Earnings call transcript: Intellicheck Q4 2024 beats EPS forecast, stock rises

Intellicheck Mobilisa Inc. (NASDAQ: INTK), a $50.2 million market cap company, posted stronger-than-expected earnings for Q4 2024, with earnings per share (EPS) of $0.03, surpassing the forecast of $0.0025. The company’s revenue reached $5.94 million, exceeding the anticipated $5.2 million. Following the announcement, Intellicheck’s stock rose by 7.06% in after-hours trading, reflecting positive investor sentiment. According to InvestingPro data, the company maintains impressive gross profit margins of 91.86%, highlighting its operational efficiency.

Key Takeaways

• Intellicheck’s EPS of $0.03 exceeded forecasts significantly.
• Revenue for Q4 2024 increased by 15% year-over-year.
• Stock surged by 7.06% in after-hours trading.
• SaaS revenue showed a robust 17% growth.
• The company is expanding into new verticals, including social media and automotive.

Company Performance

Intellicheck demonstrated strong performance in Q4 2024, with a 15% increase in revenue compared to the same quarter last year. The company’s SaaS revenue, a key growth driver, rose by 17%, highlighting the successful adoption of its ID verification technologies. The company’s strategic shift to AWS and investment in AI capabilities are expected to bolster future growth.

Financial Highlights

• Revenue: $5.94 million, up 15% year-over-year.
• Earnings per share: $0.03, significantly above the forecast of $0.0025.
• Gross profit margin: 91% for Q4 and the full year.
• Cash and cash equivalents: $4.7 million at year-end.

Earnings vs. Forecast

Intellicheck’s actual EPS of $0.03 was a substantial beat over the forecasted $0.0025, representing a positive surprise of 1,100%. This marks a significant improvement in earnings performance, indicating effective cost management and revenue growth strategies. Revenue also exceeded expectations by $740,000, reflecting strong market demand for the company’s solutions.

Market Reaction

Following the earnings announcement, Intellicheck’s stock price increased by 7.06% in after-hours trading, reaching $2.73. This positive movement contrasts with the stock’s earlier 1.92% decline during regular trading hours. With a beta of 1.91, the stock shows higher volatility than the broader market. InvestingPro analysis indicates the stock is currently trading near its Fair Value, with 8 additional ProTips available to subscribers regarding the company’s financial health and market position.

Outlook & Guidance

Intellicheck projects Q1 2025 revenue to be around $4.78 million, with expectations of stronger performance in the latter half of 2025. The company is focusing on expanding its market presence and diversifying revenue streams, particularly in emerging verticals like background checks and social media. With a trailing twelve-month revenue growth of 5.22%, the company shows steady expansion. Dive deeper into Intellicheck’s growth potential with InvestingPro’s comprehensive research report, part of its coverage of over 1,400 US stocks.

Executive Commentary

CEO Brian Lewis emphasized the company’s competitive edge in fraud prevention, stating, "We are more effective at identifying fake IDs than our competitors." He also highlighted the importance of sales expansion, noting, "Sales, sales, sales," as a top priority for 2025.

Risks and Challenges

• Macroeconomic concerns affecting consumer spending could impact revenue.
• The transition to AWS, while promising cost savings, may pose short-term operational challenges.
• Increased competition in the ID verification market could pressure margins.

Q&A

During the earnings call, analysts inquired about the integration of social media customers and challenges in retail transaction volumes. The company addressed potential cost savings from its AWS migration and discussed macroeconomic factors influencing consumer behavior.

Intellicheck’s strong Q4 performance and positive market reaction underscore its strategic initiatives and growth potential in the ID verification industry.

Full transcript - Intellicheck Mobilisa Inc (IDN) Q4 2024:

Conference Operator: Greetings, and welcome to the IntelliJek Fourth Quarter and Year End twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Gar Jackson, Investor Relations.

Please go ahead.

Gar Jackson, Investor Relations, Intellicheck: Thank you, operator. Good afternoon, and thank you for joining us today for the Intellicheck fourth quarter and full year twenty twenty four 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 with the Securities and Exchange Commission. Statements made on today’s call are as of 03/20/2025. Management will use the 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 will begin today’s call with Brian Lewis, Intellitech’s Chief Executive Officer Denavim Shragovits, Intellitech’s Chief Financial Officer, who will discuss the Q4 and full year 2024 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.

Brian Lewis, Chief Executive Officer, Intellicheck: Thanks, Gar, and thank you all for joining us today for the Intellicheck Q4 twenty twenty four and fiscal year twenty twenty four earnings call. Twenty twenty four marked

Gar Jackson, Investor Relations, Intellicheck: the year focused on vertical channel diversification

Brian Lewis, Chief Executive Officer, Intellicheck: and further investment in what we believe are the best in class ID validation services. We are keenly aware of the fact that the market for identity verification services continues to evolve at a rapid pace. One of the most important facets we are focused on is to maintain our competitive stance in ongoing investments in our IT initiatives. We have also added new leadership to the customer success team that we believe will be instrumental in enhancing the customer experience through improved marketing and stronger relationships with our key accounts. Leveraging marketing and customer service capabilities will allow us to emphasize our technology solutions key distinguishing benefits as we believe that we are more effective at identifying fake IDs than our competitors.

