Greetings, and good afternoon. This is Graham Arad, General Counsel of authID. Welcome to the authID First Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. With me on today's call are our CEO, Rhon Daguro; our CFO, Ed Sellitto; and our CTO, Tom Szoke. By now, you should have access to today's press release announcing our Q1 2024 results. If you have not received this, the release can be found on our website at www.authid.ai under the Investor Relations section. 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 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 are available at www.sec.gov. I'd now like to introduce our CFO, Ed Sellitto.

Thanks, Graham. I'm pleased to report that Q1 2024 has been a pivotal turning point for authID's revenue growth. Our sales, engineering, and customer success teams have worked tirelessly to launch new customers so that we could begin to recognize revenue from customers booked in 2023. Turning to slide four, the following highlights compare our GAAP results from continuing operations for the three-month period ended March 31, 2024, with the three-month period ended March 31, 2023, unless otherwise specified. Total revenue for the quarter increased to $0.16 million, compared with $0.04 million for the same period last year, as the result of the launch of several new customers that were signed in 2023, including both consumer and workforce use cases. Q1 revenue is already approaching $0.19 million in revenue earned in all of 2023. Operating expenses for the quarter totaled $3.31 million, compared to $1.02 million for the same period last year. This increase was driven by a one-time non-cash expense reversal in Q1 2023 of $3.4 million from the reversal of certain stock-based compensation related to employee terminations, which was not repeated in 2024. From a quarter-over-quarter perspective, operating expenses for Q1 2024 remained in line with the operating expenses incurred in Q4 of 2023. Losses from continuing operations for the quarter was $3.06 million, of which non-cash charges were $0.77 million, compared with the loss of $1.78 million in Q1 of 2023 of which the impact of non-cash and one-time severance charges was a negative $0.42 million comprised of the $3.4 million reversal of stock-based compensation noted previously, as well as $3.0 million in additional non-cash and severance charges. Looking again from a quarter-over-quarter perspective, loss from continuing operations decreased approximately 4%, from $3.2 million in Q4 of 2023, to $3.06 million in Q1 2024. Net loss per…

Thank you, Ed. I'm also very excited and I'm very proud of our team's accomplishments. In just under one year, our new team has laid a strong foundation for continued growth and market leadership. We are laser-focused on our mission statement to help our enterprise customers eliminate authentication fraud and deliver 100% zero-trust identity assurance across their workforce and consumer platforms. Today, too many organizations rely on outdated authentication strategies that merely assume the correct user is accessing a system or resetting an account. authID helps our customers defeat today's rampant fraud and malicious AI-generated cyber-attacks with strong identity assurance to know who's behind the device every time. The value proposition of our biometric technology continues to resonate strongly in the market. Let's look at our continued market momentum and progress. A little less than one year ago, I joined authID as CEO, excited by the strength and value of authID's technology and the opportunity to build a high-performance sales machine. Along with the newly reconstituted board of directors and a small team of identity domain experts, we have launched a turnaround of authID, and I am pleased that in every quarter we have made progress across multiple facets of the business. By shifting the company to a sales-focused mindset in 2023, we secured a record $3 million in booked contracts that supported use cases for identity verification and authentication across financial services, fintech, social commerce, and workforce authentication on shared devices. Turning to Q1 of 2024, we focused our efforts in three key areas. First, technology hardening and feature enhancement. Second, securing fast 100 customer goal lives for revenue. And third, refocusing our sales strategy to concentrate our efforts on building fat 100 and channel partner opportunities. During the first quarter, our highly talented engineering team worked on to…

Thank you, Rhon.

[Operator Instructions] I'm going to open the line for [Gary Brody] (ph). Gary, please go ahead and ask your question.

Thanks, Graham, I appreciate it. Ed, really nice job breaking out bARR into Committed Annual Recurring Revenue and Usage Above Commitment, it was a great presentation. Rhon, I want to ask you an important question. In my opinion, the two key things the company is going to need later this year are new contract signings, which you talked about a lot, in the second-half, and a secondary offering later this year. It's not a secret that the company is going to need additional financing to get to the point where you're self-financing. Would you mind talking a little bit about your level of confidence in being able to achieve each of these goals?

