Intellicheck, Inc.

2025 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone 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, Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon, and thank you for joining us today for the IntelliCheck second quarter 2025 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 heading 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, August 12, 2025. Management will use the financial terms adjusted EBITDA and adjusted gross margin 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 these terms. We'll begin today's call with Brian Lewis, IntelliCheck's Chief Executive Officer, and then Adam Tragovitz, IntelliCheck's Chief Financial Officer, who will discuss the second quarter 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, Gar, and thank you all for joining us for today's earnings call. Our second quarter's total revenue grew to $5.1 million from $4.7 million which adjusted EBITDA of $75,000 for the quarter, which is a $145,000 improvement versus the year-ago period. Additionally, the end of the quarter was $8.6 million in cash at quarter end, an increase of $3.5 million versus a $5.1 million balance at the end of the first quarter. During the second quarter, we did some significant achievements that I will recap for you. Among the highlights we will be discussing are the multi-year expansions of our relationships with some of our major banks and credit card issuer clients, including the significant upsell of your profits with the leading regional banks headquartered in the Southeast. We will also be sharing with you the results of our efforts on contract renewals, where we are demonstrating continued strength as well as some new wins. We will discuss organizational moves that have been made within our sales staff, and some metrics that show that our marketing spend, while lower than last year, is showing significant gains. Additionally, we made major progress on our AWS customer migration project that was undertaken for a multitude of reasons. During the second quarter, we announced some very exciting news on that regional bank firm. We completed the extensive contract negotiations with the large regional bank, as well as all of the integration work. They began their rollout, and we began invoicing that bank in July. As a reminder, this three-year contract has year one revenues in the low seven-figure range and ramps in year two and three to have a total contract value in the very high seven figures over the contract duration. I'm also pleased to report that the large banking credit card issuer that is using our technology in-branch, online, in their call center, in their auto loan group, for the issuance of new white-label credit cards, and for our account lookup that has been buying buckets, is now signed to a new three-year tier contract that is facing an annual contract value in the mid-seven-figure range. We believe this is yet another demonstration of the value-add that IntelliCheck technology provides for our customers and their clients across multiple supermarket verticals. We believe that there is great promise for further expansion of our relationships with our largest clients across all sectors. With the addition of our SVP of customer experience and account management, Sandra Bauer, and the changes she has made to the customer success team, many new initiatives are starting with large clients. The two three-year agreements previously discussed are examples of those changes working. In another example of doing more with existing clients, one of our top three clients out of a 50-location department store retailer that went live late in the quarter. In addition to credit cards, this client also has a significant buy-now, pay-later business. They have begun using our authentication at their retailers for that size of a business as well. While retail may be off, it is good to see clients continuing to add retailers and new ways of spending with IntelliChef as the first step, and we believe that there is still significant opportunity for growth with both in-mall and off-mall retailers who are dealing with fraud issues. We also believe that it is what some view as a headwind now will eventually become a chill-in, and the more retailers and use cases our clients have using IntelliChef, the stronger that tailwind will be. It is important to note that we continue to see pricing power that drove both our average price per scan and new business price per scan, which were up 25% and 36%, respectively, versus the prior year. Part of this is being driven by a shift in the market vertical mix as we have put more focus on a new and expanding number of verticals that include title insurance, automotive, notary services, and background checks, where we charge a much higher price per scan, yet the volumes for these clients are lower than large retail chains. At the same time, we have reduced our focus and emphasis on individual bars and restaurants that were both high-maintenance and low-revenue per venue. This is a perfect example of a market where a channel partner makes sense. Lots of target clients, but low revenue for clients, so we are now shifting that individual bar and restaurant business to one of our channel partners. Turning now to our social media clients. What we were waiting for finally happens. The volume of ID verification transactions we were expecting finally starting on the end. Unfortunately, it appears that this client has recently changed some code on their end, and as a result, we are currently unable to process nearly all of the documents that they are attending. Rest assured, we are working on the situation, and our engineers are in