Templating, which is the most common practice for ID verification, is prone to errors. Many factors such as glare on the license and bad lighting for image capture impact the accuracy of what others can do. But we are different. We utilize the barcode on the back of the license and confirm that the DMV planted hidden attributes exist in that barcode and that the license is in fact a government issued document. Nobody else does this.

This is something that is unique to Intellicheck and is driven by our long standing relationship with the American Association of Motor Vehicle Administrators. We will begin with an overview of our results that Adam will go into in more detail later on in this call. SaaS revenues in Q4 grew 17% quarter over quarter and totaled a record $5,900,000 SaaS revenues for the full year grew 7% and came in at a record $19,800,000 versus the prior year, just shy of the $20,000,000 mark. We achieved our goal at the outset of the year finishing adjusted EBITDA positive and believe that we are well positioned as we go into 2025 to accelerate growth, particularly in the back half of the year. What this tells us is that our focus on new verticals is working.

We put a very strong focus on the automotive, title insurance, email, social media and retail banking verticals. And I’m excited to say that the volume in these new and targeted verticals grew 13%, two thousand five hundred %, fifty four % and seventeen % respectively for the year. These new clients are important to us as they are generally at higher rates than our legacy customers. Illustrating this point is the very strong progress we have made in the title insurance vertical. We just signed another title insurance company after a successful pilot.

We anticipate issuing a press release with more details when the rollout is completed later this year. That gives us the top two title insurance companies. Across this vertical, our direct title clients give us approximately 45% of this market. In addition, as has been our strategy where it makes sense, we want to sell through channel partners. In this regard, we are up and running with the two largest providers of software to independent title insurance agents.

The growth in these new categories more than offset the headwinds we faced from retail bankruptcies and customer churn driven primarily by bars and restaurants and hardware focused manufacturers that didn’t fit into our SaaS focused growth plans. We are particularly excited about the title insurance vertical that we believe will benefit from lower mortgage rates as of late that have historically driven significant refinancing and improved home purchasing activity. In addition to our market diversification efforts, we set a goal last year to drive more business through existing clients. I’m pleased to announce that we made further progress on this goal. You likely saw the press release we issued recently highlighting the renewal and expansion of a contract with a prominent domestic bank and credit card issuing customer.

This leading bank has increased their contract value by approximately 15% resulting in revenues that now total a mid-seventy figure annual amount making them one of our top three clients at this time. Two factors drove this growth. First is the expanding use of our technology in the bank branches. Second is they integrated a retail client they provide credit cards for that previously came to us directly. These transactions now have a higher cost per scan.

In mind that this retailer was one of the original IntelliCheck clients. This further illustrates our pricing power. We believe that this is further testament that we are truly helping credit card issuers stop fraud quickly, efficiently and without the need for additional hardware purchases. As often the case with banks, these 7 figure deals take longer than we would like to close but are significant when they do. A case in point, we’ve come to a verbal agreement with that super regional bank we have been sharing with you.

That discussion surrounds a three year deal with a minimum dollar commitment when fully rolled out. Although many on their team would like this to be implemented immediately, IT still has a say and they will be doing a phased rollout. We are working on that rollout plan now. We have already agreed to the pricing for the fully rolled out transaction volumes. Now, we are negotiating higher pricing per transaction while volumes scale.

They are anticipating the rollout to begin in early Q3 of this year. Another leading off price department store client recently renewed their contract to include a three year commitment with guaranteed volumes. Although we’ve been working with this retailer for years, this is the first time they are guaranteeing minimum volume levels. With guaranteed levels in the mid 6 figures, this retailer has historically done much higher transaction volumes than these current commitments. We believe that having guaranteed commitments is important in the event that there is further significant slowdown on the retail front and expanded erosion of consumer confidence.

We continue to gain ground in the specialty finance vertical. I’m excited with the progress we are making in the lease to own space where we now work with half of the top four players who make up a significant portion of the LTO market. Remember, our product accelerates our clients’ customer acquisitions with a frictionless, seamless process that onboards good customers faster while protecting our customer and consumers by stopping fraud. It is important to recognize that stopping fraud is part of the solution, but the speed in which our technology solution responds is another important part of our service. Not to be overlooked is yet another distinguishing factor and value add as our methodology triggers very few false negatives.

This is another aspect that I don’t think customers and investors fully appreciate, which is why we are working to ensure more awareness. You may remember that we have shared with you that we moved into the higher education vertical with a university client where the ease of obtaining false credentials is taking a significant toll. So called ghost students are robbing legitimate students of the opportunity to attend this university. And keep in mind, it’s not only the loan money that is at the heart of this problem. These fake students also tie up class sign ups, which means legitimate students can’t register for classes in order to complete the coursework they need to obtain a degree.

By authenticating that the applicants are who they say they are, we have given them an effective affordable technology solution to address their issue and at the same time we see opportunity. We believe that there are additional prospects to grow this vertical and continue to stop student loan fraud before it starts. On the IT front, we’ve been keeping you up to date on the growing investments we have made over the last two years. We are almost to the finish line with our move from Azure to the AWS cloud platform. This move will not only result in savings in the hosting front, but more importantly, we believe this will make implementations faster and easier.

At the same time, it has considerable impact to both current and future customers because the move results in a more user friendly environment. And as we continue to build out our AI capabilities, our data science team will be key to ongoing investments in this evolving discipline. We’re investing in the use of high performance servers equipped with powerful GPUs for AI capabilities and machine learning in our continuing efforts to keep one step ahead of the bad guys. As we expand our presence in new market verticals and build on our presence in others, our ongoing efforts include leadership additions. I am very pleased by the progress we have already seen since August when Sandra Bauer came on board to lead this customer success team.