Well, thank you, Gary for the question. We definitely like to see quarter-over-quarter growth in Q1, Q2, Q3, Q4 with our businesses as still being predictive. We're still trying to get really good at predicting that. In leading indicators that I alluded to before was for me, at least as a former CRO, is I really measure the ability to build pipeline. And if we can build pipeline, then we have line of sight of some bigger number over the number that we have to achieve and close. And right now, I think the -- I know that the rate of what we're building pipeline at, at $9 million a quarter, is very healthy to build on top of the existing $21.3 million that we have in place. So, we'll definitely have plenty of pipeline to go close the business by the end of the year. Now, the second question that is our ability to close that pipeline and what's our win ratio to do that, in 2023 our win ratio was over in the 90s, and coming into 2024, even though it's still early to tell, it's just -- it's lower, right around 25. And so, you take an average of the two and you say, "Hey, do we have the ability to close that?" And the answer is absolutely yes. That's why I alluded to the 40%-plus that's required to close the business. Absolutely believe that we'll do that, and we'll exceed that. So, we definitely have line of sight of the pipeline to close. We definitely have the history and the close ratios to be able to do it. And I certainly definitely have the sales team that can achieve that. And so, those are the indicators that allow us to know whether we're going to hit that number or not, and that's why we're sticking close to our projection there to be able to hit triple bARR at $9 million. On the second question, you were asking the financing. Ed, do you want to take that one?

Sure, yes. So, as you mentioned, we do -- we'll need to raise money in the balance of the year, as we stated in our 10-Q. Our balance sheet as of the end of the quarter starting off pretty strong at $7.2 million, but we will need to raise money sometime this year. We do feel confident in our business model and with the relationships we have with various fundraising resources. And do intend and are confident that we will be able to raise money throughout the year as judiciously as we can.

Sounds good, guys. Thanks. I'll get back in line for a follow-up question later. Thank you.

Thanks, Gary.

Thank you, Gary. The next question comes from George Sutton. George, please go ahead and unmute yourself and ask your question.

Great, thank you. Hi, Rhon. And I wanted to get a sense of the range of use cases that you are going after. Obviously, the facilities provider you mentioned is a shared device, I would assume, scenario for the workplace. But as you're building up this pipeline, I'm just curious what kind of the top use cases you're finding to be?

I'll give you the top three core use case, and I'll give you kind of the sub-derivatives, which is what's making it exciting, right? So, the first use case is account opening and new user onboarding. So, when I did the demo, you can see that all the institutions that have any way to apply for a loan or a credit card. They have to try to do it digitally and remotely. And so, they have to do that first time check of whether George is really George, or Gary pretending to be George. And so that user onboard identity verification use case is absolutely one that we have been accelerating into our -- helping us create our pipeline. The sub derivatives of that, what's making that exciting is you had your kind of like old school fraud or old school fraudster who would maybe print a paper ID or they would manufacture their own IDs off of Etsy or they would order it on Poshmark. But now with the new Gen AI tools, these people can actually get a printer at their own house, shift to them from Amazon for $600, and they can actually produce the highest quality of fakes and fake IDs, again, at the comfort of their homes. So, the increasing rate of technology in Gen AI is actually enabling just a ton more fraudsters, which then obviously is going to overwhelm the existing technology, existing legacy systems that are in place today. So, that's one of the use cases where we can try to go fulfill and prevent really the onboarding of fraudulent users. The second use case that we fulfill is the actual strong authentication. So, let's say the account is already open. George, you already have your bank account already established. And I,…

Just one other question, I'm curious if you look through your pipeline, how much of it is an organic new application that a company is looking to pursue versus a required competitive replacement.