contact with this client's engineering team to find a solution. It was agreed that we would hold a comprehensive in-person meeting to discuss the solution, as well as look at the entire suite, of IntelliCheck technology offerings to see how we might help them. We believe that the most effective solution is to embed our skin and technology as the first step in their workflow, and that will be one of the topics of discussion. We are pleased that this has reached the very top of the identity organization management there, and both our STP of sales, Jim Poulin, and I have spoken with them. I look forward to the engineers finding a solution. I stand by what we shared with you before regarding the crucial role we can play as a partner to this social media giant with our industry-leading technology. The top issues they said they are facing is account takeover and all these issues that come with that for them. Reputational ruin, crime, and underage access. Given what we do for all of our financial institutions and our email clients, they understand we can do it for them. We will keep you posted as new developments occur. On the sales front, I am optimistic about the changes Tim Poole has made since coming on board in April. He has revitalized the sales staff with new sales executives for all season's strategic account representatives focused on targeting major accounts. He has also hired a dedicated channel manager to strengthen our coverage in strategic verticals and provide consistent new revenue streams. Although we've had channel partners in place previously, we need to have a substantive focus on driving revenues through these accounts and onboarding new strategic partners. Our new channel manager will have a dual role of both signing up existing partners and driving revenues through our existing partner base. To that point, on previous calls, I've spoken about our commitment to find the companies that provide the backbone software for generally smaller banks and credit unions that want to outsource that function. These software providers are really the only way to reach this potential client base. I am pleased to say that we've signed our first. We will be going live in November through their platform with a $20 billion credit union and have other credit unions on this platform interested in our solution. Our channel partner manager is working with their partner manager to build out the launch plan, and you'll see press releases and a lot of marketing around that as we get closer to launch. Our marketing programs have really helped us gain ground in promoting our business value, making our outreach more effective. The more people that know who IntelliCheck is and how we sell products differently than the rest of our competitors who simply template the front of the license the easier it is for our sales team to get meetings. Looking at some of the stats, it's clear that the new marketing efforts are working. A few examples of the progress we are making include new inbound prospects are up 30% over Q1. Interest from banking and finance users is up 79% on Google Analytics over Q1. LinkedIn impressions are up 300% over Q1. Video views are up 19% over Q1. We also launched the Intellitech podcast series in Q2 and released five episodes. And we published seven blog posts during the quarter. Both the blog posts and the podcast can be found under the resources tab on our website. My goal here was and remains thought leadership and brand awareness, and we believe that that's an inbound lead, so we are achieving that. In fact, this is a good time to share with you a little color on our revenue breakdown curve vertical. Now, keep in mind that there's a fair bit of volatility to these figures for a number of reasons. For example, we believe the branch banking business will remain fairly consistent. But if one of our banks brings on board, or for that matter, loses a retail client, the mix between banking and retail can shift dramatically. In addition, as we have repeatedly said, there is significant seasonality to retail volume. Retail is also volatile because of consumer confidence, power concerns, inflation impacts, and other things that impact retail sales in general. That being said, this is where we believe our Q2 revenue breakdown by vertical stands. Banking and lending contributed approximately 38%. Retail was approximately 25%. Age-restricted was approximately 7%. Barter was approximately 5%. And title insurance was approximately 2%. On the IT products front, we have spoken about the AWS migration from the Azure platform and I am pleased to say that we now have approximately 95% of our clients migrated onto the AWS platform. We expect our savings to be in excess of $300,000 annually going forward. These savings are of particular benefit because we believe they will more than offset the additional GTE spending for AI that is becoming ever more important in what our data science team is doing for future product offerings for our clients and to bolster our current offering. It's important to point out that this migration wasn't solely focused on cost savings. It was also designed to make it easier for our developers to write and release codes and for our sales engineers and customer success teams to onboard new customers faster and more easily. We've also provided expanded data feeds that allow for additional risk analytics to inform our clients' decision processes. The backend we invite to make the move to AWS also made the code days much simpler and platform-agnostic. We can now easily move between cloud providers based on client needs and additional savings. Although we don't anticipate any additional platform migrations