She has hit the ground running for sure. Through Sandra’s efforts, we have bolstered our relationships with our key accounts and have substantially improved the process for implementations. On the marketing front, we have refreshed much of our customer facing materials and key message points as part of our ongoing efforts to critique and improve how we are communicating with both current and prospective customers. We have also continued to refine the look and feel of our website to build engaging content and customer support. In addition, all of our materials, the website, the blogs and our videos have been properly optimized for search.

This has resulted in a 15% increase in both followers and impressions since December. Brand awareness has been a focus and I will be believe we are on our way. Our staffing changes include customer facing positions as well. We have added three new sales associates that we believe are solid fit for the organization. We believe that we should start seeing contributions from them in the back half of the year.

They are very excited about our differentiated product technology and the efficacy that we have for helping our clients onboard better customers faster and addressing stopping fraud. Accelerating revenue growth and achieving increased productivity are that much more attractive when viewed with the understanding of just how damaging the problem of fraud continues to be. As reported by Javelin Research, businesses and consumers suffered a $43,000,000,000 cost from fraud in 2023 alone. Breaking it down further, the Federal Trade Commission said that self reported consumer losses alone in 2024, up $12,500,000,000 And remember, that’s only people who self reported to the FTC. But even that was a twenty five percent increase over 23%.

The bottom line is clear. Credit card, loan and lease, bank account, employment and government program related fraud remains an explosive problem that shows no sign of diminishing. The most recent data from Bankrate is Sol Ring. About one in three adults have experienced financial fraud or a scam in the past twelve months since January 2024 alone. Among them, nearly two in five lost money.

And the generations viewed as tech savvy aren’t immune. Sixty three percent of Gen Zers, those aged 18 to 28 and sixty four percent of millennials aged 29 to 44 have been victimized. Bankrate’s U. S. Economic analyst summed it up well.

She noted that Bankrate’s survey shows fraud can happen to just about anyone, even those who appear technologically savvy or those who have taken steps to safeguard themselves. And I get it. In fact, it hit home for me recently. My wife was just last month the target of fraudsters. She had somebody try and open up online three different credit cards and they successfully changed personal information with one of the credit bureaus.

I have now seen firsthand how long it takes and how difficult it is to correct anything related to identity theft and it’s even worse for the victim when they are able the crooks are able to open accounts. It is happening with the increased frequency and generally when I talk to someone, they are personally aware of someone else who has been a victim of attempted fraud. So before turning the call over to Adam, here’s some color on our first quarter outlook. Coming off a solid Q4 that was propelled by the additional scanned volumes driven by the holiday, the first quarter sees a natural retraction. Of note, our retail customer transaction volumes in Q4 were down more than our current outlook would indicate because they were offset by the growth we are seeing in our new verticals that typically have a higher price per transaction value.

We believe our diversification strategy is working and our focus on longer contracts with minimums and guarantees are starting to bear fruit. Many of you have probably seen reports with cautious outlooks for the consumer as we start 2025. Recent reports show that while U. S. Consumers open their wallets during the holiday season, that quickly changed as 2025 got underway.

Recent research shows consumers are now focusing on needs based spending with drivers cited such as lower consumer confidence numbers, macro and inflation concerns, the continual rise in prices on grocery items and other basics, as well as products across the board, all against the backdrop of uncertainty around tariffs and program changes at the federal and state level. This has driven cautious outlooks from many retailers, some of whom are our customers. Although we continue to diversify away from retail, it still represents approximately 75% of our scan volume, either through the retailers directly or through one of our bank or credit card partners. While we remain excited about our growth for the year, particularly in the back half, we anticipate that our first quarter will approximately be in line with the sell side consensus estimate that at the time of this call was $4,780,000 Another thing to note, all of our Q1 renewals were re signed and including upsells and guarantees, these renewals have an ACV that exceeds $10,000,000 giving us a solid base to build upon as we focus on growth in 2025 and the other renewals that we have coming throughout the year. Finally, I want to remind everyone that we will be presenting at the iAccess Alpha virtual conference next Tuesday at 2PM Eastern, and I will be hosting one on one meetings on Wednesday.

We issued a press release earlier this week with the details. You can find the press release posted in the newsroom on our website. Additionally, we will be presenting a Planet Microcap Showcase on April in Las Vegas. We look forward to seeing you there. I will now turn the call over to Adam, who will discuss our financial results in more detail.

Gar Jackson, Investor Relations, Intellicheck: Thank you, Brian. Twenty twenty four was an important year for Intellicheck on the financial side as well as on the business side, where the initiatives that we have talked to you about in the past are now bearing fruit. As you just heard, our fourth quarter revenues were 15% higher than the prior year. We also saw new business pricing firmer growing at 5% versus 2023. We achieved an important goal that we have mentioned of adjusted EBITDA positive results for the year in the amount of $520,000 for 2024.

As Brian also mentioned, we are pleased to see the continued growth progression of SaaS revenue. As we previously have discussed, we are continuing to maintain our focus on our operating expenses to ensure that we achieve the expected return on our investments in this area as we migrate customers from Azure to AWS. Starting first with some quarterly results. Revenue for the fourth quarter of twenty twenty four increased 15% to a record $5,936,000 that’s compared to $5,176,000 in the same period of 2023. Our SaaS revenue for the fourth quarter of twenty twenty four grew 17% to 5,913,000 from $5,069,000 during the same period of 2023 and represented over 99% of our fourth quarter revenue.