They're pretty much competitive replacements right now, because the current technology in place that they have is really fundamentally rooted in passwords. And everybody knows that they don't work. So, that's why they invented this thing called onetime passwords or SMS code to your phone or a stronger authenticator. And again, because those are reliant on a Telco, T-Mobile, AT&T, the bank is relying on the strong authentication on another company. And so, we know the hack right now is that fraudsters will target workers at Telcos and they will pay them $600. That's the going rate right now to be able to do passive resets on people's phones and then to be able to do SIM swaps on phones. And our financial institutions that we're working with are current customers who are sophisticated, yet not everybody understands that they can now protect us with biometrics. So, that's why we need to really do our job to be able to show that we can do this. But the ones that are innovators that are seeing this are realizing that they cannot outsource their security to a Telco, a phone system because we don't know how good their security is. So, they want to be able to just say, pop up the camera, let me see who's behind the camera and then I'll decide and they don't -- a lot of them are just soon realizing that we can do that pretty darn quickly and so under 700 million.

Rhon, thank you very much.

Thanks, George.

Thank you, George. [Operator Instructions] Gary, I think you said you had some other questions. So, please go ahead and unmute yourself and ask your question.

I do. Thanks, Graham. I don't know if this question should be directed to Rhon or Ed, either one of you would be great. So, you guys did about $200,000 of revenue in the first quarter, which is roughly what you did in all of last year. If we take the low end of your guidance this year of $1.4 million that means $1.2 million of revenue for the rest of the year, assuming that we're evenly dispersed, which I know it won't be, that would be about $400,000 per quarter, which would be double the rate from this quarter. So, first quarter, you matched your revenue for the full-year last year, and you're basically saying for the rest of the year, we're going to be at a run rate that's double what you did in the first quarter. What gives you the confidence that the revenue will start to ramp so quickly?

A big question, Gary, I could take that one, Rhon.

Yes, go ahead.

So the main reason why we would see that ramp up the way you described, Gary, is that we are starting to recognize revenue from our contracted customers as they go live with our service. And we started going live during Q1. So, we've had several customers with revenue beginning to be recognized in Q1, though it would be a partial quarter, maybe half of the quarter, one-third of the quarter is being recognized in Q1, and then we will start seeing full quarters of that revenue going forward. So, we will -- as new customers go in, go live with our service, we'll have a lower first quarter than slow one to a steady state as a full quarter of recognized revenue rolls in.

Okay. And just to reiterate, those -- that $1.4 million to $1.6 million and the run rate that you were just talking about, that's from your existing signed customer base, correct, not assuming additional sales throughout the year?

That's right. That's right. We are assuming that it's going to be a recognition of our existing contracted customers as well as a smaller subset of customers that are currently on usage revenue only and don't have broader overarching commitments. So, that will add to a smaller degree. But we're not assuming any signings in year to be converted to revenue in '24 when we provided that guidance. So, that would be additional upside.

Okay, that is helpful. Thanks. I am going to meet myself now. I appreciate the solid answer.

Thanks, Gary.

Okay. We've had a question to Rhon. Can you explain a little bit more about the significance of the deal with Equifax and what that offers in terms of new products that we're able to roll out to our customers?

So traditionally, today, in the compliance world, there's these KYC checks and we play a part in that whole entire KYC process. We play a part in the SIP process, which is a subpart of the KYC process. So, we don't go out and we don't -- you look at some of these other passive signals that are required by the compliance team. That's simply not our business. Our business is to focus on the biometrics and to know exactly who's holding the devices. We don't check the phone number associated to the user. We don't check their address associated to the user, and we certainly don't check their phone number associated to the user. We simply check if that's really the person who registered and do they match their government-issued ID. This partnership kind of allows us to be a broader service to our customers. Our customers want our stuff and they also say, "Hey, can you also do this? And can I just buy it for me instead of having another vendor to buy it from?" And again, we built a great relationship with Equifax at this company, I've had that experience at other companies. And so, it just made complete sense because we know how to win business together and do deals together. So, that's -- right now, Phase 1 of this relationship is for us to broaden and expand our capabilities to our clients and customers who need these other things that we just don't simply provide.

Thank you. I have another question. We've talked about the FAT 100 and the large customers that you -- we are working in the pipeline that we expect to sign. Can you give some indication how large are these customers? Are we talking potential seven-figure revenue numbers for some of these customers?