at this time, we believe it is good to be in an affordable position if necessary. As part of our efforts to raise visibility with both investors and prospects, we are continuing to attend and speak at key conferences. We will be presenting at the Civility Microcap Conference on August 20th. as well as hosting one-on-one meetings. For more information and to schedule a meeting, please visit the stability website at stability.com slash event. It is necessary to be a stability client to schedule a meeting or listen to the presentation. On the trade show front, we are looking forward to Sino Day Fall, where I will be speaking on September 9th. We will also be presenting Money Live in Chicago September 15th. Several of our major banking clients will be attending, and we are looking forward to seeing them and meeting with additional prospects. Finally, we will be participating at the ACAM, the Association of Certified Anti-Money Laundering Specialists Conference, which is scheduled for September 16th to the 18th in Las Vegas. I will be speaking there on the 16th. I will now turn the call over to Adam, who will go into more details about our financial results. Thank you, Brian. In addition to Guy's full of looking statements, please note the occasional use of rounding during this call. For more detailed and authoritative financial information, please refer to our press release and to our quarterly report filed earlier today on Form 10-2 of the FTC. It's great to share more details around the numbers of the second quarter of 2025. As Brian mentioned, our second quarter revenues were 10% higher versus the same period in the prior year. We also saw continued strong pricing of 10% for new business versus the first quarter of 2025. You can see the strategy paying off, pursuing verticals such as auto and title insurance with higher cost per stand. Adjusted EBITDA also improved by $145,000 versus 2024, with a gain of $75,000 for the quarter. Revenue for the second quarter of 2025 increased 10%, through a first quarter record of $5.1 million, compared to $4.7 million in the same period of 2024. Our SaaS revenue for the second quarter of 2025 was also up 10%, to $5.08 million from $4.6 million during the same period of 2024, and represented over 99% of our second quarter revenue. Growth profit as a percentage of revenues was 89.8% for the quarter, which included about 260 basis points of amortization expense related to the proper development projects previously discussed. This compares to 90.5% that included about 60 basis points of amortization expense in the second quarter of 2024. Our adjusted growth margin, which you may remember as a new metric we introduced in the first quarter of 2025, improved to 92.2% in Q2 of 2025 compared to 91% in Q2 of 2024. We capitalized $47,000 this quarter and don't expect to see any more capitalization next quarter. It has been a remarkable journey of modernization for Intel Check, where Q2 of 2024 saw $781,000 of capitalization spent. This was mostly driven by the software that we had been developing for deployment on AWS that, as Brian mentioned, is now in production. Operating expenses, which consist of selling, general administrative, marketing, and research and development expenses, increased $465,000, or 10%, to $4.9 million for the second quarter of 2025, compared to $4.4 million for the same period of 2024. On an accounting basis, R&D expenses were $528,000 higher in Q2 of 2025, but as I just mentioned, we capitalized $781,000 of R&D expenses in Q2 of 2024 and only $47,000 in Q2 of this year. Beginning in Q3, we expect that R&D costs will hit the P&O in their entirety for our current offers. The weighted average diluted common shares was $19.8 million for the second quarter of 2025, compared to $19.5 million for the same period of 2024. As for the company's liquidity and capital resources, at June 30, 2025, the company had cash and cash equivalents of $8.6 million. We shared with you last quarter that we expect Q2 of 2025 to be a high point in 2025 of cash, but we expect to finish the year higher than where we were in Q1. As we look at the timing of customer payments and future processing costs related to those, we believe this forecast will hold. At quarter end, there was working capital, which is current assets minus current liabilities of $7.1 million, total assets of $23.1 million, and stockholders' equity of $18 million. At this point, we usually talk about liquidity available from financing in the company's $2 million revolving credit facility with Citibank. There are no amounts outstanding under this facility, and the facility was not utilized during 2025. We are gradually winding that relationship down. On another note, you may soon see a final in advance 3, also known as a shelf registration. This will allow IntelliCheck to sell shares in the market efficiently if the need or unusual opportunity arises. You have heard about cash balances being strong and we don't currently have any reason to sell shares in the market. You may also note that it will be filed without any particular bank or purpose mentioned. We do see having a registration statement like this on file as being good corporate housekeeping. We are really just renewing the company's previous filing that was made in 2020. As a CFO and an IntelliCheck employee and shareholder, it is gratifying to see the execution of Brian's and the rest of the leadership strategy. With such a solid cash position, growing revenue, and strong pricing, I am confident in our ability to drive sustainable growth and deliver continued value to our shareholders and customers. We look forward to sharing our Q3 results with you in November.