Gross profit as a percentage of revenues was 91% for the fourth quarter of twenty twenty four compared to 95% for the same period of 2023. Cost of goods sold in Q4 of twenty twenty four was a bit higher at about $528,000 versus $263,000 in 2023, partly due to cloud computing costs as we ran both AWS and Azure in parallel for a period of time to ensure stability of the customer experience during migration. We expect to largely complete this customer move to AWS around the middle of twenty twenty five. Operating expenses, which consist of selling, general and administrative, marketing and research and development expenses, increased $864,000 or 21% to $4,928,000 for the fourth quarter of twenty twenty four, compared to $4,064,000 for the same period of 2023. On an accounting basis, R and D expenses were higher in Q4 of twenty twenty four, driven largely by the fact that we have put many development projects into production and are now only capitalizing very few of our ongoing engineering expense.

We’ve also started to amortize previously capitalized software development expenses. Going forward, we expect our cash R and D spend to be flat to only modest growth. In any case, we expect such spending to grow at a rate less than the growth rate of revenue. In broader context, I would mention you’ll shortly hear about how our overall B and A expense fell for the year in 2024 versus 2023. While we realize the benefits of our cost conscious efforts in the period, we are capitalizing $216,000 in costs tied to software projects in the quarter.

We anticipate that we will see de minimis levels of capitalization of software going forward as the migration and other projects we’ve been sharing with you have moved into production. The weighted average diluted common shares were fairly stable at 19,300,000.0 for the fourth quarter of twenty twenty four compared to 19,200,000.0 for the same period of 2023. Now turning to our full year 2024 results. Total revenue for the full year of 2024 increased $1,100,000 or 6% to $19,997,000 dollars compared to eighteen point nine million dollars for 2023. Excluding equipment, our SaaS revenue for the full year for 2024 grew $1,200,000 or 7% to $19,800,000 from $18,600,000 for 2023.

Gross profit as a percentage of revenues was 91% for the full year of 2024 compared to 93% for the full year of 2023. The gross margin profit percentage was impacted mostly by Q4 R and D costs, as previously mentioned. Operating expenses, which consist of selling, general and administrative marketing and research and development expenses decreased $473,000 or 2% to $19,300,000 for the full year 2024 compared to $19,800,000 for the full year of 2023. The reduction was primarily driven by lower R and D costs over the course of the 2024 year. Another item to note in 2024 was stock based compensation expense, which decreased by $720,000 versus 2023.

As discussed on our last call, we expect our total noncash expenses will continue to decrease and comprise approximately 10% of our operating expenses with stock based compensation comprising 90% of that figure. This compares to our prior historical trend of 13% to 15%. The company reported improved net income, a GAAP loss of $918,000 for the full year of 2024 compared to a net loss of $1,980,000 for the same period of 2023. Net loss per diluted share for the full year of 2024 improved to $0.05 compared to the net loss per diluted share of $0.1 for the full year 2023. The weighted average diluted common shares were $19,300,000 for 2024 compared to $19,200,000 for 2023.

Adjusted EBITDA for the full year of 2024 improved to a positive $520,000 versus $377,000 for the same period in 2023. Now to the company’s liquidity and capital resources, at 12/31/2024, the company had cash and cash equivalents that totaled $4,700,000 At year end, there was working capital, which is current assets minus current liabilities, of $6,700,000 total assets of $21,000,000 and stockholders’ equity of $17,700,000 The first quarter of twenty twenty five is not yet complete, but we expect to finish the first quarter with a cash balance of approximately $5,000,000 at least a few hundred thousand higher than at the end of twenty twenty four. This shows the business’s ability to generate cash even in a seasonally weaker first quarter. On another liquidity note, the company has a $2,000,000 revolving credit facility with Citibank. That credit line may be secured by accounts receivable.

There are no amounts outstanding under this facility and the facility was not utilized during 2024. In 2024, we executed on a number of key initiatives that we believe set us up well for continued strong performance in 2025. We believe that our more efficient new marketing approaches are already yielding dividends for the sales pipeline, and we anticipate that we will be able to generate significantly better results with the same or even slightly lower spending. We have remained committed to achieving adjusted positive EBITDA for the year, which we did in 2024, and it now puts us in a position to improve on that result in 2025. We believe that we have discipline in executing on we’ll keep a close eye on operating expenses, which should help us achieve this very important EBITDA goal.

For 2025, we expect to see continued gross margins of approximately 90%, while we improve our architecture and data intelligence capabilities. We also expect to see continued leverage in our operating expenses as a result of the initiatives we implemented in 2024 and do not expect that expenses will grow as quickly in 2025 as our revenue. I would specifically mention two of the initiatives that I’m most excited about to drive results in 2025 and beyond, as Brian alluded to, input marketing strategy and tactics and a revamped holistic approach to the customer experience. I see these two areas of focus as being critical for new customer acquisition, as well as for boosting existing customer satisfaction. I’ll now turn the call over to the operator,

Brian Lewis, Chief Executive Officer, Intellicheck: who will take your questions.

Rudy Kissinger, Analyst, D.A. Davidson: And Uh-huh.

Gar Jackson, Investor Relations, Intellicheck: Uh-huh.