So, the quick answer is yes. In my presentation, we highlighted over 10 customers over the 500-plus mark. Right now in our pipeline, we're getting volumes from our customers and the use cases. If you can imagine a large organization, a large organization, even just in one line of business could be millions of consumers. Imagine if they then open that to additional lines of business of things that they open to that same customer base can get bigger and bigger. So, certainly, those accounts can be in multiple seven figures. It just depends on how many use cases they're going to go live with on that first particular deal. They go live across the enterprise, answer is absolutely yes. If they don't go live with the entire enterprise and they go live use case, we'll eventually get there, and that's why we like to use the 18-month out metric to allow our technology to be utilized across the organization.

Thank you. George, I see you still have your hand or did you have another question, George Sutton. Please go ahead and unmute if you do. I guess not. But if anyone else has any other questions, please do put them in the Q&A or raise your hand. In the meantime, Rhon, perhaps you can talk a little bit about the TAM for our current product and how we look in the marketplace, how you look at the marketplace, I should say.

Well, this gets me excited because it's just way bigger than I can ever imagine. We're very fortunate that the product that we sell right now today affects the consumers, employees, anybody that does anything digital, we can absolutely provide a solution there to make sure you are who you say you are. Now with that being said, I always look at the market leaders or at least I look at these public companies who are in a similar marketplace, companies that are in the authentication space and people are familiar with Okta and Okta and Gartner and all these people and Forbes. They all put out their numbers and they say that the market has grown from $18 billion to $50 billion, heading to $80 billion in terms of a TAM. Certainly, authID would love a piece of that. And certainly, we believe we've carved out a very specialty niche in this program. We've been far ahead of the game the deep fake demo I showed everybody on the call, nobody's doing that, the way we're doing it. And we are just maniacally focused on this next-generation set of authentication and we're trying to figure out how to make the best user experience possible. And we've really been focusing on that, and that story has been resonating which contributes to our ability to build pipeline at $9 million a quarter in that rate. I mean that's -- for those who are in sales, like we're trying to go for -- we try to build a tremendous amount of pipeline in a short period of time for a small company. That's the type of pipeline you build with a larger org and we're trying to do that with a small org. We've been able to do that. So, pretty excited about that, and again, you can't build that pipeline that people don't think you have good use cases and you can't build that kind of pipeline if you don't have a big TAM. So, all these are aligning. We're definitely working our buts off, but the TAM is massive. It's too big to Fathom.

Okay. Thank you, Rhon. Our next questioner is [Dean Cadaques](ph). Dean, please unmute yourself and go ahead with your question.

Yes, Rhon, great presentation, a good explanation of everything. I have a couple of questions. One, is Equifax going to be marketing our services for their customer base?

There's two phases to this partnership. And so, Phase 1 was to be able to bring their services into our components. And our Phase 2 is something that we're trying to do, which is the ability to have them resell our products, but we're still working on that and that was not completed. We just completed Phase 1.

Okay. The other question I have is how many users are there active right now that we're servicing? Not customers, but the customers that have multiple users. How many users would you say we're at now and where do you see us being in a quarter or two?

Tom Szoke, can you answer that? I know that we're servicing over 60 customers direct and we have a ton of customers that are coming through some of our channel stuff, but do you have the volumes in front of you?

I don't have exact volume, Dean. As Rhon said, we have about 69 customers currently using it and because we have a mixture of user types, we have the one that are day zero where they come through and they onboard and then those are passed through and handed off to our customer and then we have what we call the monthly recurring one. So, it's a mixture of both. We can definitely provide some more input, but on a weekly or monthly, it varies because of that. Sometimes you have ramp ups on some months where there's a lot of onboarding activity and then you have those converting over to monthly active users. Again, based on which type of customer we have.

Do you have any idea how the user base is looking right now? Not the customers. Each customer might have 10, 20, 200,000 users. What's that look like?