I'll now turn the call over to your operator, who will take your questions. Thank you. We will now be conducting a question and answer session.

If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please, while we poll for questions. The first question is from Rudy Kessinger from DA Davidson.

Please go ahead.

Hey, great. Thanks for taking my questions and congrats on the quarter and certainly on the large deal with that Southeastern Regional Bank.

I want to start there with that regional bank. I know there was a low seven-figure kind of year one commitment that had straight-line rev rec. Has that changed?

Step-up in their revenue begun to flow yet in Q3, or when is it expected to begin generating? Yeah. Yeah, we started invoicing. Remember, they had been a small client for a while. We started invoicing for the bank branches in July.

Okay. So just to be clear, that step-up in revenue should be present for all of Q3?

Correct.

Okay.

Got it. Okay. And then I want to ask about this social media client.

It seems like there's some integration issues or technical issues that you're working through. Just any kind of timeline to a revolution that you have visibility to today? And could you also maybe just, you know, give us a sense of how big this customer could be based in those

They've made this duty a significant client to us. You know, I know that my team was on with them today. They're continuing to look at the issue. I think, you know, one of the things my team is talking to them about is how we help them in terms of what they're doing. You know, they've repeatedly said two of the most important countries to them are the United States and Canada. The most important thing in those countries to be able to use for authentication is a driver's license. They love what we're doing, but they also miss their technology. And a lot of this is stuff that they built back when everything was more or less manually view. And it's not fast enough for what they need to do. things like image quality or poor and that's the kind of stuff we're on we can tell them that and how to be taken or we can let them know it's a driver's license so use your scanner not a photo so that's what we're going through you know they are motivated we are motivated um it's just you know now it's a matter of you know they're and they're looking at it and our team is looking at it um it's work you know they're very pleased with what we do they know they have a problem on their hands and now it's how do we get it fixed the good thing is we're you know we're in my mind talking at the high enough levels and they said here are the people that are going to get it done because they have financial incentives to do so so it's you know we've been working with them since they turned the faucet on And, you know, we're all trying to figure it out as quick as possible. That's all I can say. I wish I could say next Tuesday, but, you know, we're working through it. Okay. And then last one for me, just what was your data on retail stand volumes in the quarter?

Any improvement or further decline from what you saw in Q1 and just how it's been trending there so far in Q3?

Yeah, I'd say two things. One is the good thing is banking is more than offsetting retail. Retail was down 2% quarter over quarter and down 20% year over year. But banking was up 12%, Q1 to Q2, and up about 85% year over year.

Very helpful and good to see in the bank side. Thanks for taking the questions and congrats, Jeff.

Thank you.

Next question is from Mike Grindahl from Northland Capital Markets. Please go ahead.

Hey, guys. This is Logan. I'm from Mike. Thanks for taking our question. First, so with staff and total revenue of 10% year-over-year, can you help us quantify that with how that correlates to retail revenue in terms of percent of total revenue and how much retail is down year-over-year?

Thanks. So retail revenue... year-over-year down 20%. You know, and again, but, you know, offset by things like banking and other sectors that were up. And also, if you look at the numbers that I gave out on the call, you'll see that they think they got up around 76%. The rest of it are other markets. And that's where we're looking at where we have, you know, I like those other kind of little markets, things that are coming to us. And if we look at that as areas of where maybe should we shift some marketing and sales focus. But, yeah, overall retail as a percentage of sort of major revenue was 25%. And retail revenue is down 20% year over year.