Rudy Kissinger, Analyst, D.A. Davidson: Uh-huh. Uh-huh. Uh-huh. Uh-huh. And

Gar Jackson, Investor Relations, Intellicheck: and

Rudy Kissinger, Analyst, D.A. Davidson: Okay. Uh-huh. And Uh-huh.

Gar Jackson, Investor Relations, Intellicheck: Uh-huh. Okay.

Rudy Kissinger, Analyst, D.A. Davidson: Uh-huh.

Conference Operator: Thank you. We will now be conducting the question and answer session. Our next question comes from the line of Scott Buck with H. C. Wainwright.

Please proceed with your question.

Scott Buck, Analyst, H.C. Wainwright: Hi, good afternoon guys. Thanks for taking my questions. I’m curious, Brian, you mentioned stronger back half. Could you give us a little color on your visibility there? And is it just simply that’s what the rollout schedule is telling you or is there something more to it?

Brian Lewis, Chief Executive Officer, Intellicheck: Yes. So two things. First, apologize to everybody, technical difficulties were going on. We were all as floramics as you were probably. Yes, so looking at rollout schedules, that’s really what we are seeing, rollout schedules, proof of concepts, when they’re ending and generally a proof of concept is a full implementation where they have an out if we don’t do what we said we do going into it.

So that’s why we’re saying sort of the back half of the year. I think things would have been sooner. As I said, hadn’t it been for the fact that that one bank wanted to move their IT guys want to move things out, which is I look at it as twofold. It’s really painful on one end. But on the other end, they’re building new middleware that they want us to connect to, which means it connects to every part of the bank as opposed to so far with them, it’s been a new development process, whether it was online for one use, online for another use, and then in branch.

I’m hoping that delay, while painful, means easier going down the road. So, yes, all timing on rollouts and POCs.

Scott Buck, Analyst, H.C. Wainwright: Great. I appreciate that. And second, you mentioned some of the uncertainty that’s out there in regards to the retail customer. But I’m curious whether or not your sales conversations have seen any kind of disruption due to the current macro?

Brian Lewis, Chief Executive Officer, Intellicheck: No, nothing from the sales side because it doesn’t really matter. The fraud has been so consistent. The percentage of transactions that happen is so consistent across every industry. They all have their number. That doesn’t change.

So, it’s the same impact on profitability. And what I’m also seeing and part of what’s really been resonating with sort of our sales pitches, people they get a pat on the back for cutting the fraud losses and they get a bonus based on bringing on new clients. And one of the things that they’re all noticing about us is the speed and ease of bringing on a new client. And they’re almost looking at stopping the fraud as a byproduct of getting all those new clients. So that seems to be resonating well in the sales process.

I just look at the consumer as right now, as I said on the call, 75% still the transaction volume is retail. So that is still significant. That’s down about 2.5% from 23%. But it is a component, right? If people don’t want to go get credit, if people don’t want to use their credit card at a retail location, that does impact us.

Hopefully, most of the bankruptcies are over with. But again, retail is still a portion of, a big portion of our business. So, it’s something that we watch with a close eye. Great. And if

Scott Buck, Analyst, H.C. Wainwright: I could squeeze one more in. I don’t know if you’ve disclosed it or not, but potential operating expense savings from switching to AWS?

Brian Lewis, Chief Executive Officer, Intellicheck: Here’s what I’d say. My IT guys gave me a big number. I cut it in half. I think we’re probably exceeding what I was hoping. It’s becoming really a bit of a battle out there between the different providers of the cloud hosting.

Because once we get this move done, we’re basically cloud agnostic. And I can tell you some of the other big cloud vendors are coming to us and saying, all right, we’ll buy out your contract, we’ll give you rates like this. So I think we’re going to continue to see reductions. Now, I also want to be clear, part of what we have to do and when I was discussing AI and all those things, that requires expensive computing power. So it’s going to be a balance between what we’re saving on our normal transactions and then what we’re doing to truly enhance our product through AI and machine learning.

Conference Operator: Our next question is from Rudy Kissinger with D. A. Davidson.

Rudy Kissinger, Analyst, D.A. Davidson: I want to start and maybe just understanding the big Q4 revenue number. I mean, the sequential was much stronger than past years. And I mean, SaaS revenue growth went from, I think, 1% year over year last quarter, 17% in Q4, then you’re kind of indicating back to close single digits in Q1. So was there any one time kind of revenue or true ups or anything in Q4 that drove that? Or I guess why if not, then why such a drop off in Q1?

Brian Lewis, Chief Executive Officer, Intellicheck: I think how we look at the transaction volumes very closely. And I looked at for Q1 for the first two months and then extrapolated out what the quarter would be. And the major retailers are not seeing anywhere near the transaction volume that they did before. So again, that’s why I think consumer credit worries and things like that are impacting it. They are I think on average, we saw that they’re down transactional volume 45% from Q4 last year.

Normally that would be about a 15% drop. So, that’s why we’re seeing what I’m looking at. And it seems consistent. We looked at our top retailers and then the one top three company we have that does nothing but retail credit cards. And they’re all down fairly consistently.

Rudy Kissinger, Analyst, D.A. Davidson: Okay, that’s helpful. So I guess if I read it back, I mean the strength in Q4 sounds like it came from non retails, improvements in scan volume there and then the reversal in that growth rate in Q1 is retail getting worse on a year over year basis. Is that Yes, a little bit.

