Good afternoon, everyone, and thank you for your participation in today's conference call to discuss authID Inc.'s fourth quarter and full year 2024 financial results. I would now like to turn the call over to authID Inc.'s General Counsel, Graham Arad. Graham, please go ahead..

Thank you, Operator. Greetings, and good afternoon. This is Graham Arad, General Counsel at authID Inc. Welcome to the authID Inc. fourth quarter and full year 2024 earnings conference call. 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 Founder and CTO, Tom Szoke.

By now, you should have access to today's press release announcing our fiscal year 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 reconciliation of our non-GAAP adjusted EBITDA information to the most directly comparable GAAP financial information appears 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 available at www.sec.gov. I'd now like to introduce our CEO, Rhon Daguro..

the fear of biometric data being stolen. Identity verification technology is critical to corporations and governments. As AI continues to advance, authID Inc. offers a critical solution for our customers while also eliminating barriers to biometric adoption. Customers choose us because we fulfill the requirements of speed, accuracy, and data privacy.

Before I turn to Ed to cover the financials, Dale will show you a three-minute demo so you can see for yourselves how we help our customers combat AI-generated fraud..

So I'd love to talk about the type of fraud that our prospective customers experience. So across the top, we have examples of the same fraudster impersonating different victims. The victims are across the bottom.

They steal someone's likeness either from social media, LinkedIn, Facebook, Instagram, find those likenesses, train a model, and overlay that likeness on top of themselves. And, unfortunately, they can use this very effectively to bypass some of the legacy tools for account opening and authentication. Alright.

So I wanted to show some of the tooling that these fraudsters use to commit this type of fraud. On the bottom left, we have my actual face. Then we introduce a mapping of my face so we can track data points. Then we load up our target model of the person that we wish to impersonate.

And then, ultimately, we merge the two to create this likeness so that it appears live to be used for fraudulent purposes across digital account opening, biometric authentication. This type of tool is becoming more widespread and easily accessible. And these types of fraud attacks are what authID Inc. is well-positioned to stop.

Now to go through an example of how one would use this in practice, for account opening, a fraudster would steal potentially the ID of the victim through a data breach. It could be legitimate or it could be some digitally rendered version of that ID credential.

Then secondly, as you saw me do live, I can steal the likeness of my target victim, create a deepfake video feed or overlay their likeness onto a live version of myself to pass biometric and liveness detection. And, ultimately, what the fraudster will then do is go through an account opening flow through a bank.

Let's say that flow is on the left, and on the right, the fraudster would have tooling that allows them to push in stolen copies of identities for this digital account opening. So here we see a fraudster pushing in a stolen copy of someone's ID digitally, both for the front and the back.

And then secondly, they'll take that biometric that they've created through a deepfake or generative AI and use that biometric impersonation of that individual to pass a biometric match plus liveness detection. Now, unfortunately, this works with some of our competitors in the market.

Thankfully, authID Inc.'s solution is well-positioned to detect these types of fraud attacks..

Thanks, Dale. We are very excited about our technology and our customers are equally excited. I'd like to pass the call to Ed Sellitto, our CFO..

Thank you, Ron, and thank you all for joining us today. Looking at slide nine, total revenue for the quarter was approximately $0.2 million compared to $0.07 million a year ago. For the year, total revenue was $0.89 million compared with $0.19 million a year ago and at the top of our expected range of $800,000 to $900,000.

Operating expenses for Q4 were $4.9 million compared with $3.3 million last year. For the full year, operating expenses were $15.6 million compared with $10.9 million in 2023.

The 2024 increase is primarily due to a one-time noncash expense reversal in Q1 2023 of $3.4 million of certain stock-based compensation related to employee terminations, which was not repeated in 2024, as well as reinvestment in employees and contractors following the Q1 2023 restructuring.

