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.