Brian Lewis, Chief Executive Officer, Intellicheck: Yes, I mean, and certainly I think you look at credit and credit card spending and other things during the holiday season, people did go out there and spend money. And I think that they’re just being very, very cautious now.

Gar Jackson, Investor Relations, Intellicheck: Okay. And then one last one, if I could. I don’t believe

Rudy Kissinger, Analyst, D.A. Davidson: I heard any update about the large social media customer. Any update you can provide there? And then Adam, just to clarify, I believe you said in EBITDA, you expect to make further progress on the EBITDA you did in ’twenty four. Just to make sure I’m hearing that right, you expect EBITDA to be higher for the full year in ’twenty five than ’twenty four or no?

Brian Lewis, Chief Executive Officer, Intellicheck: So, I’ll start. The joy of big companies is they’re usually big deals. The pain of big companies, it means procurement and everything gets into it. And I think if you all recall, one of the things that they wanted to do and which then also delayed testing so much is they wanted to use another one of our products, which being able to they wanted us to OCR the front of the license and that kind of stuff. So, they needed to test it.

Once it was tested and they said that they were good with it, then procurement comes in and that can drag on. So, that’s what’s happening now. We’re just going back and forth on some final language on what a successful transaction is with procurement. And then we should have further updates after that.

Gar Jackson, Investor Relations, Intellicheck: Great. Thanks for your question.

Scott Buck, Analyst, H.C. Wainwright: Yes, I think that we’re going

Gar Jackson, Investor Relations, Intellicheck: to be seeing continued improvement in 2025. But again, if you’ve been following us for a while, you know that our really great quarter in terms of cash generation and adjusted EBITDA is it comes down to Q4. So the magnitude of the increase will probably be how we see Q4 twenty twenty five. But I expect the number to be positive and I do think we’ll improve on 2024.

Conference Operator: Our next question is from Mike Grondahl with Northland Securities.

Mike Grondahl, Analyst, Northland Securities: Brian, the three new salespeople, how many total people do you have in sales now? And what did you focus the three new salespeople on, like a specific vertical? Or how did you kind of point them in the right direction?

Brian Lewis, Chief Executive Officer, Intellicheck: So the three folks have really just started and we’re kind of going a little bit different. In the past, we’ve hired a lot of people who are sort of experienced and this time one of the things I like is bringing on really young hungry people who have generally I think where you have good salespeople is where they’ve been working in a place booking meetings for somebody else who makes all the money and they want to do it. And that’s kind of what we focused on. The good thing is the way that I look at what we do, the problem is the same problem across any vertical. Do I need to know who you are with certainty?

And that message works for every single vertical. So instead of some verticals take longer to close and others, we’re going to give a mix of here’s some very targeted accounts. Now, we do have verticals that we’re focusing on and that’s where we’re doing targeted marketing. All the things that really smart, modern digital marketers know how to do to go and hit the right person to warm up that cold call. That’s how we’re focusing what we’re doing.

And then people might find they’ve got a natural affinity to one or another vertical. But I think that it’s not like I’m an equity guy trying to sell fixed income. This is I’m selling the solution of identity validation. And then it’s just what’s your use case, how do you want to consume it, is it do you need international, do you need this, do you need that? Just questions to figure out how to provide the solution, much more consultative selling because I think that works better than just trying to go out and demo a product.

Mike Grondahl, Analyst, Northland Securities: Got it. And Brian, what would you say are your top two priorities now for ’twenty five?

Gar Jackson, Investor Relations, Intellicheck: ’5? What are you focused on?

Brian Lewis, Chief Executive Officer, Intellicheck: Sales, sales, sales. Honestly, I think that we finished the we finally got the really the right marketing people in place and I cannot believe what they’ve done. I mean the fact that without even boosting or doing anything on any post or any of that stuff, we’re up 15% in both impressions and followers. I think that shows that the message is getting out. So that’s working right.

Finance is working right. IT, it’s working right. IT people are always like, I can’t make that deadline, but we’ll get them there. I think that we just need to make sure that we’ve got the right sales thing happening. And that’s we’re getting there.

That’s working pretty good. We’ve got good leads in the pipe. We’ve got good things happening. Now, we just need to get more of that. And then Sandra is so experienced in customer success, customer journey, all those types of things, like I don’t have to worry about that, that’s just being completely taken care of.

Mike Grondahl, Analyst, Northland Securities: Got it. And then last question, if I heard it right, I think you said in Q1, you re signed about $10,000,000 of ACV. Yes. That seems like a huge number relative to your roughly $20,000,000 in sales. Is it a lot of things just came due And what’s kind of the pace for the rest of the year?

Brian Lewis, Chief Executive Officer, Intellicheck: So the rest of the year is certainly a little bit more even, if you will. A couple of things I think made this one really big, right? So obviously, one of the big banks always just every year, their contract is it was a three year contract, we’re in year two of it now. That ends on December 31. And then they say, all right, same amount of transactions or we’ve given them some sort of break points going up or you can commit to this number, this number, this number.

So, that came in. And then that other bank that we talked about on the earnings call who had been buying buckets, like again, the buckets ended way earlier than they thought. So, it was a and we didn’t have time to renew it in December. So, we said to them, look, fine, we’ll just do we’ll just keep billing you, but in arrears. And then in January, you can buy a new bucket.