Net loss from continuing operations for the quarter was $4.6 million, of which noncash charges were $0.6 million, compared with a net loss of $3.2 million a year ago, of which noncash charges were $0.5 million. For the full year, net loss from continuing operations was $14.3 million, including $2.8 million in noncash charges.

This compares to a net loss of $19.6 million for the same period last year, which included $10.9 million in noncash and one-time severance charges, with approximately $7.5 million related to the exchange of convertible notes for common stock in 2023. Net loss per share for the quarter was $0.49 compared with $0.41 a year ago.

For the full year, net loss per share improved to $1.40 compared with $3.19 last year. Next, let's turn to RPO on slide ten. Remaining performance obligation or RPO provides a measure of the minimum revenue expected to be recognized from our signed contracts based on our customers' contractual commitments.

As of December 31, 2024, our total RPO was $14.26 million, an increase of $10.43 million over the prior quarter, due to the impact of the large $10 million contract secured in the fourth quarter. This compares favorably with the RPO at the same period last year, which was approximately $4 million and is above our expectation of $13 to $14 million.

We expect to recognize the full RPO of $14.26 million over the entire life of the contracts, which are typically signed with a three-year term. Onto our non-GAAP results on slide eleven. Adjusted EBITDA loss was $4.1 million for Q4, compared with a $2.7 million loss for the same period last year.

For the full year period, adjusted EBITDA loss was $11.9 million compared with an $8.7 million loss for the same period last year. The increase in EBITDA loss is primarily due to reinvestment in employees and contractors, following the Q1 2023 restructuring.

We also monitor and report on ARR, or annual recurring revenue, which is defined as the amount of recurring revenue earned during the last three months of the relevant period as determined in accordance with GAAP multiplied by four.

The amount of ARR as of Q4 is $0.8 million, compared to $1.0 million of ARR as of Q3 and $0.3 million of ARR for the same period last year. The temporary quarter-over-quarter decrease was driven by the accounting impact of the modification of a customer contract due to a delayed go-live timeline, as we previously discussed in Q3.

Turning to BAR or booked annual recurring revenue, which is the projected amount of annual recurring revenue we believe will be earned under contracted orders looking at eighteen months from the date of signing each customer contract.

The gross amount of BAR signed in the fourth quarter of 2024 was $7.13 million, up from $1.67 million of gross BAR a year ago. Our Q4 BAR was driven by the large deal with our next-generation AI partner in India. For the full year, 2024 gross BAR was $9.01 million, up from $2.94 million in 2023 and in line with our expectation.

Net BAR, which reflects the deduction in BAR from contracts previously included in reported BAR, that were subject to attrition during the quarter, was approximately $6.86 million compared with $1.67 million of net BAR signed in the fourth quarter of 2023. 2024 net BAR was $7.38 million compared with $2.94 million in 2023.

The reduction from gross to net BAR in 2024 is due to the impact from certain customers that have delayed their go-lives and expected usage ramp. As previously explained during our quarterly earnings call, BAR comprises two components, we refer to as CAR.

The Q4 2024 CAR or committed annual recurring revenue represents $3.68 million with 2024 full year CAR representing $4.68 million. Both approximately 52% of reported BAR. UAC or estimated usage above commitment is an estimate of annual customer usage that will exceed contractual commitments.

The UAC comprises the remaining $3.45 million of Q4 BAR and $4.33 million of full year 2024 BAR. Both approximately 48% of reported BAR. Turning to our revenue growth stages on slide twelve. I'll take a moment now to summarize our progress through the following revenue growth stages.

The first milestone we use to monitor our growth is bookings as measured by BAR. In 2024, we realized the total gross BAR of $9.01 million, approximately a 3x increase over the same period in 2023. The next milestone is our remaining performance obligation or RPO.

As I detailed earlier, as of the end of the year, we've secured approximately $14.3 million in RPO, a $10.2 million increase over the RPO secured by the end of 2023. Our third milestone is revenue recognized in accordance with GAAP. Our 2024 revenue is $0.89 million and grew approximately $0.7 million over the same period in 2023.

