one of the largest providers of software that small title companies use to run their business. We are fully incorporated into their platform now, and they are looking to really expand the world out in Q2. We believe that being an integral part of a larger platform creates an incremental growth opportunity in the real estate transaction space that is seeing a significant pickup in fraud. Our growth in the age restricted space in both unattended and in-person use cases continues to grow. During the fourth quarter, we signed an additional two vending machine companies. Also in Q4, we signed a company that provides the access to unattended liquor distribution in loyalty lounges at hotels. They're going live with a proof of concept with a very large hotel chain in Q2 of this year. A deal that we closed a long time ago but will finally be going live is TrueAge, which was developed by the National Association of Convenience Stores and Connexus to provide a simple way for convenience stores to stop sales to the underage. IntelliCheck will be used to authenticate the user before they are given access to the app. They expect to begin nationwide deployment in Q2 of this year, starting slowly and ramping up throughout the year. We continue to expand in new markets. In Q4, we signed two crypto wallet companies. The use case will be to validate people as they open an account for the wallet. We believe that cryptocurrency could be another meaningful market vertical for IntelliCheck. In Q4, we also signed a wire transfer payments company. They see so much fraud that they are going to make validation mandatory on all transfers. Integration is underway, and it will be working to be live by the end of Q2. I am happy to say that our pipeline of pilots all are going extremely well, which I believe bodes well for future quarters. In closing, with the current wins going live over the next two quarters, as well as the robust pipeline that the sales team has created, we see significant growth throughout the rest of the year and look forward to keeping you updated as clients go live and we report our Q1 results in May. With that, I'll turn it over to Jeff, who will provide more details on the financials.