And now, they’ve realized that that bucket won’t make it. So they want to start thinking about how do they go on a model like the bank I spoke about prior, where it’s they’re going to commit to a number of transactions for the year. And then if they miss that, they can pay through the end of the year at that rate. And then in the following year, they can commit to a higher rate and get a slight discount. So they win a little bit and we win a lot.

So, it’s just a bit of timing. And what I like about the way we’re doing it now is we’ll be able to give a little bit of guidance better because I can talk about ACV and TCV and those types of things.

Conference Operator: Our next question is from Jeff Van Ream with Craig Hallum Capital Group.

Daniel, Analyst, Craig Hallum Capital Group: This is Daniel on for Jeff. Just briefly on the sequential here from Q3 to Q4, it sounds like there was still trying to understand on the retail dynamic. So I think last quarter it was called out that there was a double digit decline year over year in retail volumes. Sounds like that improved to like negative 2.5, I think it was mentioned year over year for Q4. And it sounds like that was sort of a on a stronger than usual seasonal strength in Q4 and that’s expected to kind of go back to more pressure in Q1 ’twenty five.

Am I reading all that right or where am I wrong there?

Brian Lewis, Chief Executive Officer, Intellicheck: Just so I clarify, if you’re saying that, was it a stronger Q4 than in 2023? I’m looking at the numbers right now. So

Daniel, Analyst, Craig Hallum Capital Group: it was not In terms of the seasonal impact, it was not.

Brian Lewis, Chief Executive Officer, Intellicheck: Right. So Q4 ’twenty four, and if I and again I’m just looking at this listing of our top retailers and then that one company that does nothing but retail was down 9% from Q4 ’twenty three.

Daniel, Analyst, Craig Hallum Capital Group: Okay. So

Brian Lewis, Chief Executive Officer, Intellicheck: Yes. And that’s just those volumes. But I think part of what happened is we do have part of it was some things were at

Gar Jackson, Investor Relations, Intellicheck: a higher rate for some

Brian Lewis, Chief Executive Officer, Intellicheck: of these customers. So there was a jump, right? And I’m looking overall. So I mean, I’m sorry, I’m looking at a few specific ones. Overall, we did see retail was good and strong.

But also there’s other areas too that you can consider retail or not, but automotive was very strong. And those are things where again much, much higher price per transaction than if you’re going into a department store.

Daniel, Analyst, Craig Hallum Capital Group: Okay. So normally you see sort of a low teens, call it, sequential uptick in Q4 revenue mostly off of retail volumes. And I’m thinking maybe saw a little bit less of that impact than normal this Q4. So to be up 26% sequential, you’re talking about over 10 points of that being strength elsewhere. Just help us walk through, is that primarily title insurance?

Help us size eightytwenty where that’s landing.

Brian Lewis, Chief Executive Officer, Intellicheck: I think it’s more automotive than title at this point. And again, I look at automotive. Automotive and title are both significantly higher priced than our banks who are providing credit cards doing tens of millions of transactions. These folks are doing a lot less, so their price per transaction is much higher. So one of those transactions can be equal to four or five of a retail transaction.

Daniel, Analyst, Craig Hallum Capital Group: Okay. That’s helpful. And then just one last for me. On the results, I think last quarter it was said sort of guidance for Q4 here was that there would be year over year growth. Wasn’t said how much, but kind of interpreted that as low year over year growth like single digits.

We ended up coming in at 15%. So it looks like it was a stronger quarter than was expected as of kind of mid quarter. Was there something was this sort of fair to read this as some big wins kind of late in the quarter or how should we read that?

Brian Lewis, Chief Executive Officer, Intellicheck: A few things did go live in that quarter. Not that I would consider them really big wins that would impact it. I think what we saw is across where consumers were spending money, right? So that’s not just retail, but it’s also in the automotive space, in other places like that. We saw increased demand in usage, right?

The other thing is we certainly saw surprisingly in the email recovery it went up. So there are different there was different sectors and part of it is that that’s part of the reason that I want to get out of things that aren’t tied to somebody doing an economic transaction. One of the things I’m looking forward to is, we announced it a while back to do in the development now, but that company that provides background checks to tons and tons, vast majority of the independent background check companies, they’re excited, I’m excited, because jobs happen all the time and it’s background checks happen at all levels. So to me that’s going to be a great way to make sure that we’re further insulating ourselves from easy consumer making a transaction.

Daniel, Analyst, Craig Hallum Capital Group: That’s it for me. Thanks, Brian.

Brian Lewis, Chief Executive Officer, Intellicheck: All right. Thank you.

Conference Operator: Our next question is from Neil Katalje with Blue Primate Capital. Please proceed with your question.

Rudy Kissinger, Analyst, D.A. Davidson: Hi, Brian. Great quarter. Thanks for taking a question or two here. If I could ask, identity verification across social media seems to have really strong tailwinds right now. I’m curious if you could talk a little bit about the role you think IntelyTech can play as age verification, possibly you come to the norm and are you guys seeing any activity in your pipeline to support your role expanding in that vertical?

Brian Lewis, Chief Executive Officer, Intellicheck: Yes. I think the main thing is the discussions we’ve had about where else this current client can use us. And when you look at where they are talking about where they know that they have issues, certainly you mentioned one, age verification. That’s becoming important not only across for what they’re doing, but now you’ve got many states that are passing laws for pornographic websites that you need to age verify there. So that’s just a whole other area.