And as we've called out in prior earnings calls, we will increase our focus in monitoring our customer retention and expansion in 2025 as our customer contracts mature.

We'll optimize our sales and support efforts to deepen our customer relationships and increase the value added by our services through renewals, usage growth, and customer expansions for additional use cases and product upsells. With that, Operator, we would now like to open up for questions..

Thank you, sir. And to ask a question, you can submit your written questions through the webcast chat or by pressing star one one on your telephone. And then wait for your name to be announced. To remove yourself from the queue, press star one one again. Please stand by while we compile the Q&A roster.

Again, that is star one one if you do have questions through the telephones. One moment please for our first question. It comes from the line of Ricky Solomon with Wilmot. Ricky, your line is open..

Yeah. Hey, Ron. In your sales conversations, what are the things the customers are looking at and why are they choosing authID Inc.

over other options?.

Thanks, Ricky.

Can you hear me?.

Yes..

Alright. Awesome. Thank you. Hey. Thanks for the question. So what's really exciting with the last release of the software, we've actually been placed in a lot of these large enterprise organizations' POCs.

So in these POCs, we are having use cases around new customer onboarding, workforce authentication, time and attendance, so people showing up to work and they do not want to log in, they just want to scan their face. Real big issues around downloading sensitive documents like W-2s, tax forms.

The very big one right now that's really taking a lot by storm is this account takeover, where people are coming in and they're impersonating somebody else and they're kind of moving stuff around and around personal data and money. Wire transfer is a big use case.

Personal information changes, high-risk transactions, even stuff like deleting databases. These are very critical things that they need really strong authentication. Single identity source of truth, so making sure that there's no duplicate, like, Solomons inside anybody's identity database. So making sure everybody's unique.

And then, more recently, verification of biometrics. As these companies are actually looking to solve these use cases and looking at biometric providers, really, they're centering their kind of scorecard around three major pillars.

First one, how fast can we do the biometrics, so speed? Second one is how accurate is it? Because right now the new standard is only one in a hundred thousand false match rate where we're at one in a billion.

And then the last piece is do I get in trouble for deploying biometrics because I'm not complying with the law? And so we had this story around a chief compliance officer saying, I'd love to use biometrics, but I just simply cannot because I'm not a biometric expert. And I do not want to subject myself to any liability.

So we basically have to hit all three of these categories, which are speed, accuracy, and privacy. So it's those scorecard items against those use cases that our customers are looking at with us..

Yeah.

And if you look at, let's say, Privacy Key and ADIA, you know, coming altogether, you I mean, how are customers looking at that, like, could we be looking at something where, you know, a solution based on ADIA can be instead of, like, the business use cases you laid out, like, consumer-facing where businesses trust one identification source for say, if I log on to my Chase app or if I log on to my Fidelity app or like, how do you see that going forward?.

Thank you, Ricky. I love that question because there's actually two really big parts around ADIA. The first big part around ADIA is exactly how you describe.

Can an origination like Wells Fargo trust an identity that's been banking with Bank of America or trust an identity that's been banking with Chase? And so how does one bank be able to leverage the history and the activity and the longevity of that identity's behavior at a different institution as a form of knowing that that's Ricky Solomon as opposed to just doing a simple KYC check, which is what's your favorite color, what year car did you drive, or, you know, what was your address ten years ago.

They would rather trust another institution who has had history with you as opposed to just answering KYC questions. So that reusability has actually been requested of us. And in fact, many institutions have been trying to produce this. Name your favorite credit bureau are gonna have this thing called their name plus the word ID right behind it.

And they've been trying to a lot of organizations trying to create a unified ID. The problem is they were never built on a standard. So what ADIA does is create that standard that everybody can use. The beauty of that standard, it was founded by Ramesh Kesanapali who founded the Fido Alliance.