Yes. Again, we have customers that are ramping up as Rhon has described in his presentation. They're ramping through their use case. So, their first step is always onboarding, which will then become a monthly active user as we protect and reauthenticate those individuals in their accounts. That process is ongoing. We had a group, a small legacy set of users that we've been working with for the past years in our platform and the new customers we just signed are in that first phase of ramp. So we anticipate those to be growing quite quickly here and we see a lot of traction. I don't have an exact number, but it is growing quite steadily in the months. So, yes, we see a good ramp happening there, but again, it's the early phase of these use cases. They just went live in Q1, but we're seeing the growth.

Okay. Thank you.

I'll give another minute or two for anyone who would like to ask a question. We have a few more minutes on the call. Perhaps we could talk a little bit whilst we're waiting for an additional question, if there is any, in terms of the pipeline and how you see that converting over the period of the remaining quarters.

Ed, do you want to take that?

Sorry, Graham. Can you rephrase?

Yes, the question, is how we see the pipeline converting over Q2, Q3, Q4 in order to reach the 9 million of bAAR that we are targeting.

Yes. This is what Rhon had spoken to earlier. We see our pipeline of 21 plus million that we have currently converting that into one deals over the balance of this year from Q2 to Q4. Predominantly, we will expect some of that remaining 9 million to be coming in Q2. And then, the majority of it would probably be spread over Q3 and Q4 as we convert that pipeline and the growing pipeline at an additional 9 million a quarter to one deals. So, that's the plan. I have Rhon just described it in a couple of other questions as well.

Okay. Our next questioner is [Andy Stern] (ph). Andy, please go ahead and unmute yourself and ask your question. Good to hear from you.

I think I'm unmuted. First of all, congratulations, you're making tons of progress and doing just what you said. That is really great to see. I guess it seems to me that at some level, this is a race to get the sales and revenue traction against the need to raise money. It feels to me like you probably need to raise money by the middle of this year or thereabouts or be raising it. The sales traction you're projecting really isn't until the second-half of the year or the end of the year. I just wonder, you express confidence, but I wonder how much of that is dependent on actually generating the revenue ramp. How are you thinking about the confidence you need to raise the next round?

Yes. Thanks, Andy, and good to hear your voice. I think about it in two parts. One is this business and with shareholders who are interested in this business, the first thing they need to see is that we can actually execute and execute on a full plan, not just small stuff, but big stuff and be able to scale and to be able to be in that direction, increasing the value of the company in the sense that you can have high-level confidence to do that. Fortunately, that aligns with our ability to be able to raise money as well. You need to be able to show these metrics, and demonstrate the right behaviors, demonstrate the right market conditions and the market response to be able to even convince or be successful in a fundraise. And so first and foremost, our mission has always been, at least with this organization, is to prove that this technology has product market fit, not only with the booking, but to be able to go live, and then not only to go live, but to be able to start recognizing revenue. We've been working on that plan. And unfortunately, we've only had a short 11 to 12 months to be able to do that. I think we're doing a pretty decent job doing that in very short order. It is no secret we will need money and funding to do that because the revenue will not offset some of those costs. In fact, we're not slowing down in our spend. We actually are trying to double down on our spend because some of these FAT 100 opportunities that want to use us need certain capabilities for us to deliver. And we're making those adjustments and changes now, but if you have a limited amount of engineering and resources, then that could delay your opportunity to close some of these FAT 100 opportunities. So, we're obviously making the right investments to service our customers. They want us to make those investments so that they can be serviced by us. And so, for us, it is absolutely a race to be able to do that, but we're going to have to rely on funding. The timing is up in the air. We'll figure that out because we're being very conscious as well, but it's no secret that we have to raise money.

Okay. Thank you.

The next question comes from Alan Sasserath. Please unmute and go ahead and ask your question.

Sure, thank you very much. I'm not sure if Rhon might have answered part of this already with his previous comment, but if you were to get a customer today, how much can you onboard based on your current capacity if everybody were working full tilt? How much stay per quarter would you be able to onboard if everybody were ready to go? Is that part of this delay as far as going from bARR to revenue or do you have the people there and you're just waiting for another milestone to hit?

