Hello, and thank you for standing by. Welcome to authID Second Quarter 2023 Earnings Conference Call and webcast. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Graham Arad. You may begin.

Thank you, operator. Good afternoon, everyone. With me on today's call are our CEO, Rhon Daguro and our CFO, Annie Pham. By now, you should have access to today's press release announcing our second quarter 2023 results. If you have not received this, the release can be found on our website at www.authid.ai under the Investor Relations section. Turn to slide two. Throughout this conference call, we will be presenting certain non-GAAP financial information. This information is not calculated in accordance with GAAP and may be calculated differently from other companies similarly titled non-GAAP information. Quantitative reconciliations of our non-GAAP adjusted EBITDA information to the most directly comparable GAAP financial information appear in today's press release. Before we begin our formal remarks, let me remind you everyone that part of our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's press release, others are discussed in our Form 10-K and other filings which were made available at www.sec.gov. We will have a question-and-answer session following our presentation. To participate in the Q&A, you must be registered on the telephone. You can find the link for telephone registration on the Investor Relations section of the authID website. I'd now like to introduce our CFO, Annie Pham.

Thank you, Graham. Turning to slide number three, the following highlights compare results from continuing operations for the quarter and six-month ended June 30, 2023, with the quarter and six-month ended June 30, 2022 unless specified otherwise. Total revenue was $0.04 million for the second quarter compared with $0.07 million a year ago. For the six-month period ended June 30, 2023, total revenue was $0.07 million compared with $0.2 million a year ago. The reduction was primarily attributed to revenue from a legacy authentication product that was discontinued in April 2022. Operating expenses declined to $2.8 million for Q2 compared with $6 million a year ago. For the six-month period in 2023, operating expenses declined to $7.2 million compared with $11.2 million for the same period last year. The reduction was primarily due to the company cost savings measure, resulting in lower headcount and third-party vendor costs. Loss was $10.9 million for the second quarter, with non-cash charges of $9.2 million compared with a loss of $6.4 million a year ago with non-cash charges of $3.3 million. For the six-month period in 2023, loss was $16.1 million with non-cash and one-time severance charges of $12.2 million compared with a loss for the same period last year of $11.5 million with non-cash and one-time severance charges of $5.6 million. The increase in non-cash charges in the second quarter and six-month period this year was primarily due to the one-time conversion expense of $7.5 million related to the exchange of convertible notes for shares of our common stock that the company executed in May 2023. Net loss per share was $2.15 for the second quarter compared with $2.06 a year ago. For the six-month period in 2023, net loss per share was $3.91 compared with $3.80 for the same period last year.…

Thank you, Annie. I do want to take a moment to extend my sincere appreciation to you for all your hard work and valued insights over the last few months. Under extremely tight timeframes, you helped us close a recent fundraise and note conversion, as well as helping us regain compliance with the NASDAQ listing standards. You've been an integral part of helping lead authID, and I wish you all the best on your next endeavors. Turning to slide seven. So I came to authID because of the opportunity to build a high-performance sales machine for the company to achieve strong growth. To that end, it gives me great pleasure to welcome Ed Sellitto, who will join authID as the Chief Financial Officer, effective August 15, 2023. Mr. Sellitto is a seasoned financial executive with over 15 years of experience in revenue optimization roles, supporting high-growth B2B and SaaS organizations that needed to be built and optimized for go-to-market operations. Ed has worked at companies including Zero Hash, Sprinklr, [inaudible], American Express, and News Corp. Ed earned his MBA in Corporate Finance and Strategy from the Stern School of Business at New York University. Having previously worked with Ed at an identity business where we grew ARR by over $100 million in three years, I very much respect his exceptional intellect and agility, and proven success in helping drive revenue optimization. I am confident that Ed will be integral to our efforts to grow our business, increase our sales, and advance authID to the next level of market leadership. To achieve high market growth, we also need a proven and accomplished sales team. It gives me great pleasure to introduce our new sales executives, Greg Manship, Dale Daguro, and Jeff Scheidel, who joined us in July to help us build…

Well, thank you, Rhon. We'll now turn it back to the operator, who will explain again how to raise a question for those who have signed in and registered on the telephone line. Operator?