So that means that all eighty-four members of the Fido Alliance, including the major top five enterprise tech organizations, they're all part of it. And the hope and what we're starting to see is people are adopting that standard. So one, you gotta have an adoption.

Two, you have to have a standard that everybody can follow, and three, you can actually demonstrate it. So that's use case number one is company to company trust.

The second more exciting use case is what we're seeing right now is, like, seeing an organization who has multiple business entities that they acquired over a period of time, but yet they did not integrate the business. I'll give you an example because this is my favorite company, Disney.

Disney owns many brands, ESPN, all the way down to Marvel, all the way down to Hulu, all the way down to Pixar. And if you can imagine, they're not gonna blend all of those companies together and have them all work in a unified system or the same payroll system or the same identity system.

They're actually each operating entity, but they're still part of the same family. So how does one manage an identity that where they were onboarding Hulu, but they still need to log in to Pixar or they need to log in to ESPN because they're also part of the same parent company.

And so that same ADIA solution can work within an organization who has many entities, or it can help us work with the independent entities that have nothing to do with each other, but they could still trust that identity if they follow the standard. So that's the big opportunity. That's the holy grail for actually eradicating fraud completely.

And authID Inc. has been really focused on delivering that through ADIA because what we love about the standard is that this standard is rooted all in biometrics.

And so we've been very active in that forefront and then obviously, Privacy Key allows us, allows every organization that participates in ADIA to be fully compliant around storage or biometric and making sure that nobody's getting in trouble for keeping people's biometrics stored.

And again, we do not store it, so that helps with enterprises adopting the standard..

Great. Thanks. Hey. And one more question. I'll let someone else ask a question. So you mentioned, you know, closing, Fortune I forget the language in the press release, but large enterprises this year.

Like, what gives you confidence that that, you know, that's actually going to happen in the near future here?.

Yeah. Thanks for the question. And that's what I'm super, super excited about because 2024, we made a bet early in the year saying, okay. What will allow large Fortune 500 companies to adopt biometrics? And so that's why I was very specific saying, hey, what are the blockers? One was speed. We got that nailed. Second one was accuracy.

We got that one nailed. Privacy and compliance was the third one, we got that nailed. Then it took us a little longer in 2024 to do that. So we had set out back in April to say, let's go solve this. We were trying to go into POCs with our customers and partners in the summer. We're still delayed in building the tech. Finalized the tech.

We got it into what I call MVP status, then we got it into beta, then we got the beta program. So we were a little bit later in the year to deliver it, but now that we're in POC with that technology, the results are just awesome right now. We're in the late stages of these sales cycles with a number of these major enterprises to date.

It's only a matter of time before we sign them. The response to the outreach in regards to the performance and the privacy piece has just been phenomenal. So just super excited.

I mean, privacy and compliance alone represent the biggest hurdles for these Fortune 500 accounts in terms of adopting biometrics, and we've basically gotten rid of every single one of those. And then we're starting to see that, again, we're in late stages of those particular deals.

I was hoping that we would get a couple more right before this announcement, but we're very excited that we'll be able to close those this year..

Awesome. Thank you..

Thanks, Ricky. Ron, we've actually had a couple of questions on the same subject from listeners on the webcast asking about these major contracts.

And can you give a little bit more color about how long it takes to sign such a contract? And then the sort of the time to bring them live and revenue-generating and also how long we might expect to see the length of those contracts.

Well, the typical contract terms that we do with anything in cybersecurity and it's also represented here in authID Inc., they're usually contracts are two to three years. That's the typical time frame for how long the contracts will hold. And what we signed them up for.

And also, we do not want to sign them up for too long it also limits authID Inc.'s ability to upsell, cross-sell. We do give discounts early on obviously, to acquire customers. We do not want to extend the discounts all the way through to the point where our, you know, cost of goods go up and go down.

So we want to have flexibility for what's right for the business and what's right for the customer at that time. So that's typically two to three years.