Great question because it falls in two buckets that we look at internally as well. When we look at our FAT 100 opportunities, and actually, if you think about the way we separated the FAST 100 versus the FAT, the FAST 100 were accounts that we knew we can close without having tremendous amount of effort of the company, like recoding things, like building features that didn't exist or trying to create capabilities that we just simply didn't have off the shelf. The FAST 100 was our focus to be able to close those deals that didn't need anything special and they can actually use our stuff right off the shelf that we can get them to go live and we can get them the book to be able to get them to revenue. And so, we saw success with that. We did the bookings in 2023. We signed those customers way faster than we have projected in our model, and we got them live right around the same time that we projected to get them live. Now with these bigger accounts, these FAT 100, these strategic accounts, a lot of them actually are using that, want to use the stuff off the shelf. So, we're hoping that we can actually get them live faster than what's in the model and get them using the technology. And we can handle the volume because we actually built our infrastructure to be able to handle that volume. So, we can actually try to get those customers live. But then there's the second-half of this FAT 100 that says, hey, we need you integrated with this core system. Well, we don't have that core system yet, but our engineering teams will have that in the next three months. And so, those will actually certainly be delayed in our ability to get that customer onboarded, booked and get them live. And so, we're watching those two mixtures, but certainly those are the two things that we're trying to predict internally. But those are the two types of things that we care about and that's what we're looking at. So, obviously we'd like to onboard more customers that could just use our stuff right off the shelf. But we know that large customers are sophisticated. They want special things. They have way more workflows and departments that most typical smaller organizations don't have. And so, we're building those enterprise capabilities to be able to service those larger customers.

Right. Okay. Thank you. So, then again, if one of those came in and wanted it off the shelf, how much revenue could you build in a quarter based on the way that you're structured to that?

So when we see customers who have large volumes, if it's like a large fintech, and we certainly have one in the pipeline right now, that's super large. The way that, that customer moves, the way that fintech moves, they move pretty darn quick, which means they can go live in three months. So, technically, if we had a very large opportunity and that fintech has a great engineering arm and knows exactly what they're doing, and it's a swap out. So, that was a question earlier. Are we doing brand new things or are we just replacing incumbents? The beauty of replacing an incumbent is that all the plumbing is already in place and you just swap out our API with their API and away we go. So, there are certainly capabilities to accelerate that, but we don't have it built in our model. So, if we have acceleration, that's great, but we don't build it into our model in terms of forecasting.

Okay. Thank you.

And we are a little bit over time, but I think we have time for one more question. Dean Cadaques has another question. Dean, if you'd like to go ahead and ask your question.

Yes, real quickly, what is the breakdown roughly by industry category of the pipeline that you have right now?

I'm sorry, say that again, you want the breakdown of --

Yes, by industry type, hospitality, fintech, retail, whatever it is.

Yes, yes. Thank you. Thank you. The predominant vertical right now is financial services. That includes banks, credit unions, payments. It's predominantly financial services. The great news is, we are closing other opportunities like we have gaming. Just another opportunity that we believe is closing soon is going to be in the cannabis space around age verification. But predominantly everything is certainly around financial services. We have hotels as well. But again, in this industry and where we come from and where we see people spending money quicker, sooner than later, and where obviously the urgency drives from is where people are losing money. And financial services is a place for that.

Okay. Thank you.

Dean, I just like to add. I was able to go in our system. So, in the last quarter, we processed approximately 500,000 users. Just in the last quarter.

That's an impressive number, actually. And it's growing by geometric factors, I guess, right?

Exactly.

Okay. Well, thank you very much, everyone. That's really all the time we have. We've run a little bit over the time. And thank you for your patience and your questions. Rhon, would you like to just wrap up the call?

Absolutely. Thank you again, everyone, for the questions and your time, certainly enjoyed that. I definitely want to thank our investors for their continued support to be able to be able to take off ID to a high growth company that it should be. I assure you that we continue to be focused on our mission and to help today's digital enterprises know who's behind the device. Thank you everyone.

That ends the call. Thank you very much.