Thank you. [Operator Instructions].

Thank you, operator. Whilst we are compiling the Q&A roster, Rhon, you've talked about all of the steps and achievements over the last quarter. What do you see as the next sort of major challenges and opportunities in the coming months through the rest of the year?

Well, the exciting thing for us is that we've been spending a lot of time building the foundation; getting the finances right, getting the people right, and then really understanding how to articulate this message to fit the use case, and that's what we've really been spending our time over the last four or five months. The challenge now over the next six to nine months is we need to execute on everything that we've been building on, really going after the customers, delivering this message to our customers, and do it as fast as possible. Really, that's going to be the focus over the next six to nine months.

Okay. Thank you. Operator, would you like to invite the first questioner, please?

Sure. One moment. Our first question comes from [Inaudible] with Diamond Equity. Your line is open.

Hi. Congratulations on the results. So I had a couple of questions. The first one was, maybe if you could give more clarity on sort of the size of the companies you're targeting, the industries, and then what solutions are they utilizing right now? I don't know if it's two-factor, other software solutions, but what are they sort of comping your offering to?

Let me – so there’s a couple of questions in there, so let me unpack them first. So the types of organizations we're going after, we categorize them in three tiers. There's Tier I, very, very large enterprise; Tier II, more of like a medium-sized enterprise; and Tier III, which is more of the startups or emerging technology. The way we approach it is, there's a strategic set of accounts that we believe are the most strategic for authID, so very large and also strong use cases for us. And then there's another set, which we call the fast 100 list, which is our customers who just perfectly fit our sweet spot. We can solve their problems very quickly and we can do a deal very quickly, and so that's how we're approaching it. It's about 200 accounts split across those three types of tiers. The use cases fall in two categories. Essentially our core use case is facial biometric authentication. Basically replacing the password with a very strong facial biometric authentication, essentially. So that is really the core use case. And then these customers that we've closed have also extended that use case not only for replacing passwords from personal devices, but also to replace passwords on a shared device, and that's what we had highlighted there with ABM. The other use cases involve identity proofing or identity verification, which is the first time any company sees any identity. So is it Rhon really – is Rhon really Rhon or is it Tom pretending to be Rhon? That particular use case when somebody's applying for a credit card, applying for an account, that is the secondary use case that we're also seeing in these accounts, and luckily for us, both of those use cases have been served by these customers that we've closed recently in our Q2.

Great. No, perfect. That makes a lot of sense, and then my second question is, obviously the gross margin profile. Its early days of the revenue ramp, and obviously the revenue isn't too material today, and you've guided for sort of – not formal guidance, but you've said an annual run rate that you're sort of looking to hit. What do you see as sort of the margins or gross margin targets for this business? Obviously large SaaS companies are very high gross margin or Salesforce, Oracle in general. So I don’t know – do you have any thoughts on kind of the gross margin targets?

I do. I do. Absolutely, Absolutely. And we have a formulary here. So essentially world-class gross margins, at least in this particular space that we're aiming for, is above 85%, but we are – just to be clear, we are going to go win our first 10 Halo accounts, then we're going to go win our next 100 accounts, and then we're going to go win our next 100 accounts. So efficiency early on, as we get our customers excited about our technology, will maybe go below those margins, but ultimately we're aiming for 80%, 85%.

Great. Perfect. No, that's it for me. I'll open the line for other questions. Thank you for addressing those points.

Appreciate the questions.

Thank you. Please stand by for our next question. Our next question comes from the line of Ricky Solomon with Wilmot. Your line is open.

Hey, guys. So my question is about the product, and then about the TAM. So it seems to me in just early discussions and am hearing you talk now about the opportunities that are there. The TAM has increased, and it sounds like there's a lot of use cases to our technology. How much work do we have to do to kind of expand the TAM? What tweaks can we do to expand the product to fit the market needs, and how long will it take to kind of get the product to a point where it's massively scalable?