But if you think about there’s marketplaces on these things where people are buying and selling and there’s a lot of crime that takes place because people are pretending to be people who they’re not or it’s a front for selling stolen goods, they need to make sure people are right there. One of the things that they’ve said is, we want to make sure that people are not bots and how do we do that. So to me, social media is kind of the wild, wild west of where people hadn’t thought about proving who you were. You pay your $8 or whatever it is and you get a blue check, doesn’t mean you’re real. And the important thing is those are the ones that are usually get the most clicks and the most credibility.

And now what they’re talking about is how do we ensure that credibility is deserved.

Rudy Kissinger, Analyst, D.A. Davidson: Got it. Okay. And just a follow-up on the one customer that you have referenced.

Gar Jackson, Investor Relations, Intellicheck: I completely understand why it’s hard

Rudy Kissinger, Analyst, D.A. Davidson: to forecast. You mentioned procurement, which seems like you’re finalizing pricing on the new applications and whatnot.

Gar Jackson, Investor Relations, Intellicheck: If I could ask, are they finished testing or

Rudy Kissinger, Analyst, D.A. Davidson: are there other testing steps that also still need to occur as part of the revenue?

Brian Lewis, Chief Executive Officer, Intellicheck: Right now, we are fully integrated. They’re running transactions through the system, not just at the volumes that they said they will, just to keep the pipeline, if you will. But fully tested, fully vetted, they gave us great marks on what we did and the results we did. I think it’s interesting too when you work with companies like that, it helped us think about new ways to work with our products. So, part of what we did was the expense of like AI machines, we were like there was a process that everybody usually has, take the front, take the back of the document.

We now have a detector. We don’t care what the customer on the end does, which means I look at that as we can do that across every single one of our customers and hopefully get more volume out of it because if somebody in the past sent the front when it should have been the back, we couldn’t process it, give them a result and charge for it. So sometimes delays can help you build products that get you revenue across the board.

Conference Operator: Our next question is from PJ Sala with Potomac Capital. Please proceed with your question.

PJ Sala, Analyst, Potomac Capital: Well, I must have been at the back of the queue. So all my questions were answered. But I guess, while I’m here,

Conference Operator: I’ll say congrats on a

PJ Sala, Analyst, Potomac Capital: nice fourth quarter. And I mean, big picture wise, my interest in the company has always been that you have such great gross margins that if you can get some accelerating growth, the operating leverage is substantial. As you’re looking into second half and into 2026, I mean, is it too optimistic to think that you can really start to sustain growth rates well into the double digits and see some of that leverage?

Brian Lewis, Chief Executive Officer, Intellicheck: Yes. I mean, that’s I can tell you that the Board certainly has set growth rates that are that would make everybody happy, including me. So, yes, and again, I always say this to everybody. I don’t need legions of people to run this company, right? It’s the technology team does not need to be any bigger really than it is today, other than maybe a few specialty people like a product manager and that kind of stuff.

Salespeople, they should pay for themselves, so they don’t matter. We need some good account management customer success people, because I think that we still leave a lot of money on the table with existing clients just because we’re not focusing on it like we should. But again, they should pay for themselves. So I don’t see any need for increasing expenses. And the only thing I see a need for is increasing the revenue.

Gar Jackson, Investor Relations, Intellicheck: That’s good. One last question. It’s Adam. I’ll just jump in real quick and mention that one of the things to think about margins and in this business cost of goods sold is mostly made up of cloud computing expenses. And as Brian mentioned, that’s a place that has a lot of downward pressure in pricing.

So that’s kind of exciting to look at because there are a lot of other things that have pricing going up. But the cloud hosting, which is the vast majority of our cost of goods sold, has kind of downward pricing pressure. So that’s something that does make us optimistic.

Brian Lewis, Chief Executive Officer, Intellicheck: Yes, great. And you’re kind

PJ Sala, Analyst, Potomac Capital: of alluded to before, we’ll see it improve, but probably not until after this summer when you get rid of the dual system? Yes, correct. Okay. And last thing on the social media customer, sounds like you’re getting closer. Is it too optimistic to hope that maybe that could hit sometime in the second quarter or is that just too optimistic?

Brian Lewis, Chief Executive Officer, Intellicheck: They’ve been an interesting customer to deal with. So it’s almost like I’ve begun to figure out I almost can’t figure out what they’re doing. But here’s what I’ll say. Again, we are completely integrated, right? There is no more testing need to be done.

Now it’s just a matter of them getting their stuff and their act together on their side, and then we should be in good shape. So at this point in time, it’s just up to them almost once we get the contract signed or I should say the new purchase order for the new product signed.

Conference Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to Brian Lewis for any closing comments.

Brian Lewis, Chief Executive Officer, Intellicheck: Great. So thanks everybody for joining us. You may remember at the close of the last earnings call, what I said is that our new strategic plan and the implementation of that, I think was going to be the key to us handling some of the marketplace challenges, particularly what I was seeing in the economy, in consumers and how they’re feeling. And I think that that decision to move into new market verticals continues to be key in us growing. And I think you’ll see that that has helped us in some of these downturns.

We believe we’ll continue to show progress in 2025. We’re going to remain focused on expanding our customer base, growing within our existing customers through the efforts of Sandra and her team, and getting in much stronger in some of these new market verticals. And one thing we really didn’t talk about, but I am excited about is our partners that’s really beginning to show real growth and benefit and we’re going to focus on that more. So I look forward to discussing our Q1 results with you in mid May. So thank you and have a great evening everyone.

Conference Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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