Okay, great. And then building on that.

Yeah. Mm-hmm. No, continue. Yeah, and, you know, and that's 20% down in the combination of, you know, there are a significant amount of our customer clients in retail who went out of business last year. And then, you know, obviously, consumers have been doing as much in some areas as they were before.

That's great. And then building on that, What are some of the smaller verticals you guys are most excited about going forward in terms of you taking a bigger piece of the total revenue?

It's funny because talking to the scale team and helping them with some stuff today, I think my personal belief is background check is going to be really important. in my mind, exciting or smaller for us right now. You know, I'm hearing, you know, anywhere from no cuts to four cuts in the interest rates, you know, between now and the end of the year. To me, that could unleash a ton of refinancing. And that means, you know, a lot of new title insurance needs to be looked at. I think that would be good for us if that happens, you know, in addition. So I think it would really be helping, you know, to reach, you know, consumer sentiment and spending and all that kind of stuff. It would be nice to see that going into the holiday season. But, you know... certainly we're looking at a lot of things in the game economy and what's going on uh which you know in effect is another type of background check because you read about what's going on with you know drivers and other things like that um i think consumers are landing and i think the providers of the services are realizing that they've got to make sure that they hired who they thought they were hiring and not only that the person behind the wheel is the person that they hired because there is a large business out there selling you know to drivers apps just like renting out you know an old taxi medallion in new york city so that's what we're looking at more and more is the person you're hiring, who they say they are, especially in the remote world. You know, just another story came out the other day about a nurse, supposed to pretend nurse, you know, who treated, I think, 4,000 patients with self-hustle. You know, people have to make sure that they are hiring the right person. So I'm kind of excited about that case.

Got it. And then one more from us. Anything to call out on the sales pipeline and performance of the sales team now under the leadership of Tom

I think a combination of having some really good senior guys who know how to really run with the deal and then also what we're seeing, the leads coming in from the marketing. It's night and day from what we had with the last marketing going on. Again, I love the fact that it's probably less than half the cost and we're getting probably three times the result. So the pipeline is really full. I think, you know, very interesting, you know, not only is it new pipeline, but if you just think about, you know, the company we signed with that provides the backbone software for these banks, you know, we already have one, and we've got at least five more that are interested, and we haven't even really launched yet. You know, and I think that a lot of these are very much me, too. So once you find one of the players in this space, the others get very interested in you because they know that you work. Got it.

Thanks, guys. Congrats on the quarter. Thank you.

The next question is from Jeff Van Lee from Craig Howland Capital Group. Please go ahead.

Great, thanks. I'll have my congrats, a few for me. The large bank credit card issuer, you're in branch, online, auto loans, et cetera, the reference they use for your ACB mid-seven, six-year range, what was that customer running prior?

slightly lower than that, but they've been expanding drastically. You know, it's funny, we were having a quarterly business review with the risk people, and they're like, you know, they basically were saying that their credit card folks are planning on new customers so fast they don't even know it half the time. So, You know, they expect to continue to be expanding. And it's just like I like the predictability of it because they're doing what everybody else was, you know, saying, hey, we're going to commit to this this year. And then next year, you know, we've got years, and they can update it. They see that they're bringing in more. As opposed to we kind of knew what they were going to be doing, but they buy a bucket, and they expect it to last maybe a year or maybe lasting nine months, and we have to redo it. So this is, like, simpler for all of us and allows me to have more predictability or, you know, visibility into what I expect out of them in a year.

On the retail down 20%, how's that feeling so far this quarter?

I haven't really looked at the numbers so far this quarter. You know, we were down 2% from Q1. into q2 um i'm not you know i can my guide is i'm just looking at the numbers and saying nothing drastic you know no other change i think you know i'm feeling like we're about where we're going to be at the bottom if there is one um and again i hope i'm not getting word here that we do see race testing things because i think that would help that better

So you mentioned a channel partner and something around credit unions. I missed that. You mentioned you signed a $20 billion credit union, if I heard that part right. But just can you just recap there? It sounds like you're formulating a bit of a new push there.