Tom, you want to address that?

Yes, absolutely. So on the product, the current product is designed to service within those two types of markets that Rhon described, the fast 100. In that market, our product is a direct fit. Our key differentiator and what people are coming to us for are the speed, the accuracy, and the user experience. It's what we invested into, and that is what is bringing them to us as customers. The larger accounts obviously have incremental requirements, and those are being put into our pipeline on a roadmap as those opportunities come in. So we're developing those in accordance as the opportunities come in. The product is scalable as it is right now, and we're ready to service those accounts that meet the requirements. So there's not that much incremental work to do to what we would say scalable; it's there already.

And to answer the other question around, what does it take to expand. The customers are sharing more use cases with us, and we're learning more and more, so we'll go ahead and try to address that more in the future, but the use cases are expanding as we meet with those customers.

Great. Thanks.

Thank you. [Operator Instructions].

Thank you, Operator. I've neglected to introduce our last speaker was Tom Szoke. Some of you will be – many of you will be familiar with as our Founder and CTO, and Tom is obviously also on the call. While we're waiting for any additional questions, Rhon, perhaps you could expand a little bit. You talked about the significance of the ABM deal in terms of shared device market, which obviously is one particular but large use case. Can you talk a little bit more about that, and what does the competition in the shared device market look like?

That use case is very significant in the sense that the customer themselves have been evaluating solutions for over a year and a half. They've been looking at every single vendor, every single option, because this is a very big problem for any organization that has shared devices, so think similar companies like ABM, large stadiums, large airports, anywhere where there's a large, massive workforce, and you may even consider that population low-tech. So they need to have the ability to have the highest levels of security, regardless of whether there's high technology involved or low technology involved, and ABM obviously hadn’t looked at all those solutions, which is why that's very significant and telling for us at authID. So based off of their own analysis of the competition, they obviously selected authID for those things I described earlier, which was speed, accuracy, and the amazing user experience. The key thing in any authentication in the world, anytime you have to go log into a system, seconds, minutes, any of those things will upset anybody in a user experience. They have to get in very, very quickly, and essentially that's what we saw for ABM. Like I alluded earlier, in the marketplace, there is nobody faster than us, and so in terms of competition, yes, there are people trying to solve this shared device use case, but nobody can solve it as fast as we can.

Thank you, Rhon. Next question, Operator?

Please stand by for our next question. We have a follow-up from the line of David Lerner with Madison Global Partners.

Hey, Rhon.

Hey, David.

Hey, Tom.

Hi, David.

Hi, Graham. So what I think I heard was 77 meetings were set up in a month's time, and you are moving forward with some percentage of that 77. Did you give a number there?

So 77 are scheduled meetings, and of those 77, we created 19 opportunities, so about a 58% for the month of July.

Got it. Is it asking too much to know the average size of those 19?

Little.

The average BARR?

So the total BARR opportunity created for those 19 opportunities was $2.4 million, which I did state earlier, so nothing to hide there, $2.4 million in opportunities off those 19 opportunities.

And those are fast 100s?

Absolutely, because the fast 100 accounts are the ones that we are going to show value to the market and show value to the business in the next six to nine months. The Strategic 100, they are the larger organizations. Think large, like very big banks, very big strategic organizations, those that are a little slower to move on adopting technology and so that's how we're planning on attacking those accounts.

And they are not in the $2.4 million. You're separating these TPG meetings.

Absolutely.

Okay. Well, thank you. Congratulations on your team. Good luck with your new financial folks and continued success to you, my friend.

Thank you, David.

Thank you. At this time, I would like to turn the call back over to Rohn for closing remarks.

Well, one, I wanted to thank everybody again for their extreme support, as well as their patience for us as we rebuild the organization and get this thing on its way. Hopefully, we will continue to share good results, which I know we will. So thank you for your questions and your time today. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.