Greetings, and welcome to the Intellicheck Q3 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gar Jackson, Investor Relations. Thank you. You may begin.

Thank you, operator. Good afternoon, and thank you for joining us today for the Intellicheck Third Quarter 2024 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 -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 and it's 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. Throughout this call, we may reference certain financial metrics that have been rounded for the ease of discussion. These forward-looking statements are based on management's current expectations and beliefs about future events. As of 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 today, November 13, 2024. Management will use the financial term adjusted EBITDA in 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 Bryan Lewis, Intellicheck's Chief Executive Officer; and then Adam Sragovicz; Intellicheck's Chief Financial Officer, who will discuss the Q3 2024 financial results. Following their prepared remarks, we will take questions from our analysts and institutional investors. Today's call will be limited to 1 hour, and I will now turn the call over to Bryan.

Thanks, Gar, and good afternoon, and thanks for joining us today for our third quarter 2024 earnings call. Total revenues for the third quarter were $4.71 million, and SaaS revenues increased slightly totaling $4.66 million. Our gross margin remained strong at 91%, in line with last year's results. Of note, our new business continued to generate higher prices per transaction values. During the third quarter, our new business price per transaction increased 25% year-over-year and 8% sequentially when compared to the second quarter of this year. We believe this further reiterates our pricing power. On our last call, I began with an update on some recent organizational changes. I told you about Sandra Bauer is joining the team as Vice President of Customer Success and Account Management. I'm very pleased to say that she hit the ground running and has already made significant progress in a very short period of time. Sandra has evaluated our customer success program and has made changes to the organization that we believe will drive sales growth as we enter 2025. One of the big opportunities that she saw in an area that we have needed to capitalize on more effectively is driving more use cases for customer and increasing incremental revenue. Sandra has done a deep dive on the product pipeline, has been putting plans in motion that we expect will drive additional revenues with many of our customers. She is effectively aligned with the sales team, give a fresh look to our customer-facing marketing materials and is providing valuable input into these important areas. We see the customer success program as the key metric to our success. Organizational change is not a new topic on these calls. I have continued to underscore my commitment to organizational review with a focus on our needs…

Thank you, Bryan. I'm excited to be here at Intellicheck and to join such a dedicated and talented team under Bryan's leadership. As this is my first earnings call, I'm eager to share our progress and outlook for the future. Let's dive into the key points for this quarter. You have heard us in the past discuss our cloud migration from Azure to AWS. And as a result, we anticipate seeing less R&D spend in Q4 and going forward. We believe that this migration as well as other systems initiatives, such as how that Bryan just discussed, will improve customer satisfaction, retention and accelerate new customer onboarding. They should also provide customers with analytics that will help them monitor and improve their own businesses. We are proud that we have maintained our gross profit and gross margins, even while running a dual cloud infrastructure during this period of transition. We've also made a few targeted changes within Intellicheck's marketing channel sales and customer success teams, which should result in better operating efficiencies without increasing spending. Turning now to our third quarter results. Revenue for the third quarter of 2024, decreased 1% to $4,709,000 compared to $4,760,000 in the same period of 2023. Our SaaS revenue for the third quarter of 2024 increased 1% to $4,661,000 from $4,635,000 during the same period of 2023 and represented 99% of our third quarter revenue. Gross profit as a percentage of revenues was at the higher end of our expectations at 91% for both the third quarter of 2024 and the same period in 2023, and is reflective of the architecture efforts even though we incurred transitional overlap on cloud expenses. Our product team and temporary contractors have worked efficiently and they have been able to maintain recurring margins of over 90% through the…

[Operator Instructions] The first question is from Scott Buck from H.C. Wainwright.

Bryan, I guess the first one, I was curious, when do you start to anniversary some of those more difficult retail comps, trying to understand when we might see some better growth on the optic side.

Scott, so happy to answer your question. Are you saying, when do we expect retail to come back or I'm not quite sure I understand.

When do you anniversary when the softer trend started. So the year-over-year comparables start to look a little bit better because that weakness is already kind of baked in at that point?

Yes. Look, I think the weakness I'm looking at the numbers, the weakness certainly didn't start in my mind until about halfway through last year. So that's why I'm looking at, I should say, actually, even in the third quarter, things have started been going down as soon as inflation went up. And if you're looking at now the amount of credit a lot of people are carrying, there's issues there. Even something came out today that retail hiring in October was the lowest it's been, and I think it was 10 years. So I think retail certainly is hurting. I'm hoping that as we see inflation dropping and other things happening that it comes back, I'm looking at it hopefully I look at it is if I'm flying to the West Coast, it takes longer because I'm going into the wind and flying to the East Coast because I'm going with the wind. So I'm looking at something a headwind that could become a tailwind. But what I'm happy to say is we look at the other verticals we're going into and even in some of the customers in those verticals haven't fully implemented and we know what they're going to do, I'm happy that well over a year ago, we decided to make sure that we were looking at other places that need to know that you are who you say you are.

Yes. No, that makes sense. I appreciate that. And then the second thing, just curious on cash levels, where your kind of comfort is? And if you have some room, whether it makes sense to put a little more money into sales and marketing to try to drive that top line if the opportunities are there.

So I'm still comfortable that we do not need to raise cash to run the business. And currently, what we're doing is assessing where did we spend money last year on marketing that we're not going to this year. Looking at ROI some of these conferences have become kind of ridiculously expensive. And if we're not seeing the ROI, we're not going back. How do we tighten up our messaging, how do we get out there and do things differently than we did. And certainly, reminding everybody that the partnerships that we have with them and the DMVs is what makes us unique. I was talking to a woman who runs partnerships for a company that does software for issuing credit. And explained to her what she -- to her what we do, she thought everybody was the same. And I've said this many times. One of the hardest things is getting people to realize, we don't template. We don't need that picture. And that picture doesn't work anymore because AI and machine learning has made it so the bad guys have really, really good faith. We've got something unique. And that's still what we're getting -- need to get across, and we will, that you need to talk to us because we do it different than everybody else who might have a much, much larger marketing budget.

The next question is from Mike Grondahl from Northland. .

This is Logan on for Mike. Could you provide some color around how retail volumes trend in 3Q? And then also what you guys are seeing in 4Q so far in terms of seasonality?

Look, I haven't looked at yet seasonality because it really picks up really right about now. October is usually kind of like October. It really is what it is. But certainly, across department stores, apparel stores, jewelry stores, those types of things. We saw a double-digit decline in transaction volume there. which, again, I'm going to point to and say, I'm happy we decided to go get other markets that aren't tied to the economy.

Yes. So with those new ones, too, should we expect possible year-over-year growth in 4Q?

Look, that's my hope. That's my anticipation. I think it depends on when some of these big guys that we've been working on go live. I still think there's going to be, in my mind, some seasonal growth because you always -- people will be shopping. There are some people that are earning, and there are some people that aren't. But hopefully, the goal is a few of the folks that we get live do help fuel growth.

The next question is from Rudy Kessinger from D.A. Davidson.

Thank you for taking my questions. I guess, first, I just want to clarify on the price per transaction. You set up 25% year-over-year, 8% quarter-over-quarter. You said on new business. So just to be clear, that wasn't a -- was that across the board for all scan volumes? Or that was pricing for scan volumes from new logos that you signed in Q3 versus Q2 and Q3 last year?

Yes. Good question. We haven't had any of our largest clients, they're not up for renewal yet, right? It will be year-end and beginning of next year. One of the things I just wanted to make clear to everybody because I think there are some confusion that people thought our growth is being driven only by charging existing customers more, right? So that is new business versus new business. So comparing customers that were brand new to us a year ago versus customers that were brand new to us, Q3. And a customer is brand-new Q2 to brand new in Q3. Just to show that people are willing to pay for the accuracy that we bring to the table.

Okay. That's helpful. And I know you guys caught out several banks, social media, a few customers that have low, mid 6-figure revenue potential, it sounds like starting at some point next year. I guess just as you evaluate the pipeline today, what is the size of the pipe versus, I don't know, 1, 2, 3 quarters ago? And are there any other large needle-moving type of deals in there that could repel you back the year-over-year growth over the next 1 or 2 quarters?

I'm much happier with the pipeline today than I was 3 quarters ago. We are certainly talking to and in proof of concept with some client prospects that I would consider to be needle moving. I just don't want to like -- I'm a more under promise and over deliver. I would rather that we get -- I'll talk to you all next call, and there's more substantive things to say about it that we certainly have people coming to us large clients in telling us what they have and what they're using, that templating system that just about everybody else on the planet tries to do to see if an ID is real, isn't working. And when we get to them and get them to understand, we are way different than what they're doing. They want to talk, and they want to get into a proof of concept. But the thing is with very large customers, sometimes it takes a while to get to the proof of concept and then to get through the security audit that they always put you through. So hopefully, more to talk about that on the next call.

This concludes the question-and-answer session. I would like to turn the floor back over to Bryan Lewis for closing comments.

So thanks, everybody, for joining us. As we look back on this quarter, I believe we've made progress in a number of ways. The reality is that retail bankruptcies, consumer pullback on spending and certainly credit tightening reflects the state of the economy and has hurt part of our business, but we've stayed the course and implemented what I believe to be a successful strategic plan and that is getting into other markets. In the face of -- as I said earlier, double-digit drops in the retail sectors, we're flat to slightly growing. So those new verticals are paying off, right? And our strategic vision and pursuing new directions has allowed us to achieve growth and offset this economic weakness, right? We believe these new verticals will continue to show significant growth opportunities in 2025. So in closing, we remain committed to revenue growth and will continue to work in concert with the executive team and staff to achieve our revenue goals for our shareholders and stakeholders alike. Thank you all, and have a great evening.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.