Yeah, sure, Jeff. So one of the things we've been talking about is, you know, there are a ton of small banks and credit unions out there that, you know, our sales guys talk to and they're like, I love it, but I don't run my own software, so you need to go talk to an alloy of Jeff Henry or Galileo, you know, those types of companies that provide sort of the whole bank processing, you know, all the computer systems that they need. And those folks usually have you know, choices for, you know, who do you want to use for payments, who do you want to use for credit card issuance, who do you want to use for, you know, IDB. So, you know, we found that in this one large credit union, because I was talking to them, they wanted us, we went to their provider, the provider said, yep, we'll get you going, we've got a queue, you'll be live in November. And then we just started talking, you know, by chance we had other um credit unions we've been talking to that were also used this one platform so they're looking forward to stuff going on and you know and you know we're going to start the real marketing so you know my goal and one of the things that i um you know tapped gmail with is you know the guy needing the channel charge is these are important to us you know it's basically core banking which i like Again, it's simple. One of the things that I love about this $20,000 credit union that's going with us, they talk through, yeah, we use this one of your competitors, that one, that one. None of them were given a satisfactory result. They used our web-based portal product. to check us against them, and that's when they said, we have to have you, because they saw such an increase in, you know, fraud stoppers.

Interesting. Very helpful. And last for me, our social media player that turned on, obviously, unfortunate that you've got... You know, the integration is bundled up here, but presumably you'll get on top of that in the not-so-distant future. What did you learn from the early volumes? I mean, obviously you got a glimpse of what they were intending to throw at you. Was it the type of volume, the scale of volume? Were there any learnings in just that early glimpse? What did they want to use you for and how?

It was the scale of volume that you had said from day one. So, you know, we were very pleased to see that. um something obviously changed in their software because in you know prior to them a few weeks prior to them we really opened up the faucet we began to see that um the fail rate of you know this is what they were sending us was basically illegible um because they send us photographs of of the front and back of the document and then we extract all the data out of that uh because they basically became unreadable you know even looking at them with your eye like what is that kind of thing so we're working on to figure out what changed on darren I think the things that we've learned in the conversations since then, as we're working with both business and the development side, is that they know we've got a problem. They know that they have, you know, they've got particular focus on North America, and they know that it's a way to authenticate people because it's about us. Every single person, anyone within that area has a driver's license. And they want to make sure that you guys can install it correctly. And, you know, that's what we're talking through. So, you know, in my mind, all good stuff. Unfortunate that, you know, something changed. They were kind of laughing about their technology in doing this. Like I said, I think a bit earlier, much of what they wrote was when you could take two days to do an authentication, and now they realize that some of the tools that they wrote just aren't up to snuff, and they're working with us to figure out what we can do to help them augment those tools. Got it.

All right, helpful. Congrats again.

Thanks, Seth.

There are no further questions at this time. I would like to turn it over to Brian Lewis for closing comments.

Thanks, operator. So, in closing, I think this quarter demonstrated that, you know, we're delivering on the commitment to grow by making changes, aligning our resources, I think, to where, you know, we get bigger bags for the bus. and continuing to evolve our market presence and getting branding and other things out there. And hopefully that continues to deliver value for you, our clients, and their clients and the customers they serve. I also just want to remind everybody, I think it's very common that our four largest clients have committed to and signed multi-year renewal agreements. I think that's a real validation of our technology, and I like the fact that it adds additional predictability for our business. We are going to continue to expand our market penetration in our existing verticals. As you have seen, we're doing a pretty good job with that, and we are definitely landing and expanding our presence in new ones. So we look forward to sharing more new developments with you guys on our next call in November. And with that, I'd like to thank you for joining with us today.

This is the State Hall Conference. You may disconnect your lines at this time. Thank you for your participation.