In terms of the large enterprise deals, if you think about, like, the just the example I just gave you with Disney, where there could be many multiple lines of businesses, and so some of these large enterprises have this thing called a core enterprise service, where they will standardize the security program across all the various entities or each division will have their own core security enterprises and then they have to individually figure out how to work with each.

So when we come into an enterprise, our goal is to capture the entire enterprise base. But, obviously, we want to get in there with one use case. And typically, what happens when you're in a large enterprise, they say, hey. We have to stop buying one vendor for each thing.

So anytime you have a vendor that does something very special, or very unique, you must run it by the cybersecurity committee and get approval and also share it because we do not want to buy thirteen different technologies. We do not want to have thirteen different vendor contracts. We do not have thirteen different account teams.

You want to be able to standardize on the best and make sure there's best practice with the cross. So for example, we went into this very large payroll provider. On the planet, large payroll provider on the planet, they brought us into a particular use case around downloading sensitive documents.

And then when they shared it internally, another group that's been looking at biometrics had no idea that that was happening. But there's another group that was looking at biometrics and said, hey.

Well, what is that technology you're looking at? Can we speak to them? Then all of a sudden, they introduced this to them, and then we're in a different POC. And that keeps going and it keeps going. And then sometimes their evaluations will go for three months, sometimes they'll go for one month.

In our case, because biometrics is new, it has to go through several committees for approval. But also at the same time, it's exposing authID Inc. to all the various use cases that they have, and it's allowing us to put together, we think, a very large deal.

So we can go from a regional use case to now a multistate use case to now a full country use case and now even a global use case. And so it takes time, and we've built that into the deal cycle. We say anywhere between six to nine months. We're right around that time frame, six to nine months on some of these deals that were in late stage.

We did have a little delay when we were releasing the Privacy Key technology, but those weren't lost deals. We just had a little push in terms of a delay in delivering. But that's kind of like the DNA of these large deals.

And it's no different than when I worked at Oracle or any other of these large enterprises where we're still trying to take down big cybersecurity initiatives..

That's great. Thank you very much..

Reminder, if you want to ask a question, comment, what does it.

Yes. If you do have questions through the telephones, it's star one one..

Or you can ask a question by pressing the button on the webcast..

Ron, we have another question.

Can you talk a little bit more about the progress we're making with channel partners and how you see that moving forward in the future?.

Yeah. Thanks for your question. Channel partners for us are just super special. There are two types of channel partners that we look at. One is the OEM partner who says, hey. Listen. We know biometrics are gonna be used. We are lacking biometrics in our platform. We're not gonna go and buy one. I'm sorry.

We're not gonna go buy a company, and we're not gonna go build one. So the best thing to do is partner with the best in the marketplace, integrate it into our platform, and offer it to all our customers. We love those deals. Because it does not require my sales team to go after them. It's built into their platform.

They have their own sales team to go after them. And then they can go and sell to their own customer. So for us, love those opportunities, and we have spun up several of those OEM opportunities, including the India announcement that we just made. And we're about to sign up a couple more. So very excited about that OEM channel partner opportunity.

On the other side of the partner channel is those that want to resell our technology. And they refer customers and clients. So we've actually had several partners already start to turn in more of their clients into us, referring their clients into us, saying, hey. This client wants to use the authID Inc. technology.

They go ahead and they set us up with their customer. They introduce us. Even this morning, we just had a phenomenal one where a partner introduced us to a client. Client, you know, we got a warm intro because the client already had vetted the partner. The partner trusts authID Inc., so it's a very warm introduction.

So the channel partnership business has been going very well, and I think it's gonna help lead to some of the larger big deals we've been talking about..

Okay. Well, thank you, Ron. That seems to be all the questions we have right now. So perhaps you'd like to wrap it up..

Fantastic. Well, thank you everyone for joining us. We like to thank you all for listening today, listening to the call, and we look forward to speaking with you all when we report our first quarter results for 2025. And, again, thank you for joining us. Have a nice day..

Thank you. And, ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation..